Chapter 5

1. Chapter 5 Business Ethicsand EthicalDecision Making

2. Business Ethics • Ethics • A conception of Right and Wrong conduct • Business Ethics • Principles and standards that guide the behavior of individuals and groups in the world of business. • Managers, employees, consumers, industry associations, government regulators, business partners, and special interest groups all contribute to business ethics. • Principles and standards tend to change over time. • Business ethics goes beyond legal issues.

3. Reasons Business should be Ethical • To meet demands of business stakeholders • To enhance business performance • To comply with legal requirements • To prevent or minimize harm • To promote personal morality

4. Why Ethical Problems Occur in Business?

5. Foundations of Business Ethics • Ethical conflict in the organization dictates the need for organizational ethics policies and procedures. • Many ethics conflicts are resolved through negotiation or litigation. • Personal morality is often not sufficient to help people navigate through difficult legal issues. • Antitrust, conflict of interest, etc.

6. Ethical Issues in Business • 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. • Ethical issues: • Honesty and fairness • Conflict of interest • Fraud • Discrimination • Information technology

7. Specific Types ofMisconduct Observed

8. Abusive or Intimidating Behavior • Abusive or intimidating behavior is the most common ethical problem for employees. • It can mean anything from physical threats, false accusations, annoying a coworker, profanity, insults, yelling, harshness, to ignoring someone, or being unreasonable. • VIDEO

9. Lying • To be honest is to tell the truth to the best of your ability. Lying relates to distorting the truth. • Three major types of lies: • Joking without malice, white-lie told in order notto hurt someone’s feelings • Lying by commission, creating a perception orbelief by words that intentionally deceives • Lying by omission, intentionally notinforming the receiver of material facts

10. Conflict of Interest • A conflict of interest arises when an individual must choose whether to advance his or her own personal interests, those of the organization, or those of some other group. • Organizations often prohibit employees from accepting bribes, personalpayments, gifts, or special favors.

11. Fraud • Fraud is any false communication that deceives, manipulates or conceals facts in order to create a false impression or damage others. • Types of fraud • Accounting fraud • Marketing fraud

12. Consumer Fraud • Consumer fraud occurs when consumers attempt to deceive businesses for their own gain. It involves intentional deception to derive an unfair economic advantage by an individual or group over an organization. • For example • Shoplifting • Price-tag switching • Lying to obtain age-related and other discounts • Taking advantage of return policies by returningclothing that has been worn

13. Discrimination • Affirmative action programs • Programs that involve 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.

14. Information Technology • As the use of the Internet increases, the areas of concern related to its use have increased. • For example • Monitoring employee useof available technology • Consumer privacy • Site development andonline marketing • Legal protection of intellectual property such as music, books, and movies

15. The Ethical Decision Making Process • Factors that influence the ethical decision-making process include: • Individual factors. • Organizational relationships. • Opportunity.

16. Individual factors: Moral Philosophies • Consequentialism • A decision is right or acceptable if it helps achievethe desired results • Egoism • maximizing one’s own self-interest • Utilitarianism • Greatest good for the greatest number of people • Ethical formalism • Focuses on the rights of the individual • Justice theory • Evaluations of fairness

17. Individual factors: Stages of Moral Development (Kohlberg’s Model) • People progress through the previous six stages. • Cognitive moral development should be viewed as a continuum. • People’s moral beliefs and behavior change as they gain education and experience. • There are universal values by whichpeople in the highest level of moraldevelopment abide.

18. Stages of Moral Development and Ethical Reasoning

19. Organizational Relationships • An individual’s ethical decision can also be influenced by: 1. co-workers 2. managers • The strength of the influence will be determined by: • The strength of the individual’s personal values • Opportunities for unethical behaviour • Exposure to others who behave unethically

20. Corporate Factors: Corporate Culture • Values, beliefs, goals, norms, and rituals shared by members or employees of an organization. • What is important? • How do we treat each other? • How do we do things around here? • Conveyed through employeehandbooks, codes of ethics, memos,and ceremonies. • An organization’s culture can encourage employees to make unethical or socially irresponsible decisions. • Most misconduct happens when employees try to attain the performance objectives of the company.

21. Corporate Factors: Corporate Culture (cont.) • Gives members meaning and offers direction about how to behave and deal with problems. • Ethical climate • Part of corporate culture that relates to an organization’s expectations about appropriate conduct and focuses specifically on issues ofright and wrong.

22. Corporate Factors: Significant Others • Superiors, peers, and subordinates in the organization who influence theethical decision-making process. • CEO establishes the ethicaltone for the organization. • Obedience to authority accountsfor employees following superior’s directives. • The more employees are exposed to unethical activity by co-workers, the more likely they are to also behave unethically.

23. Opportunity • Conditions that limit barriers or provide rewards: • Financial gain • Recognition • Promotion • Positive feelings from a job well done • Usually relates to employees’immediate job context • Where they work • With whom they work • The nature of the work

24. Creating an Ethical Climate • Top managers, employees, and stakeholders must support the philosophy that all organizations have responsibilities that extend beyond legal and economic obligations. • Members of the organization must be willing to share their values about workplace ethics.

25. Creating an Ethical Climate (cont.) • Ethical concerns should be incorporated into strategic planning. • Management must develop a mechanism for assessing its progress in making ethical decisions that contribute to social responsibility.