Business Ethics
Content
Business Ethics
Ethics
is the study of right and wrong behavior; f whether an action is fair, right or just. ri In business, ethical decisio ecisions are the application of moral and ethical principle to the marketplace inciples and workplace. ³What¶s Good for Busines is Good for the usiness Country´
± This former attitude of business is no longer adequate f busi to insure ethical conduct uct
© De Vee E. Dykstra, J.D., 2004 1
Business Stakeh takeholders
Shareholde eholders Employees loyees Communit munity Customers omers
The interests/needs of these stakeholders need s the to be balanced in ethical decision making to ethic ensure a firm¶s long-term survival. ¶s lon
© De Vee E. Dykstra, J.D., 2004 2
Ethical Conflicts to be Balanced ts b
Shareholders
- want profits ant pro Employees - want safe and secure jobs t Community - wants economic benefit or the nts eco business and the environment protected enviro Customers - want quality product for good/fair t quali price
© De Vee E. Dykstra, J.D., 2004
3
Business Ethics and the Law th
Legal
compliance is the moral/ethical minimum. mo Simply obeying the law does not necessarily make do the business practice ethical. ethica ³Gray´ areas in the law. aw.
± Business leaders must contemplate the ethical t conte implications of a business decision. iness d
© De Vee E. Dykstra, J.D., 2004
4
Ethics and Law
ETH ICAL
L
YES
E G A
NO
L YES
© De Vee E. Dykstra, J.D., 2004
NO
5
Ethics, Economics, and Law mics, a
Why is Business Ethics Important? s Ethic
Directors and
Officers ± owe a complex set of ethical duties to various stakeholders olders
± When these duties conflict, ethical dilemmas are created ct, eth
Importance of
Values in Business Success n Busi
± Profits - Ethics Resource Center Study e Cent ± Costs of Unethical Behavior ior
Ethics as
a Strategy Good Reputation Personal Reasons Seen as a leader and regulatio may be prevented ulation
© De Vee E. Dykstra, J.D., 2004 7
EXECUTIVES COMMEN ON REPUTATION MENT
³A
reputation, good or bad, is tough to shake.´ d b
± Richard Teerlink, CEO, Harley-Davison EO, H
³If we were making that decision now in light of the press decisio
scrutiny we have been receiving we probably would not ceiving, have taken that risk.´
± Robert C. Winters, Chairman, Prudential Insurance Chairm
³A
bad reputation is like a hangover. It takes a while to get hang rid of, and it makes everything else hurt.´ thing
± James Preston, CEO, Avo , Avon
© De Vee E. Dykstra, J.D., 2004
8
Setting the Right Ethical Tone t Ethic
Importance
of Ethical Leadership and Creating l Lead Ethical Codes of Conduct duct
± Clear Communications to Employees s Em ± E.g., Costco and Johnson and Johnson¶s web-based son an ethical training
Corporate
Compliance Programs e Prog Conflicts and Trade-Offs ffs
± Stakeholder interest¶s differ
© De Vee E. Dykstra, J.D., 2004
9
Ethics and Leadershi dership
STAYING AHEAD OF THE REG E REGULATORY CURVE
© 2000 by West Legal Studies in Business
10
How does a firm promote the importance of mote ethical behavior?
a code of ethics Initial and ongoing employee training ployee Employee hotline for anonym nonymous reporting of ethical violations Distribute ethical bulletins tins Management (from the top down) provides a role model do Continued review of compan policies to determine their mpany effect on ethical behavior ior
Adopt
© De Vee E. Dykstra, J.D., 2004
11
Beware!!!
Watch
for Dangers of Unethical Environment rs U
± Intense competition and issues of survival on ± Managers making poor judgments g ± Employees with no personal values pers
© De Vee E. Dykstra, J.D., 2004
12
ETHICS
Ethical Dilemma
Ethical
Dilemma
lthough ± A situation that, althoug offering potential benefits, is unethical. ommon ± One of the most commo ethical dilemmas occurs ¶s cultu when a company¶s culture conflicts with an nal eth employee¶s personal ethics.
