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© 2013 Cengage Learning. All Rights Reserved. 1
Part Two: Ethical Issues and the Institutionalization of Business Ethics
Chapter 3: Emerging Business Ethics Issues
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
© 2013 Cengage Learning. All Rights Reserved. 2
© 2013 Cengage Learning. All Rights Reserved. 3
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
© 2013 Cengage Learning. All Rights Reserved. 4
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
© 2013 Cengage Learning. All Rights Reserved. 5
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
© 2013 Cengage Learning. All Rights Reserved. 6
© 2013 Cengage Learning. All Rights Reserved. 7
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
© 2013 Cengage Learning. All Rights Reserved. 8
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
© 2013 Cengage Learning. All Rights Reserved. 9
© 2013 Cengage Learning. All Rights Reserved. 10
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
© 2013 Cengage Learning. All Rights Reserved. 11
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
© 2013 Cengage Learning. All Rights Reserved. 12
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
© 2013 Cengage Learning. All Rights Reserved. 13
Corporate Intelligence
The collection and analysis of information on Markets Technologies Customers and competitors Socioeconomic and external political trendsThree intelligence models• Passive monitoring system for early warning• Tactical field support• Support dedicated to top management strategy
© 2013 Cengage Learning. All Rights Reserved. 14
Corporate Intelligence
Hacking System hacking Remote hacking Physical hacking
Social engineering Shoulder surfing Password guessing Dumpster diving Whacking Phone eavesdropping
© 2013 Cengage Learning. All Rights Reserved. 15
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
© 2013 Cengage Learning. All Rights Reserved. 16
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
© 2013 Cengage Learning. All Rights Reserved. 17
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
© 2013 Cengage Learning. All Rights Reserved. 18
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
© 2013 Cengage Learning. All Rights Reserved. 19
To Avoid Sexual Misconduct, a Firm Needs
1. Statement of policy2. Definition of sexual harassment3. Non-retaliation policy4. Specific procedures for prevention5. Establish, enforce, and encourage victims to
report6. Establish a reporting procedure7. Timely reporting requirements to the proper
authorities
© 2013 Cengage Learning. All Rights Reserved. 20
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
© 2013 Cengage Learning. All Rights Reserved. 21
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 HydropowerSolar BiofuelsGeothermal Nuclear
© 2013 Cengage Learning . All rights reserved. 22
© 2013 Cengage Learning. All Rights Reserved. 23
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
© 2013 Cengage Learning. All Rights Reserved. 24
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)
© 2013 Cengage Learning. All Rights Reserved. 25
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
© 2013 Cengage Learning. All Rights Reserved. 26
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© 2013 Cengage Learning. All Rights Reserved. 27
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
© 2013 Cengage Learning. All Rights Reserved. 28
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
© 2013 Cengage Learning. All Rights Reserved. 29
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
© 2013 Cengage Learning. All Rights Reserved. 30
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