Business Ethics Exam 4

Conflict of Interest

Arises in business when an employee or officer of a company is (1) engaged in carrying out a certain task for the employer; (2) has an interest that provides them with an incentive or motive to do the task in a way that serves that interest; (3) has an obligation to do the task in a way that serves the interests of the employer, free of any incentive to serve another interest.

Objective Conflict of Interest

Conflict of interest that is based on financial relationships

Subjective Conflict of Interest

Conflict of interest that is based on emotional ties or other kinds of relationships

Potential Conflict of Interest

Occurs when an employee has an interest that could influence what they do for their company if the employee were performing a certain task for their company but has not yet been given that task to perform.

Actual Conflict of Interest

Occurs when an employee has an interest that could influence what they do for their employer when the employee performs a certain task for that employer, and they actually have been given that task to perform.

Apparent Conflict of Interest

Exists when an employee has no actual conflict of interest, but other people looking at the employee’s situation may come to believe (wrongly) that they have an actual conflict of interest.

How to Resolve Conflict of Interest

1. Specify amount of stock, if any, that the company will allow employees to hold in firms with which the company does business or with which the company competes

2. Prohibits certain relationships with employees of competitors, buyers, or suppliers

3. Require key officers to disclose all their outside financial interests

Commercial Bribe

Something of value that is given or offered to an employee by a person outside the employe'e’s company who intends it to lead the employee to deal favorably with that person or the person’s firm

• May consist of money, tangible goods, the “kickback" of part of a payment, preferential treatment, or any kind of benefit

Commercial Extortion

An employee who demands a bribe from persons outside the firm

EX. Marco is a purchasing agent who buys only from vendors who agree to give him a kickback

Ethics of Accepting Gifts

1. What is the value of the gift?

2. What is the purpose of the gift?

3. What are the circumstances under which the gift was given?

4. What is the position of the recipient and the giver of the gift?

5. What is the accepted business practice in the area?

6. What is the company’s policy?

7. What is the law?

Employee Theft

An employee using company resources for their own benefit—they’re taking/using property that belongs to another without the consent of its rightful owner

• Petty crime (small tools, office supplies, clothing, etc.) or white-collar crime (embezzlement, larceny, and fraud)

Embezzlement

Theft by one who had authority to possess or use the funds/property

Larceny

Theft by one who never had the authority to handle or possess property

Fraud

Theft through dishonesty

Theft of Information

• Hacking a company’s database, copying company’s computer programs or its computerized data

Even if not damaged, changed, or carried away that is was used for their own benefit is irrelevant.

Violates the owner’s right to have their property used as they choose, even if the theft does not injure the owner

Skills one acquires through their job are not information, but it’s hard to distinguish skills from information

Trade Secrets

(Includes Proprietary Information)

Consists of nonpublic information that concerns company’s activities, tech, plans, policies, records that, if known by others, would materially affect the company’s ability to compete commercially.

• Is owned by the company (developed internally or purchased)

• Company indicates through explicit directives, security measures, or agreements tat info should not be shared outside the company

How to Reduce Loss of Trade Secrets

• Recruiting and keeping top employees

• Non-competes

• Continued payment for retired employees to keep secrets private

Insider Trading

Buying or selling a company’s stock on the basis of “inside” information about the company (illegal!)

Arguments for Insider Trading

Insider Trading Signals the True Value of a Stock

• Ensures that the market value of stocks more accurately reflect their true underlying value and securing a more efficient market

Insider Trading Does no Harm

• Insider not only do harm to those who sell stocks to them right from the beginning, but also benefits those who sells stocks to them (or others) later

Using Inside Information is No Worse Than Using Any Information

• There is nothing unethical or unfair about having an information advantage over others in the stock market

Arguments against Insider Trading

Insider Trading Involves a Theft of Information

• An insider who takes confidential inside company information and uses it to enrich themselves is in effect a thief stealing what is not theirs

The Insider’s Advantage is Unfair and Unjust

• Has harmful effects on the stock market and increases the costs of buying and selling stocks

• The advantage of insider trading is not like the advantage of an expert because it’s based on theft.

