BMGT380 Business Ethics Fall 2024-2025 PDF

School of Business Department of Management & International Management BMGT380 – Business Ethics Fall 2024 – 2025 Chapter 7: What Employees Owe Employers Ob...

School of Business Department of Management & International Management BMGT380 – Business Ethics Fall 2024 – 2025 Chapter 7: What Employees Owe Employers Objective 7.1: Loyalty to the Company A Duty of Loyalty One of the main duties of employees toward their employer is the duty of loyalty, requires that an employee refrain from acting in a manner contrary to the employer’s interest. This duty creates some basic rules employees must follow on the job and provides employers with enforceable rights against employees who violate them. In general terms, the duty of loyalty means an employee is obligated to render “loyal and faithful” service to the employer, to act with “good faith,” and not to compete with but rather to advance the employer’s interests. The employee must not act in a way that benefits him- or herself (or any other third party), especially when doing so would create a conflict of interest with the employer. What is clear is that it is wrong for employees to make work decisions primarily for their own personal gain, rather than doing what is in the employer’s best interest. The degree to which the duty of loyalty exists is usually related to the degree of responsibility or trust an employer places in an employee. More trust equals a stronger duty. For example, when an employee has very extensive authority or access to confidential information, the duty can rise to its highest level, called a fiduciary duty. Confidentiality In the competitive world of business, many employees encounter information in their day-to-day work that their employers reasonably expect they will keep confidential. Proprietary (private) information, the details of patents and copyrights, employee records and salary histories, and customer-related data are valued company assets that must remain in-house, not in the hands of competitors, trade publications, or the news media. Employers are well within their rights to expect employees to honor their duty of confidentiality and maintain the secrecy of such proprietary material. Sometimes the duty of confidentiality originates specifically from an employment contract. Employers also want to protect their trade secrets, that is, information that has economic value because it is not generally known to the public and is kept secret by reasonable means. Trade secrets might include technical or design information, advertising and marketing plans, and research and development data that would be useful to competitors. Often non-disclosure agreements are used to protect against the theft of all such information, most of which is normally protected only by the company’s requirement of secrecy. Law generally protects registered trademarks (commercial identifications such as words, designs, logos, slogans, symbols, and trade dress, which is product appearance or packaging) and grants creators copyrights (to protect original literary and artistic expressions such as books, paintings, music, records, plays, movies, and software) and patents (to protect new and useful inventions and configurations of useful articles). Companies also use non-compete agreements as a way to provide another layer of confidentiality, ensuring that employees with access to sensitive information will not compete with the company during or for some period after their employment there. The stated purpose of such agreements is to protect the company’s intellectual property, which is the manifestation of original ideas protected by legal means such as patent, copyright, or trademark. 1|Page  Employers may also insert a non-solicitation clause, which protects a business from an employee who leaves for another job and then attempts to lure customers or former colleagues into following. Though these clauses have limitations, they can be effective tools to protect an employer’s interest in retaining its employees and customers. A final clause an employee might be required to sign is a non-disparagement clause, which prohibits defaming or deliberately running down the reputation of the former employer. Objective 7.2: Loyalty to the Brand and to Customers Respecting the Brand Every company puts time, effort, and money into developing a brand, that is, a product or service marketed by a particular company under a particular name. As Apple, Coca-Cola, Amazon, BMW, McDonald’s, and creators of other coveted brands know, branding—creating, differentiating, and maintaining a brand’s image or reputation— is an important way to build company value, sell products and services, and expand corporate goodwill. Companies want and expect employees to help in their branding endeavors. Good branding requires that a business think of marketing not just to its customers but also to its employees because they are the “very people who can make the brand come alive for your customers”. The process of getting employees to believe in the product, to commit to the idea that the company is selling something worth buying, and even to think about buying it, is called internal marketing. Obligations to Customers Employees are obliged to assist the firm in forming a positive relationship with customers. How well or poorly they do so contributes a great deal to customers’ impression of the company. And customers’ perceptions affect not only the company but all the employees who depend on its success for their livelihood. Thus, the ethical obligations of an employee also extend to interactions with customers, whom they should treat with respect. Employers can encourage positive behavior toward customers by empowering employees to use their best judgment when working with them. Employees who treat customers well are assets to the company and deserve to be treated as such. Objective 7.3: Contributing to a Positive Work Atmosphere Getting Along with Coworkers An employee who gets along with coworkers can help the company perform better. What can employees do to help create a more harmonious workplace with a positive atmosphere? Keep an open mind when starting a new job and avoid making prejudgments about colleagues. Engage with coworkers by accepting lunch invitations, participating in social activities, and embracing office traditions. Be kind to colleagues, as small gestures can improve relationships and create a positive work environment. Show respect by avoiding actions that could offend, such as taking credit for others' work or being narrowminded about sensitive topics. Refrain from making inappropriate jokes or comments to maintain professionalism. Make an effort to get along with all coworkers, even those who may be difficult. Do not use social media to gossip about colleagues, as it can harm relationships and lead to disciplinary actions. 2|Page Reducing Workplace Violence Workplace violence is a significant concern. Employees have a legal and ethical duty to maintain a safe workplace, and managers must prevent and address violence. Workplace violence falls into four categories: 1. Traditional Criminal Intent: The perpetrator has no legitimate relationship with the business and often commits violence during a crime, such as robbery. 2. Worker-on-Worker Violence: This occurs when an employee attacks a coworker. 3. Personal Relationship Violence: This type involves a perpetrator who has a personal relationship with the victim, who is an employee, not with the business itself. 4. Customer Violence: Occurs when a customer or client becomes violent on the premises. This type is common in nightclubs, restaurants, and healthcare settings. Codes of Conduct Companies have the right to require ethical decision-making from their employees and managers, often providing a written code of ethics or code of conduct. These codes cover a range of topics, such as workplace romance, sexual harassment, hiring practices, bribery and gifts, insider trading, and more. They include legal and ethical guidelines to ensure proper behavior. Two critical areas in codes of conduct are cybersecurity and harassment. Objective 7.4: Financial Integrity Insider Trading It refers to buying or selling stocks, bonds, or other investments based on confidential, nonpublic information that could impact the security's price. For example, if someone knows a company is about to be taken over, which will likely increase its stock price, they might buy shares before the news is public to profit from the price rise. Similarly, someone aware of an impending drop in stock price may sell their shares early to avoid losses. Insider trading is considered unethical and unfair because it gives an unfair advantage to those with access to nonpublic information, harming other investors who do not have the same information. This behavior damages trust in the financial markets. The term "insider" includes not only company employees but also temporary insiders like consultants, investment bankers, and reporters who may have access to confidential information. Objective 7.5: Criticism of the Company and Whistleblowing Whistleblowing: Risks and Rewards Whistleblowing involves disclosing an employer's illegal activities to government authorities. This act is seen as a public service because it helps to expose and address unethical behavior, but it comes with considerable risks and challenges. Whistleblowers often face significant personal and professional consequences. If their identity becomes known, they might experience career setbacks, such as job loss or being overlooked for promotions. They may also face resentment from management and colleagues who fear the repercussions of their disclosures. In some cases, whistleblowers might be blacklisted, making it difficult to secure future employment. Before going public, employees should use internal reporting channels to address the issue within the company. This approach allows the company a chance to investigate and correct the problem. Whistleblowers should ensure they have strong evidence and a legitimate reason for their actions, such as enforcing compliance or protecting others, rather than personal grievances. The potential rewards for whistleblowers can be significant. For example, whistleblowers who report serious fraud or misconduct can sometimes receive a financial reward based on the penalties imposed on the wrongdoers. High-profile cases have shown that rewards can be substantial, with some 3|Page whistleblowers receiving millions of dollars. These rewards serve as an incentive for individuals to come forward and report wrongdoing. Overall, whistleblowing is a difficult decision with far-reaching implications. While it can lead to significant personal and professional risks, it also plays a crucial role in maintaining ethical standards and fairness in business practices. 4|Page