Conducting Business Ethically

What Is Ethical Behavior?

Ethics
Right and wrong, good and bad, in actions that affect others

Ethical Behavior
Conforming to generally accepted ethical norms

Ethical Considerations
Regarding a particular act
Utility: Does it optimize what is best for those who are affected by it?
Rights: Does it respect the rights of the individuals involved? Justice: Is it consistent with what we regard as fair? Caring: Is it consistent with peoples responsibilities to each other?

Company Practices and Business Ethics

Best Approach: Open, Honest, Responsive!

Ethics
Ethics
the system of rules governing the ordering of values

business ethics - the moral principles and standards that guide behavior in the world of business

Ethics (cont.)
Ethical systems
moral philosophy - the principles, rules, and values people use in deciding what is right and wrong universalism - individuals should uphold certain values, regardless of the immediate result
egoism - acceptable behavior maximizes consequences for the individual utilitarianism - seeks the greatest good for the greatest number of people, thereby maximizing total utility

Ethics (cont.)
Ethical systems (cont.)
deontology - focuses on the rights of individuals

relativism - ethical behavior defined by the opinions and behavior of relevant other people

Ethics (cont.)
The ethics environment
Ethical climate - processes by which decisions are evaluated and made on the basis of right and wrong

Corporate ethical standards- organizations must be explicit regarding their ethical standards and expectations

Business Ethics
Business Ethics:
The principles and standards that define acceptable conduct in business

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Recognizing an Ethical Issue

An ethical issue is an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical

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Ethical Issue Categories

1. Conflict of interest 2. Fairness and honesty 3. Communications 4. Business relationships

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1. Conflict of Interest
Occurs when a person must choose whether to advance their own personal interest or those of others

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2. Fairness and Honesty

The heart of business ethics General values of decision makers

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3. Communications
False and misleading advertising and deceptive personal-selling tactics anger customers and may cause a business to fail.

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4. Business Relationships
Businesspeople must be ethical toward their customers, suppliers, and others in their workplace.

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Reasons For Not Reporting Observed Misconduct

1. Fear of not being considered a team player 2. Didnt believe corrective action would be taken 3. Feared retribution or retaliation from supervisor or management 4. No one else cares about business ethics so why should I 5. Didnt trust organization to keep report confidential
Source: 1997 Society for Human Resource Management/Ethics Resource Center Business Ethics Survey Report, p. 21.

Climate Factors Conducive To Unethical Behavior

Emphasis on shortterm revenues Shareholders concerns take precedence over other constituencies No written code of ethics

Lack clear procedures for dealing with ethical problems

Danger Signs

Desire for quick fix solutions

Ethics considered from legal or public relations viewpoint

Financial concerns take precedence over ethical considerations

Questions to Consider in Determining Whether an Action is Ethical

Are there any potential legal restrictions or violations that could result from the action?

Does your company have a specific code of ethics or a policy on the action?

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Questions to Consider in Determining Whether an Action is Ethical

Is this activity customary in your industry? Are there any industry trade groups that provide guidelines or codes of conduct that address this issue?

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Questions to Consider in Determining Whether an Action is Ethical

Would this activity be accepted by your coworkers?
Will your decision or action withstand open discussion with coworkers and managers and survive untarnished?

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Questions to Consider in Determining Whether an Action is Ethical

How does this activity fit with your own beliefs and values?

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Ethics (cont.)
The ethics environment (cont.)
Ethics codes - most visible sign of corporate commitment to ethical behavior

Ethics programs
compliance-based - designed by corporate counsel to prevent, detect, and punish legal violations integrity-based - guiding principles that instill personal responsibility for ethical behavior

Ethical Decision Making

Define the issue clearly

Identify the relevant values in the situation

Ethical Decision Making

Implement the decision Weigh conflicting values and choose option that balances them

Three Factors that Influence Business Ethics

Individual Standards and Values

Managers and Coworkers Influence

Opportunity: Codes and Compliance Requirements

Ethical/Unethical Choices in Business

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Codes of Ethics
Formalized rules and standards that describe what a company expects of its employees

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Whistleblowing
The act of an employee exposing the employers wrongdoing to outsiders

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

The Facts on Business Ethics Today

Of employees surveyed:
84% reported that their organizations offer mandatory ethics training 54% reported that ethics training was useful at work

Source: Ethics Resource Center, 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work.

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