Bus 226: Business Ethics

Professor Mike Wade

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CHAPTER ONE

Business Ethics, The Changing Environment, And Stakeholder Management

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Copyright

Software piracy http://www.bsa.org/~/media/10A2E6D161594C 499AC16F68C7E57A65.ashx

Trademark: youre fired http://jip.kentlaw.edu/nart/2004/A-5.htm Three-Peat?

Recent Examples of Ethical Events in Corporate America

Subprime lending crisis Scandals

Enron Tyco WorldCom,

etc.

Excessive CEO pay and relative firm performance Sarbanes-Oxley Act of 2002 Outsourcing trends

Figure 1.1: Environmental Dimensions

Economic Factors

Increasingly global context for trade, markets, resources Business expansion, product expansion Stock & bond market volatility and interdependency The effects of the European Union (currency exchange, negotiating power, etc.) The rise of China and India

Technological Environment

Internet and telecommunication innovations Change in jobs, financial transactions, market operations Change in business best-practices Integration of supply chains Access to information

What privacy and surveillance issues arise for employers?

Political Environment

Rise of global terrorism Change in international coalitions (NATO, EU) Increased awareness of issues via electronic technology Fall of communism/Soviet Union

Governmental and Regulatory Environment

Constantly changing/updating laws and procedures

Sarbanes-Oxley,

2002 2004 Federal Sentencing Guidelines

Changing standards for products, processes (e.g., FDA approval) Judicial actions (e.g., Microsoft) against anticompetitive practices

Legal Environment

Competing rights (Patriot Act) Consumer protection (tobacco, gun control, Firestone tires) Corporate copyright protection (Napster vs. recording industry)

Demographic Environment

Globalization Workforce diversity and accompanying issues

Sexual

harassment Discrimination

Downsizing and outsourcing work force Aging workforce

Figure 1.2: Stakeholders

Secondary Stakeholders

Local community groups Special Interest groups Consumer groups Environmental groups Media Society-at-large American Civil Liberties groups ETC
Should managers pay attention to the needs of these groups? What priority should they have?

Stakeholder Management Approach

Six Steps to developing win/win strategies:
1. 2. 3. 4. 5. 6. Identifying and prioritizing issues, threats, or opportunities Mapping who the stakeholders are Identifying their stakes, interests, and power sources Showing who the members of coalitions are or may become Showing what each stakeholders ethics are and should be Developing collaborative strategies and dialogue from a higher ground perspective to move plans and interactions to the desired closure for all parties

What is Business Ethics?

Laura Nash has defined business ethics as the study of how personal moral norms apply to the activities and goals of commercial enterprise, as dealing with three basic areas of managerial decision making:
1. 2. 3. Choices about what the laws should be and whether to follow them Choices about economic and social issues outside the domain of law Choices about the priority of self-interest over the companys interests

Unethical Business Practices of Employees

Showing respect to those who act unethically

Abusive or intimidating behavior Misrepresentation of hours worked Lying

Withholding information

Context issues:
Companies in transition (mergers, downsizing) Younger employees and employees with lower tenure in the organization

Ethics and compliance Programs

Employees believe that nothing will be done if they report unethical behavior, or they are unsatisfied with the actions taken Only 25% of employees:

are willing to seek advice about ethics questions that arise; feel they are prepared to handle situations that could lead to misconduct; indicate that they are rewarded for ethical behavior; report that their company does not reward success obtained through questionable means; say they feel positively about their company

Employees feel that reports will not be held confidentially

Why does business ethics matter?

Financially and Economically Relationships and Reputation Morale and Productivity Culture and Communication Integrity and the Common Good

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http://money.cnn.com/magazines/fortune/bestc ompanies/2009/full_list/

http://www.greatplacetowork.com/gptw/mi ssion.php

Figure 1.3: Five Levels of Business Ethics

Key Questions if Faced with an Ethical Dilemma

What are my core values and beliefs? What are the core values and beliefs of my organization? Whose values, beliefs, and interests may be at risk in this decision? Why? Who will be harmed or helped by my decision or by the decision of my organization? How will my own and my organizations core values and beliefs be affected or changed by this decision? How will I or my organization be affected or by the decision?

Figure 1.5: 5 Business Ethics Myths

Why Use Ethical Reasoning In Business?

Laws are insufficient Free-market and regulated-market mechanisms are insufficient Complex moral problems require an intuitive or learned understanding and concern for fairness, justice, and due process to people, groups, and communities

Can Business Ethics be Taught/Trained?

We can facilitate the development of awareness of what is ethical Help individuals and groups realize that their ethical tolerance and decision-making styles decrease unethical blind spots. Enhance discussion of moral problems openly in the workplace.

Kohlbergs Levels and Stages Of Moral Development

Level 1: Preconventional level (selforientation)
Stage 1: Punishment Stage 2: Reward seeking

Level 2: Conventional level (others orientation)

Stage 3: Good person Stage 4: Law and order

Level 3: Postconventional level (universal, humankind orientation)

Stage 5: Social contract Stage 6: Universal ethical principles

Kohlbergs Study and Business Ethics

Study of 219 corporate managers: reason at Moral stage 3 or 4:

Stage 3: Good person Stage 4: Law and order

Self Employed: Stage 4: Law and order

Author: issues of high moral intensity will be recognized as moral issues more frequently than will issues of low moral intensity. The Study suggest that people who do not recognize moral issues will not act morally regarding those issues.