morals
a person's personal philosophies about what is right or wrong
business ethics
includes organizational principles, values, and norms that may originate from individuals, organizational statements, or from the legal system that primarily guide and group behavior in business
Principles
specific and pervasive boundaries for behavior that should not be violated
values
enduring beliefs and ideals that are socially enforced
four basic consumer rights
the right to safety, the right to be informed, the right to choose, and the right to be heard
corporate social responsibility
An organization's obligation to maximize its positive impact and minimize its negative impact on society
Defense Industry on Business Ethics and Conduct (DII)
a guide for corporate support for ethical conduct created in the 1980s
The six principles of the Defense Industry on Business Ethics and Conduct
support codes of conduct and their widespread distribution; members are expected to provide ethics training for their employers and provide continuous support between training periods; defense contractors must create an open atmosphere for employees so th
Federal Sentencing Guidelines for Organizations (FSGO)
set the tone for company ethical compliance in the 1990s; codified into law incentives to reward companies for taking action to prevent misconduct
Sarbanes-Oxley Act
Passed in 2002 made securities fraud a criminal offense and stiffened penalties for corporate fraud
Dodd-Frank Wall Street Reform and Consumer Protection Act
The most sweeping financial act since Sarbanes-Oxley. Designed to make the financial sector more ethical and responsible
ethical culture
acceptable behavior as defined by the company and industry
stakeholders
anyone with a stake or claim in some aspect of a company's products, operations, markets, industry, and outcomes
primary stakeholders
those whose continued association and resources are absolutely necessary for a firm's survival
secondary statekeholders
those who do not typically engage directly in transactions with a company and are therefor not essential to its survival
stakeholder interaction model
reciprocal relationships between the firm and a host of stakeholders
stakeholder orientation
Understanding and addressing the needs of all stakeholders, including communities and special-interest groups
three activities in stakeholder orientation
(1) the organization-wide generation of data about stakeholder groups an assessment of the firm's effects on these groups, (2) the distribution of this information throughout the firm, (3) the responsiveness of the organization as a whole to this informat
corporate citizenship
the extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders
reputation
how the public views or regards an individual; one of an organization's greatest intangible assets with tangible value
corporate governance
the development of forma systems of accountability, oversight, and control
shareholder model of corporate governance
founded in classic economic precepts, including the goal of maximizing wealth for investors and owners
stakeholder model of corporate governance
a model where the business is accountable to all its stakeholders, not just the shareholders; broader than the shareholder model of corporate governance
interlocking directorate
the concept of board members being linked to more than one company
executive compensation
The use of salary, bonuses, and long-term incentives to align managers' interests with shareholders' interests.
Six steps in implementing a stakeholder perspective
(1) assessing the corporate culture, (2) identifying stakeholder groups, (3) identifying stakeholder Issues, (4) assessing organizational commitment to stakeholders and social responsibility, (5) identifying resources and determining urgency, (6) gaining
integrity
being whole, sound, and in an unimpaired condition
honesty
truthfulness or trustworthiness
Fairness
the quality of being just, equitable, and impartial
reciprocity
an interchange of giving and receiving in social relationships
optimization
trade-off between equity and efficiency
ethical issue
a problem, situation, or opportunity that requires an individual group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical
ethical dilemna
a problem, situation, or opportunity that requires an individual group, or organization to choose among several actions that have negative outcomes
abusive or intimidating behavior
physical threats, false accusations, being annoying, profanity, insults yelling, harshness, ignoring someone, or unreasonableness
commission lying
creating a perception or belief by words that intentionally deceive the receiver of the message (lying about being at work, expense reports, or completing work assignments)
omission lying
intentionally not informing others of any differences, problems, safety warnings, or negative issues relating to the product or company that significantly affect awareness, intention, or behavior
conflict of interest
when an individual must choose whether to advance his or her own interests, those of the organization, or those of some other group.
