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BUSINESS ETHICS
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What is ethics?
Ethics is the branch of philosophy that focuseson morality and the way in which moralprinciples are applied to everyday life. Ethics
has to do with fundamental questions such asWhat is fair? What is just? What is theright thing to do in this situation? Ethicsinvolves an active process of applying values,
which may range from religious principles tocustoms and traditions.
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What is business ethics?
Every business has an ethical duty to each of
its associates namely, owners or stockholders,
employees, customers, suppliers and the
community at large. Each of these affectorganization and is affected by it. Each is a
stakeholder in the enterprise with certain
expectations as to what the enterprise shoulddo and how it should do it.
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What is business ethics?
Business ethics is applied ethics.
It is the application of ourunderstanding of what is good
and right to that assortments ofinstitutions, technologies,
transactions, activities andpursuits that we call business.
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What is business ethics?
Ethical behaviour is the best long term businessstrategy for company , however this does notmean that occasions may never arise when doingwhat is ethical will prove costly to a company nor
does it mean that ethical behaviour is alwaysrewarded or that unethical behaviour is alwayspunished. On the contrary, unethical behavioursometimes pay off and the good sometimes lose.
Strategy means merely that over the long run andfor most of the part, ethical behaviour can give acompany significant competitive advantages overcompanies that are not ethical.
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Ethics, Morality and Values
Ethics is the study of morality
Morals are the standards used to judge right
and wrong
Values are the degree of conviction about the
way to conduct life
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Conviction
The degree of conviction to your values can be
described as primary, secondary, or peripheral
Primary core values, unchanging
Secondary Important, but changeable
occasionally
Peripheral Values that are known but not lived
by
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How Do We Get Values?
Parents, family and friends
Experiences
The environment (media, education)
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Conflict of Values
Dramatic outcomes can occur when
individuals and groups hold conflicting core
values:
Religious wars
Business scandals
Crime
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The Relationship Between Law and
Ethics
The law is an expression of the ethical beliefs of our
society.
Law and ethics are not the same thing. The
question, Is an act legal? is different from thequestion, Is an act ethical? The law cannot codify
all ethical requirements. Therefore, an action might
be unethical, yet not necessarily illegal. For example,
it might be unethical to lie to your family, but it is notnecessary illegal.
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STAKEHOLDERS AND ETHICS: Employees A companys duty to employees arises out of respect for the
worth and dignity of individuals who devote their energies tothe business and who depend on the business for theireconomic well being. Principled strategy making requires thatemployee related decisions be made equitably andcompassionately with concern for due process and for theimpact that strategic change has on employees lives. At bestthe chosen strategy should promote employee interests and
concerns such as compensation, career opportunities, jobsecurity and overall working conditions.
At worst the chosen strategy should not disadvantageemployees. Even in crisis situations, businesses have an ethicalduty to minimize whatever hardships have to be imposed in the
form of workforce reductions, plant closings, job transfers,relocations, retraining and loss of income.
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STAKEHOLDERS AND ETHICS: Consumers
The duty to the customer arises out of
expectations that attend the purchase of a good
or services. However, the questions which still
abound are, should a seller voluntarily inform
consumers that its products contain ingredients
that though officially approved for use aresuspected of having potentially harmful effect? Is
it ethical for cigarette manufacturers to advertise
at all ? Is it ethical for manufacturers to stonewall
efforts to recall products they suspect have faulty
parts or defective designs.
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STAKEHOLDERS AND ETHICS: Suppliers A companys ethical duty to suppliers arises
out of the market relationship that exists
between them. They are both partners and
adversaries. They are partners in the sense
that the quality of suppliers parts affects the
quality of a firms own product and in thesense that their businesses are connected .
They are adversaries in the sense that the
supplier wants the highest price and profit itcan get while the buyer wants a cheaper price
, better quality and speeder service.
l
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STAKEHOLDERS AND ETHICS: Suppliers A company confronts several ethical issues in its
supplier relationship. The questions that arise are
Is it ethical to purchase goods from foreignsuppliers who employ child labour, pay
substandard wages? Is it ethical for supermarket
chains to demand slotting fees from foodsuppliers in return for placing their items in
favourable shelf? Is it ethical to threaten to cease
doing business with a supplier unless supplier
agrees not to do business with key competitors?Is it ethical to reveal one suppliers price quote to
a rival supplier?
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STAKEHOLDERS AND ETHICS: CommunityA companys ethical duty to the community at large stems
from its status as a member of the community and as
an institution of society. Communities and society are
reasonable in expecting businesses to be good citizens
to pay their fair share of taxes for fire and police
protection , waste removal, streets and highways andso on, and to exercise care in the impact their activities
have on their environment, on society, and on the
communities in which they operate. The questions that
arise are for example, whether it is ethical for a
brewer of beer to advertise its products on TV, at slots
when these ads are likely to be seen by underage
viewers or not?
