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Ethics

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Objectives1. To examine the role of ethical behavior in

business finance.2. To illustrate the role of unethical behavior

in the downfall of business.3. To describe the need for ethical practices

in business finance.

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EthicsEthics: a set of beliefs about right and wrong.

Ethics guide people in dealings with stakeholders and others, to determine appropriate actions.

Managers often must choose between the conflicting interest of stakeholders.

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StakeholdersStakeholders: people or groups that have an interest in the organization. Stakeholders include employees, customers,

shareholders, suppliers, and others. Stakeholders often want different outcomes and

managers must work to satisfy as many as possible.

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EthicsAre guidelines for human behaviorAre the moral code by which individuals live and conduct business

Help individuals decide how to act in situations where moral issues are concerned

Set standards for moral behavior

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Ethics Vary from person to personDo not solely rely on the basis of an act being legal or illegal

Can be viewed as a moral philosophyAre generally termed gray areas

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Business Ethics Study the behavior and morals in a business situationAre determined mainly by the business owner’s

principles and valuesShould be practiced by all individuals in a businessReflect the beliefs of an organizationAre tied directly to a businesses reputation Can be expressed in a code of ethics

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Code of Ethics Code of Ethics: set of rules for guiding the actions of employees or members of an organization

Is a set of ethical behavior guidelines which govern the day-to-day activities of a profession or organization

Describe the appropriate conduct for a businessCan be used to defend a company against criminal

action if an employee violates the lawCan be written or unwritten

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Unwritten Codes of Ethics Are the customs of a businessAre ways of completing tasks which are generally

accepted practicesAre passed through the business verbally from

employee to employee example: an employee knows the Internet at work is

not to be used for personal matters

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Written Codes of Ethics Are considered formal codes of ethicsAllow a company to have a “hard copy” of the procedures it condones

Are mainly found within large businesses example: an employee must sign a

confidentiality agreement prior to employment in order to prevent them from leaking company information

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Developing a Code of Ethics

Can be completed by: brainstorming ethical dilemmas discussing potential solutions writing a set of general guidelines improving the code in place

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Why Behave Ethically?Managers should behave ethically to avoid harming others. Managers are responsible for protecting and nurturing

resources in their charge.Unethical managers run the risk for loss of reputation. This is a valuable asset to any manager! Reputation is critical to long term management

success. All stakeholders are judged by reputation.

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Guidelines for Writing a Code of Ethics

1)Determine the purpose of the code2)Tailor the code to the needs and values of the organization3) Consider involving employees from all levels of the company in writing the code4) Determine the rules or principles that all members of the organization will be expected to adhere to5) Include information about how the code will be enforced6) Determine how the code will be implemented and where it will be published or posted7) Determine how and when the code will be reviewed and revised

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Results of Illegal Unethical Practices

Include the following: jail sentences

length is directly related to the severity of the crime hefty fines

amount is linked to the cost of the crime community service removal from leadership positions irreparable damage to those affected by the

practices

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Guidelines

When considering the ethics of business situations, you can follow these guidelines: Is the action legal? Does the action violate professional or company

standards? Who is affected by the action and how?

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Results of Unethical Practices

Include the following:

damage to reputation loss of trustworthiness decrease in employee morale negatively viewed by customers

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Managing Diverse WorkforcesThe workforce has become much more diverse during the last 30 years. Diversity refers to differences among people such as age,

gender, race, religion. Diversity is an ethical and social responsibility issue.

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Types of DiversityFigure 5.5

CapabilitiesDisabilities

Socioeconomicbackground

Sexual orientation

Religion Ethnicity

Race

Gender

Age

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Manage DiversityDistributive Justice: dictates members be treated fairly concerning pay raises, promotions, office space and similar issues. These rewards should be assigned based on merit and

performance. A legal requirement that is becoming more prevalent in

American business.Procedural Justice: Managers should use fair practices to determine how to distribute outcomes to members. This involves how managers appraise worker

performance or decide who to layoff.

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Diversity Makes Business SenseDiverse employees provide new, different points of view. Customers are also diverse.

Still, some employees may be treated unfairly. Biases: systematic tendencies to use information in ways

that result in inaccurate perceptions. Stereotypes: inaccurate beliefs about a given group.

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How to Manage DiversityIncrease diversity awareness: managers need to become aware of their own bias.

Understand cultural differences and their impact on working styles.

Practice effective communication with diverse groups.

Be sure top management is committed to diversity.

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