BUSINESS ETHICS
Ethical
decision making in Business
Moral Choices Facing
Employees
Employment
issue
Job
discrimination
Workplace
Ethics
in Marketing
Ethics
in Finance Industry
Legal
liabilities of Manufacturers
Ethical
decision making in Business (top)
Factor
influencing ethical decision making (top)
- ethical issue
intensity
- def : relevance / importance of
an ethical issue in the eyes of individual, work group, org.
- personal / temporal character to
accommodate value, belief, needs, perception
- eg : Enron staff initially
perceive off-balance sheet partnership to be legal, Panzi-scheme
(pyramid fund) finally collapse causing trouble to Enron
- ethical issue yet to teach
critical awareness level if managers fail to educate employees about
specific problem
- individual factor
- based on own value, principle
- learned from socialization
process - family, social groups, church, formal education
- typically involve
- honesty
- conflict of interest
- discrimination
- nepotism
- theft of org. resources
- eg: using company phone to make
personal call is debatable- if emergency call, maybe ethical
- organizational
factor
- organizational value sometimes
has higher influence on personal value
- includes
- corporate
culture
- set of value, belief,
goals, way of problem-solving that the org. members share
- eg: Walt Disney requires
its worker to understand its ethical approach toward customers
- ethical
climate
- decision process of an
org. culture to determine responses to ethical issue are correct
/ wrong
- function of many
factors:
- corporate policies
on ethics
- top mgt leadership
- co-workers influence
- significant
others
- those who have influence
on others
- eg: co-workers, peers,
subordinate
- opportunity
- def : condition in an org that
limit / permit ethical / unethical behavior
- opportunity that results from
providing rewards
- internal - feeling of
goodness
- external - social approval.,
status, esteem
- condition fail to erect barriers
- absence of punishment
- reward for unethical behavior
eg: salesperson awarded due to dishonest tactic in securing huge
business deals for a company
- relates to immediate job context
- where, whom, nature of work
- eg : staff working under
absence of supervision might steal thing
- include motivational factors
- pay rates, bonus, public
recognition
- eg: low salary might
prompt staff to be dishonest towards company
- opportunity to eliminate
unethical behavior - formal codes, policies, rules
Corporate
governance (top)
- formal system
developed to remove opportunity to behave unethically
- concept :
- accountability -
how closely workplace decision aligned with firm objectives / mission
and comply to legal consideration
- oversight
- system of checks, limit policy deviation and ethical misconduct
- control
- audit / improve company decision making process
- eg : financial
controller falsifying account, creating a fraud because no check / system
implemented
- major issue:
- shareholder
right
- executive
compensation - eg: pay too much to under performed CEO
- risk mgt
- financial report
integrity
- role of CEO in
board decision
Moral Choices Facing
Employees (top)
Obligation to firm
(top)
- loyalty to company
- promote employer / company
interest
- carry out lawful instruction
- warn org. danger / defend org.
reputation
- include - work overtime /
accepting transfer
- conflict of interest
- reward, autonomy and
self-fulfillment (workers) not compatible with org. desired productivity
- eg: employee prefer to wear
informal vs formal wear (dress code issue)
- work
contract - work agreement to expect worker obliged to company
- workers should not subordinate
org. welfare for their own gain
- eg : accepting bribe to leak out
company confidential data
Abuse of official
position (top)
- insider trading
- use of significant data yet been
made to public likely to affect stock prices
- eg: leaking information about
acquisition / merger to relatives to buy anticipated increased stock
prices
- propriety data
- leaking 'patent' / data /
confidentiality of processing to other company
- 3 agreements protecting trade
secrets
- trade secrets are
intellectual properties (research)
- theft of trade is unfair
competition
- employees disclose secrete violate
confidentiality owed to their company
Bribes
(top)
- remuneration for performance of an
act that inconsistent with work contract /
nature of work being hired to perform
- can be internal / external
- kickbacks
- practice that involve % payment to person able to influence source
of income
- gift a bribery ?? depends on
- value
of gift -suspected if high
- purpose of gift - intention
- circumstances
in which it is received / given - given publicly or secretly
- position
and sensitivity to influence the person 'receiving the gift'
- could recipient opinion,
influence result in preferential treatment
- accepted business practice
- eg: giving 'tips' for waiter
/ luggage boy is a norm - not a bribery
- company policy
- give / receive gift is forbidden in certain company to avoid conflict
- law -
under federal / gov. law
Obligation
to 3rd parties (top)
- eg: A worker knows that a fellow
worker worker occasionally use cocaine during working. Should he /she inform
the boss?