S O S CS C i
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STAKEHOLDERS AND ETHICS: CommunityA companys community citizenship isultimately demonstrated by whether it
refrains from acting in a manner contrary tothe well being of society and by the degree towhich it supports community activities,encourages employees to participate incommunity activities, handles the health andsafety aspects of its operations, acceptsresponsibility for overcoming environmental
pollution, relates to regulatory bodies andemployee unions and exhibits high ethicalstandards.
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Similarly, just because an act is illegal does not
necessarily mean it is immoral. Rosa Parks wasacting illegally when she refused to give up herseat on the bus to a white male, but that does notnecessarily mean she was acting unethically.Should an individual obey the law even if it wouldbe unethical to do so? Under the theory of civildisobedience espoused by Martin Luther King,Mahatma Ghandi and others, an immoral lawdeserves to be disobeyed. Can you think of anyexamples of acts that would be illegal, yetarguably ethical?
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THEORIES OF ETHICAL CONDUCT
Theories of ethics present standards by which
a person can analyze and evaluate his or her
own moral conduct.
Over the centuries, two different philosophical
frameworks developed: ethical standards
based on universal duties (deontology) and
ethical standards based on consequences(utilitarianism).
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Deontology
Deontology is the philosophical practice of
defining and adhering to an absolute set of
standards by which ethical behavior can be
measured. It tries to define universal dutiesthat serve as moral guides to decision making.
When a moral dilemma arises, a person can
apply these universal standards to determinea course of action that is good.
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In deontology, a person fulfills absolute moral
duties regardless of whether good comes from
the actions. A person decides upon actions by
asking if a particular action is morally right orwrong. The act of carrying out that duty is
important rather than the consequences of
the act. An example of a set of deontologicalrules would be the Ten Commandments.
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The Rights Model
The rights model analyzes ethical issues byfocusing on an actions impact on humanrights. Under this model, human rights are
the rights all people have. An action thatmaximizes respect for human rights andminimizes their violation is morally correct.When encountering ethical dilemmas, a
person applying the rights model selects theaction that minimizes the violation ofstakeholders rights.
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The two necessities to be fully human are
freedom and well-being. Thus, two basic
categories of human rights exist within the
model: (1) rights of liberty, and (2) rights ofwell-being.
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Rights of Liberty
Privacy
Free consent
Free speech Freedom of conscience
Right to life
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Rights of Well-Being
Employment
Food
Housing Education
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Under the rights model, each person
possesses certain fundamental human rights
because of the fact that they are a human
being. Each persons life has an infinite value.
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Utilitarianism
Utilitarianism is an approach to establishing
ethical standards based on the consequences
of an action. In an ethical dilemma, a person
selects the action that brings about thegreatest amount of good for the greatest
number of people. The model determines
correctness in terms of social benefit. Manybusiness people favor the cost/benefit
approach of utilitarianism.
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Applying the Rights Model
Identify the facts.
Identify the ethical issues.
Identify the alternative courses of action.
Identify the stakeholders. Determine to which extent each alternative
respects the dignity and fundamental rights ofstakeholders or violates their rights.
Choose the alternative that maximizes the dignityof stakeholders and minimizes the violation oftheir rights.
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Applying Utilitarianism
Identify the facts.
Identify the ethical issues.
Identify the alternative courses of action.
Identify the stakeholders. For each alternative, calculate the costs and
benefits (identify who would be harmed and whowould benefit).
Choose that alternative which results in thegreatest amount of good for the greatest numberof stakeholders.
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Example
A secretary who has worked for your
corporation for fifteen years is involved in a
car accident in which she permanently loses
the use of her right hand. Thus, she can nolonger effectively type, file, or perform many
of the other functions that she previously had
performed and that are included in her jobdescription.
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Your corporation has a very tight budget and
does not have sufficient funds to pay for an
additional secretary without reallocating
budget items. The injured secretary has beenvery loyal to your corporation, and you have
been very satisfied with her work and
dedication. She wants to stay at her job.
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Moreover, she does not believe that she could
find other employment at this time. Should
your corporation fire her, lay her off with
compensation, or find a way to retain her? Inresolving this dilemma, apply:
Utilitarianism
The Rights Model Your own personal opinion
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Marketing ethics and social
responsibility
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What is ethics?
Ethics are the moral principles and values that govern
the actions and decisions of an individual or group.
They serve as guidelines on how to act rightly and
justly when faced with moral dilemmas.
Right ? Wrong ?
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Definition of marketing ethics
Marketing ethics is the area of applied ethics whichdeals with the moral principles behind the operation and
regulation of marketing. Some areas of marketing ethics
(ethics of advertising and promotion) overlap
with media ethics.
