Conducting business ethically
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Chapter 2. Conducting Business Ethically. Ethics. Ethics ( الاخلاق ) : are the beliefs ( المعتقدات ) about what is right and wrong or good and bad in actions that affect others .

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Conducting business ethically

Chapter 2

Conducting Business Ethically

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Ethics

Ethics

  • Ethics (الاخلاق): are the beliefs (المعتقدات) about what is right and wrong or good and bad in actions that affect others.

    An individual’s values and morals + The social context in which his or her behavior occurs,determine whether behavior is regarded as:

    Ethical or Unethical (أخلاقي أو غير أخلاقي).

    Examples :

    (how we behave in a football ground or in a mosque).

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

2


Ethical behavior

ETHICAL BEHAVIOR

  • Ethical behavior is behavior that:

    Conforms to individual beliefs (المعتقدات الفرديه)(you personally believe the action to be correct behavior)

    and

    Social norms (المعايير الاجتماعية)(accepted by society as “normal” behavior)

  • About what is right and good

  • Unethical behavior is behavior that: individual beliefs and social norms (individuals and society) define as wrong and bad

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Individual ethics

Individual Ethics

  • Individual Ethics: since they are based on our beliefs and social concepts:

    • They vary (change) from person to person(different beliefs and different level of practicing that beliefs).

    • They vary from situation to situation, ( example: too hungry might steal to eat “unethical”).

    • They vary from culture to culture.(example: multiple marriages are unaccepted in the west).

    • Therefore people developed personal codes of ethics reflected from there wide range of attitudes and beliefs.

      (different people in the broad society, with different codes of ethics, living together without breaking the general social standards of ethics.

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

4


Managerial ethics

MANAGERIALETHICS

Managerial ethics are standards (rules) of behavior that guide managers in their work

  • While ethics can affect a manager’s work in many ways, we will look at three main areas:

    • Behaviour towards employees

    • Behaviour towards the organization

    • Behaviour towards other economic agents(الاقتصادية الوكيل)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


1 ethical behavior toward employees

1. ETHICAL BEHAVIORTOWARD EMPLOYEES

  • This area covers the ethics of the employer’s behavior towards the employee –

  • hiring and firing (التعيين والفصل) should be based only on ability to work. Hiring your friend instead of another qualified (تأهل) person is unethical.

  • Wages and working condition, usually regulated by law. Yet it is unethical to pay a worker less because you know he really needs the job.

  • Privacy and respect (واحترام الخصوصية), protection of the employees personal information.

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Ethical behavior toward the organization

ETHICAL BEHAVIORTOWARD THE ORGANIZATION

  • This area covers the ethics of the employee’s behavior toward his or her employer – conflict of interest, confidentiality, and honesty

  • Conflict of interest (تضارب المصالح): when an activity may benefit the individual to the loss of his employer.(like accepting gifts from company’s suppliers).

  • Confidentiality (السرية), (like selling company’s secrets to competitors).

  • Honesty (الصدق), (Like: stealing, using expenses account, using company phone for personal long distance calls).

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Ethical behavior toward other economic agents

ETHICAL BEHAVIOR TOWARD OTHER ECONOMIC AGENTS

  • This area covers the ethics of both the employer and employee’s behavior towards those companies and individuals who are their “primary agents of interest”: customers, competitors, stockholders, suppliers, and labor unions…….

    Employers and their employees must be fair, honest, and ethical in:

  • Advertising (الاعلان)

  • Financial disclosure (الذمه المالية)

  • Ordering and purchasing supplies and products

  • Bargaining and negotiating with labor unions (المساومه والتفاوض مع النقابات العماليه)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Assessing ethical behavior

ASSESSINGETHICAL BEHAVIOR

To make an ethical judgment (الحكم الأخلاقي), we:

  • Gather factual information (جمع الحقائق)

  • Analyze (نحلل)the facts to decide the correct moral values

  • Make a judgment (حكم) based on what is right or wrong

    We must trust that others will do what is most correct – as otherstrust us to do the same

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Company practices and business ethics

COMPANY PRACTICES AND BUSINESS ETHICS

  • Companies try to encourage (تشجيع) ethical behavior and discourage unethical behavior

  • Many companies have codes of conduct

  • Ethical behavior within a company must begin at top management and filter down to lower level employees

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Adopting written codes

ADOPTING WRITTEN CODES

  • Many companies, particularly large national and international companies, have written codes of ethics which all employees are required to follow

  • These policies state

    • how the company will conduct (تصرف) business,

    • how employees will be treated (تعامل), and

    • how employees must behave (تصرف)

  • An organization’s core principles and values usually remain the same - they do not change over time

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Instituting ethics programs

INSTITUTING ETHICS PROGRAMS

Ethics are taught:

  • At home

  • In social situations

  • At school and in university

  • In the workplace

    It is the responsibility of the employer to educate employees in the way business ethics are to be practiced in their organization

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Social responsibility

Social Responsibility

  • Social responsibilities (المسؤوليات الاجتماعية): the attempt of a business to balance its commitments (التوازن التزاماته) to groups and individuals in its environment. These groups are called the :

    The organizational stakeholders:

    they are those groups, individuals and organizations that are directly affected by the practices of the business. they have a “stake” (حصة) in its performance.