Ethical Dilemmas in Business as B
Two
Types Private Interest Conflicts with Corporate st Con rest Co Business Interest Conflicts with Public
© De Vee E. Dykstra, J.D., 2004
14
Language of Ethical Dilemmas al Dile
³Everybody ³If
else does it.´ es
we don¶t do it, someon else will.´ omeone
the way it has always been done.´ as alw ³We¶ll wait until the lawyers tell us it¶s wrong.´ e lawy ³It doesn¶t really hurt anyone.´ rt any ³The system is unfair.´ ir.´ ³I was just following orders.´ g orde
³That¶s
© De Vee E. Dykstra, J.D., 2004 15
ETHICAL DILEMMA CATEGORIES MA
Taking things that don¶t belong long to you Saying things you know aren¶t en¶t true Giving or allowing false impressions Buying influence or engaging ing in conflict of interest Hiding or divulging information Taking unfair advantage
© De Vee E. Dykstra, J.D., 2004
Committing personal decadence Perpetrating interpersonal abuse Permitting organizational abuse Condoning unethical actions Violating rules Balancing ethical dilemmas
16
ORGANIZATIONAL ETHICS
IPS MANAGEMENT TIPS
Checklist
for dealing with ethical dilemmas ng wit
± ± ± ±
Step 1. Recognize the ethical dilemma. eth Step 2. Get the facts. ts. Step 3. Identify your options. ur opti Step 4. Test each option: Is it legal? Is it right? Is it ption: beneficial? ± Step 5. Decide which option to follow. ch opt ± Step 6. Ask the ³Spotligh Questions´: To double check otlight your decision.
» ³How would I feel if my family found out about my decision?´ f » ³How would I feel if the local newspaper printed my decision?´ l
. ± Step 7. Take action.
ETHICS
Ethics and Work
The Wall Street Journal reports:
36% of workers calling in sick are lying. alling 35% keep quiet about co-worker misconduct. bout co 12% of job resumes contain falsehoods. es con Managers are more likely than other workers to report re likel wrongdoing. Managers with 0±3 years experience feel most 3 year pressure to violate personal ethics. e perso
ETHICS
Rationalizing Unethic Behavior nethical
Four
reasons: 1. ³What I¶m doing is not really illegal.´ ng n 2. ³My behavior is in everyone¶s best e interests.´ 3. ³Nobody will ever find out what I¶ve fi done.´ 4. ³The organization will protect me.´ tion w
ETHICS AND ETHICAL BEHAVORIAL
Organizational Ethics
MODULE GUIDE 4.2
Personal
and contextual factors influence ethical xtual
conduct Training in ethical decision making may improve decisi ethical conduct Protection of whistleblow tleblowers may encourage ethical conduct Managers acting as positive role models may s posit motivate others toward ethical conduct ward e Formal codes of ethics set standards for ethical thics se conduct
ORGANIZATIONAL ETHICS
Ethics Training
Ethics
Training
ple un ± Seeks to help people understand the ethical aspects g of decision making and to incorporate high ethical ir dail standards into their daily behavior.
Code
of Ethics
nt v ± A formal statement of values and ethical standards
Ethical Dilemma Resolution Models a Reso
Blanchard
and Peale d Pea
± Is it legal? ± Is it balanced? ± How does it make me feel? ake m
Front
Page of the Newspaper Test f N
± How would the story be reported? e ± Objective and informed reporter¶s point of inform view
© De Vee E. Dykstra, J.D., 2004 22
Ethical Dilemma Resolution Models a Reso
Laura Nash ± Put yourself in the other¶s shoes. other¶ ecision ± Can I discuss my decisio with family, friends? o acco ± What am I trying to accomplish? t ± Long-term comfort level Wall Street Journal M rnal Model ± Comply with the law aw ± Contribution to stakehold keholders ± Consequences-short and long term rt
© De Vee E. Dykstra, J.D., 2004 23
Business Ethics on a Global Level G
companies must be trained in crosses mus cultural business practices actices Monitoring the Employm ployment Practices of Foreign Suppliers
American
± Corporate Watch groups can disseminate information oups c instantly around world rld
Foreign
Corrupt Practices Act actices
± Bribes and Accounting Practices ing Pra
© De Vee E. Dykstra, J.D., 2004 24
Foreign Corrupt Practices Act t Pract
Prohibits
making, authorizing or promising a , autho gift to a foreign official with the intent to fficial corrupt Applies to business concerns with their ss con principal office in the United States U Grease payments are permitted pe
± secure permit or license, obtain paper processing, icense, secure police protection, phone, water, power ection, supply, etc..
