ethics 1

Business Ethics

Business Ethics

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

Principles

Specific boundaries that should not be violated

Values

Existing beliefs and ideals that are socially enforced

Ethical Culture

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

Stakeholders

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

Name 9 Issues to Be Addressed to Prevent Misconduct

1. Misuse of Company Resources

2. Abusive Behavior

3. Harassment

4. Accounting Fraud

5. Conflicts of Interest

6. Defective Products

7. Bribery

8. Product Knockoffs

9. Employee Theft

Name 5 Reasons for Studying Business Ethics

1. Improves an individual's personal ethics

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

3. Ensures collective agreement of organizational ethics

4. Helps peoples with limited experience in making organizational decisions

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

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

Consumer's bill of rights was introduced

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

Corporate social responsibility emerged as a subject

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

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

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.

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

Name 4 benefits of Business Ethics

1. Employee Commitment

2. Investor Loyalty

3. Customer Satisfaction

4. Profits

How does development of ethical culture affect Employee Commitment?

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

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.

How does development of ethical culture affect Customer Satisfaction?

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

How does development of ethical culture affect Profits?

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

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.

What are the 3 approaches to Stakeholder Theory?

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

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

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

What are the 2 roles of Stakeholders?

1. Foster decision making

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

What are the 2 types of Stakeholders?

• Primary Stakeholders - essential to survival

• Secondary Stakeholders - not essential to survival

What are the 6 types of Primary Stakeholders?

1. Customers

2. Employees

3. Shareholders

4. Suppliers

5. Community

6. Government Regulatory Agendas

What are the 4 types of Secondary Stakeholders?

1. Special Interest Groups

2. The Mass Media

3. Competitors

4. Trade Associations

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:

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

• Distribution of the generated data throughout the firm

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

What are the 4 steps of Social Responsibility?

1. Philanthropic: "giving back" to society

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

3. Legal: abiding by all laws and government regulations

4. Economic: maximizing stakeholder wealth and/or value

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:

• Strong sustained economic performance

• Rigorous compliance

• Ethical actions beyond what the law requires

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

Name 4 Issues in Social Responsibility

1. Social Issues

2. Consumer Protection

3. Sustainability

4. Corporate Governance

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.

2. 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.

How does Corporate Governance affect Stakeholders?

Corporate governance provides formalized responsibility to stakeholders

Corporate Governance established systems and processes for what 3 areas?

1. Preventing and detecting misconduct

2. Investigating and disciplining

3. Recovery and continuous improvement

What are the 2 models of Corporate Governance?

1. Shareholder Model

2. Stakeholder Model

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.

What is the Stakeholder Model?

• Company is answerable to its stakeholders.

• Promotes stakeholder welfare along with corporate needs and interests

What are 3 characteristics of a Board of Directors?

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

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

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

Interlocking Directorate

Board members linked to more than one company

What is a Stakeholder mentality of Executive Compensation?

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

What are the 5 steps to Implementing a Stakeholder Perspective?

1. Assessing the corporate culture

2. Identifying stakeholder groups and issues

3. Assessing organizational commitment to social responsibility

4. Identifying resources and determining urgency

5. Gaining stakeholder feedback

What are the 3 foundational values for identifying Ethical Issues

• Integrity

• Honesty

• Fairness

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

1. Time theft

2. Using company software and internet services for personal business

What are 3 examples of Abusive or Intimidating Behavior?

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

2. Wage theft