3 What Are Business Ethics? Ethics: moral principles by which people conduct themselves personally, socially, or professionallyBusiness Ethics: rules based on moral principles about how businesses and employees aught to conduct themselvesProviding safe productsCreating jobsTreating employees fairlyProtecting the environmentBeing truthful about financial situationsBusiness ethics may vary across cultures, companies, and industries.
5 Customers Can Be Unethical, Too! To make up for unethical behavior by customers, businesses have to charge more for their products.What other examples of unethical consumer behavior can you identify?
6 Ethics and the LawLaws = rules for conduct that may be used to punish violatorsUnethical ≠ illegalUnethical behavior may lead to passage of legislation to make the behaviors illegal
7 1911: Triangle Factory Fire (NYC) Factory located on 8th, 9th, and 10th floors of building; fire began on 8th floor146 workers killedMost employees were teenage girls and recent immigrantsContributing factorsFailure to enforce anti-smoking policyOnly one fire escape (collapsed during fire)Factory door locked? (not proven in court)
8 Labor Reform1911 – 1914: 36 new laws enacted to reform labor codes in New YorkSweatshop: a shop or factory in which workers are employed for long hours at low wages and under unhealthy conditionsOccupational Safety and Health Administration (OSHA): division of US Dept. of Labor that sets and enforces work-related health and safety rules
9 Code of EthicsMost businesses self-regulate with a code of ethics, a set of guidelines for maintaining ethics in the workplace.Common code of ethics topics includeEmployment PracticesWorkplace HarassmentEqual OpportunityDiversityFair Treatment of StaffWork-Family BalanceDiscriminationIllegal Drugs and AlcoholUse of Organization PropertyConflicts of InterestGifts and GratuitiesPolitical ActivityOutside EmploymentFamily MembersEmployee, Client, and Vendor InformationMaintaining Records and InformationPrivacy and ConfidentialityDisclosure of InformationPublic Information & CommunicationsAdvertising and MarketingDevelopment and FundraisingClarity of InformationAccess to InformationTransparency of Information
10 Ethics Are Good Business Unethical business practices include lying, knowingly offering substandard merchandise, and treating customers and employees unfairly.Direct consequences of unethical behaviorBusiness violates government regulations owner may be fined or go to jailEmployee violates code of ethics employee may be fired and/or lose licenseIndirect consequences of unethical behaviorMistreating customers bad reputation, loss of salesMistreating employees lose investment in employee, benefits competitors
11 Conflict of InterestConflict between self-interest (what benefits you personally) and professional obligation (what benefits the business)Hiring friends and family who are unqualifiedGiving business to a company in which you have an investmentSupervising or evaluating someone with whom you have a personal relationshipWhen making business decisions, employees have an ethical obligation to act in the best interests of the company (barring any threat to life, health, and/or safety).
12 Making Ethical Decisions Questions to AskIs it against the law? Does it violate company or professional policies?Even if everyone is doing it, how would I feel if someone did this to me? (Golden Rule)Am I sacrificing long-term benefits for short-term goals? (consequences?)
13 Making Ethical Decisions 1. Identify the dilemma.What is the conflict?What principles are involved?2. Discover alternative actions.What are my options?Think outside of the box.3. Decide who might be affected.StakeholdersConsider ripple effect.4. List probable effects of actions.Weigh pros and consConsider consequencesThink long-term5. Select the best alternative.In whose interest?Achieving long-term goals?Respect yourself in the morning?
15 Business and Social Responsibility Business Ethics: focus on doing what is good vs. bad, correct vs. incorrect (generally reactive)Social Responsibility: the duty to do what is best for the good of society (generally proactive)Social responsibility goes beyond simply providing products that benefit society.
16 Business Stakeholders & Responsibilities CustomersEmployeesSocietyCreditors & Owners
17 Responsibility to Customers Offer good, safe products and services at reasonable pricesFood and Drug Administration (FDA): federal government agency that protects consumers from dangerous or falsely-advertised productsEngage in fair competitionBenefits of competitionCompetition is key component of market economyAllows customers to have choicesKeeps prices under controlPushes companies to innovateSome companies use unethical tactics to eliminate competition (e.g. trusts)
18 Responsibility to Employees Provide work experience for employeesAllow companies to engage in work-sponsored volunteerismProvide employees with safe working conditions, equal treatment, and fair payEqual Pay Act (1964): requires that men and women be paid the same wages for doing equal workAmericans with Disabilities Act (1992): bans discrimination against people with physical or mental disabilityCompanies that fail to treat workers fairly may suffer fromLow morale (“I hate my job!”)Poor production (“I didn’t feel like doing it.”)High turnover (“I quit!”)
19 Responsibility to Society Many different ways to contribute to societyEnvironmental responsibility is a major issue in today’s society.Environmental Protection Agency (EPA): federal agency that enforces rules to protect the environment and control pollution
20 Responsibility to Creditors and Owners Stakeholders with a financial stake in the businessCreditors: loaned money to the business (banks, suppliers)Owners: invested money in the business (owner, investors, stockholders)Primary responsibility of the business is to make a profit in order to repay loans and/or provide a return on investment.Businesses must keep accurate and truthful recordsBusinesses that falsify records may cheat creditors, owners, and other stakeholders out of millions (Enron, Ponzi schemes)Sarbanes-Oxley Act (2002):Mandates truthful reportingMakes top management more accountable for actions of a firm’s financial managers
21 Questions to ConsiderDiscuss the following questions with your table mates. Record your answers for submission (one paper per group).In a purely market economy, the only pressure on businesses to be socially responsible comes from consumers, who can “vote with their dollars.” Do you feel that this pressure is enough, or do countries need the mixed-market model to make sure that businesses behave? As consumers, how much do you consider social responsibility when making economic decisions (job selection, purchases, etc.)?Some countries (like the US) refuse to trade with other nations that have a poor human rights record. What are some pros and cons of such a decision? Do you think it is a good idea to have a policy like this?