Business Ethics The

Basics

Jayadeva de Silva

Some Scandals..

Promoting Sales of a harmful product to school children through exclusive contracts with schools.

Negative implications of Advertisements on School Children.

Moral and Ethical obligations of a company to be honest about its product and services.

Understanding religious, moral and health concerns of different classes of customers across the entire product range and geographic operations by a fast food company.

The concept of monopolistic practices Forming an opinion on whether Microsoft’s monopolistic

behavior is ethical or not.

Maltreatment of employees and sweatshop conditions in Nike’s Asian Factories

Role of non-profit organizations/special interest groups in creating awareness of malpractices of a multinational company.

Music piracy and its impact on the music industry Legal and ethical aspects of how Super Cassettes built up a

successful business empire by promoting music piracy.

Role of Government of India and Madhya Pradesh government in the Bhopal Gas Disaster.

Response of Union Corporation after the disaster.

Political, Economic and social consequences of liquor on society

Ethical dilemma of the liquor business for the Government, Industry and Society.

Johnson & Johnson's public relations campaign after the Tylenol crisis in 1982.

Danduwam Mudalali What happened ?

Ethics ... A set of Rules that

help to tell us the difference between right and wrong and encourages us to do the right thing.

Help people decide best actions to take in a situation.

Ethical Behaviour- What are the

factors that influence ethical behaviour ?

What Shapes Ethical Behavior at Work? Individual factors Organizational factors The boss’s influence Ethics policies and codes The organization’s culture

Based on…. Good character Trustworthiness Respect Responsibility Caring for others Good citizenship Moral rules values

Do what’s best for me…

Do what’s right!!

Ethics

Relationship between ethics and the law ...

Ethics

Law

Most people believe law-abiding behavior = ethical behavior

but ...

… the domain of ethical behavior extends beyond what’s legal; some issues may be covered by “codes of conduct” or other polices

… and some laws may seem counter to your ethical standards

Bad Ethics Increases Transaction Costs

PartyA

PartyB

Trade

Security

LawyersRegulators

Delays

Interest

Duplication

Testing

Etc, etc!

Factors affecting ethical decisions Normative judgments

Judging something as good or bad, right or wrong, better or worse.

Moral standards (Morality) Society’s accepted standards for behaviors that

have serious consequences to its well-being. Behaviors that cannot be established or changed by

decisions of authoritative bodies. Behaviors that override self-interest.

Ethics and the law An behavior may be legal but unethical. An behavior may be illegal but ethical. An behavior may be both legal and

ethical. An behavior may be both illegal and

unethical.

Levels of Constraints on Behavior

Ethical Behavior Tied to Set of Values

Professional Standards

Legal Requirements

Situation #1 Your Friend asks you to

add a few extra hours to a work time sheet for him, but you know that he did not put in the time.

What would you do? Who wins and who loses if

you agree to put down the time?

How do you feel about it?

Situation #2 A salesperson in an

electronics store offers to sell you an iPod after hours at a discounted price.

What would you do? Who wins and who loses

if you agree to buy it? How do you feel about

it?

Ethics in Business Business ethics

are tied to both society’s ethics and the ethics of individuals.

Employees, customers, suppliers shareholders etc.

Business Situation #1 You work for a company

that makes cyanide gas. You know this is harmful to people.

Is it unethical for you to make the

gas, knowing it is used to poison people?

What about helping the company make a profit?

What if workers health is at risk? Shouldn’t you follow employers

instructions?

How can Businesses Solve Ethnical Dilemmas?

Dilemmas- situation with difficult choice or 2 or more options

Positive and Negative points for every option.

Key Questions:

1.Who will be helped by what you do?

2. Who will be hurt?

3.What are benefits and problems of each decision?

4. Will the decision survive the test of time?

A Code of Ethics Business create a

document that explains how employees and management should respond in different situations.

