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Business Ethics

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180 Terms

1

Business Ethics

Organizational principles, values and norms that originate from individuals, organizational statements, or from the legal system

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Principles

Specific boundaries that should not be violated

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Values

Existing beliefs and ideals that are socially enforced

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4

Ethical Culture

Acceptable behavior as defined by the company and industry that captures the values and norms of the company

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Stakeholders

People who have a stake or claim in some aspect of a company's operations, markets, and industry.

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6

Name 9 Issues to Be Addressed to Prevent Misconduct

  1. Misuse of Company Resources

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  1. Abusive Behavior

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  1. Harassment

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  1. Accounting Fraud

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  1. Conflicts of Interest

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  1. Defective Products

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  1. Bribery

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  1. Product Knockoffs

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  1. Employee Theft

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15

Name 5 Reasons for Studying Business Ethics

  1. Improves an individual's personal ethics

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  1. Helps in addressing business-strategy decisions that are complex and detailed

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  1. Ensures collective agreement of organizational ethics

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  1. Helps peoples with limited experience in making organizational decisions

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  1. Helps one identify and resolve ethical issues in a quick manner

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20

What major development in Business Ethics occurred in the 1960's?

Consumer's bill of rights was introduced

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21

What major development in Business Ethics occurred in the 1970's?

Corporate social responsibility emerged as a subject

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22

What major development in Business Ethics occurred in the 1980's?

The Defense Industry Initiative on Business Ethics and Conduct was developed to guide corporate support for ethical conduct

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23

What major development in Business Ethics occurred in the 1990's?

Federal Sentencing Guidelines for Organizations (FSGO) provided law incentives to reward organizations to prevent misconduct

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24

What two major developments in Business Ethics occurred in the 2000's?

  • Sarbanes-Oxley Act made securities fraud a criminal offense and increased penalties for corporate fraud.

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  • The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed to make the financial services industry more ethical and responsible

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Name 4 benefits of Business Ethics

  1. Employee Commitment

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  1. Investor Loyalty

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  1. Customer Satisfaction

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  1. Profits

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How does development of ethical culture affect Employee Commitment?

Development of an ethical culture leads to employee retention and loyalty, which increases employee performance.

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How does development of ethical culture affect Investor Loyalty?

Investors are aware of the contributions of ethical conduct in providing a foundation for efficiency, productivity, and profits in a firm.

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How does development of ethical culture affect Customer Satisfaction?

Companies viewed as socially responsible gain a high amount of customer trust and satisfaction.

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How does development of ethical culture affect Profits?

Ethical culture helps a company stay ahead of its competitors, thereby gaining more profits.

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34

What is the function of Stakeholder framework?

Stakeholder framework identifies the internal and external stakeholders who agree, collaborate, and engage i confrontations on ethical issues.

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What are the 3 approaches to Stakeholder Theory?

  • Normative - Sets forth ethical guidelines that dictate how firms should treat stakeholders

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  • Descriptive - Focuses on the actual behavior of a firm and addresses how decisions and strategies are made for stakeholder relationships

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  • Instrumental - Describes what happens if a firm behaves in a particular way

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What are the 2 roles of Stakeholders?

  1. Foster decision making

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  1. Provide resources that are critical to a firm's long-term success

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What are the 2 types of Stakeholders?

  • Primary Stakeholders - essential to survival

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  • Secondary Stakeholders - not essential to survival

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What are the 6 types of Primary Stakeholders?

  1. Customers

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  1. Employees

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  1. Shareholders

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  1. Suppliers

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  1. Community

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  1. Government Regulatory Agendas

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What are the 4 types of Secondary Stakeholders?

  1. Special Interest Groups

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  1. The Mass Media

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  1. Competitors

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  1. Trade Associations

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What is Stakeholder Orientation and what activities does it consist of?

Degree to which a firm understands and addresses stakeholder demands. Consists of the following activities:

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  • Organization-wide generation of data about stakeholder groups and assessment of the firm's effects on these groups

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  • Distribution of the generated data throughout the firm

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  • Responsiveness of the organization as a whole to the data generated

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What are the 4 steps of Social Responsibility?

  1. Philanthropic: "giving back" to society

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  1. Ethical: following standards of acceptable behavior as judged by stakeholders

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  1. Legal: abiding by all laws and government regulations

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  1. Economic: maximizing stakeholder wealth and/or value

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What is Corporate Citizenship and what are its dimensions?

Degree to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their stakeholders. Dimensions:

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  • Strong sustained economic performance

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  • Rigorous compliance

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  • Ethical actions beyond what the law requires

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  • Voluntary contributions that advance the reputation and stakeholder commitment of the organization

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Name 4 Issues in Social Responsibility

  1. Social Issues

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  1. Consumer Protection

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  1. Sustainability

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  1. Corporate Governance

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What are the 2 main views on Stakeholder importance?

  1. Friedman's View: Stakeholders do not have any role in requiring business to demonstrate responsible and ethical behavior.

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  1. Adam Smith's View: Values that a firm should adopt to produce correlate with the needs and concerns of the stakeholders in a more socially responsible way.

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How does Corporate Governance affect Stakeholders?

Corporate governance provides formalized responsibility to stakeholders

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Corporate Governance established systems and processes for what 3 areas?

  1. Preventing and detecting misconduct

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  1. Investigating and disciplining

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  1. Recovery and continuous improvement

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What are the 2 models of Corporate Governance?

  1. Shareholder Model

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  1. Stakeholder Model

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What is the Shareholder Model? What is its goal?

Focuses on developing and improving the formal system for maintaining performance accountability between top management and shareholders. Goal: Maximize wealth for investors and owners.

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What is the Stakeholder Model?

  • Company is answerable to its stakeholders.

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  • Promotes stakeholder welfare along with corporate needs and interests

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What are 3 characteristics of a Board of Directors?

  1. Responsible for the ethics of a firm's actions (fiduciary duty)

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  1. Assume ultimate authority for their organizations effectiveness and subsequent performance

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  1. Governed by the amendments of the Federal Sentencing Guidelines for Organizations (FSGO)

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Interlocking Directorate

Board members linked to more than one company

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What is a Stakeholder mentality of Executive Compensation?

Stakeholders support high level of compensation only when it is linked to strong company performance

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What are the 5 steps to Implementing a Stakeholder Perspective?

  1. Assessing the corporate culture

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  1. Identifying stakeholder groups and issues

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  1. Assessing organizational commitment to social responsibility

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  1. Identifying resources and determining urgency

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  1. Gaining stakeholder feedback

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What are the 3 foundational values for identifying Ethical Issues

  • Integrity

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  • Honesty

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  • Fairness

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What are two examples of Misuse of Company Time and Resources?

  1. Time theft

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  1. Using company software and internet services for personal business

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What are 3 examples of Abusive or Intimidating Behavior?

  1. Physical threats and false accusations, profanity, and insults

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  1. Wage theft

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