Business Ethics

Zen and the Art of Business Peace

Professor Derek Parkin

The e Art to of War a

6th Century BC military treatise by Sun Tzu Has (apparently) influenced and inspired: Napoleon p General Douglas MacArthur Mao Zedong Planning of Operation Desert Storm Business leaders. leaders

Zen philosophy p p y
Western societal interest p post WWII General haziness as to origin and beliefs Buddha legend Introduced to China 2nd century BC Later L t reached h dJ Japan Zen broadly translates as meditation A state of mind, a state of being

What one might do for $500

Stop going to the movies for 6 months (62%) Get a tattoo (39%) Switch political parties (35%) Cheat on income taxes (9%) Ch Cheat on a spouse (4%)

(Anything for money, Business Week (USA), August 2004)

Ethics
Can be defined as a system system of right and wrong Assists A i t individuals i di id l d decide id whether h th an act ti is:
Moral or immoral Socially desirable or undesirable

Ethics
Many sources:
Religious beliefs National and ethnic beliefs Community standards Family practices Educational experiences Friends

What is Business Ethics?

Principles and standards which guide behaviour in the world of business Right Right or wrong wrong , acceptable acceptable or unacceptable behaviour within the organisation i ti Determined by key stakeholders

Some myths about business ethics

Its easy to be ethical U thi l b Unethical behaviour h i i is part t of fb business i There are no rewards for being ethical Ethical behaviour will prevent me from being successful Business is like sport push the rules and try not to get caught Business ethics is about character education and teaching moral philosophy

Ethical issues for business

Product safety standards Advertising contents Working environment Unauthorised payments E l Employee privacy i Environmental issues

Common unethical acts (reported by employees)

Lying to supervisors Falsifying records Alcohol and drug abuse Conflict of interest Stealing Receiving a gift/entertainment in violation of company policy Improper accounting procedures Sexual harassment Di i i ti Discrimination Violation of environmental laws
(1997 Society for Human Resource Management)

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Key y causes of unethical behaviour

Meeting overly aggressive financial or business objectives bj ti Meeting schedule pressures (deadlines) Helping the organisation survive Rationalising that others do it Resisting competitive threats gj jobs Saving
(1997 Society for Human Resource Management)

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Key y influences on ethical behaviour

Personal values Supervisor influence g influence Senior management Internal drive to succeed Performance pressures Lack of consequences Friends/co worker influence (peer pressure) Friends/co-worker

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Why y misconduct is not reported p

Fear of not being considered a team player Did not think that corrective action would be taken Fear of retribution from management No-one else cares why should I? g to keep p the report p Did not trust the organisation confidential

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Principle of employee conduct

10% follow their own beliefs 40% try to follow company policies and rules l 40% go along with the work group Take advantage if the risk is low
(Ferrell, Marsh 2005)

Classification of ethical issues

Conflict of interest Honesty and fairness C Communications i i Organisational g relationships p

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Conflict of interest
Exists when an individual must choose whether to advance his/her own interests, the organisations or others Examples: Bribes/personal payments, gifts, or special favours intended to influence decision making Do auditor actual or alleged conflicts of interest represent unethical behaviour?

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Honesty y and fairness

Following g applicable pp laws and regulations g and not knowingly harming stakeholders Is advertising cigarettes at the cricket fair? Why was it phased out? Are mobile phone ads that mask mask the effective cost of the call, especially if the limit is exceeded, fair?

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Communications
Refers to the transmission of information and the sharing of meaning eg: deceptive advertising, product safety information, product composition Financial Statements is this not simply a means of communication to stakeholders? Continuous disclosure obligations for ASX companies?

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Organisational g relationships p
Behaviour of organisational g members toward stakeholders Includes confidentiality, meeting obligations and deadlines, not pressuring others to behave unethically y

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So what does this mean to you and me?

We have a personal obligation to ourselves and our employers y to act ethically y in our business dealings Personal and corporate p reputational p risk

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So what does this mean to you and me?

We are also bound by the Ethical Rules of professional bodies ( (ICAA, CPAA, NIA, CMA) )
Disciplinary consequences for bringing the bodies into disrepute Includes fines, suspension or expulsion

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What does this mean for our company or business?

We may be officers of the company or business
possibly a listed company

Rules of engagement:
Corporations Act Ci Crimes A Act Anti-money laundering legislation Income tax legislation ASX listing rules

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What does this mean for our company or business?

Obligation to:
Directors Auditors Shareholders Other stakeholders

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What is the companys responsibility?

Code C d of fC Conduct d t Attitude of the Board & senior management
The tone from the top

Provide a ready avenue for discussion of ethical issues

Designated privacy officer(s) Training T i i and d open f forums, such h as thi this

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So, what do we do when faced with a difficult ethical issue?

Define problem Identify stakeholders Identify practical alternatives Determine measurable impact of each alternative Identify immeasurable consequences of each alternative Arrive at tentative decision Decide how to implement decision

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So, what do we do when faced with a difficult ethical issue?

Always: Take time out to reflect on issue
Consideration before action

Discuss with a trusted person (could be a peer employee or the privacy officer) ff ) Consider taking up with senior management, if appropriate

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So, what do we do when faced with a difficult ethical issue?

Also: Consider Whistleblower legislation g provisions
Communicate with auditors

Consider communication to Chair of Audit C Committee, if f appropriate Consider Chartered Accountants Advisory Group services and similar

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So, where does this Zen thing fit in?

Ethics can be a learned behaviour.to a point Rather, a way of thinking which underpins personal lb behaviour h i

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So, where does this Zen thing fit in?

Will be assimilated over a period of time, primarily during more vulnerable years
Youth family/schooling Young adult university/workplace

Will be dispersed during more secure years

Mature adult workplace/social group

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ONE SIMPLY CANNOT MAKE AN OVERNIGHT DECISION TO BE ETHICAL AS OF TOMORROW

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Ethics t cs a and d co committed tted employees e p oyees

Creates employee p y loyalty y y Encourages personal sacrifices Focuses on organisational success Honours organisational policies and contractual obligations Reduces staff turnover Satisfies S ti fi customers t

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Remember...
If If you have ethics, ethics nothing else matters. If you dont have ethics, nothing else matters. matters.

Remember
Consider your own reputation reputation.. Consider the reputation of the people y around you.. Consider the reputation of your company.

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...and dont forget your Zen!