Fair Wages

Worker POV: Wages are the principle means for satisfying the basic economic needs of the worker and the worker’s family

Employer POV: Wages are a cost of production that must be kept low lest the product be prices out of the market

Factors of Fair Wages

1. Going Wage in the Industry and the Area

2. Firm’s Capabilities

3. Nature of the Job

4. Minimum Wage Laws

5. Relation to Other Salaries

6. Fairness of Wage Negotiations

7. Local Cost of Living

Job Risks

Employer’s Ethical Duty

• Become informed about and inform workers about workplace risks

• Eliminate workplace risks

• Fully compensate and insure workers for assuming risks that cannot be eliminated

Sweatshop

Used to describe a workplace that has numerous health and safety hazards and poor working conditions, as well as low wages.

• Usually due to multinational companies outsourcing factories at foreign (developing) nations

Whistleblowing

An attempt of a member or former member of an organization to disclose wrongdoing in or by the organization

Internal: reporting to higher ups within the company

External: reporting to government agencies, newspapers, etc.

Conditions of Whistleblowing

1. Clear, substantiated and reasonably comprehensive evidence that the organization is engaged in some activity that is seriously wronging or will seriously wrong other parties

2. Reasonably serious attempts to prevent the wrong through internal whistleblowing have been tried and have failed

3. It is reasonably certain that external whisteblowing will prevent the wrong

4. The wrong is serious enough to justify the injuries that external whistleblowing will probably inflict on oneself, one’s family, and other parties.

Moral Obligation of Whistleblowing

• Moral duty to prevent the wrong because it’s the person’s work or b/c no one else can or will

• Wrong involves a serious harm to society’s welfare

Anti-Discrimination Employment Laws

Require intentional discrimination for: hiring, firing, compensation, promotion/demotion, other actions that cause employees harm, harassment, or denial of reasonable accommodation or leave.

Title VII

Prohibits employment discrimination based on race, color, religion, sex (including sexual orientation), and national origin

• Includes right to be free from retaliation from reports of discrimination

• Reasonable religious accommodations required unless imposes substantial increased costs

Administered by the EEOC

Equal Pay Act

(EPA)

Prohibits sex-based pay discrimination between workers for the same employer who perform jobs that require substantially equal, skills, effort, and responsibility under similar working conditions.

Enforced by the EEOC

Age Discrimination in Employment Act

(ADEA)

Prohibits work discrimination against workers over 40, harassment based on age, and retaliation for activity reporting alleged violations of the ADEA

• Applies to employers with 20+ employees and specified entities like state & local governments, labor organizations, etc.

Administered by the EEOC

Pregnancy Discrimination Act

Amended Title VII to prohibit discrimination on the basis of pregnancy, childbirth, or related medical conditions

Administered by the EEOC

Pregnant Workers Fairness Act

Requires covered employers to provide reasonable accommodations to an employee’s or applicant’s known limitation related to pregnancy, childbirth, or related medical conditions—unless the accommodation will cause the employer an undue hardship.

Americans with Disabilities Act

(ADA)

Prohibits discrimination against an employee with a disability

• Requires employer to provide reasonable accommodations to an employee with a disability unless doing so would pose an undue hardship, pose an unavoidable direct threat, or change the nature of the job

• Must keep medical information in separate, locked files, not employee’s personnel file

• Disclose information only as necessary to supervisors

Administered by the EEOC

Genetic Information Discrimination Act

(GINA)

• Title I prohibits discrimination in group health plan coverage based on genetic information

• Title II prohibits the use of genetic information, including family medical history, in making employment decisions such as hiring, firing, advancement, pay, and other terms, conditions, and privileges of employment.

Administered by the EEOC

Section 1981

Protects the equal right of all persons to make and enforce contracts without the respect to race

• Covers all contractual aspects of the employment relationship, such as hiring, discharge, and the terms and conditions of employment, and protects against retaliation.

• Applies to all private employers and labor organization, but not federal, state, or local government employers.