© De Vee E. Dykstra, J.D., 2004 25
FCPA Elements
Instrumentality
of interstate commerce used; f inters Payment or something of value given to: thing o
± foreign official with discretionary authority th disc ± foreign political candida andidate ± foreign political party; arty;
Purpose
of payment is to get the recipient to nt act or to not act; and nd Intended result is assisting giver¶s business assisti
© De Vee E. Dykstra, J.D., 2004 26
ORGANIZATIONAL ETHICS
Managers
Management
Behavior avior
± In order to have a positive impact on ethical conduct positi throughout an organizat anization, those at the top must walk the talk.
ORGANIZATIONAL ETHICS
Whistleblowers
Whistleblowers
ose organizational misdeeds in order ± Persons who expose org l stand to preserve ethical standards and protect against l, ill wasteful, harmful, or illegal acts. wers w ± Many whistleblowers were / are fired for their actions. ± State and federal laws now offer some protection n
Whistleblowing
of disclosing wrongdoing in an organization wrong Like blowing a whistle to call attention to a thief histle Types Internal External
Act
Can Cause Bitterness in rness Organization
- Must speak o against others in eak out organization Breach of Loyalty - Perceived as one who Pe violates confidentiality and loyalty tiality Accusation - Singles out specific individuals as gles ou threats to organization or the public ation
Dissent
Possible Retaliation tion
Fired Blacklisted Transferred
to undesira locations desirable Lifestyles, sex lives and mental stability es questioned Physical abuse and murder possible nd mur
Failure to Reveal Wrongdoing al Wro
Severe
problems for society or organization so
Can
be implicated as an accessory before or after d the fact
Ethics of Whistleblow leblowing
When
is it ethical to reveal wrongdoing ? l rev is it ethical to remain silent? l rem
When
Whistleblowing Example Exam
In
charge of Quality Control lity Co Company makes parts for automobile brakes f Find defect in brake part ake pa Could cause failure in brakes re b Failure not certain n May take many years to develop ears
Whistleblowing Example (cont.) Exam
Go
to VP of Production your boss uction, He tells you to overlook defect - company may verlook loose too much money oney
What
would you do?
Challenger Disaster ster
Morton-Thiokol
rings Cold in Florida Engineers warned ³O´ Rings could fail d NASA management made decision to launch ent ma Space Shuttle anyway yway
³O´
Cautious Approach to ach Whistleblowing
1. Make sure situation involves an imminent tion in threat to society or to the business th 2. Document all allegatio legations 3. Examine internal whistleblowing first l whis 4. Should you remain anonymous? ain an 5. Get another job first!!!
Bribery
A
payment, usually to a public official, to induce lly that person to either do something improper or to her influence decisions or actions ns a - same as bribery - recipient of brib payment initiates transaction transa
Extortion
Case
International
consulting firm - designs and sulting supervises construction of hydroelectric power uction generating systems s Your proposal is far sup superior to any other technically lowest bid To get job, must deposit $250,000 in official¶s deposi personal Swiss bank ac ank account
Should you pay the money? m
Foreign
Corrupt Practices Act of 1997 Practic Grease payment allowed allowe Standard Practice in most foreign countries mo Results in lost business opportunities for US siness companies American tax dollars may be used to pay bribe llars m
Bluffing and Deceptio ception
Negotiating
a labor contract or con Plant has experienced losses over past several nced l years - not clear why Want concessions from labor s Tell labor that plant will be closed if no ant wil concessions are made. In reality , no such plans ade. contemplated Is This Ethical?
