Business Ethics

1. Business Ethics “Doing the Right thing, and Making the Good Life Better”

2. Overview of Ethics • What is Business Ethics? • Some Ethical Quotes/Quiz • Some moral theories • Moral Development • Professional Standards/Industry Paradigms • Moral Decision Making

3. ETHICS QUOTES • 1. When I do good, I feel good; when I do bad, I feel bad. That’s my religion. (Abraham Lincoln) • 2. A man does what he must.. in spite of personal consequences, in spite of obstacles and dangers, and pressures.. and that is the basis of all human morality. (JFK)3. If you don't have integrity, you have nothing. You can't buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing. (Henry Kravis) • 4. Always do right – this will gratify some and astonish the rest. (Mark Twain) • 5. Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws. (Plato) • 6. Associate with men of good quality, if you esteem your own reputation; for it is better to be alone than in bad company. (George Washington) • 7. To educate a person in mind and not in morals is to educate a menace to society. (Theodore Roosevelt) • 8. A good name is more desirable than great riches; to be esteemed is better than silver or gold. (Pr 22:1) • 9. Two wrongs don’t make a right. (old english proverb) • 10. Its not enough to be busy– so are the ants! The question is– what are we busy about? (thoreau) • 11. What does it profit a man to gain the whole world, yet forfeit his soul? • 12. It takes less time to do a thing right than to explain why you did it wrong. (longfellow) • 13. “Live so that when your children think of fairness and integrity, they think of you.” (H.J. Brown) • 14. “The most important persuasion tool you have in your entire arsenal is integrity” (Zig Zigler) • 15. “A man without ethics is a wild beast loosed upon this world.” (Albert Camus) • 16. Ethics or simple honesty is the building blocks upon which our whole society is based, and business is a part of our society, and it's integral to the practice of being able to conduct business, that you have a set of honest standards. And it's much easier to do business with someone when you look them in the eye and say, "This is what we're going to do," and you understand what you each mean, and you can go away and get it done. (Kerry Stokes) • 17. If you can’t find time to do it right, when will you do it over? (Jeffrey Mayer)

4. ETHICS • QUIZ

5. Question 1 1. Which of the following has been found to be a true statement regarding ethics and the insurance industry? • a.) On average, insurance practitioners are more likely to act unethically in business practices than in purely personal situations. • b.) More than 50 percent of people in business indicate having observed one or more unethical or illegal acts in the past twelve months. • c.) Insurance practitioners believe that management’s emphasis on the bottom line is one of the main factors leading to unethical decision-making. • d.) All of the above are true statements.

6. Answer • Answer Q1. (d) All of the above are true statements. (a) is based on research by Eastman, Eastman, and Eastman 1996; (b) is American Society of CLU and CFC Ethics Officer Association); (c) Cooper and Frank, 1991. People with high ethical values in their personal lives may act unethically in their business practices because of what is expected and rewarded in their work. (Reilly, Kjy 1990)

7. Question 2. A strong organizational culture is one in which there is a high expectation of conformity with the organization’s beliefs, values, and purpose. All of the following are true statements regarding organizational culture EXCEPT: • a.) In general, members of organizations having strong cultures are more likely act ethically. • b.) In general, members in organizations with weak cultures are more likely to base their ethical decisions on the norms and values of small groups within the organization. • c.) In general, members of large organizations feel less responsibility for their actions than those in small organizations. • d.) In general, higher level employees have less ethical beliefs and their ethical decision-making is less than lower level employees.

8. Answer • Answer Q2. (a) A strong culture can lead to more ethical behavior if the culture’s values and purposes are ethical but it can also lead to conformity of unethical behavior. (Diacon & Ennew, 1996); (b) is true (Trevino 1986); (c) is true because responsibility is more diffused in large organizations (Ford & Richardson, 1994); (d) (Ford & Richardson 1994)

9. Question 3. All of the following are true statements EXCEPT: • a.) Individuals see themselves as more ethical than their coworkers or supervisors. • b.) The ethical behavior of supervisors strongly influences the ethical behavior of their subordinates. • c.) In general, supervisors’ and management’s actions have little influence over individuals’ ethical behavior because individuals form their ethical values outside of the work environment. • d.) Supervisors who are successful performers have greater influence over their subordinates’ ethical behavior.

