Business Ethics Ssim

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BUSINESS ETHICS


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What is ethics?

Ethics is the branch of philosophy that focuseson morality and the way in which moralprinciples are applied to everyday life. Ethics

has to do with fundamental questions such asWhat is fair? What is just? What is theright thing to do in this situation? Ethicsinvolves an active process of applying values,

which may range from religious principles tocustoms and traditions.


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What is business ethics?

Every business has an ethical duty to each of

its associates namely, owners or stockholders,

employees, customers, suppliers and the

community at large. Each of these affectorganization and is affected by it. Each is a

stakeholder in the enterprise with certain

expectations as to what the enterprise shoulddo and how it should do it.


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Business ethics is applied ethics.

It is the application of ourunderstanding of what is good

and right to that assortments ofinstitutions, technologies,

transactions, activities andpursuits that we call business.


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Ethical behaviour is the best long term businessstrategy for company , however this does notmean that occasions may never arise when doingwhat is ethical will prove costly to a company nor

does it mean that ethical behaviour is alwaysrewarded or that unethical behaviour is alwayspunished. On the contrary, unethical behavioursometimes pay off and the good sometimes lose.

Strategy means merely that over the long run andfor most of the part, ethical behaviour can give acompany significant competitive advantages overcompanies that are not ethical.


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Ethics, Morality and Values

Ethics is the study of morality

Morals are the standards used to judge right

and wrong

Values are the degree of conviction about the

way to conduct life


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Conviction

The degree of conviction to your values can be

described as primary, secondary, or peripheral

Primary core values, unchanging

Secondary Important, but changeable

occasionally

Peripheral Values that are known but not lived

by


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How Do We Get Values?

Parents, family and friends

Experiences

The environment (media, education)


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Conflict of Values

Dramatic outcomes can occur when

individuals and groups hold conflicting core

values:

Religious wars

Business scandals

Crime


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The Relationship Between Law and

Ethics

The law is an expression of the ethical beliefs of our

society.

Law and ethics are not the same thing. The

question, Is an act legal? is different from thequestion, Is an act ethical? The law cannot codify

all ethical requirements. Therefore, an action might

be unethical, yet not necessarily illegal. For example,

it might be unethical to lie to your family, but it is notnecessary illegal.


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STAKEHOLDERS AND ETHICS: Employees A companys duty to employees arises out of respect for the

worth and dignity of individuals who devote their energies tothe business and who depend on the business for theireconomic well being. Principled strategy making requires thatemployee related decisions be made equitably andcompassionately with concern for due process and for theimpact that strategic change has on employees lives. At bestthe chosen strategy should promote employee interests and

concerns such as compensation, career opportunities, jobsecurity and overall working conditions.

At worst the chosen strategy should not disadvantageemployees. Even in crisis situations, businesses have an ethicalduty to minimize whatever hardships have to be imposed in the

form of workforce reductions, plant closings, job transfers,relocations, retraining and loss of income.


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STAKEHOLDERS AND ETHICS: Consumers

The duty to the customer arises out of

expectations that attend the purchase of a good

or services. However, the questions which still

abound are, should a seller voluntarily inform

consumers that its products contain ingredients

that though officially approved for use aresuspected of having potentially harmful effect? Is

it ethical for cigarette manufacturers to advertise

at all ? Is it ethical for manufacturers to stonewall

efforts to recall products they suspect have faulty

parts or defective designs.


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STAKEHOLDERS AND ETHICS: Suppliers A companys ethical duty to suppliers arises

out of the market relationship that exists

between them. They are both partners and

adversaries. They are partners in the sense

that the quality of suppliers parts affects the

quality of a firms own product and in thesense that their businesses are connected .

They are adversaries in the sense that the

supplier wants the highest price and profit itcan get while the buyer wants a cheaper price

, better quality and speeder service.

l


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STAKEHOLDERS AND ETHICS: Suppliers A company confronts several ethical issues in its

supplier relationship. The questions that arise are

Is it ethical to purchase goods from foreignsuppliers who employ child labour, pay

substandard wages? Is it ethical for supermarket

chains to demand slotting fees from foodsuppliers in return for placing their items in

favourable shelf? Is it ethical to threaten to cease

doing business with a supplier unless supplier

agrees not to do business with key competitors?Is it ethical to reveal one suppliers price quote to

a rival supplier?


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STAKEHOLDERS AND ETHICS: CommunityA companys ethical duty to the community at large stems

from its status as a member of the community and as

an institution of society. Communities and society are

reasonable in expecting businesses to be good citizens

to pay their fair share of taxes for fire and police

protection , waste removal, streets and highways andso on, and to exercise care in the impact their activities

have on their environment, on society, and on the

communities in which they operate. The questions that

arise are for example, whether it is ethical for a

brewer of beer to advertise its products on TV, at slots

when these ads are likely to be seen by underage

viewers or not?