Managerial Implicatio lications
Top
Management Leadership t Lead Organizational Culture al Cult Realistic Goal Setting tting Ethics Audit Code of Ethics Ethics Committee e
Ethics
is the study of right and wrong behavior; f whether an action is fair, right or just. ri In business, ethical decisio ecisions are the application of moral and ethical principle to the marketplace inciples and workplace. ³What¶s Good for Busines is Good for the usiness Country´
± This former attitude of business is no longer adequate f busi to insure ethical conduct uct
© De Vee E. Dykstra, J.D., 2004 1
Business Stakeh takeholders
Shareholde eholders Employees loyees Communit munity Customers omers
The interests/needs of these stakeholders need s the to be balanced in ethical decision making to ethic ensure a firm¶s long-term survival. ¶s lon
© De Vee E. Dykstra, J.D., 2004 2
Ethical Conflicts to be Balanced ts b
Shareholders
- want profits ant pro Employees - want safe and secure jobs t Community - wants economic benefit or the nts eco business and the environment protected enviro Customers - want quality product for good/fair t quali price
© De Vee E. Dykstra, J.D., 2004
3
Business Ethics and the Law th
Legal
compliance is the moral/ethical minimum. mo Simply obeying the law does not necessarily make do the business practice ethical. ethica ³Gray´ areas in the law. aw.
± Business leaders must contemplate the ethical t conte implications of a business decision. iness d
© De Vee E. Dykstra, J.D., 2004
4
Ethics and Law
ETH ICAL
L
YES
E G A
NO
L YES
© De Vee E. Dykstra, J.D., 2004
NO
5
Ethics, Economics, and Law mics, a
Why is Business Ethics Important? s Ethic
Directors and
Officers ± owe a complex set of ethical duties to various stakeholders olders
± When these duties conflict, ethical dilemmas are created ct, eth
Importance of
Values in Business Success n Busi
± Profits - Ethics Resource Center Study e Cent ± Costs of Unethical Behavior ior
Ethics as
a Strategy Good Reputation Personal Reasons Seen as a leader and regulatio may be prevented ulation
© De Vee E. Dykstra, J.D., 2004 7
EXECUTIVES COMMEN ON REPUTATION MENT
³A
reputation, good or bad, is tough to shake.´ d b
± Richard Teerlink, CEO, Harley-Davison EO, H
³If we were making that decision now in light of the press decisio
scrutiny we have been receiving we probably would not ceiving, have taken that risk.´
± Robert C. Winters, Chairman, Prudential Insurance Chairm
³A
bad reputation is like a hangover. It takes a while to get hang rid of, and it makes everything else hurt.´ thing
± James Preston, CEO, Avo , Avon
© De Vee E. Dykstra, J.D., 2004
8
Setting the Right Ethical Tone t Ethic
Importance
of Ethical Leadership and Creating l Lead Ethical Codes of Conduct duct
± Clear Communications to Employees s Em ± E.g., Costco and Johnson and Johnson¶s web-based son an ethical training
Corporate
Compliance Programs e Prog Conflicts and Trade-Offs ffs
± Stakeholder interest¶s differ
© De Vee E. Dykstra, J.D., 2004
9
Ethics and Leadershi dership
STAYING AHEAD OF THE REG E REGULATORY CURVE
© 2000 by West Legal Studies in Business
10
How does a firm promote the importance of mote ethical behavior?
a code of ethics Initial and ongoing employee training ployee Employee hotline for anonym nonymous reporting of ethical violations Distribute ethical bulletins tins Management (from the top down) provides a role model do Continued review of compan policies to determine their mpany effect on ethical behavior ior
Adopt
© De Vee E. Dykstra, J.D., 2004
11
Beware!!!
Watch
for Dangers of Unethical Environment rs U
± Intense competition and issues of survival on ± Managers making poor judgments g ± Employees with no personal values pers
© De Vee E. Dykstra, J.D., 2004
12
ETHICS
Ethical Dilemma
Ethical
Dilemma
lthough ± A situation that, althoug offering potential benefits, is unethical. ommon ± One of the most commo ethical dilemmas occurs ¶s cultu when a company¶s culture conflicts with an nal eth employee¶s personal ethics.
