Ethical Issues in Ethical Issues in BusinessBusiness

Chapter 03

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Lesson’s ObjectivesLesson’s ObjectivesDefine Ethical IssuesClassification of ethical issuesIdentify the ethical issues with examples

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Three “C’s” of Business EthicsThree “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.

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Three “C’s” of Business EthicsThree “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.

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Three “C’s” of Business EthicsThree “C’s” of Business EthicsThe 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.

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Influences on Ethical BehaviorInfluences 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

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Ethical IssueEthical Issue•A problems, situations, or opportunities requiring an individual to choose among actions that may be evaluated as right or wrong, ethical or unethicalEthical issues arise because of:Conflict among personal/organizational values◦Conflicts with societal values

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Is it Ethical Issue?Is it Ethical Issue?Is it ethical to reduce costs by exploiting low

quality resourcesIs it ethical to sell products that are legal, but

known to harm those who use themIs 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

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Then…..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.

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Theory & PracticeTheory & 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.

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Classification of Ethical IssuesClassification of Ethical Issues

I. Conflicts of interestII. Honesty & fairnessIII. Communications issuesIV. Organizational relations

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I.I. Conflict of InterestConflict 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.

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Conflict of InterestConflict of Interest

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• Exists when an individual 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

Conflict of InterestConflict 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

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II.II. Honesty and FairnessHonesty and FairnessHonesty relates to truthfulness, integrity & trustworthiness with business activitiesFairness relates to being just, equitable & impartial with organizational activitiesBusiness should not be played as a “ game” and managers tend to Breaking or bending laws means violates trustAnd finally Lack of rules & poor enforcement of firm may leads to unethical behavior

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III.III. CommunicationsCommunications Issues involved relate to advertising, product

safety, pollution, & employee work conditions.Lying is a major ethical issue with internal &

external communicationsFalse advertising relates to: Exaggerated/inflated claims Concealed / hidden facts & ambiguous statements Lying

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IV.IV. Organizational RelationshipsOrganizational Relationships

Organizational behavior related to behavior of organizational members toward customers, suppliers, subordinates, superiors, peers & others

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Ethical Issues Related to OwnershipEthical Issues Related to OwnershipOwners have an obligation to society as well as their employees & customersMinimize pollutionCompensate working fairlyProduce safe productsMust be sensitive to legal & ethical risks of their industry & region

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Employees & Management ConcernsEmployees & Management ConcernsEmployee theft, sabotage & competitive intelligence, child labor,Rights in hiring, promotion, and firingFear of layoffs, Upward mobility Salary plateau/level, motivationsDiscrimination, security of jobPrivacy & data access, outsourcingHealth & safety, welfare facility

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Consumer & Marketing Issues Consumer & Marketing Issues Better quality of goods, truthReasonable price not discriminatory pricingHow to use positioning, promotion toolHow shows differentiationsMaximize positive publicity & avoid negativeBidding, Pricing, Competition

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ShareholdersShareholders

Ensure capital appreciationEnsure steady & regular dividendsDisclosure all relevant informationProtect minority shareholders interestProtect interest in times of mergers, amalgamations and takeovers.

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GovernmentGovernment

Comply with rules and regulationsHonesty in paying taxes

Honesty in attracting customerPractice win-win approachBeating with value not cheating

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Competitor

DistributorsDistributors

Comply with rules and regulationsHonesty in paying taxes

Comply with agreementsUse bargaining powerConsider as a supplier to supplier

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Supplier

Identify an Ethical IssueIdentify an Ethical Issue

An activity approved by most members of the organization & customary in the industry is probably ethicalIf the issue withstands open discussion between groups within & outside the organization is probably ethical Covert discussion, destroyed or disguised documents indicate potential problems.

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