S O S CS C i


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STAKEHOLDERS AND ETHICS: CommunityA companys community citizenship isultimately demonstrated by whether it

refrains from acting in a manner contrary tothe well being of society and by the degree towhich it supports community activities,encourages employees to participate incommunity activities, handles the health andsafety aspects of its operations, acceptsresponsibility for overcoming environmental

pollution, relates to regulatory bodies andemployee unions and exhibits high ethicalstandards.


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Similarly, just because an act is illegal does not

necessarily mean it is immoral. Rosa Parks wasacting illegally when she refused to give up herseat on the bus to a white male, but that does notnecessarily mean she was acting unethically.Should an individual obey the law even if it wouldbe unethical to do so? Under the theory of civildisobedience espoused by Martin Luther King,Mahatma Ghandi and others, an immoral lawdeserves to be disobeyed. Can you think of anyexamples of acts that would be illegal, yetarguably ethical?


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THEORIES OF ETHICAL CONDUCT

Theories of ethics present standards by which

a person can analyze and evaluate his or her

own moral conduct.

Over the centuries, two different philosophical

frameworks developed: ethical standards

based on universal duties (deontology) and

ethical standards based on consequences(utilitarianism).


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Deontology

Deontology is the philosophical practice of

defining and adhering to an absolute set of

standards by which ethical behavior can be

measured. It tries to define universal dutiesthat serve as moral guides to decision making.

When a moral dilemma arises, a person can

apply these universal standards to determinea course of action that is good.


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In deontology, a person fulfills absolute moral

duties regardless of whether good comes from

the actions. A person decides upon actions by

asking if a particular action is morally right orwrong. The act of carrying out that duty is

important rather than the consequences of

the act. An example of a set of deontologicalrules would be the Ten Commandments.


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The Rights Model

The rights model analyzes ethical issues byfocusing on an actions impact on humanrights. Under this model, human rights are

the rights all people have. An action thatmaximizes respect for human rights andminimizes their violation is morally correct.When encountering ethical dilemmas, a

person applying the rights model selects theaction that minimizes the violation ofstakeholders rights.


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The two necessities to be fully human are

freedom and well-being. Thus, two basic

categories of human rights exist within the

model: (1) rights of liberty, and (2) rights ofwell-being.


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Rights of Liberty

Privacy

Free consent

Free speech Freedom of conscience

Right to life


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Rights of Well-Being

Employment

Food

Housing Education


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Under the rights model, each person

possesses certain fundamental human rights

because of the fact that they are a human

being. Each persons life has an infinite value.


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Utilitarianism

Utilitarianism is an approach to establishing

ethical standards based on the consequences

of an action. In an ethical dilemma, a person

selects the action that brings about thegreatest amount of good for the greatest

number of people. The model determines

correctness in terms of social benefit. Manybusiness people favor the cost/benefit

approach of utilitarianism.


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Applying the Rights Model

Identify the facts.

Identify the ethical issues.

Identify the alternative courses of action.

Identify the stakeholders. Determine to which extent each alternative

respects the dignity and fundamental rights ofstakeholders or violates their rights.

Choose the alternative that maximizes the dignityof stakeholders and minimizes the violation oftheir rights.


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Applying Utilitarianism

Identify the facts.

Identify the ethical issues.

Identify the alternative courses of action.

Identify the stakeholders. For each alternative, calculate the costs and

benefits (identify who would be harmed and whowould benefit).

Choose that alternative which results in thegreatest amount of good for the greatest numberof stakeholders.


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Example

A secretary who has worked for your

corporation for fifteen years is involved in a

car accident in which she permanently loses

the use of her right hand. Thus, she can nolonger effectively type, file, or perform many

of the other functions that she previously had

performed and that are included in her jobdescription.


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Your corporation has a very tight budget and

does not have sufficient funds to pay for an

additional secretary without reallocating

budget items. The injured secretary has beenvery loyal to your corporation, and you have

been very satisfied with her work and

dedication. She wants to stay at her job.


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Moreover, she does not believe that she could

find other employment at this time. Should

your corporation fire her, lay her off with

compensation, or find a way to retain her? Inresolving this dilemma, apply:

Utilitarianism

The Rights Model Your own personal opinion


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Marketing ethics and social

responsibility


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What is ethics?

Ethics are the moral principles and values that govern

the actions and decisions of an individual or group.

They serve as guidelines on how to act rightly and

justly when faced with moral dilemmas.

Right ? Wrong ?


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Definition of marketing ethics

Marketing ethics is the area of applied ethics whichdeals with the moral principles behind the operation and

regulation of marketing. Some areas of marketing ethics

(ethics of advertising and promotion) overlap

with media ethics.

