An Overview of Business Ethics

1. An Overview of Business Ethics Class 1 The Importance of Business Ethics

2. Chapter 1: Overview • Getting Started • Emails, Syllabus, Helpers • Business Ethics in Action Club • PMC Scale (fill out) • Framework for the Course • Terms, Stakeholders, CSR, Institutionalization • Ethical Decision-making, Leadership • Individual factors and philosophies • Cultures, programs, audits • Global concerns Why Study Business Ethics?

3. The Big Picture I. So what? II. Relationship to business III. Ethical decision-making process (individual and org factors) • Explore systems/processes associated with implementing ethics into business Regardless of who you are in business, it is your job to be ethical and make ethical decisions every day.

4. Current Events

5. What were you thinking Ryan? Oh wait…you Weren’t! “I over-exaggerated that story, and if I had never done that, we wouldn’t be in this mess,” Lochte said. “None of this would have happened. It was my immature behavior.”

6. Wells Fargo Bankers Open Millions of Fake Accounts • Two basic principles of management, regulation, and life: • You get what you measure. • The thing that you measure will get gamed. • If you want hard workers and measure hours worked, you'll get a lot of employees surfing the internet until midnight. If you want low banking bonuses and measure bonus-to-base-salary ratios, you'll get high base salaries. Measurement has consequences. Wells Fargo was just fined $185 million for opening accounts without customers’ permission.

7. What happened HERE? Basic scandal story: small groups of highly paid traders gleefully conspire to rip-off customers and make tons of money for themselves. Wells Fargo isn’t that story. Here, low-paid and ill-treated employees faced bad management, got tricked and were fired (5300 of them). Problem? WF had strict quotas regulating the number of daily “solutions” bankers were require to reach (e.g., new accounts). Managers told employees to do whatever it takes to reach their quotas. While managers wanted employees to open lots of real accounts, they designed a bogus measurement system, prompting fraud.

8. Basic Terms Ethics(from ethos: Greek for customs) • Philosophy of human conduct to determine right/wrong • Study of moral values and choices • Involves principles/values, rules, and goals Ethics = Thinking through one’s values Morals(from mores: Latin for customs) • Codified principles/values that establish boundaries of accepted “right” behavior • Morality is associated w/duty, which may require the subordination of one’s personal desires Morality = Living the values one holds

9. What do you value? • Money • What else?

10. What are your values?Based upon… • Religion/spirituality • Political beliefs • What else?

11. Ethics is not just “problems.” • Here’s $1 • Who should get it and why?

12. Ethics is also about making sound monetary decisions • Here’s $20 • Now who should get it?

13. ??$$ Who got the money $$?? • How did you decide? Is this how you would decide other business challenges? • Did the $ amount make of difference? What if were 1K? • Regarding other business decisions, what might work about the process you used –or not work? • How can you make the best possible decisions --for you, your organization, and those around you?

14. For instance . . . • Let us say I am trying to convince you that we all share some basic similar values. • It is not enough for me to simply tell you, or even “teach” you. You have to experience it…yourself! • You use your values when you’re faced with a problem or challenge. • Try your hand at the following brief exercise.

15. Drawing a house . . . • In pairs, cooperatively draw a house without talking. • Both team members must hold the writing instrument during the entire activity. • You will have only a minute or two.

16. Drawing a house • What values influence your different experiences? • What differences in task, relationship, or physical orientations did you discover? • What differences in cooperation vs. competition did you notice? • Were there any misunderstandings? • How might this apply in real-life situations? • How might culture therefore influence behavior?

17. Why are emotions important? . . . When you face an ethical challenge, emotions influence how you think about competing pressures that can lead to your reasons to act—or not to act.* *Sekerka, L.E. & Bagozzi, R.P. (2007). Moral courage in the workplace: Moving to and from the desire and decision to act. Business Ethics: A European Review, 16(2), 132-142.

18. What is Business Ethics? • Staying out of trouble? Paying fines? • Religion mucking around and pushing their agenda in business? • Unnecessary; we only hire good people here! • Good guys preaching to bad guys. • An imposition on business, we don’t do good, we make money! • Academics /philosophers getting together to leverage their ideas? • Ethics can not be managed, you either are ethical or you’re not! • The same thing as social responsibility. • Irrelevant unless there’s a law suit; we're ethical if we follow the laws. • Little practical relevance for the workplace.

19. Comprises principles/standards that guide behavior in business Principles/standards are specific boundaries for behavior considered universal Values are specific beliefs about right/wrong that contribute to social norms The study of what is right or wrong, acceptable or unacceptable behavior within an organizational setting Determined by the person, organization, situation, and stakeholders What is Business Ethics?

20. Today’s Challenge Trust in “business” is declining No one is exempt from ethical misconduct Stakeholders determine what is ethical/unethical Investors Employees Customers Interest groups Legal system/governments Community

21. Why Study Business Ethics? Unethical behavior is on the rise Society’s evaluation of right or wrong affects its ability to achieve its business goals External requirements such as Sarbanes-Oxley, FSGO, and stakeholder demands for ethics Individual ethics alone is not sufficient Need to identify ethical issues for key stakeholders

22. Living wage Theological & Philosophical domains 1990s Institutionalized 1960s Social Issues 1970s BE as a Field 1980s Consolidation 1950s Ethics in Business • Consumer’s Bill of Rights • Nader’s push for (safety) • Social Responsibility • Bribery • Corruption • Deceptive advertising • Price collusion • Product safety • Environment • Organized field • BE centers • Ethics emerging in course work • Defense • industry initiative • Multinationals • Push for self-regulation/ deregulation (Reagan/Bush) • Free trade • Push for self-regulation • Federal Sentencing Guidelines for Orgs (FSGO) • Shift toward multi-national operations TODAY • Issues with corporate non-compliance • Sarbanes-Oxley Act (2002) and FSGO reform (2004) • Danger lack of misconduct discovery early • Basic assumptions of capitalism being debated • What is corp social responsibility? • What duty does the corp have to protect people and the planet? • What is the inherent meaning of the firm, the corporation?

23. 21st Century Rationale for Business Ethics Better ethical climate Employee commitment and trust Investor loyalty and trust Customer satisfaction and trust Long-term profits Ethical culture Corporate culture captures the values and norms that define organizational conduct.

24. The Corporation • Some special aspects must be considered when applying ethics to business. • Business must earn a profit to • survive. • 2. Business must balance their desires for profits against the needs and desires of society. • 3. Maintaining this balance often requires compromises or tradeoffs.

25. Movie: The Corporation 1. What role should the corporation play in society? 2. How can we hold corporations accountable for their actions? What about their Boards, CEOs (execs), employees? 3. Can org members overcome the inherent flaws of their corporations? 4. Are corporations the cause of social problems, or is it consumerism, capitalism, or all three? 5. If corporations were more considerate toward people and the planet (poverty, pollution) would that help? How can you “make” a non-sentient business care? 6. Are corporations inherently amoral? Why?

26. Due Next Week • Look around – prepare to form teams (4 people each) • Read Chapter #1 and #3 in text • Write conversation starter (CS) #1 • Print out VIA strengths results with your CS • Email me if you have any questions 