- identify relevant obligations
- human relationship
- eg: engineer reports defect
of building because fear of endanger the lives of occupants
- official relationship
- general duties to employers
Whistle
blowing (top)
- def : refer to an employee act of
informing the public about the illegal /
immoral behaviour of an employer /org.
- eg: inform public the company has
falsifying financial account data
- vs. gossip
- only reserved for activities
that are
- harmful to 3rd parties
- human right violation
- contrary to public purpose
- morally justified if
- done from appropriate
moral motive
- has exhausted
all internal channels for dissent before going public
- has compelling
evidence of immoral act
- nature of
wrongdoing - serious and immediate of the problem
eg: food product has harmful poison
- has chance to success
Employment
issue (top)
Hiring
(top)
- treat job applicant
fairly
- company
can be sued because of principle
of negligent hiring
- eg: employee
raped another employee because no proper selection guideline
- process
- screening
- 'filter' the
good chance of qualifying
- begins with
- job description
- list details about job duties,
responsibilities, working environment
- job specification
- qualification
required - education, skills, experience
- ban discrimination
on age, race, religion, gender
- eg:
job description in advertisement
- 'female
> 20 years old' - legally wrong
- gender
linked job - 'salesperson', 'mail carrier' better than
'salesman', 'mailman'
- bona fide
occupational qualification (BFOQ)
- limited
scope / special case only eg:
- woman
model for women dress only - advertise for women only
- pilot
for those good eyesight only
- testing
- measure
applicants skills
- aptitude
test - suitability
- proficiency
test - performance eg typing speed
- personality
test - maturity, responsibilities, character
- test
characteristic
- valid -
score according to performance
- reliable
- score remain the same from test to test
- unethical if
test is culturally
biased
- eg: a
foreign English lecturer tested on Mandarin language in China
- interview
- no rudeness, hostility
- avoid thoughtless comments
- use standard
uniform list of question to increase objectivity and prevent
bias
Promotion
(top)
- seniority
- longevity
on a job with firm
- rewarding faithful / loyal employee
vs new qualified person
- seniority does not necessarily
having good talent / performance
- if seniority is considered,
ambitious / talented workers might lose initiative anymore
- inbreeding
- practice of promoting within
the firm
- due to years of loyalty
- relationship / bond created
- nepotism
- showing favoritism
to relatives / friends
Discipline
and discharge (top)
- concept
- just cause
- reasons for discipline/ discharge deal with job performance
- due
process -fairness of procedures (clear, specific, no discrimination)
used by an org. to impose sanction on employees
- type of discharge
- firing
- cause dismmisal eg : theft, bribery
- termination
- poor perfomance
- lay off
- applied to hourly employess, 'subject to recall'
- position
elimination - permanent job elimination due to workforce
reduction, plant closing, department consolidation
- ways to terminate workers painlessly
- give prior notice
- not to defame the person
Wages
(top)
- factor influencing wages
consideration
- law
- the least minimum wage for 'living wage'
- prevailing
(industry) wages -the current 'industry' wage. Eg. the normal
earning of an accountant
- community wage
level
- based on living cost in a
certain community
- large city would have higher
wages
- nature of job
- risky job - higher wages
- more training, experience,
education would increased wage
- job secure,
prospect
- no future job should demand
higher wage
- secure job and job which
has retirement benefits = moderate wage
- on probation - low
wage
- employer
financial capabilities
- well established org. should
be able to pay higher wages
- other employee
inside the org. earning with comparable work
- to prevent unfairness /
discrimination
- same job description and
specification should have the same wages in the same org.
