ACC 112 | SAS 10

Common Unethical Practices of Business Establishments & Ethical Dilemma

Unethical behavior

refers to actions that do not conform to acceptable standards of business conduct or involve failing to do what is right in a particular situation

• Misrepresentation

• Over-persuasion

Two of the most common unethical practices are:

Misrepresentation

is an intentionally or sometimes negligently false representation made through:

• Words or statements

• Actions or conduct

• Nondisclosure

• Concealment

It is often done to deceive, defraud, or cause another person to rely on false information to their disadvantage.

Misrepresentation

Giving false or incomplete information to make someone believe something that is not true.

Direct misrepresentation

occurs when the seller actively gives false or misleading information about a product or service

Deceptive Packaging

characterized by inconsistency of product content and capacity

Misbranding/Mislabeling

the product label contains false statement or container is similar to

a well-known product

False/Misleading Advertising

when advertising fails to provide useful service to customers

Adulteration

offering a product that does not meet the required standards

Weight understatement/Short weighing

applicable for products whose prices depends on the weight such as sugar, meat, fish, etc.

Measurement understatement/Short measurement

applicable for products whose prices depends on the length such as wires, textiles or on its volume such as sacks of rice

Quantity understatement/Short numbering

done when seller gives the customer less than the number asked for or paid for

Indirect Misrepresentation

characterized by omitting adverse or unfavorable information about the product of service

Direct Misrepresentation

The seller actively says, shows, or provides something misleading.

Indirect Misrepresentation

The seller misleads by what they DON'T tell you.

Caveat emptor

It involves taking advantage of the buyer's lack of information.

The seller may know something important about the product but relies on the buyer's failure to discover it.

Deliberate Withholding of Inform

The seller intentionally hides important information that could affect the buyer's decision.

The seller intentionally hides important information that could affect the buyer's decision.

The seller fails to provide complete information to the buyer.

The deception may occur because the seller does not correct a misunderstanding or does not give relevant information.

Persuasion

• process of appealing to the emotion of a prospective customer and urging him to buy an item of merchandise he needs.

• legitimate if done to the interest of the buyer.

Over-Persuasion

• appealing to emotion of prospective buyer with the intention of the seller to take the sole interest without considering the interest of the buyer.

• unethical business practice.

Over-Persuasion

Urging customer to satisfy a low priority need for merchandise.

Over-Persuasion

Playing upon intense emotional agitation to convince a person to buy

Over-Persuasion

Convincing a person to buy what he does not need just because he has the capacity or money to do so.

Persuasion

• Can be ethical

• Considers buyer's interest

• Helps buyer make an informed decision

• Product is reasonably connected to buyer's needs

Over-Persuasion

• Unethical

• Prioritizes seller's interest

• Manipulates buyer

• Buyer may be convinced to buy something unnecessary

Board of Directors

Responsible for overseeing and directing the company's affairs. They have significant authority, unethical conduct by them can seriously affect the organization.

Plain Graft

their salaries and benefits does not commensurate their service

Interlocking Directorship

director holds directorial position in two different companies doing business with each other

Insider Trading

broker has access to confidential information to trade in shares and securities

Negligence of duty

failure to attend regularly in board meeting could result to betrayal of trust of the parties who elected them to their position

Claiming a Vacation Trip as a Business Trip

A manager goes on a personal vacation but reports the expenses as a business trip

Having Employees Perform Work Unrelated to Business

Managers may misuse employees by requiring them to perform personal tasks unrelated to their jobs.

Loose/Ineffective Controls

Weak controls = Greater opportunity for fraud and unethical behavior.

Needs proper separation of duties

Unfair Labor Practices

These involve treating employees unfairly or violating their legitimate workplace rights.

Making False Claims About Losses

Managers may falsely claim that the company suffered losses to avoid paying legally required compensation or benefits.

Making Employees Sign False Documents

Employees may be forced to sign documents indicating that they received their full legal compensation even though they received only a fraction.

Sexual Harassment

involves unwelcome sexual conduct, comments, requests, or behavior in the workplace.

Conflict of Interest

employees’ decision is influence by what he can personally get than what his employee can gain from it

Dishonesty

involves intentionally deceiving the employer or other parties for personal benefit

Ethical dilemma

a situation in which a person must make a decision about the appropriate behavior, and the decision has consequences

Ethical dilemma

dilemma is a situation a person faces in which a decision must be made about the appropriate behavior