ARC MGMT 374 Week 1 Presentation


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ARC MGMT 374 Week 1 Presentation

  1. 1. Chapter 1: The Importance of Business Ethics Part One: An Overview of Business Ethics© 2013 Cengage Learning. All Rights Reserved. 1
  2. 2. Business Ethics Ethics is a part of decision making at all levels of work and management  Just as important as functional areas of business  Deals with questions of whether practices are acceptable  No universally accepted approach for resolving issues© 2013 Cengage Learning. All Rights Reserved. 2
  3. 3. Business Ethics Defined Comprises principles, values, and standards that guide behavior in the world of business  Ethical decisions occur when accepted rules no longer serve and decision makers must weigh values and reach a judgment  Values and judgments are critical in ethical decisions Principles: Specific boundaries for behavior that are universal and absolute • Freedom of speech, civil liberties Values: Used to develop socially enforced norms • Integrity, accountability, trust© 2013 Cengage Learning. All Rights Reserved . 3
  4. 4. A Crisis in Business Ethics Nearly half of employees observe misconduct in the workplace  After the financial crisis, business decisions and activities have come under scrutiny  The financial sector has not regained stakeholder trust© 2013 Cengage Learning. All Rights Reserved. 4
  5. 5. Americans’ Trust in Business Sectors (% of respondents who say they trust the following business categories)© 2013 Cengage Learning. All Rights Reserved 5
  6. 6. Specific Issues  Misuse of company resources  Abusive behavior  Harassment  Accounting fraud  Conflicts of interest  Defective products  Bribery  Employee theft© 2013 Cengage Learning. All Rights Reserved. 6
  7. 7. The Reasons for Studying Business Ethics  Having good individual values/morals is not enough to stop ethical misconduct  Ethics training helps provide collective agreement in diverse organizations  Business ethics decisions can be complicated  Studying business ethics helps identify ethical issues to key stakeholders© 2013 Cengage Learning. All Rights Reserved. 7
  8. 8. A Timeline of Ethical and Socially Responsible Concerns 1960s 1970s 1980s 1990s 2000s Environmental Employee Bribes and Sweatshops and unsafe Cybercrime issues militancy illegal working conditions in contracting third-world countries prices Civil rights Human rights Influence Rising corporate liability Financial issues issues peddling for persona damages misconduct (for example, cigarette Source: Adapted from “Business companies) Increasing Covering up Deceptive Financial Global issues, employee- rather than advertising mismanagement and Chinese product employer correcting fraud safety tension issues Changing work Disadvantaged Financial fraud Organizational ethical Sustainability ethic consumers (for example, misconduct savings and loan scandal) Rising drug use Transparency Intellectual issues property theft Ethics 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,© 2013 Cengage Learning. All Rights Reserved. 8
  9. 9. Before 1960: Ethics in Business Theological discussions of ethics emerged  Catholic social ethics included a concern for morality in business, workers’ rights, and living wages  Protestants developed ethics courses in their seminaries and theology schools  The Protestant work ethic encouraged hard work© 2013 Cengage Learning. All Rights Reserved. 9
  10. 10. The 1960s: The Rise of Social Issues in Business Social consciousness emerged  Increased anti-business sentiment  JFK’s Consumer Bill of Rights— a new era of consumerism  Right to safety, to be informed, to choose, and to be heard  Consumer protection groups fought for legislation changes  Ralph Nader© 2013 Cengage Learning. All Rights Reserved. 10
  11. 11. The 1970s: Business Ethics as an Emerging Field Business professors began to write about social responsibility  An organization’s obligation to maximize positive impact and minimize negative impact on stakeholders • Philosophers involved • Businesses concerned with public image • Conferences held and centers developed • Issues: Bribery Deceptive advertising Price collusion Product safety Environment© 2013 Cengage Learning. All Rights Reserved 11
  12. 12. The 1980s: Consolidation Increased membership in business ethics organizations  Ethics centers provided publications, courses, conferences, and seminars  Firms established ethics committees  Defense Industry Initiative on Business Ethics and Conduct (DII)  The foundation for the Federal Sentencing Guidelines for Organizations  Corporate support for ethics© 2013 Cengage Learning. All Rights Reserved . 12
  13. 13. The 1990s: Institutionalization of Business Ethics Continued support for self-regulation, deregulation, and free trade  Health-related issues more regulated  The Federal Sentencing Guidelines for Organizations (FSGO) in 1991  Set tone for compliance  Preventative actions against misconduct  A company could avoid/minimize potential penalties© 2013 Cengage Learning. All Rights Reserved. 13
  14. 14. The Federal Sentencing Guidelines for Organizations Standards and procedures for preventing misconduct  High level of oversight  Care in delegation of authority  Effective communication  Employee training  Systems to monitor, audit, and report misconduct  Consistent enforcement and continuous improvement© 2013 Cengage Learning. All Rights Reserved. 14
  15. 15. The 21st Century: A New Focus Continued 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 business ethics programs  Dodd-Frank Wall Street Reform and Consumer Protection Act (2009)  Aimed at making the financial industry more transparent/responsible A firm’s greatest danger is not discovering misconduct early© 2013 Cengage Learning. All Rights Reserved 15
  16. 16. Organizational Ethical Culture Ethical culture: The component of corporate culture that captures the values and norms that an organization defines as appropriate  Creates shared values Goal is to:  Minimize need for enforced compliance  Maximize utilization of principles/ethical reasoning© 2013 Cengage Learning. All Rights Reserved. 16
  17. 17. Global Ethical Culture Nations working together to establish standards of ethical behavior  NAFTA  MERCOSUR  WTO  Companies can demonstrate their commitment to social responsibility through adopting international standards  Global Sullivan Principles  Coalition for Environmentally Responsible Economies (CERES)  United Nations Global Compact© 2013 Cengage Learning. All Rights Reserved. 17
  18. 18. The Role of Organizational Ethics in Performance Source: Adapted from “Business© 2013 Cengage Learning. All Rights Reserved. 18
  19. 19. Ethics Contributes to Employee Commitment Commitment comes from employees who are invested in the organization  Employees willing to make personal sacrifices for the organization  The more company dedication to ethics, the greater the employee dedication  Concerns include a safe work environment, competitive salaries and benefits packages, and fulfillment of contractual obligations© 2013 Cengage Learning. All Rights Reserved. 19
  20. 20. Ethics Contributes to Investor Loyalty Companies perceived by their employees as being honest are more profitable  Ethical climates in organizations provide a platform for  Efficiency  Productivity  Profitability© 2013 Cengage Learning. All Rights Reserved. 20
  21. 21. Ethics Contributes to Customer Satisfaction Consumers respond positively to socially concerned businesses  Being good can be profitable  Customer satisfaction dictates business success  A strong organizational ethical climate places customers’ interests first  Research shows a strong relationship between ethical behavior and customer satisfaction© 2013 Cengage Learning. All Rights Reserved. 21
  22. 22. Ethics Contributes to Profits  Corporate concern for ethical planning is being integrated with strategic planning  Maximizes profitability  Corporate citizenship is positively associated with  Return on investment and assets  Sales growth  Studies have found a positive relationship between corporate citizenship and performance© 2013 Cengage Learning. All Rights Reserved. 22