The power of ethics in businesses

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MGTS7608
BUSINESS AND SOCIETY
Ethics and
Ethical Reasoning
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Part 1
What does it mean to be ‘ethical’?
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Sources of Ethics
Ø Notions of right and wrong come from many sources
§ Religious beliefs
§ Family background
§ Education
§ Community/neighborhood
§ Media influences
Ø These experiences create a concept of ethics,
morality, and socially acceptable behavior in each
person
§ Acts as a moral compass to guide an individual when ethical
dilemmas arise
§ Developed through the study of western philosophy. Values
and ethics are needed for people to survive in society and
maintain some form of order.
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Core values
Ø Honesty
Ø Trustworthiness
Ø Compassion
Ø Fairness
Ø Integrity
Ø Justice
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The Meaning of Ethics
Ø Ethics
§ A conception of right and wrong conduct
§ Tells us whether our behavior socially acceptable
§ Deals with fundamental human relationships—how we think and behave
toward others and want them to think and behave toward us, e.g. I must do
the right thing at all times! Or, maybe just most of the time! Or, maybe I
don’t care!
Ø Ethical Principles
§ Guides to moral behavior. Critical to the stakeholder relationship
Ø Corporate Social Responsibility
§ Good ethics have a positive impact on the performance of business
Ø Business Ethics
§ Application of general ethical ideas to business behavior, what is acceptable
behaviour by business to its stakeholders, what is ‘good’ and what is ‘bad’
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Investors, employees, customers, interest
groups, managers, the legal system and
community often determine whether an action
or standard is ethical or unethical (Ferrell
2015).
What is ‘acceptable’ behaviour?
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Specific unacceptable behaviour: business ethics issues
Ø Misuse of company resources
Ø Abusive behaviour
Ø Harassment
Ø Accounting fraud
Ø Conflict of interest
Ø Defective products
Ø Bribery
Ø Employee theft
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Impact of individual
In the courtroom Kamay’s barrister Peter Morrissey SC, painted a picture of an
ambitious, young trader driven by the thrill of the chase and a culture to “succeed
at all costs”. He pleaded guilty to conspiring in one of the biggest insider trading
cases in Australian history, worth $7 million.
"I've let down my family, my friends, my work colleagues and the community I
guess. They all trusted me to be honest.” (Lukas Kamay)
Lukas Kamay
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Impact of business
"Woolworths spies on its poker
machine customers without their
knowledge, keeps a secret database
of personal information, and uses that
information to encourage increased
gambling,"
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Impact of institutions: Ethical Investment
screening
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The power of ethics
Ø Clients, customers, shareholders or society at large will not tolerate
professional or business conduct that is perceived to be unethical (Grace &
Cohen 2013).
Ø ‘Good ethics is good business’?
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MGTS7608
BUSINESS AND SOCIETY
Ethics and
Ethical Reasoning
12

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Part 2
Why is it important for business to be
ethical?
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Business Ethics
Organisational principles, values, and norms that may originate from
individuals, organisational statements, or from the legal system that
primarily guides individual and group behaviour in business (Ferrell et al
2015).
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Stakeholder theory
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The role of organisation ethics in
performance
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Suncorp values
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H&M Sustainability
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Five Key Reasons Business
Should Be Ethical
1. To meet demands of business stakeholders
§ Shareholders, investors, employees avoid being associated with
unethical (possibly corrupt organisations) customers prefer
products from ethical organisations
2. To enhance business performance
§ Research shows linkage between ethically responsible
behavior and favorable corporate financial performance
§ Imparts trust, promoting positive alliances among
business partners
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1. Meet demands of stakeholders
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Community : Qidong
http://whttps://www.aljazeera.com/news/asia/2012/07/20127287
1518282322.html
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2. Enhance business performance
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Performance of responsible investment
and mainstream funds
Research shows linkage between ethically responsible
behavior and favorable corporate financial performance.
Imparts trust, promoting positive alliances among
business partners
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Key drivers of market growth
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Five Key Reasons Business
Should Be Ethical
3. To comply with legal requirements
§ Two legal requirements provide direction for companies
interested in being more ethical in their business operations
§ U.S. Corporate Sentencing Guidelines
§ Sarbanes-Oxley Act of 2002
§ Although they apply only to U.S.-based firms, these legal
requirements also provide a model for firms that operate outside
the United States
§ Stand as models for other countries
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Walmart de Mexico
https://www.youtube.com/watch?v=hmr6uHjoV8o&ebc=ANyPxKqhZuLJ1XufaN0V8ZciTO0jgTtGc6zQHL-
Zv3FVwzC5Fz6jrEEx2rcDrHJnRuI0A-8_HxVC
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Some countries slow to act: Australia
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4. To prevent or minimize harm
§ Overriding principle that business should
“do no harm”
§ Examples include not harming society with toxic
waste, protecting business from unethical employees
and unethical competitors
5. To promote personal morality
§ Knowing one works in a supportive ethical climate
contributes to sense of psychological security
§ People want to work for companies that do the right
thing
Five Key Reasons Business
Should Be Ethical
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4.Minimise harm: BP oil spill, Gulf of
Mexico
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On 20 April 2010, a huge fire engulfed a
Deepwater Horizon petroleum-drilling rig that
had exploded in the Gulf of Mexico, killing 11
platform workers and injuring 7 others.
