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  1. 1. BUSINESS ETHICS Milton Friedman
  2. 2. What is an ethics? <ul><li> Ethics involves a discipline that examines good or bad practices within the context of moral duty. but &quot;the good practices&quot; is not nearly as straight forward as conveyed. </li></ul><ul><li> Many ethicists assert there’s always a right thing to do based on moral principle, and others believe the right thing to do depend on the situation – ultimately it’s up to the individual Ethics is considered as &quot; Science of Conduct.” </li></ul><ul><li> The need for a company to behave “ethically” is described in terms of a company’s need to interact productively with its stakeholders. </li></ul>
  3. 3. What are Business Ethics? <ul><li>Business Ethics means conducting all aspects of business and dealing with all stakeholders in an ethical manner… </li></ul><ul><li> Attention to ethics in the work place sensitizes leaders and staff to how they should act. </li></ul><ul><li> It may be safe to assume that ethics involves some </li></ul><ul><li>hard features, like duties and rights (most of them legal), that are mandatory for all, and soft components, like values, aspirations or best practices , that are desirable but not compulsory and can vary from one organization and person to the next. </li></ul>
  4. 4. Business Ethics... <ul><li>comprises principles and standards that guide behavior in the world of business </li></ul><ul><li>is right or wrong, acceptable or unacceptable behavior within the organization </li></ul><ul><li>is determined by key stakeholders </li></ul>
  5. 5. Business Ethics… <ul><li>Knowing the difference between what you have a right to do in the organization and what is the right thing to do. </li></ul>
  6. 6. The Ethics Mirror & Reality… <ul><li>people judge themselves based on their intentions </li></ul><ul><li>others are judged based on their behavior </li></ul><ul><li>everyone is accountable for their actions </li></ul>
  7. 7. Why study business ethics <ul><li>in an Ethics Officer Assoc. Survey, 48% of employees indicated that they had done something unethical or illegal in the past year </li></ul><ul><li>annual cost of unethical or illegal acts by U.S. employees: $400 billion </li></ul>
  8. 8. Common Unethical Acts... <ul><li>lying to supervisors </li></ul><ul><li>falsifying records </li></ul><ul><li>alcohol and drug abuse </li></ul><ul><li>conflict of interest </li></ul><ul><li>Stealing </li></ul><ul><li>gift/entertainment receipt in violation of company policy </li></ul>
  9. 9. Key Causes of Unethical Behavior... <ul><li>meeting overly aggressive financial or business objectives </li></ul><ul><li>meeting schedule pressures </li></ul><ul><li>helping the organization survive </li></ul><ul><li>rationalizing that others do it </li></ul><ul><li>resisting competitive threats </li></ul><ul><li>saving jobs </li></ul>
  10. 10. Key Influences On Ethical Behavior... <ul><li>personal values </li></ul><ul><li>supervisor influence </li></ul><ul><li>senior management influence </li></ul><ul><li>internal drive to succeed </li></ul><ul><li>performance pressures </li></ul><ul><li>lack of punishment </li></ul><ul><li>friends/coworker influence </li></ul>
  11. 11. Why Misconduct Is Not Reported... <ul><li>fear of not being considered a team player </li></ul><ul><li>did not think corrective action would be taken </li></ul><ul><li>fear of retribution (from management) </li></ul><ul><li>“ no one else cares, why should I” </li></ul><ul><li>did not trust the organization to keep report confidential </li></ul>
  12. 12. Classification of Ethical Issues... <ul><li>conflict of interest </li></ul><ul><li>honesty and fairness </li></ul><ul><li>Communications </li></ul><ul><li>organizational relationships </li></ul>
  13. 13. Conflict of Interest... <ul><li>exists when an individual must choose whether to advance his/her own interests, the organization’s, or others’ </li></ul><ul><li>examples include bribes or personal payments, gifts, or special favors intended to influence decision making </li></ul>
  14. 14. Honesty & Fairness... <ul><li>following applicable laws a regulations & not knowingly harming stakeholders </li></ul><ul><li>Is advertising prescription drugs on TV and in magazines fair? </li></ul><ul><li>Are long distance information ads that place the cost of the call in very small print at the bottom of the screen fair? </li></ul>
