business ethics in a global economy


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business ethics in a global economy

  1. 1. © 2013 Cengage Learning. All Rights Reserved. 1Dr. Jingjing WengCollege of ManagementYuan Ze UniversityBusiness Ethics in a GlobalEconomy
  2. 2. Recommended text bookEthical Decision Making for Business: AManagerial Approach (9th edition)Fraedrich, Ferrell and Ferrel (2013).International Edition.華泰文化© 2013 Cengage Learning. All Rights Reserved. 2
  3. 3. Business EthicsEthics is a part of decision making at alllevels of work and management Just as important as functional areas ofbusiness Deals with questions of whether practices areacceptable No universally accepted approach for resolvingissues© 2013 Cengage Learning. All Rights Reserved. 3
  4. 4. Why Study Business Ethics?• Business decisions under great scrutiny• Global financial crisis created diminishedstakeholder trust• Deals with questions about whether practicesare acceptable• No universally-accepted approach for resolvingissues© 2013 Cengage Learning. All Rights Reserved. 4
  5. 5. Why Study Business Ethics?• Reports of unethical behavior are on the rise• Society’s evaluation of right or wrong affects itsability to achieve its business goals• Studying business ethics is a response togovernment policies and stakeholder demandsfor ethics initiatives• Individual ethics alone is not sufficient• Studying business ethics helps identify ethicalissues to key stakeholders© 2013 Cengage Learning. All Rights Reserved. 5
  6. 6. Business Ethics DefinedComprises principles, values, and standardsthat guide behavior in the world of business Ethical decisions occur when accepted rules nolonger serve and decision makers must weighvalues and reach a judgment Values and judgments are critical in ethical decisionsPrinciples: Specific boundaries for behaviorthat are universal and absolute• Freedom of speech, civil libertiesValues: Used to develop socially enforcednorms• Integrity, accountability, trust© 2013 Cengage Learning. All Rights Reserved . 6
  7. 7. A Crisis in Business EthicsNearly half of employees observe misconduct inthe workplace After the financial crisis, business decisions andactivities have come under scrutiny The financial sector has not regained stakeholder trust• Consumer trust of businesses is declining• No sector is exempt from ethical misconduct• Stakeholders determine what is ethical/unethical• Investors• Employees• Customers• Interest groups• Legal system• Community© 2013 Cengage Learning. All Rights Reserved. 7
  8. 8. © 2013 Cengage Learning. All Rights Reserved. 8Specific Issues Misuse of company resources Abusive behavior Harassment Accounting fraud Conflicts of interest Defective products Bribery Employee theft
  9. 9. © 2013 Cengage Learning. All Rights Reserved 9Americans’ Trust in Business Sectors(% of respondents who say they trust the following businesscategories)
  10. 10. © 2013 Cengage Learning. All Rights Reserved. 10The Reasons for Studying Business Ethics Having good individual values/morals is notenough to stop ethical misconduct Ethics training helps provide collectiveagreement in diverse organizations Business ethics decisions can be complicated Studying business ethics helps identify ethicalissues to key stakeholders
  11. 11. © 2013 Cengage Learning. All Rights Reserved. 11Source: Adapted from “BusinessA Timeline of Ethical and SociallyResponsible Concerns1960s 1970s 1980s 1990s 2000sEnvironmentalissuesEmployeemilitancyBribes andillegalcontractingpricesSweatshops and unsafeworking conditions inthird-world countriesCybercrimeCivil rightsissuesHuman rightsissuesInfluencepeddlingRising corporate liabilityfor persona damages(for example, cigarettecompanies)FinancialmisconductIncreasingemployee-employertensionCovering uprather thancorrectingissuesDeceptiveadvertisingFinancialmismanagement andfraudGlobal issues,Chinese productsafetyChanging workethicDisadvantagedconsumersFinancial fraud(for example,savings andloan scandal)Organizational ethicalmisconductSustainabilityRising drug use TransparencyissuesIntellectualproperty theftEthics Timeline,” Ethics Resource Center, (accessed May 27, 2009). Copyright ©2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave. N.W., Suite 400, Washington, DC, 2006,
  12. 12. Before 1960: Ethics in BusinessTheological discussions of ethics emerged Catholic social ethics included a concern formorality in business, workers’ rights, and livingwages Protestants developed ethics courses in theirseminaries and theology schools The Protestant work ethic encouraged hard work© 2013 Cengage Learning. All Rights Reserved. 12
  13. 13. The 1960s: The Rise of Social Issuesin BusinessSocial consciousness emerged Increased anti-business sentiment JFK’s Consumer Bill of Rights— a new era ofconsumerism Right to safety, to be informed, to choose, and tobe heard Consumer protection groups fought forlegislation changes Ralph Nader© 2013 Cengage Learning. All Rights Reserved. 13