Principal Causes of Ethical Compromises

Table 14–1Sources: O.C. Ferrell and John Fraedrich, Business Ethics, 3rd ed. (New York: Houghton Mifflin, 1997), p. 28; adapted from Rebecca Goodell, Ethics in American Business: Policies, Programs, and Perceptions (1994), p. 54. Permission provided courtesy of the Ethics Resource Center, 1120 6th Street NW, Washington, DC: 20005.

Note: 1 is high, 9 is low.

Employees and Ethical Dilemmas Questions employees should ask when

faced with ethical dilemmas: Is the action legal? Is it right? Who will be affected? Does it fit the company’s values? How will it “feel” afterwards? How will it look in the newspaper? Will it reflect poorly on the company?

Ethical Issues Relating to Business

Honesty—communication and behavior consistent with facts

Disclosure of information Promises/commitments Representation of others like shareholders

(applies to board members) Unfair competition Avoid quid pro quo transaction Comply with “anti-trust” laws (these relate to

pricing, monopolistic practices)

Just compensation Respect intellectual property (product piracy) Treat employees fairly

Respecting rights of others Treat others with fairness and respect regardless

of age, religion, ethnic group, sex, economic status, etc., especially children, women, and subordinates

Respect the community you operate in by paying fair share of economic costs you create

Respect others and future generations by treating the environment well

Why Ethical Behavior Adds Value

Better information Trust from investors Lower costs for audits, controls, investigations Better allocation of resources Customers will be more loyal (RC Willey

example) Lower costs from suppliers (automotive

company example) Attracting and retaining better employees

Fair competition Lowers cost of business in economy Leads to better decision-making (do what’s best

for firm, not one individual) Improves competitive nature of a country’s

economy

Why Ethical Behavior Adds Value

Just compensation Creates a more vibrant, entrepreneurial

economy Attracts and retains better employees

Rights of others Draws upon talents of wider set of individuals Develops long-term respect from the

community Maintains the environment for long-term

value to all

It’s the right thing to do!

Is There Evidence that Ethical Behavior Yields Increased Value?

1. Study of 2,100 firms with very strong, well-governed boards of directors outperformed overall market 15% vs. 12.5% in 2005

2. Firms with high level of “democracy” outperformed “dictatorial” firms by 8% per year in the decade of the 1990’s.

3. Philanthropy: Firms that contribute a higher portion of their assets to the communities in which they reside fare better in an economic downturn.

How Important is Integrity in a Leader? In a survey of 54,000 people

Integrity was by far the number one attribute desired in a leader

(Quoted in Stephen R. Covey’s preface to Business with Integrity, p. xx)

These are from SriLankaLook OK but we need to know

Something?

What is it Madam?

How are they treating the workers who make these?

Taught in All Cultures

Judaism: What you hate, do not do to anyone.Islam: No one of you is a believer until he loves for his brother

what he loves for himself.Hinduism: Do nothing to thy neighbor which thou wouldst not

have him do to thee.Sikhism: Treat others as you would be treated yourself.Buddhism: Hurt not others with that which pains thyself.Confucius: What you do not want done to yourself, do not do to

others.Aristotle: We should behave to our friends as we wish our

friends to behave to us.Plato: May I do to others as I would that they should do unto me.

TREAT PEOPLE THE WAY YOU WANT THEM TO TREAT YOU

Some guidelines

To increase productivity , provide safe and healthy working conditions

To inspire trust ,make your performance transparent

Your loyal decent can lead your institution in the right direction

Downsizing labor force is only beneficial when you respect each stakeholder.

To establish your brand name,act as a fair player

Reduce the gap between the rich and poor by developing a new social security system

If you act against discrimination , you will increase your productivity and profitability

If you protect intellectual property,all stakeholders will receive their due share

Ongoing changes in information technology require new forms of loyalty

Your public relations strategy will only secure your reputation if it witnesses your drive for quality and excellence.

Your economic achievements will only stand on firm ground if you diminish corruption

Long-term success urgently calls you to constantly care for the environment.

To become a refined player,sharpen your discernment and cultivate good manners

Care for your business by caring for society.