- job performance
- better performance has
higher wages
- wage agreement
Union
(top)
- function : attempt to protect
workers from power abuse of employers
- tactics used :
- direct strikes
- organized union workers withhold
its labor to force employer comply to its demand
- can cause
- financial injuries
- economic dislocation in
society
- raising moral work
question
- justified if
- just
cause - it is job-related matters
eg inadequate pay, maximum working hours, unsafe working
environment
- proper
authorization - Participants are not
being forced to strike. Do at his/ her own will
- last
resort - no choice. Exhausted
all internal / external channels
- sympathetic
strikes
- occur when workers who have no
grievance (not related to the company) but
strike in support for others
- boycott
- primary
boycott - union members
refuse buying product from company being struck
- secondary
boycott - the public refuse
buying targeted company product
- corporate
campaign
- union persuade company creditors
to pressure company comply with union demand
Job
discrimination (top)
- determined by 3 basic facts
- discrimination
is on the function of an employee or job applicants in a certain
group rather than individual merit
- based on prejudice,
false stereotype, assuming group is inferior
- the act harmed
those being aimed at
- can be
- intentional / unintentional
- individual / institutional
- type:
- racial
- gender
- religion
- skin colour
- minority
Affirmative
action (top)
- programs / guidelines to correct
racial imbalances existing as a result of past discrimination
- arguments for affirmative action:
- supporters
- compensatory
justice - obligation to repair the wrongs of the past
- permit fairer
competition - competition among White and Black, male and
female
- break the
cycle that keep minorities and woman locked into poor pay, low class
job
- critics
- violate
the principle of equality itself
- eg: allocation for
certain quota - job to minorities to enhance racial equality BUT
more white man might entitled and qualified to the job
- using affirmative action
will show / portray that we are differencing male-female,
white-black even more obvious
Sexual
harassment (top)
- legal definition:
- submission to such conduct
(unwelcome sexual advances) is made either explicit / implicit of an
individual employment
- submission to such conduct used
as basis for employment decision
- eg: sleep with employer to
get promoted
- such conduct interfere / create
a hostile environment to individual work
environment
- 3 types
- crudest
form
- 'You better sleep with me'
- threat is clear
- implied threat
- 'If sleep with me, you'll
get promoted'
- victim may risk
something (promotion) if turn down sexual offer
- hostile environment
- broadest, pervasive
- eg: sexual
innundoes - sexy remarks, unnecessary touching, portraying
nude female on the wall
- interfere mind, undermines
work performance
- encountering
sexual harassment:
- make it clear that behavior is
unwanted
- document, keep record, find
witness
- complaint to supervisor
- see lawyer if internal complaint
failed
Workplace
(top)
Organizational
influence in private life (top)
- privacy is a fundamental rights
- firm has legitimate interest which
influence work performance
- some cases interfere private life
even in outside job
- 'fire' employee who is a part
time stripper
- reason: off-duty conduct
jeopardize firm reputation
- involvement in civic activities
- some org. compels employee to
join social activities to increase firm image
- some force employee to
contribute to charities
- health programs
- push people to go for gymnasium,
join company sport team
- making employees pay extra for
health care benefits / facilities
- fire those who caught smoking
- intensive group experience
- issue of voluntary
participation
- sometimes participation become
unwritten pre-requisite for job promotion
Obtaining
information (top)
- informed
consent - implies deliberation and free choice
- deliberation - employee provide
all significant facts concerning info. gathering procedures and their
consequences
- free choice - voluntary,
uncoercive
- polygraph test
- BP increased, resp. increased,
pulse rate increased, when disturbed by question
- reason of use:
- fast, economical way to
verify applicant information - reveal behavior, principle
- identify dishonesty
- permits business to abolish
audits / oppressive control
- thus, increase work
freedom
- issue of use:
- not 100% correct
- can be manipulated by covert
self-simulation
- infringe on privacy
- justification of use (when to
use)
- info. seeking related to job
- after exhausting other info.
gathering method
- concerned how info. is used
/ distributed to safeguard personal confidential / privacy data
- personality test
- categorize employee character
based on questionnaire
- unethical test because
- oversimplify human
nature
- eliminate employee
perspective creativity
- sometimes unrelated
intrusive question
- eg: ' Do you like a girl
' ?