Ethical Dilemmas in Business as B
Two
Types Private Interest Conflicts with Corporate st Con rest Co Business Interest Conflicts with Public
© De Vee E. Dykstra, J.D., 2004
14
Language of Ethical Dilemmas al Dile
³Everybody ³If
else does it.´ es
we don¶t do it, someon else will.´ omeone
the way it has always been done.´ as alw ³We¶ll wait until the lawyers tell us it¶s wrong.´ e lawy ³It doesn¶t really hurt anyone.´ rt any ³The system is unfair.´ ir.´ ³I was just following orders.´ g orde
³That¶s
© De Vee E. Dykstra, J.D., 2004 15
ETHICAL DILEMMA CATEGORIES MA
Taking things that don¶t belong long to you Saying things you know aren¶t en¶t true Giving or allowing false impressions Buying influence or engaging ing in conflict of interest Hiding or divulging information Taking unfair advantage
© De Vee E. Dykstra, J.D., 2004
Committing personal decadence Perpetrating interpersonal abuse Permitting organizational abuse Condoning unethical actions Violating rules Balancing ethical dilemmas
16
ORGANIZATIONAL ETHICS
IPS MANAGEMENT TIPS
Checklist
for dealing with ethical dilemmas ng wit
± ± ± ±
Step 1. Recognize the ethical dilemma. eth Step 2. Get the facts. ts. Step 3. Identify your options. ur opti Step 4. Test each option: Is it legal? Is it right? Is it ption: beneficial? ± Step 5. Decide which option to follow. ch opt ± Step 6. Ask the ³Spotligh Questions´: To double check otlight your decision.
» ³How would I feel if my family found out about my decision?´ f » ³How would I feel if the local newspaper printed my decision?´ l
. ± Step 7. Take action.
ETHICS
Ethics and Work
The Wall Street Journal reports:
36% of workers calling in sick are lying. alling 35% keep quiet about co-worker misconduct. bout co 12% of job resumes contain falsehoods. es con Managers are more likely than other workers to report re likel wrongdoing. Managers with 0±3 years experience feel most 3 year pressure to violate personal ethics. e perso
ETHICS
Rationalizing Unethic Behavior nethical
Four
reasons: 1. ³What I¶m doing is not really illegal.´ ng n 2. ³My behavior is in everyone¶s best e interests.´ 3. ³Nobody will ever find out what I¶ve fi done.´ 4. ³The organization will protect me.´ tion w
ETHICS AND ETHICAL BEHAVORIAL
Organizational Ethics
MODULE GUIDE 4.2
Personal
and contextual factors influence ethical xtual
conduct Training in ethical decision making may improve decisi ethical conduct Protection of whistleblow tleblowers may encourage ethical conduct Managers acting as positive role models may s posit motivate others toward ethical conduct ward e Formal codes of ethics set standards for ethical thics se conduct
ORGANIZATIONAL ETHICS
Ethics Training
Ethics
Training
ple un ± Seeks to help people understand the ethical aspects g of decision making and to incorporate high ethical ir dail standards into their daily behavior.
Code
of Ethics
nt v ± A formal statement of values and ethical standards
Ethical Dilemma Resolution Models a Reso
Blanchard
and Peale d Pea
± Is it legal? ± Is it balanced? ± How does it make me feel? ake m
Front
Page of the Newspaper Test f N
± How would the story be reported? e ± Objective and informed reporter¶s point of inform view
© De Vee E. Dykstra, J.D., 2004 22
Ethical Dilemma Resolution Models a Reso
Laura Nash ± Put yourself in the other¶s shoes. other¶ ecision ± Can I discuss my decisio with family, friends? o acco ± What am I trying to accomplish? t ± Long-term comfort level Wall Street Journal M rnal Model ± Comply with the law aw ± Contribution to stakehold keholders ± Consequences-short and long term rt
© De Vee E. Dykstra, J.D., 2004 23
Business Ethics on a Global Level G
companies must be trained in crosses mus cultural business practices actices Monitoring the Employm ployment Practices of Foreign Suppliers
American
± Corporate Watch groups can disseminate information oups c instantly around world rld
Foreign
Corrupt Practices Act actices
± Bribes and Accounting Practices ing Pra
© De Vee E. Dykstra, J.D., 2004 24
Foreign Corrupt Practices Act t Pract
Prohibits
making, authorizing or promising a , autho gift to a foreign official with the intent to fficial corrupt Applies to business concerns with their ss con principal office in the United States U Grease payments are permitted pe
± secure permit or license, obtain paper processing, icense, secure police protection, phone, water, power ection, supply, etc..