The oil spill had significant impacts on wetland
and marine species that became covered in oil
when they encountered the oil slick, including
gannets, brown pelicans and other shore birds.
By 1 July, response teams had collected 594
stranded sea turtles, of which 441 had already
died
The implications of the oil spill include future
decisions about large-scale oil drilling versus
investments in energy efficiency and
renewable energy. The global community has
learned that future oil and gas developments
must be subjected to stringent risk and
environmental impact assessments.
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5. Employees – companies must do the
right thing!
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MGTS7608
BUSINESS AND SOCIETY
Ethics and
Ethical Reasoning
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Part 3.
Are there any consequences to
being unethical ?
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Companies need to be concerned about the impact of what is deemed to
be unacceptable behaviour, at any particular time and in any particular
location (context).
Ask if stakeholders would approve of what they are doing?
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Unethical behaviour
Ø Misuse of company resources
Ø Abusive behaviour
Ø Harassment
Ø Accounting fraud
Ø Conflict of interest
Ø Defective products
Ø Bribery
Ø Employee theft
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Some effects of ethical/unethical
behaviour
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The importance of ethics is to act as a brake on behaviour that is
unacceptable but not necessary illegal
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Shareholder Activism
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Brazil dam collapse
https://www.theguardian.com/world/video/
2019/feb/01/terrifying-dam-collapsed-in-
brazil-caught-on-camera-video
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Why Ethical Problems
Occur in Business
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Why Ethical Problems
Occur in Business
Ø Four Primary Reasons
§ Personal gain and selfish interest
§ Competitive pressure on profits
§ Conflicts of interest
§ Cross-cultural contradictions (relativism)
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Personal Gain from Bribery = Access to
university
In classrooms and dining halls, on quads and in bars, there was a similar sense of
astonishment. How could they? Can you believe it? United by an admissions
scandal that touched so many of their campuses, students seethed in unison. They
railed against privilege and greed. They worried that their diplomas might have
been tarnished even before they were handed to them on stage.
“We have parents who set a horrible example, and employees who clearly acted
in a way that showed they need to be fired.”
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Competitive advantage
Ø Exploitation of migrant workers
Ø This includes underpayment, non-payment of entitlements, such as
leave or superannuation, and sub-standard accommodation in industries
such as agriculture, meat processing, and construction.
Ø small business operators express their concern about wage theft, and
said that it allowed unscrupulous competitors an advantage.
Modern Slavery
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Conflict of interest
JP Morgan Chase will pay $307 million to
settle two U.S. government cases that
charged the bank with failing to disclose
certain conflicts of interest to some of its
wealth management clients
The bank’s wealth business preferred to
invest its clients in its own proprietary
products, but J.P. Morgan failed to tell
investors about this preference.
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Cross-cultural contradictions (relativism)
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At least 1,138 people are known to have
died in the tragedy, the worst in the
country’s history. Rescue workers
struggled for weeks to retrieve the
bodies from the ruins but several people
are still unaccounted for.
More than 2,000 people were injured,
including many who lost limbs.
Seven owners of factories housed in the
complex and 12 government officials
responsible for safety and inspections
were also charged with murder.
Rana’s parents, who jointly owned the
building with him, and the mayor and
councillor of the town of Savar where it
was located, were also charged.
Companies including Italy’s Benetton,
Spain’s Mango and the British low-cost
chain Primark used factories housed in
the building.
The disaster highlighted appalling safety
problems in Bangladesh’s $30bn garment
industry and triggered global concern as
protesters demanded action from western
retailers.
Rana Plaza
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Avoiding Ethical Dilemmas
in Business
Ø Business managers and employees need a set of
decision guidelines that will shape their thinking when
on-the-job ethics issues occur
Ø These guidelines should help them
§ Identify and analyze the nature of an ethical problem, and
§ Decide which course of action is likely to produce an ethical
result
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Ethics and misconduct
Source: Ethics Resource Centre, National Ethics Survey 2015
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Core Elements of Ethical Character:
Managers’ Values
Ø Managers are key to whether a company and its
employees will act ethically or unethically
Ø The values held by managers will serve as models for
others who work at the company (one of Lukas Kamay’s
arguments ‘everybody was doing it”)
Ø Younger generation of managers more concerned about
ethics/social responsibility
§ A company’s CSR performance is a major factor when selecting
a new employer for today’s graduating MBAs
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Is being ethical the corporate no brainer?
Ø Employee Commitment
- Misconduct declines with improvements to ethical culture
in orgs
Ø Increased Profits
§ Evidence indicates that companies that are perceived to
have a high degree of ethical behaviour and integrity have a
higher average total return to shareholders than those that
do not.
• Customer Satisfaction
§ Socially responsible behaviours will help to develop lasting,
productive relationships with stakeholders.
Ø Investor Loyalty
§ Investors are attracted to companies which demonstrate
socially responsible practices and recognise that an ethical
culture can underpin efficiency and profits. (Ferrell et al.,
2015)
Ø External control on business behaviour
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Summary
Ø Business ethics critical in the 21st
century corporate environment.
Ø Ethical issues and dilemmas are prevalent in the workplace and employees can
engage in wrongdoing for a variety of reasons.
Ø Dishonesty is common in organisational settings and its identification and management
is a constant challenge.
Ø This focus of this course is on identifying ethical issues and increasing awareness of
approaches to resolve ethical dilemmas
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