ARC MGMT 374 Week 3 Presentation

Chapter 3:
Emerging Business Ethics
Issues

Part Two:
Ethical Issues and the
Institutionalization of Business
Ethics

© 2013 Cengage Learning. All Rights Reserved. 1

Recognizing an Ethical Issue

An ethical issue is a problem, situation, or
opportunity that requires an individual or
group to choose among actions
 New ethical issues are emerging constantly
 Can be difficult to recognize ethical issues
Failure to do so puts corporations at risk
• Is a problem in industries where winning is
perceived to be a game


Specific Types of Observed Misconduct


Honesty

Honesty: Truthfulness or trustworthiness
 Telling the truth to the best of your knowledge
 Dishonesty: A lack of integrity, incomplete
disclosure, or an unwillingness to tell the truth

Issues related to honesty arise when people
perceive business as something where
normal rules do not apply


Fairness and Integrity

 Fairness: The quality of being just,
equitable, and impartial
 Equality: How wealth or income is distributed
 Reciprocity: Occurs when an action that has an effect
upon another is returned
 Optimization: The tradeoff between equity and
efficiency
 Integrity: Uncompromising adherence to
ethical values
 One of the most important terms relating to virtue


Ethical Issues and Dilemmas in
Business

 An ethical dilemma is a problem, situation, or
opportunity that requires an individual or
group to chose among several wrong or
unethical actions
 There is no ethical choice


Shareholder Issues


Misuse of Company Resources

The leading form of observed misconduct
 Can range from unauthorized use of
equipment and computers to embezzling
company funds
 Time theft costs organizations hundreds of
billions in lost productivity annually


Abusive or Intimidating Behavior

One of the most common ethical problems
 Can be physical threats, false accusations,
profanity, insults, harshness, ignoring
someone, or unreasonableness
 Intent is important in determining abuse

Bullying is a growing problem
• Is associated with a hostile workplace


Actions Associated with Bullies


Lying

Three types of lies
 Joking without malice
 Commission lying is creating a false perception
with words that deceive the receiver
 Creating noise
 Omission lying is intentionally not informing
channel members of problems relating to a
product that affects awareness, intention, or
behavior


Conflicts of Interest

Exist when an individual must choose
whether to advance his/her personal
interests, those of the organization, or
some other group
 Individuals must separate personal interests
from business dealings


Bribery

The practice of offering something in order
to gain an illicit advantage
 Different types of bribery
 Active bribery: The person who promises or gives
the bribe commits the offense
 Passive bribery: An offense committed by the
official who receives the bribe
Facilitation payments: Legal as long as they
are small


Corporate Intelligence
The collection and analysis of
information on
 Markets
 Technologies
 Customers and competitors
 Socioeconomic and external political trends
Three intelligence models
• Passive monitoring system for early warning
• Tactical field support
• Support dedicated to top management strategy

Corporate Intelligence
 Hacking
 System hacking
 Remote hacking
 Physical hacking
 Social engineering
 Shoulder surfing
 Password guessing
 Dumpster diving
 Whacking
 Phone eavesdropping

Discrimination

Is illegal in the U.S.
 A company can be sued for discrimination if it
 Refuses to hire an individual for discriminatory
reasons
 Unreasonably excludes an individual from
employment
 Unreasonably discharges an individual
 Discriminates against an individual with respect to
hiring, employment terms, promotion, or privileges


Discrimination (continued)

 Equal Employment Opportunity Commission
(EEOC)
 The Age Discrimination in Employment Act
 Affirmative Action Programs
 Efforts to recruit, hire, train, and promote qualified
individuals from groups that have traditionally
been discriminated against


Sexual Harassment

A repeated, unwanted behavior of a sexual
nature perpetrated upon an individual by
another
 Hostile work environment
 The conduct was unwelcome
 The conduct was severe, pervasive, and regarded
by claimant as hostile/offensive
 The conduct was such that a reasonable person
would find it hostile or offensive


Dual Relationship

A personal, loving, and/or sexual
relationship with someone with whom you
share professional responsibilities
 A key ethical issue in sexual harassment

Unethical dual relationship: The
relationship causes a conflict of interest or
impairment of professional judgment


To Avoid Sexual Misconduct, a
Firm Needs
1. Statement of policy
2. Definition of sexual harassment
3. Non-retaliation policy
4. Specific procedures for prevention
5. Establish, enforce, and encourage victims to
report
6. Establish a reporting procedure
7. Timely reporting requirements to the proper
authorities


Environmental Issues

Are becoming significant concerns in
business
 Air pollution: Gases and particulates in the air that
can linger or be carried long distances by winds
 The Kyoto Protocol: An international treaty on climate
change that commits nations to reducing greenhouse
gas emissions
 Water pollution: Results from dumping sewage
and toxic chemicals in places where they can filter
into water supplies


Environmental Issues (continued)
 Recycling: The reprocessing of materials,
especially steel, aluminum, paper, glass,
rubber, and some plastics
 Consumers consider recycling to be the most
important thing they can do to live “greener” lives
 Alternative energy: Is considered “green”
because it produces fewer emissions and
creates less pollution
Wind Hydropower
Solar Biofuels
Geothermal Nuclear
© 2013 Cengage Learning . All rights reserved. 22

Consumers’ Favorite Green Practices


Fraud

Any purposeful communication that
deceives, manipulates, or conceals facts in
order to create a false impression
 Accounting fraud
 Misrepresentation of company’s financial reports
 Dramatic changes in accounting field
 Increased competition and pressures to perform
can create opportunities for misconduct
 Accountants should abide by a strict code of ethics


Marketing Fraud
The process of dishonestly creating,
distributing, promoting, and pricing
products
 Puffery: Exaggerated advertising claims,
blustering, and boasting
 Can be difficult to distinguish from fraud
 Implied falsity: An advertising message that
misleads, confuses, or deceives the public
 Literally false: Claims can be divided into tests
prove and bald assertions (non-establishment
claims)


Consumer Fraud

 When consumers attempt to deceive
businesses for personal gain
 Price tag switching, item switching, or lying to
obtain discounts
 Collusion involves an employee who helps a
consumer commit fraud
 Duplicity involves a consumer duping a store
 Guile is associated with a person who uses
tricks to obtain an unfair advantage


Financial Misconduct
 The failure to understand and manage ethical
risks was a key problem in the recent financial
crisis
 Many firms rewarded risk-taking
 Difficult-to-understand financial instruments and
murky accounting played roles
 Government calls for reform
 Stricter controls on hedge funds and other
instruments
 Greater transparency
 Dodd-Frank Wall Street Reform and Consumer
Protection Act


Insider Trading

 Two types of insider trading
 Legal insider trading: Involves legally buying
and selling stock in an insider’s own company,
but not all the time
 Illegal insider trading: The buying or selling of
stocks by insiders who possess material that is
not public


Intellectual Property Rights and
Privacy
Involve the legal protection of intellectual
properties
 Books, movies, software
 Can be difficult to enforce
 Many privacy issues in the business world
 Employee use of technology
 Consumer privacy
 Can be challenging for businesses today to meet
the needs of consumers while protecting privacy
Identity theft is a growing problem

The Challenge of Determining
Ethical Issues in Business

 Most ethical issues become visible through
stakeholder concerns
 Determining ethical issues is a challenge
 Changing societal standards over time

The ethical decision making process starts
when ethical issue awareness occurs and a
discussion begins


ARC MGMT 374 Week 3 Presentation

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ARC MGMT 374 Week 3 Presentation