  14. 14. The 1970s: Business Ethics as anEmerging FieldBusiness professors began to write aboutsocial responsibility An organization’s obligation to maximizepositive impact and minimize negative impacton stakeholders• Philosophers involved• Businesses concerned with public image• Conferences held and centers developed• Issues:Bribery Deceptive advertisingPrice collusion Product safetyEnvironment© 2013 Cengage Learning. All Rights Reserved 14
  15. 15. The 1980s: ConsolidationIncreased membership in business ethicsorganizations Ethics centers provided publications, courses,conferences, and seminars Firms established ethics committees Defense Industry Initiative on Business Ethicsand Conduct (DII) The foundation for the Federal SentencingGuidelines for Organizations Corporate support for ethics© 2013 Cengage Learning. All Rights Reserved . 15
  16. 16. The 1990s: Institutionalization ofBusiness EthicsContinued support for self-regulation,deregulation, and free trade Health-related issues more regulated The Federal Sentencing Guidelines forOrganizations (FSGO) in 1991 Set tone for compliance Preventative actions against misconduct A company could avoid/minimize potentialpenalties© 2013 Cengage Learning. All Rights Reserved. 16
  17. 17. The Federal Sentencing Guidelinesfor OrganizationsStandards and procedures for preventingmisconduct High level of oversight Care in delegation of authority Effective communication Employee training Systems to monitor, audit, and reportmisconduct Consistent enforcement and continuousimprovement© 2013 Cengage Learning. All Rights Reserved. 17
  18. 18. The 21st Century: A New FocusContinued issues with corporate non-compliance Public/political demand for improved ethical standards Sarbanes-Oxley Act (2002) Most extensive ethics reform Increased accounting regulations FSGO reforms (2004, 2008, 2010) Requires governing authorities to be informed of businessethics programs Dodd-Frank Wall Street Reform and ConsumerProtection Act (2009) Aimed at making the financial industry moretransparent/responsibleA firm’s greatest danger is not discoveringmisconduct early© 2013 Cengage Learning. All Rights Reserved 18
  19. 19. Organizational Ethical CultureEthical culture: The component ofcorporate culture that captures the valuesand norms that an organization defines asappropriate Creates shared valuesGoal is to: Minimize need for enforced compliance Maximize utilization of principles/ethical reasoning© 2013 Cengage Learning. All Rights Reserved. 19
  20. 20. Global Ethical CultureNations working together to establishstandards of ethical behavior NAFTA MERCOSUR WTO Companies can demonstrate theircommitment to social responsibility throughadopting international standards Global Sullivan Principles Coalition for Environmentally Responsible Economies(CERES) United Nations Global Compact© 2013 Cengage Learning. All Rights Reserved. 20
  21. 21. © 2013 Cengage Learning. All Rights Reserved. 21Source: Adapted from “BusinessThe Role of Organizational Ethics inPerformance
  22. 22. Ethics Contributes to EmployeeCommitmentCommitment comes from employees whoare invested in the organization Employees willing to make personal sacrificesfor the organization The more company dedication to ethics, thegreater the employee dedication Concerns include a safe work environment,competitive salaries and benefits packages, andfulfillment of contractual obligations© 2013 Cengage Learning. All Rights Reserved. 22
  23. 23. Ethics Contributes to InvestorLoyaltyCompanies perceived by their employees asbeing honest are more profitable Ethical climates in organizations provide aplatform for Efficiency Productivity Profitability© 2013 Cengage Learning. All Rights Reserved. 23
  24. 24. Ethics Contributes to CustomerSatisfactionConsumers respond positively to sociallyconcerned businesses Being good can be profitable Customer satisfaction dictates business success A strong organizational ethical climate placescustomers’ interests first Research shows a strong relationship betweenethical behavior and customer satisfaction© 2013 Cengage Learning. All Rights Reserved. 24
  25. 25. Ethics Contributes to Profits Corporate concern for ethical planning is beingintegrated with strategic planning Maximizes profitability Corporate citizenship is positively associatedwith Return on investment and assets Sales growth Studies have found a positive relationshipbetween corporate citizenship andperformance© 2013 Cengage Learning. All Rights Reserved. 25
  26. 26. Guest Lecture (Mar. 20) Ethics in global finance: Emerging trends intimes of crisis Time: 3/20 (Wed) 12:00-14:00 Place: R70304 Speaker: Eddy S. Fang, PhD (Cambridge)Lecturer in Economics, Business School, Xi’anJiaotong -- Liverpool University Preparation before the lecture: reading case 9(pp214) of the textbook© 2013 Cengage Learning. All Rights Reserved. 26
  27. 27. Class Discussion todayHarvard University’s Justice with Michael Sandel moral side of murder? news sharing from next week!!(International news or news related to businessethics)© 2013 Cengage Learning. All Rights Reserved. 27