Enforced by individuals, NOT a federal agency

Occupations Safety and Health Act

(OSHA)

Sets out safety requirements for workplaces—assures every working person in the nation safe and healthful working conditions

Administered by the Occupational Safety and Health Administration

Family and Medical Leave Act

(FMLA)

• Requires employers with 50+ employees

• Grants up to 12 weeks of unpaid leave each year to full time workers with more than a year of service (all at once or intermittently)

• For one’s own serious health conditions, or same of parent, spouse, or child

• Childbirth, adoption, or foster care

• For military family leave relating to specific types of deployment or to care for a service member

• Prohibits retaliation, must restore to position

Administered by the U.S. Department of Labor

Disparate Treatment

Treat people differently because of protected characteristics

• Intentional

• Can include harassment, hiring, firing, demotions, and other harms

Often proven by showing comparable others with different traits treated more favorably

EX. Employee under 40 granted a promotion where an older employee is equally/more qualified

Disparate Imapct

Facially neutral job requirement

• Not based off of race, religion, gender, etc…but still impacts one of these groups

• Statistically disproportionate impact on employees because of a trait

• Legal if a job necessity, not legal if arbitrary distinction

EX. You have to have a college degree, you have to be able to lift 200 pounds

Workplace/Job Discrimination

• Adverse employment decision(s)

• Against employees or applicants

• Because of morally unjustified membership in a class

• Not because of merit or performance

Utilitarianism Perspective

Society’s productivity will be maximized the the extent jobs are awarded based on competence, not arbitrary characteristics (like sex, race, religion)

• Discrimination in job assignment is inefficient

Rights Perspective

Arbitrary treatment violates one’s basic moral rights

Kantian Categorical Imperative

1. None of use would want to be the target of discrimination, so it cannot be universalized

2. People should be treated as free and equal beings, which means we have a correlative duty to treat others as such

Justice-Based Perspective

Rawls: Enlightened people in the original position would choose equal opportunity

• In general, offices of power should be open to all under conditions of fair equality do opportunity

• Arbitrary exclusion from opportunity and authority is unjust

Burdens and benefits should be distributed on relevant actions or characteristics (capacity, service record), not arbitrary characteristics (like sex, race, religion).

Care Perspective

Ethic of care requires advancing the needs and interests of people close to us and those who depend on us

• Care of employees in our community desire to be treated equally is consistent with this philosophy

Virtue Perspective

Discrimination and harassment certainly is inconsistent with prudence and justice (Aristotle)

Might view workplace discrimination as destructive to the community of workers (Pincoffs)

Inconsistent with Conscious Capitalism values (higher purpose, stakeholder orientation, conscious leadership, conscious culture).

Sexual Harassment

Unwelcome sexual advances, requests for sexual favors, verbal or physical contact of a sexual nature when…

• Quid pro quo—sexual coercion

• Conduct creates a hostile environment

Policy: prohibit, clear procedure, provides defense (Faragher-Ellerth) and incentivizes reporting and intra-company responses.

Remember: while sexual harassment was first area of anti-harassment law, it’s prohibited for every protected characteristic.

Moral Muteness

When we communicate in ways that obscure our moral beliefs and commitments, or don’t voice moral sentiments at all

How to Avoid: 

• Make a habit of talking about issues with people whom we trust.

• When raising concern, position yourself as someone who is trying to help the organization, or protect it from its problems, rather than someone who is trying to slap hands or judge.

• Make persuasive arguments by illustrating the potential consequences for individuals and for the organization

Ethical Leadership

The moral example leaders set has a major impact on the behavior of others. Despite career success, leaders are particularly vulnerable to ethical lapses.

Two Things to be an Ethical Leader

• Effective ethical leaders act ethically as an inspiration to others

  • No single factor has a bigger impact on the ethicality of firm culture than the personal examples set by firm leaders

• They communicate and manage their organization’s culture so as to promote ethical action by subordinates.

Instant Entitlement Bias

If people are told that they are part of a team, and should divide resources—they divide equally between two members

• If told they are the leader of the team, they then tend to keep a larger portion of the resources for themselves

EX. Lavish lifestyles that higher ups hav