Business Ethics: When the Rubber Hits the Road Presented by: Mona E. Barragan.

Business Ethics: When the Rubber Hits the Road

Presented by:

Mona E. Barragan

Objectives

• Define business ethics and whether business ethics may be taught

• Define consumerism• Study business ethics as it relates to small

business• Highlight the results of 386 questionnaire

responses to general business ethics questions• Practice what you have learned by participating in

a group exercise

Business Ethics Definitions

• Business ethics is most narrowly defined in terms of what is right/wrong or good/bad

• The definition that is more appropriate to business today is “The processes through which individuals apply their personal values, beliefs, and attitudes to new, dynamic situations in the workforce in order to make, implement, and evaluate optimal decisions.”

Can business ethics be taught? Some say ‘no’ because...

• Values are fully formed by the time we reach adulthood

• Business ethics is unscientific

• Business instructors may not possess ethics expertise; ethics instructors may not possess business expertise

• University business curricula and business training programs are already full

Most say ‘yes’

• Most textbook authors are including ethics in their university texts

• Most authors researched believe that business ethics may be taught…their only point of contention is how it should be taught

• Many professional organizations require members to obtain ethics training

• Over 90% of questionnaire respondents believe that parents, teachers and employers should teach business ethics

Some Social Obligations of Small Firms

Response to Employee Needs

Compliance with Government Regulations

Consumerism

Protection of Environment

Contributions to Community Organizations

Response toCommunity Needs

Support of Education

Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing

Business Ethics/Social Responsibility

• Should be recognized by all businesses--especially small businesses

• Level may be limited because small businesses must make a profit to survive

• Does what is best for the majority of stakeholders--not just what is in the owner’s best interest

Small business and ethics

• In small business, the personal integrity of the founder or owner is the most important key to ethical performance

• Code of ethics may become necessary as a business grows and the owner’s personal influence decreases

Small business and ethics (continued)

• Studies suggest that entrepreneurs are more likely than other business managers and professionals to be unethical with respect to issues that directly affect profits

• Small businesses are under greater pressure to act unethically, because they may not absorb the cost of making ethical decisions as easily as large firms

Consumerism Issues

Key Emphasis: Let the seller beware!

Customer Expectations:

Products/services that reflect

•Safety

•Reliability

•Durability

•Quality

•Accuracy in advertising

Small Firm Responses:

•Clearly stated warranties

•Efforts to satisfy customers

•Honest advertising

•Smoke-free areas

•Standing behind repair work


How Entrepreneurs RationalizeCheating on Taxes

“Everybody does it.”

“It’s the way I get paid for unnecessarygovernment red tape.”

“I have to compete with people who cheat.”

“Big operators have their loopholes; this just evens things up.”

“Taxes are too high; the government doesn’t deserve that much money.”


Difficult Ethical Issues Facing Small Firms

Relationship with outside parties in the marketplace

Superior subordinate relationships

Employee responsibilities and actions that in some way conflict with the best interests of the employer

Relationships with suppliers

“Putting old parts in a new device and selling it as new”“Lying to customers about test results”

“Reporting to an unethical person”“Being asked by my superiors to do something that I know is not good for the company or its employees”

“Receiving kickbacks by awarding overpriced contracts”“Theft of corporate assets”“Getting people to do a full day’s work”

“Vendors want a second chance to bid if their bid is out of line.”“The ordering of supplies when cash flows are low and bankruptcy may be coming”


Compliance with governmental requirements and reporting to government agencies

Human resource decisions

Environmental and social responsibilities

“Having to deal with so-called antidiscrimination laws which in fact force me to discriminate”“Employing people who may not be legal [citizens] to work”

“Whether to lay off workers who [are] surplus to our needs and would have a problem finding work or to deeply cut executive pay and perks”“Sexual harassment”

“Whether to pay to have chemicals disposed of or just throw them in a dumpster”“Environmental safety versus cost to prevent accidents”

Difficult Ethical Issues Facing Small Firms


Results of 386 Questionnaires

• 186 respondents were graduating university seniors, post-graduate students, or graduate students

• 200 respondents were business practitioners

• Summary of respondents’ perceptions follow in Tables 1 through 8

Tables 1 - 6

Tables 1 - 6 compare studentand practitioner responses to questions

on business ethics

Table 1I believe I am living in a time of general ethical decline in:

(% of respondents that Agree)

Students Practitioners

Society 80% 79%Business 62% 64%

* * * * * * * * * * * * * *Have you ever made a decision in the workplace

that some may construe as unethical?