bribery
offering something in order to gain an illicit advantage from someone in authority
active bribery
the person who promises or gives the bride commits the offense; aka active corruption
passive bribery
committed by the official who receives the bribe
facilitation payments
This politically correct term covers both legal and illegal contributions to politicians and bureaucrats in foreign countries to influence their purchasing decisions and their regulatory laws
corporate intelligence
the collection and analysis of information on markets, technologies, customers, and competitors, as well as on socioeconomic and external political trends
discrimination
unjustifiable negative behavior toward a group and its members
it is illegal to discriminate on the basis of
race, color, religion, sex, marital status, sexual orientation, public assistance status, disability, age, national origin, or veteran status
Equal Employment Opportunity Commission (EEOC)
a government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it
Age Discrimination in Employment Act
outlaws hiring practices that discriminate against people 40 years of age or older and those that require retirement before age 70
affirmative action programs
efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against on the basis of race, gender, or other characteristics
sexual harassment
any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another. It may be visual, verbal, written, or physical
three criteria of a hostile work environment
the conduct was unwelcome; the conduct was severe, pervasive, and regarded by the claimant as so hostile or offensive as to alter their conditions of employment; and the conduct was such that a reasonable person would find it hostile or offensive
dual relationship
a personal, loving, and/or sexual relationship with someone whom you share professional responsibilities.
fraud
any purposeful communication that deceives, manipulates, or conceals facts in order to harm others
accounting fraud
A specific type of fraud that involves misrepresenting the truth on any one of the financial statements, either by lying or by omitting important information causing loss to another
marketing fraud
the process of dishonestly creating, distributing, promoting and pricing products
puffery
exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely upon and is not actionable under the Lanham Act
implied falsity
when the message has a tendency to mislead, confuse, or deceive the public (twice the ingredient for twice the results)
literally false
Tests prove (establishment of claims), when the advertisement cites a study to establish a claim. Bald assertion (nonestablished claim), when the advertisement makes a claim that cannot be sustained. (e.g., all natural if has synthetic ingredients)
labeling issues
Changing a label to
change customer perception about a product.
Ex. Chia seeds and vitamins vs health benefits
consumer fraud
when consumers attempt to deceive businesses for their own gain (shoplifting)
Types of Consumer Fraud
friendly fraud, price arbitrage, return fraud, wardrobing, returning stolen goods
friendly fraud
making a large purchase on a credit card and then filing a fraudulent claim
price arbitrage
substituting differently priced but similar items for a higher return
return fraud
replacing an item with something different and returning it for a full refund
wardobing
wearing an expensive outfit once and then returning it for a refund
returning stolen goods
receiving a full refund on goods that had been stolen
illegal insider trading
The buying or selling of stocks by insiders who possess material that is not public
legal insider trading
Involves legally buying and selling stock in an insider's own company, but not all the time
intellectual property rights
The legal protection of intellectual property like music, books, and movies
privacy issues
The monitoring of employees' use of available technology and consumer privacy.
hacking
breaking into a computer network to steal information
social engineering
tricking individuals into revealing their passwords or other valuable corporate information
dumpster diving
digging through trash to find trade secrets
whacking
using wireless hacking to break into a network
phone eavesdopping
using a digital recording device to monitor and record a fax line
system hacking
assumes the attacker already has access to a low level, privileged user account
remote hacking
attempting to remotely penetrate a system across the internet
physical hacking
the hacker physically enters a facility and finds vacant unsecured workstation with an employee's username and password
shoulder surfing
looking over someone's shoulder while they type a password
password guessing
when an employee is able to guess a person's password after finding out personal information about them
voluntary practices
the beliefs, values, and voluntary contractual obligations of a business
philanthropy
giving back to communities and causes
core practices
documented best practices, often encouraged by legal and regulatory forces as well as industry trade associations
better business bureau
leading self-regulatory body that provides directions for managing customer disputes and reviews advertising cases
mandated boundaries
externally imposed boundaries of conduct, such as laws, rules, regulations, and other requirements (Antitrust)
voluntary boundary
a management initiated boundary of conduct (beliefs, values, voluntary policies, and voluntary contractual obligations)
civil law
defines the rights and duties of individuals and organizations
criminal law
A law that defines crimes against the public order.