- screen for conformity to org.
values
- monitoring employees
on job
- device used : eavesdropping
cellular phone, e-mail, private video conferencing
- to check on in-house theft -
camera, electronic recorders, hidden mirror
- monitor if employee consume 'exceed'
allocated time for break
- drug testing
- issue
- any informed consent?
- is test reliable?
- is it job related? eg: test
pilot for alcohol consumption
Working
condition (top)
- health and safety
- create awareness on
facilities provided eg: emergency exit
- safety equipment eg: fire
extinguisher
- emergency exit must be wide open
- training - fire drill
- occupational hazard
- wear protective gear
- OSHA- Occupational Safety and
Health Act - regulate work condition
- redesigning job
- adjustable chair - reduce
posture problem
- work shift should be
according to biological clock
- management style
- Theory X - workers dislike work,
avoid responsibilities
- Theory Y - enjoy work, motivate
- manager damages employee
interest because
- operate with
rigid assumption on human nature
- devoted to politics
- day - care maternity
- provide in-house day care
- subsidize tuition cost
- paid holiday leave - 40 days in
Malaysia, 1/2 year in India
Job
dissatisfaction (top)
- 3 factors :
- rigidity of
rules / regulation, monotonous , repetitive tasks
- lack of opportunities
to be own boss
- 'bigness'
feeling - powerless, meaningless, isolation, alienation, because work in
big corporation
- Herzberg Theory on motivation of
work
- intrinsic - accomplishment,
responsibility, self-expression, satisfaction
- extrinsic - pay, suspension,
working condition
- mental health problem - occur in
boring, unchallenging, les autonomy career
- low self esteem
- anxiety
- impaired interpersonal relations
- redesign job process to give quality
of work life
Ethics
in Marketing (top)
- 2 views
- 'let the buyer beware' - seller
perspective
- 'caveat emptor'
- assuming that customer has knowledge
and 'free to choose'
- not fair for customer
because seller know more about the product than customer
- 'let the seller aware' -
customer satisfaction
- marketer must be aware of 3 players
- company, industry, society - conflict of interest arise with different
needs
- 1sr conflict - industry vs
society
- eg: tobacco industry
- economy : tax revenue
- society : disease ( lung
cancer)
- 2nd conflict - individual vs
society
- eg: marketing executive
promote product which acclaimed to cure cancer or reduce weight
Rules
for ethical marketing (top)
- responsibility
- marketer accept responsibility
when problem occurs
- serve / satisfy customer
- honesty / fairness
- uphold integrity
- honor dignity of marketing
profession
- Right / Duty
in marketing eXchange
process - make sure that
- product is safe
- product serve intended purposes
- org.
relationship - unethical behavior of one marketer might jeopardize
reputation of the company
Ethical
issue in marketing (top)
- truth in marketing
- misleading consumer
- women portrayal eg: women with a car
which is unrelated
- creation of needs in campaign - eg:
health supplements, infant formula, weight loss pills
- spam advertising - junk mail full,
pop browser
- marketing unsafe product - harmful
health product, electronic device which easily malfunction
Cultivate
ethical behavior
(top)
- corporate value - revised - not only
to earn profit but also to behave ethically
- internal checklist - on what to do
- ethics audit - monitor ethics / behavior
in marketing strategy
- translate moral thought into
action
Advertising
(top)
- deception methods
- ambiguity
- weasel
word - eg: help, aid, assist ,up to
- ' pill help weight loss' or
'save up to 70%'
- conceal facts
- hair spray causes cancer - not
revealed
- margarine has lower calories
but not revealed that it has higher fat content
- exaggeration
- make unsupported claims
- Vitamin supplement benefits
being exaggerated
- anti-aging product - repair,
renew skin cell
- use of puffery
- most, best, king of beers
- psychological
appeal
- influence human emotion,
power, prestige,
sensuality, subliminal advantages (subconscious)
- beautiful model in beer
advertising
- car model with successful
people
- Advertisement directed at children
- create long-term customer for
future
- build brand
loyalty today for future
- children carry brand decision
into adulthood
- eg: McD, KFC
- also make children pester their parents
to buy
- use of baby to influence emotion
of tender loving care
- eg: Johnson & Johnson -
baby - oil skin care (smooth like baby skin)
- Debate over
advertising
- Supporters
- imaginative, symbolic,
artistic content in expressing human needs
- eg: Johnson &
Johnson - Language of Love - nurturing mother
- Pepsi - teenager
independence
- Digi Prepaid -
flexibility
- provide
information in free market system
- form of free
speech
- useful sponsor
of media eg: TV channel
- Critics
- manipulate and create
artificial needs
- eg: infant milk formula
can substitute the benefits of natural breast milk
- encourage private
goods or luxury consumption than public goods
- eg: prefer luxury car
than education
- give misleading
information
Ethics
in Finance Industry (top)
Insider
trading (top)
- refers to use of significant facts
that yet been made public to affect stock prices
- 4 issue
- leaking out information
- buy / sell share
- use official position to track
data
- for personal profit
- is it unethical ? - since that
person had worked hard to obtain high position to retrieve such information
- some support it because it permits
acceleration of information inflow to other shareholder, investor
Ethical
investing (top)
- refer to obligation of investor
- investor show support by choosing
their investment
- is investor responsible to obliged in investing
a socially responsible firm ??
