Business Ethics
ETHICS IN THE WORKPLACE
Business Ethics: ethical or unethical behaviour by a business’s managers or employees
Individual Ethics
Individual Values and Morals
Business and Managerial Ethics
Behaviour towards Employees
firing and hiring, wages and working conditions, and privacy)
Behaviour toward the Organization
how employees behave towards their employers
Conflict of Interest: when an activity benefits an employee at the expense of the employer
Behaviour towards Other Economic Agents
ethical disputes may arise in the relationships between a company and its customers, competitors, shareholders, suppliers, dealers, and unions
Assesing Ethical Behaviour
Gather the relevant factual information
Utility: Does a particular act optimize what is best for those who are affected by it?
Rights: Does it respect the rights of all individuals involved?
Justice: Is it consistent with what we regard to be fair?
Caring: Is it consistent with people’s responsibilities to each other?
Determine the most appropriate moral values
Make an ethical judgement based on the rightness or wrongness of the proposed activity or policy
Encouraging Ethical Behaviour in Organizations
Managers must understand why unethical behaviour occurs in the first place. Three general factors are important:
Pressure: the employee has some problem that cannot be solved through legitimate means
Opportunity: the employee uses their position in the organization to secretly solve the problem
Rationalization: the employee sees themselves as basically an ethical person caught up in an unfortunate situation
To reduce the chance of unethical behaviour, organizations should:
Demostrate top management commitment to values and high ethical standards
Adopt written codes of ethics
Provide ethics training
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility: refers to the way a business tries to balance its commitments to important individuals and groups in its extrenal environment
Business firms that want to meet rigorous standards for inclusion, sustainability, equity, and diversity can be certified as B Corp
Managerial Capitalism: when a company’s only responsibility is to make as much money as possible for its shareholders, as long as the company doesn’t break any laws
Fair Trade Movement: motivated by several concerns workers in still industrializing countries who produce various products:
are not being treated fairly on the job
are not receiving fair payment for the products they produce
illegal child labour is being used to produce the products
THE STAKEHOLDER MODEL OF RESPONSIBILITY
Organizational Stakeholder: individuals and groups that are directly affected by the practices of an organization and have a stake in its performance
Social Return on Investment (SROI): helps companies understand, manage, and communicate the social value of their activities for stakeholders
Companies that strive to be socially responsible usually concentrate on the following stakeholders:
customers
employees
investors
suppliers
local communites where they do business
Responsibility toward Customers
There are three key areas regarding the social responsibility of business toward customers:
Consumer Rights
Consumerism: movement dedicated to protecting the rights of consumers in their dealings with businesses
Right to safe products
Right to be informed about all relevant aspects of a product
Right to be heard
Right to choose what they buy
Right to be educated about purchases
RIght to courteous service
Unfair Pricing
Interfering with competition can also mean illegal pricing practices
Ethics in Advertising
Truth in Advertising: claims must be demonstrably true, but it is not hard to find examples where this principle is violated
Stealth Advertising: when companies pay individuals to sell the virtues of their products to other individuals without disclosing that they are paid sponsors or employees
Morally Objectionable Advertising: portrayals of individuals or products that offend customer’s sense of decency
Advertising of Counterfeit Brands
Responsibility toward Employees
Recruiting, hiring, training, promoting, and compensating are the basis for socially responsible behaviour toward employees
Socially responsible companies:
hire and promote workers regardless of race, sex, or other irrelevant factors
provide a safe and non-bullyig workplace
do not tolerate managers who sexually harass subordinates
promote work-life balance among employees
emphasize mental health
pay a living wage
Whistle-Blowers: an employee who discovers and tries to put an end to a company’s unethical, illegal, or socially irresponsible actions by publicizing them
often demoted or fired when they go public with their accusations
Responsibility Towards Investors
Managers behave irresponsibly when they reward themselves at the expense of the company or other employees.
Financial mismanagement can take many forms:
Improper Financial Management
executives may make bad decisions, pay themselveves outlandish salaries, or use investor money to buy expensive personal items
Misrepresentation of Finances
Cheque Kitting
writing a cheque from one account, depositing it in one account, and then immediately spending the money from the second account while the money from the first account is till in transit
Insider Trading:
using information not available to the general investor by either buying stock just before its price goes up or selling stock just before the price goes down
Responsibility toward Suppliers
Keep suppliers informed about the company’s plans, and negotiate delivery schedules and prices that are acceptable to both firms
Responsibility toward Local and International Communities
Businesses can demonstrate socially responsible behaviour in local communities by:
contributing to local programs
donating to charities
many other actions that support an improved quality of life for people who live in the community
Socially responsible companies acknowledge their commitment to their stakeholders in each country where they do business
Responsibility toward the Government
Controlling pollution is a significant social responsibility challenge for firms
Air Pollution
Water Pollution
Land Pollution
Consumers and Pollution
MANAGING SOCIAL RESPONSIBILITY PROGRAMS
Approaches to Social Responsibility
Obstructionist Stance
do as little as possible to solve social or environmental problems
typical response is to deny or cover up their actions
have little regard for ethical conduct and will generally go to great lengths to hide wrongdoing
Defensive Stance
will do everything required of it legally, but nothing more
Accomodative Stance
meets its legal and ethical requirements
goes further in certain cases if it is asked
soliticors must convince the firm that these programs are worthy of funding
Proactive Stance
take to heart the arguments in favour of CSR
view themselves as good citizens of society
proactively seek opportunities to contribute
Ex: set up foundations to provide a direct financial support for various social problems
Managing Social Responsibility Programs
Formal Activities
top management states strong support for CSR and makes it a factor in strategic planning
Social Audit: a systematic analysis of how a firm is using funds earmarked for its social responsibility goals and how effective these expenditures have been
Sustainable Development: pursuing activities that meet current needs but will not put future generations at a disadvantage when they attempt to meet their needs
Informal Activities
the culture of the organization is important in either inhibiting or facilitating social responsibility activities
SOCIAL RESPONSIBILITY & THE SMALL BUSINESS
In general, small businesses face many of the same ethical and social responsibility issues as large businesses, but also face specific ethical dillemas that have an immediate effect on their business