03 ethical issues in business


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03 ethical issues in business

  1. 1. Ethical Issues in Business Chapter 03 1
  2. 2. Lesson’s Objectives Define Ethical Issues Classification of ethical issues Identify the ethical issues with examples 2
  3. 3. Three “C’s” of Business Ethics The need for compliance of rules, including : ◦ Laws, ◦ Principles of morality, the customs of community, and ◦ Policy of the company and fairness. 3
  4. 4. Three “C’s” of Business Ethics The contribution business can make to society through: ◦ ◦ ◦ ◦ The core values, Quality of one’s products and services By providing jobs to employees Usefulness of activities to surrounding community, and QWL (Quality of Work Life) influenced by ethical and moral values. 4
  5. 5. Three “C’s” of Business Ethics The consequences of business activity: Towards environment inside the plant and outside the organizational community, e.g., Bhopal Gas Leading Tragedy. Social responsibility towards shareholders, bankers, suppliers, customers and employees of organization. Good public image. Sound business practices so that public image is not tarnished. 5
  6. 6. Influences on Ethical Behavior  Personal values  Attitude/Behaviors of supervisor  Attitudes/Behaviors of senior management  Internal drive to succeed  Performance pressures  No threat of punishment  Friends/Coworkers 6
  7. 7. Ethical Issue •A problems, situations, or opportunities requiring an individual to choose among actions that may be evaluated as right or wrong, ethical or unethical Ethical issues arise because of: Conflict among personal/organizational values ◦ Conflicts with societal values 7
  8. 8. Is it Ethical Issue? Is it ethical to reduce costs by exploiting low quality resources Is it ethical to sell products that are legal, but known to harm those who use them Is it ethical to manufacture products that are used to kill? Those are ‘big questions’ that elicit strong views, but there are many smaller, tactical issues at an individual level 8
  9. 9. Then…..  Ethical behavior goes beyond the legal requirement placed on a business, as it concerns discretionary decisions and behavior;  In other words, what a business chooses to do, rather than what it is forced to do.  Business ethics are relevant both to the conduct of an individual within an organization and to the conduct of the organization as a whole. 9
  10. 10. Theory & Practice  In theory, business ethics are shared set of attitudes, morals and rules of behavior that underpin the decision making process  However, in practice not everybody agrees on what is ethical and what is not. 10
  11. 11. Classification of Ethical Issues I. II. III. IV. Conflicts of interest Honesty & fairness Communications issues Organizational relations 11
  12. 12. I. Conflict of Interest  A conflict of interest (COI) occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in another.  A conflict of interest is a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest. 12
  13. 13. • Exists when an individual Conflict of Interest must choose whether to advance his or her own personal interests, those of the organization, or some other group • Must be able to separate personal interests from business dealings • Bribery is a significant concern 13
  14. 14. Conflict of Interest  Grease Payments – Money given for the purpose of getting minor officials to do what they are supposed to be doing. (Money given to minor officials – clerks, to expediting a project)  Bribes – Relatively large amounts of money given far the purpose of influencing officials to make decisions or take actions that they otherwise might not take. (to high – ranking officials to get these persons to purchase goods 14
  15. 15. II. Honesty and Fairness Honesty relates to truthfulness, integrity & trustworthiness with business activities Fairness relates to being just, equitable & impartial with organizational activities Business should not be played as a “ game” and managers tend to Breaking or bending laws means violates trust And finally Lack of rules & poor enforcement of firm may leads to unethical behavior 15
  16. 16. III. Communications  Issues involved relate to advertising, product safety, pollution, & employee work conditions.  Lying is a major ethical issue with internal & external communications  False advertising relates to:  Exaggerated/inflated claims  Concealed / hidden facts & ambiguous statements  Lying 16
  17. 17. IV. Organizational Relationships Organizational behavior related to behavior of organizational members toward customers, suppliers, subordinates, superiors, peers & others 17
  18. 18. Ethical Issues Related to Ownership Owners have an obligation to society as well as their employees & customers Minimize pollution Compensate working fairly Produce safe products Must be sensitive to legal & ethical risks of their industry & region 18
  19. 19. Employees & Management Concerns Employee theft, sabotage & competitive intelligence, child labor, Rights in hiring, promotion, and firing Fear of layoffs, Upward mobility Salary plateau/level, motivations Discrimination, security of job Privacy & data access, outsourcing Health & safety, welfare facility 19
  20. 20. Consumer & Marketing Issues Better quality of goods, truth Reasonable price not discriminatory pricing How to use positioning, promotion tool How shows differentiations Maximize positive publicity & avoid negative Bidding, Pricing, Competition 20
  21. 21. Shareholders Ensure capital appreciation Ensure steady & regular dividends Disclosure all relevant information Protect minority shareholders interest Protect interest in times of mergers, amalgamations and takeovers. 21
  22. 22. Government Comply with rules and regulations Honesty in paying taxes Competitor Honesty in attracting customer Practice win-win approach Beating with value not cheating 22
  23. 23. Distributors Comply with rules and regulations Honesty in paying taxes Supplier Comply with agreements Use bargaining power Consider as a supplier to supplier 23
  24. 24. Identify an Ethical Issue An activity approved by most members of the organization & customary in the industry is probably ethical If the issue withstands open discussion between groups within & outside the organization is probably ethical Covert discussion, destroyed or disguised documents indicate potential problems. 24