- the issue of investor 'gamble' in
the stock market
Take
over, merger, leveraged buyout (LBOs) (top)
- LBOs -company
has debt being take over or 'saved'
- decision maker
(board directors) is in dilemma
to
- shareholder -
increase stock price
- other company
which salvaged the company (LBOs) - reduce stock price for repurchase or
issuing bonds
- green mail
- occurs when a
potential takeover agent purchases stock in a company
- if purchase
5%, agent must announce its intention to take over
- issue occurs
when news of takeover is 'faked',
agent sold back to the stock at higher price to the 'attacked' company
- legislation
suggest that prior to takeover announcement,
- takeover
agents must have 100% funding
- golden parachute
- refer to
guarantee for chief executive of a firm that they will be 'taken care'
in the event of takeover
- unfair to other employees
who get retrenched
Ethics
in accountancy (top)
- fair / accurate reporting - Code of
Professional Conduct
- 2 parties involved
- accountant
within the company
- auditors
who present / check data for the benefits of public, shareholders
- preferred by the public
because it is 'independent' of nature
- can be 'bribed' too
- issue:
- underreport income
- falsifying document
- evade income tax
- engaged in fraud eg Enron
Legal
liabilities of Manufacturers (top)
- due care theory
- unequal needs of customer
(satisfaction) vs company (profit)
- company obliged to customer
safety because know the product better
- strict product liability - legal
responsibility
- legal paternalism - law that
restrict freedom of people for their own goods eg: wear car seat belt
- however, the fault might not due to
manufacturer, it might due to consumers not using it properly
Business
Responsibilities
(top)
- give safety
priority of product - eg : air bag in car
- must not
assume that accident happen due to product misuse, thus take no responsibilities
- eg : handgun suddenly went off
- monitor
manufacturing process itself
- anticipate how product fail
- batch testing - in the toughest
condition
- review
marketing strategy / advertising for potential safety problem
- eg: word of caution that
children do not operate on dangerous electrical device - microwave oven
- provide accurate
information on product performance
- eg: ingredient used in food,
expire date
- topical application for EXTERNAL
use ONLY
- side effect of drug in pamphlet
- investigate customer complaint
- eg: malfunction device
- broken seal of canned food
- Product Quality
- warranty -
obligation to customer that seller assume
- express
- claims that seller
explicitly state
- eg: warranty card, 100%
guarantee, fireproof, waterproof
- implied
- not a promise that
it will be perfect but be of a passable quality
- Prices
- 'high price, high quality' not
necessarily true
- promotional price - manipulating
'sale' price but initial markup higher than before
- price fixing - big companies
colluded to fix high price (oligopoly) - violation in an open free
market
- Labeling / Packaging
- environmental labeling - 'recyclable',
'biodegradable' - to mislead customer
- 0% fat free, cholesterol free,
'fresh' juice
- packaging
- optical
illusion - tall, narrow shape perceived larger amount than
short, squat box
- contents not accurately weighted
eg: foodstuff, crackers, liquid