Part Two Ethical Issues and the Institutionalization of Business Ethics Chapter Emerging Business Ethics Issues © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Recognizing an Ethical Issue An ethical issue is a problem, situation, or opportunity that requires an individual or group to choose among actions   New ethical issues are emerging constantly Can be difficult to recognize ethical issues Failure to so puts corporations at risk  Is a problem in industries where winning is perceived to be a game © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Specific Types of Observed Misconduct Behavior Misuse of company time 33 n/a Abusive behavior 21 22 Lying to employees 20 19 Company resource abuse 20 23 Violating company Internet use policies 16 n/a Discrimination 15 14 Conflicts of interest 15 16 Inappropriate social networking 14 n/a Health or safety violations 13 11 Lying to outside stakeholders 12 12 Stealing 12 Falsifying time reports or hours worked 12 n/a Employee benefit violations 12 11 Sexual harassment 11 Source: Ethics Resource Center, 2011 National Business Ethics Survey: Workplace Ethics in Transition (Arlington, VA: Ethics 2009 (%) Resource Center, 2012), 39 2011 (%) © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Integrity  Integrity: Uncompromising adherence to ethical values  One of the most important terms relating to virtue © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Honesty  Honesty: Truthfulness or trustworthiness   Telling the truth to the best of your knowledge Dishonesty: A lack of integrity, incomplete disclosure, or an unwillingness to tell the truth Issues related to honesty arise when people perceive business as something where normal rules not apply © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Fairness  Fairness: The quality of being just, equitable, and impartial    Equality: How wealth or income is distributed Reciprocity: Occurs when an action that has an effect upon another is returned Optimization: The tradeoff between equity and efficiency © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Ethical Issues and Dilemmas in Business  An ethical dilemma is a problem, situation, or opportunity that requires an individual or group to chose among several wrong or unethical actions  There is no ethical choice © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Shareholder Issues Core values Shareholder participation in electing directors Executive compensation Legal compliance Lobbying and political activities Reputation management Integrity in collecting and managing data Supply chain relationships and human rights © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Misuse of Company Resources The leading form of observed misconduct   Can range from unauthorized use of equipment and computers to embezzling company funds Time theft costs organizations hundreds of billions in lost productivity annually © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use Abusive or Intimidating Behavior One of the most common ethical problems   Can be physical threats, false accusations, profanity, insults, harshness, ignoring someone, or unreasonableness  Intent is important in determining abuse Bullying is a growing problem  Is associated with a hostile workplace © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 10 Corporate Intelligence Three intelligence models    Passive monitoring system for early warning Tactical field support Support dedicated to top management strategy © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 16 Corporate Intelligence        Hacking  System hacking  Remote hacking  Physical hacking Social engineering Shoulder surfing Password guessing Dumpster diving Whacking Phone eavesdropping © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 17 Discrimination Is illegal in the U.S  A company can be sued for discrimination if it…     Refuses to hire an individual for discriminatory reasons Unreasonably excludes an individual from employment Unreasonably discharges an individual Discriminates against an individual with respect to hiring, employment terms, promotion, or privileges © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 18 Discrimination    Equal Employment Opportunity Commission (EEOC) The Age Discrimination in Employment Act Affirmative Action Programs  Efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 19 Sexual Harassment A repeated, unwanted behavior of a sexual nature perpetrated upon an individual by another  Hostile work environment    The conduct was unwelcome The conduct was severe, pervasive, and regarded by claimant as hostile/offensive The conduct was such that a reasonable person would find it hostile or offensive © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 20 Dual Relationship A personal, loving, and/or sexual relationship with someone with whom you share professional responsibilities   A key ethical issue in sexual harassment Unethical dual relationship: The relationship causes a conflict of interest or impairment of professional judgment © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 21 To Avoid Sexual Misconduct, A Firm Needs Statement of policy Definition of sexual harassment Non-retaliation policy Specific procedures for prevention Establish, enforce, and encourage victims to report Establish a reporting procedure Timely reporting requirements to the proper authorities © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 22 Fraud Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression  Accounting fraud    Misrepresentation of company’s financial reports  Accountants should abide by a strict code of ethics Dramatic changes in accounting field Increased competition and pressures to perform can create opportunities for misconduct © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 23 Initial Detection of Operational Frauds Source: Association of Certified Fraud Examiners, Report to the Nations on Occupational Fraud and Abuse: 2012 Global Fraud Study , 14 © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 24 Marketing Fraud The process of dishonestly creating, distributing, promoting, and pricing products    Puffery: Exaggerated advertising claims, blustering, and boasting  Can be difficult to distinguish from fraud Implied falsity: An advertising message that misleads, confuses, or deceives the public Literally false: Claims can be divided into tests prove (establishment claims) and bald assertions (non-establishment claims) © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 25 Consumer Fraud  When consumers attempt to deceive businesses for personal gain     Price tag switching, item switching, or lying to obtain discounts Collusion involves an employee who helps a consumer commit fraud Duplicity involves a consumer duping a store Guile is associated with a person who uses tricks to obtain an unfair advantage © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 26 Financial Misconduct   The failure to understand and manage ethical risks was a key problem in the recent financial crisis   Many firms rewarded risk-taking Difficult-to-understand financial instruments and murky accounting played roles Government calls for reform    Stricter controls on hedge funds and other instruments Greater transparency Dodd-Frank Wall Street Reform and Consumer Protection Act © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 27 Insider Trading  Two types of insider trading  Legal insider trading: Involves legally buying and selling stock in an insider’s own company, but not all the time  Illegal insider trading: The buying or selling of stocks by insiders who possess material that is not public © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 28 Intellectual Property Rights and Privacy    Involve the legal protection of intellectual properties  Books, movies, software Many privacy issues in the business world    Employee use of technology Consumer privacy Can be challenging for businesses today to meet the needs of consumers while protecting privacy Identity theft is a growing problem © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 29 The Challenge of Determining Ethical Issues in Business    Most ethical issues become visible through stakeholder concerns Determining ethical issues is a challenge  Changing societal standards over time The ethical decision making process starts when ethical issue awareness occurs and a discussion begins © 2015 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 30 ... Determining Ethical Issues in Business    Most ethical issues become visible through stakeholder concerns Determining ethical issues is a challenge  Changing societal standards over time The ethical. .. classroom use Ethical Issues and Dilemmas in Business  An ethical dilemma is a problem, situation, or opportunity that requires an individual or group to chose among several wrong or unethical actions... failure to understand and manage ethical risks was a key problem in the recent financial crisis   Many firms rewarded risk-taking Difficult-to-understand financial instruments and murky accounting