procompetitive legislation
laws that have been passed to prevent the establishment of monopolies, inequitable pricing practices, and other practices that reduce or restrict competition among businesses
consumer protection law
laws that protect consumers from a company's goods and services and ensure they follow safety standards; first established in 1906
Occupational Safety and Health Administration (OSHA)
1970; mandates employers provide safe and healthy working conditions for all workers
Public Accounting Oversight Board
heart of the Sarbanes-Oxley Act; monitors accounting firms auditing public corporations and establishes standards and rules for auditors in accounting firms
Consumer Financial Protection Bureau
A federal statute that requires increased disclosure of credit information and terms to consumers and regulates consumer credit providers and others; part of Dodd-Frank
Cause-related marketing
ties an organization's product(s) directly to a social concern through a marketing program (Nike & Kapernick)
Strategic Philanthropy
synergistic and mutually beneficial use of an organization's core competencies and resources to deal with key stakeholders as to bring about organizational and societal benefits
social entreprenuership
the attempt to draw upon business techniques to find solutions to social problems
When unethical acts are discovered in a firm, in most instances
there was knowing cooperation or complicity from within the company
Government regulators are a secondary stakeholder T/F
False they are primary
Which of the following describes the four levels of social responsibility?
economic, legal, ethical, and philanthropic
Major corporate governance issues normally involve _____ decisions
strategic level
Public health and safety and support of local organizations are issues most relevant to which stakeholder group?
community
Ethics and social responsibility can be used interchangeably T/F
False; they are often used interchangeably but they are not the same
Stakeholders' power over businesses stems from their
ability to withdraw or withhold resources
The normative approach ______________________.
identifies guidelines that dictate how firms should treat stakeholders
A broader view of social responsibility?
considers the long-term welfare of society
Why do critics argue that high compensation for boards of directors is a bad thing?
It could cause conflicts of interest between the directors and the organization.
A stakeholder group that is absolutely necessary for a firm's survival is defined as
primary
Accountability, oversight, and control all fall under the definition and implementation of corporate
governance
Which of the following is one of an organization's greatest intangible assets with tangible values? ?
reputation
Which of the following industries tends to generate a high level of trust from consumers and stakeholders?
technology
In Dodge vs. Ford Motor Co., the court ruled that a business exists for the profit of shareholders, and the board of directors should focus on that objective T/F
True
______________ is the idea that because people live in a community, social rules should benefit the community.
the common good
The term used to express how a firm meets its stakeholder expectations of its economic, legal, ethical, and philanthropic responsibilities is
corporate citizenship
Social responsibility rests on a stakeholder orientation. T/F
True
The final step in implementing a stakeholder perspective is identifying stakeholders. T/F
False; it is gaining stakeholder feedback
The idea that the mission of business is to produce goods and services at a profit, thus maximizing its contribution to society is associated with
Milton Friedman
Developing ethical issue awareness ?is the first step toward understanding business ethics. T/F
True
An interchange of giving and receiving in social relationships is known as
reciprocity
__ is the offering of something of value in order to gain an illicit advantage.
bribery
Omission lying is intentionally not informing others of any differences, problems, safety warnings, or negative issues relating to the product or company that significantly affect awareness, intention, or behavior. T/F
True
The _____ makes it illegal for individuals, firms, or third parties doing business in American markets to "make payments to foreign government officials to assist in obtaining or retaining business.
U.S. Foreign Corrupt Practices Act (FCPA)
____ are used to obtain or retain business and are not generally considered illegal in the U.S.
facilitation payments
War metaphors are common in business. This kind of mindset can be dangerous for business leaders because
it may foster the idea that honesty is unnecessary in business
he Age Discrimination in Employment Act specifically outlaws hiring practices that discriminate against people
who are 40 and over
__ is defined as any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression.
fraud
___ is an important element of virtue and means being whole, sound, and in unimpaired condition.
integrity
Accountants must abide by a strict code of ethics that defines their responsibilities to
their clients and the public's self interest
A secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose is known as
collusion
Ethical issues in business typically arise because of conflicts among individuals' morals and
the core values and culture of the organizations where they work.
Abusive or intimidating behavior is the most common ethical problem for employees. Which of the following is not related to this concept?
performance probation
An employee can only ?successfully accuse a co-worker of sexual harassment if it seriously affected his or her psychological well-being or caused injury. T/F
False; any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another. It may be visual, verbal, written, or physical
A company can be sued for discrimination if it
uses age as a hiring or firing criterion.
Examples of consumer fraud include shoplifting, collusion, guile, and duplicity?. T/F
True
An ethical issue is a problem, situation, or opportunity
requiring an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical.
A(n) _______ requires an individual to choose ?among several actions that have negative outcomes
ethical dilemma
The three fundamental elements that motivate people to be fair are honesty, integrity, and equality T/F
False; equality, reciprocity, and optimization