Business Chapter 3

What is ethics?

Standards of moral behavior; behavior accepted by society as right versus wrong.

Is obeying the law enough to be ethical?

No. An action can be legal but still unethical.

What is the difference between ethics and legality?

Legality concerns whether an action follows the law.
Ethics concerns whether an action is morally right or wrong.

What are some basic moral values?

Integrity, respect for human life, self-control, honesty, courage, and self-sacrifice

Why can ethical dilemmas be difficult?

There may be no easy answer and you may have to choose between equally unsatisfactory alternatives.

What three questions should you ask when facing a potentially unethical action?

1. Is my proposed action legal?

2. Is it balanced?

3. How will it make me feel about myself?

What does it mean to ask whether an action is "balanced"?

Consider whether the decision is fair to everyone affected—not just yourself

What does "ethics is caught more than it is taught" mean?

People learn ethical standards by observing the behavior of others, especially leaders.

Where does organizational ethics begin?

At the top with management.

What should ethical management be based on?

Fairness, honesty, openness, and moral integrity.

Why should businesses act ethically?

To maintain their reputation, retain/attract customers, avoid lawsuits, reduce employee turnover, avoid government intervention, please stakeholders, and do the right thing.

What is ethical leadership?

Making decisions based on what is right for employees, customers, and the community—not simply what benefits the manager or bottom line.

What are the six principles of ethical leadership?

• Respect everyone's skills and contributions

• Accept accountability

• Make decisions based on what is right

• Speak openly and honestly

• Ensure people get what they deserve

• Build equity and inclusion into decisions

What is a compliance-based ethics code?

An ethics code focused on preventing unlawful behavior through controls and penalties.

What is an integrity-based ethics code?

An ethics code that defines an organization's guiding values and creates an environment supporting ethical behavior.

What's the key difference between compliance-based and integrity-based ethics codes?

Compliance = follow the law/avoid misconduct.
Integrity = do the right thing based on shared values.

Who typically leads a compliance-based ethics program?

Lawyers.

Who typically leads an integrity-based ethics program?

Managers, with help from lawyers and others.

What is the first step in establishing an ethical business culture?

Top management must adopt and unconditionally support an explicit corporate code of conduct.

What is the second step?

Employees must understand that ethical expectations begin at the top

What is the third step?

Managers and others must be trained to consider the ethical implications of business decisions.

What is the fourth step?

Set up an ethics office where employees can communicate anonymously.

What is the fifth step?

Tell outsiders such as suppliers, subcontractors, distributors, and customers about the ethics program.

What is the sixth step?

Enforce the ethics code with timely action when rules are broken.

What is a whistleblower?

An insider who reports illegal or unethical behavior

Why is anonymous reporting important?

It allows employees to report misconduct while protecting their identity.

What does the Sarbanes-Oxley Act do for whistleblowers?

It protects whistleblowers by requiring public corporations to allow accounting and auditing concerns to be submitted confidentially and anonymously.

Are whistleblowers usually motivated primarily by money?

No. Many are motivated by a sense of professional, civic, ethical, or legal duty.

What is corporate social responsibility (CSR)?

A business's concern for the welfare of society.

What is the basic idea behind CSR?

Businesses should consider their impact on society, not just their profits

Why do supporters of CSR believe businesses have social responsibilities?

Businesses owe their existence to the societies they serve and cannot thrive in societies that fail.

What are the four dimensions of social responsibility?

Corporate philanthropy, corporate social initiatives, corporate responsibility, and corporate policy.

What is corporate philanthropy?

Charitable donations by a company

What are corporate social initiatives?

Enhanced forms of corporate philanthropy directly related to the company's competencies.

What is corporate responsibility?

Actions such as hiring minority workers and producing safe products.

What is corporate policy?

The position a company takes on social and political issues.

What is the triple bottom line?

Profit + People + Planet.

What does the triple bottom line mean?

Businesses can make profits while also improving people's lives and protecting the environment.

What are the four basic rights of consumers identified by President John F. Kennedy?

The right to safety, information, choice, and to be heard

Why is trust important between businesses and customers?

Customers prefer to do business with companies they trust.

What is a business's responsibility to investors?

To behave ethically and avoid activities that harm investors, such as insider trading.

What is insider trading?

Using private company information to benefit yourself, your family, or friends financially.

Why is insider trading unethical?

It gives insiders an unfair advantage over other investors.

What is SEC Regulation FD?

A regulation concerning fair disclosure of information to investors.

What are businesses' responsibilities to employees?

Create jobs, provide opportunities for upward mobility, treat employees with respect, and offer appropriate salaries and benefits.

What is employee fraud?

Dishonest behavior by employees that causes financial or other harm to a business.

What are examples of employee fraud/misconduct?

Manipulating budgets or expenses, hoarding resources, making false commitments, doing the minimum, or making results appear better than they are.

What is a business's responsibility to society and the environment?

Businesses should help promote social justice and work to minimize environmental harm.

What is the "green movement"?

Growing concern and action surrounding environmental protection and climate change.

What is a carbon footprint?

The amount of greenhouse gas emissions associated with an individual, organization, product, or activity.

Why is environmental quality considered a public good?

People can benefit from a cleaner environment even if they don't directly pay for it.

What is a social audit?

A systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs.

What kinds of activities can a social audit monitor?

Workplace issues, charitable donations, pollution control, and other social responsibility activities.

Who can act as watchdogs of corporate social responsibility?

Socially conscious investors, research organizations, environmentalists, union officials, and customers.

Why can ethical problems be especially difficult in global business?

Different countries have different laws, cultures, and ethical standards.

Why may companies need to police their international suppliers themselves?

Emerging economies may have weak government regulations.

Why might U.S. companies require international suppliers to follow ethical standards?

To reduce unethical practices such as worker exploitation and ensure suppliers meet the company's standards.

Why is it difficult to require U.S. ethical standards everywhere?

Cultural and ethical standards can conflict between countries

What is the Foreign Corrupt Practices Act (FCPA)?

A U.S. law that prohibits U.S. businesses from participating in bribery of foreign officials

Is a single set of international ethical rules for multinational corporations likely?

No. Differences in national laws and cultures make a single universal system unlikely.