Understanding Business Ethics

Business Ethics Defined

• Business ethics means applying ethical standards to business behaviors
• Business ethics can be approached descriptively, by documenting observed customs, attitudes, and rules within a business
• It can also be approached prescriptively, by evaluating the ethical degree of observed customs, attitudes, and rules and recommending changes

Business Ethics application

• Business ethics should not be applied separately from general ethics
• Ethical behavior should be the same inside and outside a business
• It acknowledges key players,called stakeholders, and identifies potentially unethical behaviors
• Personal values may conflict with expected behaviors in the workplace
• Business ethics aims to ensure an orderly, fair, and efficient workplace, reconciling public citizenship with producing goods and profits

Stakeholders

• Stakeholders are anyone impacted by a business
• Not every stakeholder is relevant in every situation
• Ethical operations concerns include stakeholder involvement and the impact of unethical behavior

Stakeholder Interests

• Stockholders or shareholders are interested in the value of the company stock
• Employees seek stable employment, appropriate pay, and a safe work environment
• Customers desire valuable and quality products or services
• Suppliers/vendors partners want to promote goods and receive regular orders
• Retailers/wholesalers need accurate goods delivered on time at a reasonable cost, with safe and reliable products
• Federal government seeks tax revenue and compliance with laws
• Creditors aim for capital and loan repayments on schedule
• The community seeks employment, economic growth, and environmental protection from local residents

Stakeholder Impact

• Stockholders or shareholders are concerned with available information to base investment decisions
• Employees are worried about their jobs ending and the company's ability to pay severance or pension
• Customers care about product safety, as with WorldCom's efforts to reconcile the different operating systems
• Suppliers/vendor partners depend on the company's payment for goods and services
• The federal government cares about revenue, and failure to comply with relevant legislation
• Creditors seek payments, and overall debt, according to the agreed schedule
• The community focuses on the local resident employment and economic decline

Business Ethics and Oxymorons

• Aggressively managed business models may have flawed ethical practices
• Increased attention highlights the need for third-party ethical guarantees
• Ethical conduct is essential for building stakeholder trust, enhancing reputation, and attracting customers and investors

Factors Ensuring Ethical Conduct

• A compliance system monitors and controls ethical behavior in business
• Written standards of ethical behavior empower employees in decision-making

Code of Ethics

• A code of ethics serves as a message to stakeholders demonstrating commitment to ethical standards
• It also acts as internal document, guiding managers and employees in making decisions

Brief history of business ethics

• 1960s: Concerns over military-industrial influence lead to social unrest. Major ethical dilemmas: are pollution, profit over people, civil rights, product safety and job security Business ethics development include: Consumer bill of rights and corporate codes of conduct
• 1970s: Nixon's Watergate scandal spurs questions on ethics in government, corporations are more aware of public image. Major ethical dilemma occurs labor and wage equality Business ethics becomes a distinct field of academic study. In 1977 the Foreign Corrupt Practices Act (FCPA) was created, and the Ethics Resource Center began as well
• 1980s: Corporations downsize to redefine social contract. Savings and loan scandals become an issue, as well as Waste, fraud and business ethics In 1986 the Industry Initiative on Business Ethics and Conduct (DI 1) was created to combat corporate social issues
• 1990s: Expansion of internet and global commerce brings fraud and ethics challenges to developing countries The 1991 Federal Sentencing Guidelines Organizations (FSGO) was created as well as documentation of the legal precedent for business ethics
• 2000's Increased concern of lack of practice of business ethics leads to call for increased regulation Business ethics is now faced with cyber crime, privacy issues, money laundering and loss of privacy for employees

Resolving Ethical Dilemmas

• An ethical dilemma is a situation with no obvious wrong, but a choice between right answers
• Recognize the conflict type: Truth versus loyalty, short-term versus long-term, justice versus mercy, or individual versus community to resolve.

Resolution Principles

• Ends-based: Select the decision that provides the greatest good for the greatest number
• Rules-based: Consider consequences if everyone made the same decision
• The Golden Rule: Treat others as you want to be treated

Resolving Conflicts

• Consult the company code of ethics
• Consider what's right for the organization's stakeholders
• Adhere to what is legal and use best judgment

Ethical Dilemmas

• Ethical dilemmas involve choosing between conflicting values important to the employee or organization

Justifying Unethical Behavior

• One is that the activity conforms to legal and ethical standards
• Or, that the activity aligns with individual or corporate interests
• Or that the activity will remain private and protected from visibility
• Or, a belief that the activity is justified because it helps the company, with protection for the perpetrator