© De Vee E. Dykstra, J.D., 2004 25
FCPA Elements
Instrumentality
of interstate commerce used; f inters Payment or something of value given to: thing o
± foreign official with discretionary authority th disc ± foreign political candida andidate ± foreign political party; arty;
Purpose
of payment is to get the recipient to nt act or to not act; and nd Intended result is assisting giver¶s business assisti
© De Vee E. Dykstra, J.D., 2004 26
ORGANIZATIONAL ETHICS
Managers
Management
Behavior avior
± In order to have a positive impact on ethical conduct positi throughout an organizat anization, those at the top must walk the talk.
ORGANIZATIONAL ETHICS
Whistleblowers
Whistleblowers
ose organizational misdeeds in order ± Persons who expose org l stand to preserve ethical standards and protect against l, ill wasteful, harmful, or illegal acts. wers w ± Many whistleblowers were / are fired for their actions. ± State and federal laws now offer some protection n
Whistleblowing
of disclosing wrongdoing in an organization wrong Like blowing a whistle to call attention to a thief histle Types Internal External
Act
Can Cause Bitterness in rness Organization
- Must speak o against others in eak out organization Breach of Loyalty - Perceived as one who Pe violates confidentiality and loyalty tiality Accusation - Singles out specific individuals as gles ou threats to organization or the public ation
Dissent
Possible Retaliation tion
Fired Blacklisted Transferred
to undesira locations desirable Lifestyles, sex lives and mental stability es questioned Physical abuse and murder possible nd mur
Failure to Reveal Wrongdoing al Wro
Severe
problems for society or organization so
Can
be implicated as an accessory before or after d the fact
Ethics of Whistleblow leblowing
When
is it ethical to reveal wrongdoing ? l rev is it ethical to remain silent? l rem
When
Whistleblowing Example Exam
In
charge of Quality Control lity Co Company makes parts for automobile brakes f Find defect in brake part ake pa Could cause failure in brakes re b Failure not certain n May take many years to develop ears
Whistleblowing Example (cont.) Exam
Go
to VP of Production your boss uction, He tells you to overlook defect - company may verlook loose too much money oney
What
would you do?
Challenger Disaster ster
Morton-Thiokol
rings Cold in Florida Engineers warned ³O´ Rings could fail d NASA management made decision to launch ent ma Space Shuttle anyway yway
³O´
Cautious Approach to ach Whistleblowing
1. Make sure situation involves an imminent tion in threat to society or to the business th 2. Document all allegatio legations 3. Examine internal whistleblowing first l whis 4. Should you remain anonymous? ain an 5. Get another job first!!!
Bribery
A
payment, usually to a public official, to induce lly that person to either do something improper or to her influence decisions or actions ns a - same as bribery - recipient of brib payment initiates transaction transa
Extortion
Case
International
consulting firm - designs and sulting supervises construction of hydroelectric power uction generating systems s Your proposal is far sup superior to any other technically lowest bid To get job, must deposit $250,000 in official¶s deposi personal Swiss bank ac ank account
Should you pay the money? m
Foreign
Corrupt Practices Act of 1997 Practic Grease payment allowed allowe Standard Practice in most foreign countries mo Results in lost business opportunities for US siness companies American tax dollars may be used to pay bribe llars m
Bluffing and Deceptio ception
Negotiating
a labor contract or con Plant has experienced losses over past several nced l years - not clear why Want concessions from labor s Tell labor that plant will be closed if no ant wil concessions are made. In reality , no such plans ade. contemplated Is This Ethical?
Managerial Implicatio lications
Top
Management Leadership t Lead Organizational Culture al Cult Realistic Goal Setting tting Ethics Audit Code of Ethics Ethics Committee e