10. Answer • Answer Q3. (c ) is the only one that is not true. Countless studies show that although some core values may not change, most values and ethical standards of conduct are influenced by supervisors and management actions; (a) is true (Tyson 1992), people judge themselves by their intentions and they judge others by their actions. (Cooper, 1996); (b) Nel & Watson, 1989, Cooper & Frank, 1992)); (d) True, (Javidan, Memmels, Devine & Dastmalchian).

11. Question 4. Which one of the following is a true statement? • a.) Most employees report that a company’s ethical position is stated in their training courses. • b.) The existence of a formal code of ethics is a strong deterrent to unethical behavior. • c.) The awareness of a formal code of ethics is a strong deterrent to unethical conduct rather than just the mere existence of one. • d.) The most successful ethical training programs are ones that emphasize how to make ethical decisions rather than setting clear, uncompromising rules.

12. Answer • Answer Q4. (d) As in other training in other aspects, training on how to make decisions is more effective in changing behaviors than training that sets out lists of rules to abide by. (Mahoney, 1997); (a) less than half of employees state that their company’s ethical position is stated in training; (b) The existence of a formal code has no relationship on ethical behavior. (Weaver, Trevino, Cochran, 1999) Enron, for example, had an award-winning 79 page Code of Conduct. (c) Unfortunately, awareness by employees does not affect their behavior either. (Kohut & Corriher, 1994, Vitell, 1997). However, clearly communicated and strongly enforced guidelines do make a difference. (Laczniak & Inderrieden, 1987).

13. Vocabulary: “Business Ethics” • What is “Business” ? • What is “Ethics” ?

14. Business is inherently social • Business has its own culture • Enron, Paypal, your office • Business Transforms Culture • Kiewit, FNB, community outreach • Business is about relationships • Workers, subcontractors, suppliers

15. Business: Its purpose/goal • Lone Ranger/I am an Island View: The purpose of business is to make me money, and increase stockholder value (Milton Friedman)

16. Alternate Stakeholder View: • Business should make money, but it has many stakeholders– groups/individuals who have a stake in what the business does. Owners are not the only one’s with a stake (Freeman)

17. Your business makes the world Better or Worse for people by: • The way you treat your customers • The way you treat your employees or coworkers • The way you treat your boss/company • The way you contribute to the local community

18. Responsibilities in Business: • To your employer • To Customers • To employees • To boss/es • To your community • To your family • To your God

19. The challenge: Balancing Responsibilities

20. What is ethics?

21. “Ethics” isn’t “legal” Difference between the Law and Ethics: • Some legal issues are neither ethical or unethical. • Some ethical issues have no laws to support them. • Law often tries to encourage ethical behavior: • Better to have self-regulation than more gov’t regulations

22. Ethics and Regulation • Government regulation often is designed to promote ethical behavior: • SOX • OSHA Regulations • EPA Regulations • Federal Sentencing Guidelines

23. Federal Sentencing Guidelines • 1. Having Standards • 2. Assigned Responsibility - Adequate Resources • 3. Due diligence in Hiring • 4. Communications and Training • 5. Monitoring, Auditing, Reporting • 6. Promotion and Enforcement of Ethical Conduct • 7. Reasonable Steps to Prevent Misconduct

24. Company Ethics • Company Policy often has some basis in the compliance regulations and legal statutes and fine schedules set up by government. • But Personal ethics requires personal decision-making, rooted in values.

25. Many think Ethics is just about what to NOT do: “Don’t do __!!”

26. But ethics is more than just what not to do • Minimal: What we shouldn’t do • Don’t steal, don’t kill, don’t lie • Better: What we should do (justice) • Be fair, Be honest, Fulfill duties, work hard • Best: What we could do to make things excellent for all of us… • Zoo, Childrens Hospital, Holland, Real Estate

27. Business can help create an excellent life • Example of this mindset: Midland National Life insurance mission: "To make life better for individuals and families… to afford security, trust, superior value, and peace of mind to those we serve… to offer the best in financial resources and services.“

28. How does Business make life better? Table discussion (5 min) • How do you make life better for your community through your business? • What are positive things you do for the benefit of the many through your work? • Do you see these things you do for others as being ethical?

29. The Point is: Realize the good you do in society! • Businesses do have an effect on society and culture. Business is not just about making money.

30. Moral Psychology WHY DO PEOPLE DO WRONG THINGS? Milgram Experiment

31. Question: Why do Soccer mom’s sometimes drive like jerks?

32. Question: Why do people forge signatures and documents?

33. Why do people stretch or edit the truth, or exaggerate?

34. Moral Development: Why do people do unethical things? • Why did the soccer mom drive like a jerk? • Why did my student cheat on the exam? • Why did people at Enron do unethical things? • Why do subcontractors cut corners?