Yes NoPractitioners 33% 67%

Table 2

I believe that ethical business practices lead to:(% of respondents that Agree)


increased profits 68% 75%increased returns on investment 65% 74%a positive work environment 91% 96%a positive public perception of 89% 94%

the organization

Table 3

I corporate decision-makers should be accountable to:(% of respondents that Agree)


the government 58% 57%stockholders 88% 98%employees 92% 97%the communities in which 87% 91%

they operate

Table 4I believe I will face/have faced the following issues in my

work experience:(% of respondents that Agree)


growing presence of women & minorities 95% 72%ecological responsibility 83% 40%illegal activity 74% 36%global complexities 88% 55%restructuring & reorganization 91% 85%mergers and acquisitions 87% 64%technological surveillance of employees 81% 53%

Table 5

I believe business managers should consider ethical/socialimplications before they make business decisions:

(% of respondents that Agree)


95% 96%

Table 6

I believe the following should be LEADERS in teaching ethics/social responsibility in BUSINESS decision-making to future

managers:(% of respondents that Agree)


parents 88% 91%teachers/professors 90% 97%clergy 70% 74%employers 88% 94%

Tables 7 - 8

Tables 7 - 8 present practitioners’

experiences with business ethics

Table 7

I have personally made/witnessed others make decisions in the workplace that involve(s) business ethics/

social responsibility:(% of respondents that Agree)

Personally Othersat least weekly 49% 54%between weekly and monthly 26% 27%between monthly and yearly 17% 12%less than once a year 4% 4% never 5% 3%

Table 8What do you believe are the motivating reasons forunethical behaviors by managers/non-management

employees:(% of respondents that Agree)

Managers Employeescareer advancement 74% 69%financial benefit 80% 71%no formal ethics training 33% 45%upbringing lacks ethics emphasis 57% 64%lack of accountability 64% 66%company policies do not address ethics 28% 33%corporate culture 56% 46%following directives 31% 37%

Class Scenarios

Scenario #1

Jeff is a salesman working at a small business that manufacturessmall tools. He is paid strictly on a commission basis.The higher the price he negotiates with his customers,the higher his commission, and thus, his paycheck.

Many of Jeff’s customers are small businesses like the one heworks for. While he needs to provide for a family, his smallbusinesses customers cannot afford high prices for tools.

How can Jeff balance the needs of his family and his customers?What are the ethical implications of the decisions Jeff makes?

Scenario #2

Sarah started a small Internet company two years ago. Shesees that she is beginning to lose a lot of business tocompanies that pop up, produce advertisements that promisethe world, do not deliver, and are gone in a year.

Sarah has decided she has several options: (1) compete withthem head to head by making the same promises, (2) exposingthe fly-by-night businesses for what they are, (3) wait it out,hoping her business will survive and even thrive in the long run.

What course of action should Sarah take? How will her actionsaffect all of her stakeholders?

Scenario #3Samantha runs an antique store in Madisonville, Texas.She has an assistant manager, two sales clerks, one buyer,and a bookkeeper that work for her full time. The assistantmanager resigns. One sales clerk with 15 years of experience,the buyer who has 6 years, and the bookkeeper who has1 year all want the promotion.

The sales clerk’s performance has been marginal, but sheis a steady, dependable employee. The buyer has excellentconnections to the auction market, which is why he was hired;however, Samantha and the buyer don’t always get along.The bookkeeper is a go-getter who always gives 200%.

Who should Samantha promote, and why? Are there trade-offsbetween what is fair to the employees and what is best forthe business?

Scenario #4

Paul works for a small communications company. His earningsand benefits are enough to provide nicely for his family of 4.He has just lost his largest customer, $2 million, because ofan unethical decision made by Paul’s boss.

Paul has discovered several things he could do: (1) go to hisboss and address the unethical decision with him, (2) go tothe customer and try to cut a personal deal with him, (3) leavethe company.

What should Paul do? Who will his decisions affect?

Scenario #5

Elena is the bookkeeper for a small oil & gas firm. She postsall entries, including all routine monthly entries that are requiredto close the books. The business is attempting to get a large loanfrom a bank, and so Elena works day and night to get the booksclosed quickly.

After presenting the month-end reports to the business owner,the owner says, “we are at ____ in net income; we need to beat _____.” He subsequently gives her entries to make into theaccounting records for which she has no backup. Elena calculatesthat including those entries, the net income will be where the ownerwanted it to be.

What should Elena do? What are her choices and who will herdecisions affect?

Scenario #6Joyce works for a small real estate brokerage firm. They buyand sell property that has been abandoned or repossessed for non-payment of taxes. Although an initial environmental assessmentof a property came up clean when a property was first purchased,Joyce has recently learned that a part of the property wasused as a dumping ground for paints and other chemicals inthe past.