M k ti Ethi


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Marketing Ethics

Customer

ServicePricing

DistributorRelations

General

Code

Product

Development

Advertising

StandardsCorporate

MarketingEthics

Policies


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Factors influencing ethical marketing

behavior


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Relationship between marketing and

ethics

a reasonable practice leading to positive

relationships.

that rules are not necessarily contractual.

allows buyers and sellers to work together.

disadvantage: requires time to develop a list

of expected conduct or rules of behavior.


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Three concepts ofsocialresponsibility


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Social Criticisms of Marketing



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HighPrices

Shoddy orUnsafe

Products

Poor

Service

Deceptive

Practices

Planned

Obsolescence

HighPressure

Selling

MarketingsImpact on

IndividualConsumers


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Marketings Impact on Society

Too FewSocialGoods

False Wants andToo

Much Materialism

Too MuchPoliticalPower

CulturalPollution

M k ti I t Oth B i


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Acquisitions

of

Competitors

Marketing

Practices

that

Create Barriers

to Entry

Unfair

CompetitiveMarketing

Practices

Marketings Impact on Other BusinessesCritics Charge that a Companys Marketing Practices Can Harm Other Companies and

Reduce Competition Through:


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Responsibilities of the marketer

Honesty andfairness

Rights andDuties of

Parties in theMarketingExchangeProcess

In the Area ofProduct

Developmentand

Management

In the Area ofPromotions

In the Area ofDistribution

In the Area ofPricing

In the Area ofMarketingResearch

OrganizationalRelationships

C S d


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Nike has been criticized latelyabout NOT being sociallyresponsible

Accusations of overseassweatshops, child labor, andexploiting lower income U.S.families

Nike took the charges seriously andcommissioned a study of Nikefactories abroad

Nike donates more than $30million in cash and products tosports programs and 3% ofearnings to charity

CEO Knightnot sure how wemeasure good performance in

corporate responsibility

Case Study

Nike


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Ethics and HRM


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Environmental Factors

Over the last decade, ethical scandals in

business have been on the rise:

Enron

WorldCom

Tyco

Health South


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How To Stop Unethical Behavior

A combination of external regulations and

compliance programs and voluntary corporate

ethics programs is the most effective way to

combat inappropriate corporate behavior(Trevino, Weaver, Gibson, & Toffler, 1999).


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External Regulations

Sarbanes-Oxley Act (SOX) Requires CEOs and CFOs to sign statements

making them personally responsible for theaccuracy of the quarterly financial statements

Knowingly misrepresenting the financials opensthem up to punishments including fines and jailtime

Protection for whistleblowers


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Other External Regulations

Other external regulations include regulations

related to:

Minimum wage

Overtime compensation

Discrimination

Health and Safety

Privacy


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Organizational Responses

Codes of ethics including:

Explicit standards of rules to be followed

Corporate values statements


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Explicit Standards

Explicit standards define precisely acceptable

and unacceptable conduct such as accepting

gifts and the amount allowable


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Corporate Values Statements

Describes the core values the company wants

its employees to exhibit including:

How employees are to treat one another

How employees are to treat customers andstockholders


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Effective Values Statements

Must come from the top with the CEO being

directly involved in its development

Top management must actively disseminate

the values statement and then live by it

The values statement must be focused


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HR Responses

Conduct surveys to determine:

What behaviors are routinely being rewarded and

reinforced

What values and attitudes are prevalent

How strong the pressure to engage in misconduct

is


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HR Responses Continued

Take steps to eliminate and discourage

reasons for misbehavior and introduce and

encourage reasons to behave ethically


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Develop an appraisal system that rewards

individuals for ethical behaviors and punishes

those who act unethically


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HR can use its expertise to communicate with

the workforce to get out the ethical message


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Costs of Corporate Ethics Violations

$7 trillion in stock market losses

Loss of jobs and retirement savings by

employees


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Costs of Corporate Ethics Programs

Costs of implementing and maintaining

compliance to create an ethical business

environment


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Human Costs

Unethical business environments can:

Demotivate individuals

Make good employees leave the company

Attract unethical employees

Lead to the lack of trust by the employees for the

company


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Ethics Effectiveness Quick-Test

Ethics Effectiveness Quick-Test asks eight

questions about twelve different areas that

can help to increase the ethical effectiveness

in an organization


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Guidelines for Fostering an Ethical Culture

Have a well developed policy and procedures

manual

Enforce policies

Reward compliance

Recruit ethical employees

Create a division to oversee ethics


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Conclusion

Whenever you are required to make a difficult

decision, especially one that is ethically

challenging, select an option that you would

be comfortable describing to the nation onthe evening news

Business Ethics Ssim

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