35. Some reasons people do wrong: • Ignorant • In a hurry • Thoughtless • Didn’t plan ahead • Financial difficulties • Pressure from organization • Not clear communication from management • Lazy • Want a quick buck • They are a Bad evil wicked person

36. More Moral Psychology: WHY DO PEOPLE DO THE RIGHT THINGS?

37. Kohlberg’s theory of moral development • Stage 1: Obedience and Punishment • Stage 2: For self-benefit • Stage 3: For sake of reputation (good boy) • Stage 4: Maintain Social order • Stage 5: Contractual-Legalistic orientation • Stage 6: Conscience/Principle Orientation

38. moral dilemma: Condo • Scott Bennett is the engineer assigned to deal with vendors who supply needed parts to the Upscale Company. Larry Newman, sales representative from one of Upscale's regular vendors, plays in the same golf league as Scott. One evening they go off in the same foursome. Sometime during the round Scott mentions that he is really looking forward to vacationing in Florida next month. Larry says his uncle owns a condo in Florida that he rents out during the months he and his family are up north. Larry offers to see if the condo is available next month -- assuring Scott that the rental cost would be quite moderate. • What should Scott say?

39. Condo II • Larry tells Scott he can rent his uncle's condo for $100 a week. "My uncle," Larry says, "gets nervous when he rents to total strangers. He likes to have reliable people stay in his condo; the condo is paid for, and my uncle isn't interested in making money on it -- he just wants a little help meeting basic operating expenses and the taxes." • Scott accepts the offer and begins making plans for his vacation. Just before leaving, an Upscale vice president sends out a new policy statement that says, among other things: "Accepting incentives from vendors is strictly prohibited". • What should Scott do?

40. Kohlberg’s theory of moral development • Stage 1: Obedience and Punishment • Stage 2: For self-benefit • Stage 3: For sake of reputation (good boy) • Stage 4: Maintain Social order • Stage 5: Contractual-Legalistic orientation • Stage 6: Conscience/Principle Orientation

41. Part 2: Ethical Principles, and how to use them Brief explanation of the 5 classic ethical theories: • Egoism: • Social Contract Theory • Utilitarianism • Duty-Based • Virtue Ethics

42. Egoism • People should always do what is in their own self-interest. (ex: do what it takes to get repeat business)

43. Social Contract Theory • Compromise-Egoism: Make concessions to others, but try to get what you can • Obey the law, respect others because you want to be respected, etc • When driving, slow down near other schools, not just your own kid’s school

44. Utilitarian:Outcome-Based • Do what benefits the greatest number the most • Jump on the grenade if it benefits the most. • Do what is right if it will make for a better society in the long run, even if you could have short term maximization right now • I can save my client on this insurance premium by under-reporting risks, but in the long run this will cause the insurance company and other clients to be at considerable risk.

45. We can lose our moral conscience and concern! • “Capacity for the nobler feeling is in most natures a very tender plant, easily killed, not only by hostile influences, but by mere want of sustenance; and in the majority of young persons it speedily dies away if the occupations to which their position in life has devoted them, and the society into which it has thrown them, are not favourable to keeping that higher capacity in exercise.”

46. John Stuart Mill: • “Men lose their high aspirations as they lose their intellectual tastes, because they have not time or opportunity for indulging them; and they addict themselves to inferior pleasures, not because they deliberately prefer them, but because they are either the only ones to which they have access, or the only ones which they are any longer capable of enjoying.”

47. Principle/Duty-Based: • Only act in a way that you could make your act a universal law • Should I lie? Would I make lying a universal law? No. Then don’t lie! • Should I cheat on my taxes? Would I want everyone to do that? No. Then don’t!

48. Principle #2 • Treat others always as an end, not as a means to an end. • Don’t treat checkout person as humanoid ATM • Don’t treat other drivers as obstacles in your path • Don’t treat customer as a just a means to money

49. Virtue Ethics/Nebraska Ethics What is the GOOD life, and how do we achieve that? Aim for excellence • Moderation/Balance -- Vice Virtue ++Vice (Too little) (just right) (too much) Coward Courage Foolhardy

50. Being Virtuous: • Does depend on the situation • When to be witty • Does depend on the individual • Child ‘Maestro’ • Is something we must constantly strive to upkeep, work at • We can lose our touch! • It helps to have roll models: WWJD?