Joyce and her employer feel since the property passed an initialenvironmental inspection, it will pass again, and the companydoes not wish to disclose the environmental hazards.

What are Joyce’s options when placing the property for sale?What are the implications of the decisions she makes? Who willher decisions affect?

Scenario #7

Jake, the owner of Mustang Supplies, believes thatemployees are stealing from him by placing small toolsand equipment into their lunch boxes. A friend has suggestedthat Jake place hidden surveillance cameras in the break roomand in the employee locker area.

What should Jake do? Are there privacy issues involved inthe decisions he makes? What are the implications ofthe decisions he makes?

Scenario #8

Max works for a small used car dealership. The owner hasalways allowed him to create his own advertisements.Recently, the owner has started pressuring Max about the“fine print” in his advertisements. That is, the owner wishesto price one vehicle at a super sale price, with the small printin the advertisement stating: “one at this price.” He wantsto bring in more potential customers.

What are your options? What are the ethical implicationsof these advertisements? What should Max do?

What may we learn from practitioners?

Scenario #1--a balancing act

I'm in Sales. By definition I sell a product, service, etc.,and try to increase the overall margin of a job. This means that Iam trying to "bleed" money out of my customers. I have a budget.If I obtain the budgeted goal, I am rewarded by increasedcommissions. Question: What's at stake? I am constantly tornbetween putting the "screws" to a cust that trusts meand a company signs my pay check! This far, I believe I havebeen able to balance them both.

Scenario #2--my decisions affect millions of people

Know yourself & your ethical boundaries. Be honest with yourselfabout what you can & cannot do. Be sure you understand therepercussions of your decisions-the consequences to yourcommunity, your family, your company/employees, friends and the consequences to yourself. One decision affects millions of people,more times than you think. That's a lot of responsibility.Always be prepared to take responsibility for your actions,but never expect to get credit for them.

Scenario #3--be fair

Treat everyone fairly. I have seen so much back-stabbing eitherfor getting ahead or getting out of trouble. You might havepersonality conflicts with people--but you still need to try tobe neutral. Hope this helps with your study & try to make thisworld a better place by teaching ethics!

Scenario #4--time to leave

I lost a 2 plus million dollar account because of the lackof ethics the president of the company had. I left the companyshortly after.

Scenario #5--stand your ground

"Awareness" is the key! Understand that eventually a situationwill arise where ethics is an issue. If it comes from a clientor management, don't be afraid to stand your ground. You canalways get a new job, but it's very difficult to change yourreputation.

Scenario #6--stepping over the line

Students need to be informed how ethical decisions apply toeveryone and that the decisions they make will affect everyone.Once upper management learns that you are willing to ethicallylean toward the company's side or decision, they will return againand again for your help. If you make an unethical decision forthe company's benefit you will be expected to cover it up andforget about it, until they need you to do it again. My ethicalsituations deal mainly with the environment.

Scenario #7--all-knowing Big Brother

Continue teaching ethics, but aside from that place an emphasison "Big Brother." The technological surveillance of employeesis out of control. Welcome to Dell.

Scenario #8--bait advertising--reputation is all you have to lose

Let them be fully aware that unethical behaviors will happen,and that they will be faced with it and will have to make adecision (be prepared). Unethical behavior always catches upto people. It may never catch up with them financially, however“reputation" in the business world will make or break you.Being in sales, I encounter unethical behaviors frequently.Large corporations are just as guilty as small businesses(it is not isolated to any segment of the market).

An Ethical Culture

An ethical culture is one in which the company makes a good faith effort to meet

its obligations to all its stakeholders not just to its employees, but also to its

customers, shareholders, the community and the environment. The list of

stakeholders gets longer every day, and their interests often conflict, but they

cannot be ignored. Shaun O’Malley, chairman

emeritus of Price Waterhouse

An ethical culture is one in which the company makes a good faith effort to meet

its obligations to all its stakeholders not just to its employees, but also to its

customers, shareholders, the community and the environment. The list of

stakeholders gets longer every day, and their interests often conflict, but they

cannot be ignored. Shaun O’Malley, chairman

emeritus of Price Waterhouse


“Cultivate literature and useful knowledge, for the purpose of qualifying the rising generation

for patrons of good government, virtue, and happiness.”

George Washington

Business Ethics: When the Rubber Hits the Road Presented by: Mona E. Barragan.

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Transcript of Business Ethics: When the Rubber Hits the Road Presented by: Mona E. Barragan.