  15. 15. Communications... <ul><li>refers to the transmission of information and the sharing of meaning </li></ul><ul><li>examples: deceptive advertising, product safety information, & product composition </li></ul><ul><li>Are vitamin and herbal supplements using ‘puffery’ in their advertising? – Note: roughly half of Americans take supplements </li></ul>
  16. 16. Organizational Relationships... <ul><li>behavior of organizational members toward stakeholders </li></ul><ul><li>includes confidentiality, meeting obligations & deadlines, not pressuring others to behave unethically </li></ul>
  17. 17. Ethical Issues Can Relate to All Functional Areas... <ul><li>Accounting </li></ul><ul><li>Finance </li></ul><ul><li>Management </li></ul><ul><li>Marketing </li></ul>
  18. 18. 7 Principals of admirable business <ul><li> Be Trustful </li></ul><ul><li> Keep an open mind </li></ul><ul><li> Meet Obligations </li></ul><ul><li> Have clear documents </li></ul><ul><li> Become community involved </li></ul><ul><li> Maintain accounting control </li></ul><ul><li> Be respectful </li></ul>
  19. 19. Who are the primary stakeholders that shape business ethics? <ul><li>Employees </li></ul><ul><li>Customers </li></ul><ul><li>Suppliers </li></ul><ul><li>Community </li></ul><ul><li>Government </li></ul><ul><li>Shareholders </li></ul><ul><li>other… </li></ul>
  20. 20. Guidelines for managing ethics at workplace <ul><li>Recognize that managing ethics is a process </li></ul><ul><li>The bottom line of an ethics program is accomplishing preferred behaviors in the workplace </li></ul><ul><li>The best way to handle ethical dilemmas is to avoid their occurrence in the first place </li></ul><ul><li>Make ethics decisions in groups, and make decisions public, as appropriate </li></ul><ul><li>Integrate ethics management with other management practices </li></ul><ul><li>Use cross-functional teams when developing and implementing the ethics management program </li></ul><ul><li>Value Forgiveness </li></ul>
  21. 21. Benefits of Managing Ethics at the Workplace <ul><li>Attention to business ethics has substantially improved society </li></ul><ul><li>Ethics programs help maintain a moral course in turbulent times </li></ul><ul><li>Ethics programs cultivate strong teamwork and productivity </li></ul><ul><li>Ethics programs support employee growth and meaning </li></ul><ul><li>Ethics program are an insurance policy – they help ensure that policies are legal </li></ul><ul><li>Ethics programs help avoid criminal acts “of omission” and can lower fines </li></ul>
  22. 22. Myths about business ethics… <ul><li>It’s easy to be ethical </li></ul><ul><li>Unethical behavior is part of business </li></ul><ul><li>There are no rewards for being ethical </li></ul><ul><li>Ethical behavior will prevent me from being successful </li></ul><ul><li>Business is like a sport, push the rules & try not to get caught </li></ul><ul><li>Business ethics is about character education and teaching moral philosophy </li></ul>
  23. 23. Myths of Business Ethics <ul><li>Business ethics is more a matter of religion than management: Diane Kirrane, in “Managing Values: A systematic Approach to Business Ethics,” asserts that “altering people’s values or souls isn’t the aim of an organizational ethics program – managing values and conflict among them is …” </li></ul><ul><li>Employees are ethical so we don’t need attention to business ethics: </li></ul><ul><li>significant value conflicts among differing interests, </li></ul><ul><li>real alternatives that are equality justifiable and </li></ul><ul><li>significant consequences on “stakeholders” in the situation. </li></ul>
  24. 24. Myths of Business Ethics <ul><li>Business ethics is a discipline best led by philosophers, academics and theologians </li></ul><ul><li>Lack of involvement </li></ul><ul><li>Believe to be a complex philosophical debate or a religion </li></ul><ul><li>Practical application in areas of management </li></ul><ul><li>Business ethics is superfluous – it only asserts the obvious: “do good!” </li></ul><ul><li>Values to which naturally aspire </li></ul><ul><li>Business ethics is a matter of the good guys preaching to the bad guys </li></ul>
  25. 25. What is business ethics? (a managerial perspective) <ul><li>defining appropriate behavior </li></ul><ul><li>establishing organizational values </li></ul><ul><li>nurturing individual responsibility </li></ul><ul><li>providing leadership & oversight </li></ul><ul><li>relating decisions to stakeholder interests </li></ul><ul><li>developing accountability </li></ul><ul><li>relating consequences </li></ul><ul><li>auditing & improvement </li></ul>