M k ti Ethi
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Marketing Ethics
Customer
ServicePricing
DistributorRelations
General
Code
Product
Development
Advertising
StandardsCorporate
MarketingEthics
Policies
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Factors influencing ethical marketing
behavior
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Relationship between marketing and
ethics
a reasonable practice leading to positive
relationships.
that rules are not necessarily contractual.
allows buyers and sellers to work together.
disadvantage: requires time to develop a list
of expected conduct or rules of behavior.
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Three concepts ofsocialresponsibility
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Social Criticisms of Marketing
Social Criticisms of Marketing
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Social Criticisms of Marketing
HighPrices
Shoddy orUnsafe
Products
Poor
Service
Deceptive
Practices
Planned
Obsolescence
HighPressure
Selling
MarketingsImpact on
IndividualConsumers
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Marketings Impact on Society
Too FewSocialGoods
False Wants andToo
Much Materialism
Too MuchPoliticalPower
CulturalPollution
M k ti I t Oth B i
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Acquisitions
of
Competitors
Marketing
Practices
that
Create Barriers
to Entry
Unfair
CompetitiveMarketing
Practices
Marketings Impact on Other BusinessesCritics Charge that a Companys Marketing Practices Can Harm Other Companies and
Reduce Competition Through:
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Responsibilities of the marketer
Honesty andfairness
Rights andDuties of
Parties in theMarketingExchangeProcess
In the Area ofProduct
Developmentand
Management
In the Area ofPromotions
In the Area ofDistribution
In the Area ofPricing
In the Area ofMarketingResearch
OrganizationalRelationships
C S d
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Nike has been criticized latelyabout NOT being sociallyresponsible
Accusations of overseassweatshops, child labor, andexploiting lower income U.S.families
Nike took the charges seriously andcommissioned a study of Nikefactories abroad
Nike donates more than $30million in cash and products tosports programs and 3% ofearnings to charity
CEO Knightnot sure how wemeasure good performance in
corporate responsibility
Case Study
Nike
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Ethics and HRM
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Environmental Factors
Over the last decade, ethical scandals in
business have been on the rise:
Enron
WorldCom
Tyco
Health South
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How To Stop Unethical Behavior
A combination of external regulations and
compliance programs and voluntary corporate
ethics programs is the most effective way to
combat inappropriate corporate behavior(Trevino, Weaver, Gibson, & Toffler, 1999).
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External Regulations
Sarbanes-Oxley Act (SOX) Requires CEOs and CFOs to sign statements
making them personally responsible for theaccuracy of the quarterly financial statements
Knowingly misrepresenting the financials opensthem up to punishments including fines and jailtime
Protection for whistleblowers
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Other External Regulations
Other external regulations include regulations
related to:
Minimum wage
Overtime compensation
Discrimination
Health and Safety
Privacy
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Organizational Responses
Codes of ethics including:
Explicit standards of rules to be followed
Corporate values statements
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Explicit Standards
Explicit standards define precisely acceptable
and unacceptable conduct such as accepting
gifts and the amount allowable
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Corporate Values Statements
Describes the core values the company wants
its employees to exhibit including:
How employees are to treat one another
How employees are to treat customers andstockholders
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Effective Values Statements
Must come from the top with the CEO being
directly involved in its development
Top management must actively disseminate
the values statement and then live by it
The values statement must be focused
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HR Responses
Conduct surveys to determine:
What behaviors are routinely being rewarded and
reinforced
What values and attitudes are prevalent
How strong the pressure to engage in misconduct
is
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HR Responses Continued
Take steps to eliminate and discourage
reasons for misbehavior and introduce and
encourage reasons to behave ethically
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HR Responses Continued
Develop an appraisal system that rewards
individuals for ethical behaviors and punishes
those who act unethically
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HR Responses Continued
HR can use its expertise to communicate with
the workforce to get out the ethical message
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Costs of Corporate Ethics Violations
$7 trillion in stock market losses
Loss of jobs and retirement savings by
employees
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Costs of Corporate Ethics Programs
Costs of implementing and maintaining
compliance to create an ethical business
environment
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Human Costs
Unethical business environments can:
Demotivate individuals
Make good employees leave the company
Attract unethical employees
Lead to the lack of trust by the employees for the
company
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Ethics Effectiveness Quick-Test
Ethics Effectiveness Quick-Test asks eight
questions about twelve different areas that
can help to increase the ethical effectiveness
in an organization
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Guidelines for Fostering an Ethical Culture
Have a well developed policy and procedures
manual
Enforce policies
Reward compliance
Recruit ethical employees
Create a division to oversee ethics
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Conclusion
Whenever you are required to make a difficult
decision, especially one that is ethically
challenging, select an option that you would
be comfortable describing to the nation onthe evening news