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


The stakeholder model of responsibility

THE STAKEHOLDER MODEL OF RESPONSIBILITY

Many companies concentrate on five main groups of “stakeholders”:

  • Customers (العملاء)

  • Employees (الموظفين)

  • Investors (المستثمرون)

  • Suppliers (الموردين)

  • Local Communities(المجتمعات المحلية)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Customers and employees

CUSTOMERS AND EMPLOYEES

  • Customers: Customers must be treated fairly and honestly. Companies must charge fair prices, honor product warranties (guarantees), sell quality products, and meet delivery commitments to customers

  • Employees: Employees must be are treated fairly, made to feel part of a team, and treated with respect and dignity

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Investors and suppliers

INVESTORSAND SUPPLIERS

  • Investors: Investors must be sure that the company followsproper accounting practices, gives accurate information about financial performance, and is being managed in a way which protects their investments

  • Suppliers: Suppliers must be paid acceptable prices for their products and given realistic product delivery schedules

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Local communities

LOCAL COMMUNITIES

  • Local Communities: Companies must try to be “socially responsible” by giving back to the community in which they do business

    • Many major companies in Bahrain give financial support to sports teams, charities, and health centers

    • Companies must also try not to cause damage to the environment of the country (reducing the amount of smoke from the Bapco Refinery, making sure that heavy trucks are well maintained to help reduce air pollution)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Responsibility toward the environment

RESPONSIBILITY TOWARD THE ENVIRONMENT

Companies (and individuals) have social responsibility towards the environment in the following areas:

  • Greenhouse Emissions (من انبعاثات غازات الدفيءه)

  • Global Warming (الاحترار العالمى)

  • Noise Pollution

  • Air Pollution

  • Water Pollution

  • Land Pollution

  • Toxic Waste Disposal (التخلص من النفايات السامه)

  • Recycling (أعادة)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Responsibility toward customers

RESPONSIBILITY TOWARD CUSTOMERS

Consumer Rights: Consumerism is the protection of the rights of consumers (customers) in their dealings with companies. Consumers should have:

  • The right to safe products (no manufacturing defects)

  • Be informed about the product (which fabric was used)

  • Be heard by the company if they have a question or complaint (companies must supply a telephone number or address)

  • Be able to choose what they buy (based on price and quality)

  • The right to be educated about purchases (dosages and side effects of prescription drugs)

  • The right to courteous service (bad service can be reported to a manager)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Unfair pricing collusion

UNFAIR PRICING(COLLUSION)

  • Collusion is an illegal (غير الشرعية)agreement between two or more companies to commit a wrongful act such as “price fixing” of products

  • Imagine that only three drug manufacturing companies made the same drug. If they all agreed to charge the same high price for the drug, patients who needed the drug would have no choice but to pay the high price as all manufacturers charged the same price

  • There would be nocompetition in pricing. This would result in unfair pricing of the product

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Ethics in advertising and product information

ETHICS IN ADVERTISINGAND PRODUCT INFORMATION

Product advertising:

  • Should be truthful – in the use of such words as “diet”, “light”, and “low fat”. Companies are required by law to list the ingredients contained in a product on the product package

  • Should notcause cultural or moral offenseto customers – cigarette advertising featuring young people may encourage young people to start smoking, advertising for alcoholic drinks would be offensive in a Muslim country

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Responsibility toward employees

RESPONSIBILITY TOWARD EMPLOYEES

Legal and Social Commitments: Business should not practice discrimination (التمييز) against people because of their:

  • Gender, age, or ethnicity (race or ethic origin)

    People should be hired, paid, and promotedon the basis of job-related factors only – not on the basis of race or gender.

    A workplace should also be physically and socially safe for employees

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Responsibility toward employees ethical commitments

RESPONSIBILITY TOWARD EMPLOYEES - ETHICAL COMMITMENTS

Companies should not conduct their business in a way that is:

  • Illegal, unethical, or socially irresponsible

    The “whistle-blower” : is the employee who detects and tries to stop a company’s unethical, illegal, or socially irresponsible actions by publicizing them.

    These honest employees are sometimes treated badly by there employers and some coworkers

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Responsibility toward investors

RESPONSIBILITY TOWARD INVESTORS

  • The shareholders are the true owners of the company.

  • Irresponsible behavior toward shareholders means abuse of a firm’s financial resources.

  • Improper financial management:

    In some organizations, officers in that organization do financial mismanagement, like having very high salaries, expensive holidays, or other expensive services like transports.

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Improper financial management

Improper financial management

Other improper financial management can be in one of the following:

Check kiting: Unethical and illegal practice of writing checks against money that has not yet been credited at the bank on check are drawn.

Insider Trading: Illegal practice of using special knowledge about a firm for profit or gain. Like knowing the share prices will go up for organization, and use this information to make profit for you.

Misrepresentation (تحريف) of finance: companies must use generally accepted accounting principles, the management must give true information about there profit and lose. Unethical managers hide give the investors false profit expectations, and some even hide there loses.

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

25


Implementing social responsibility programs

IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS

There are differences of opinion regarding the social responsibilities of business organizations

  • Some people think that a company’s onlyresponsibility is to make a profit

  • Other people think that as the company is operating in the community, it should be viewed as a “citizen” and help to improve the lives of fellow citizens in the community

  • (4th Page 77: 5th Pages 58 - 59)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall


Managing social responsibility programs 1

Managing social responsibility programs [1]

There is four steps required to encourage companies for social responsibilities.

Social responsibility must start at the top and be considered as a factor in strategic planning. (top management support).

A committee of top managers must develop a plan detailing the level of management support. (like setting a percentage of the profits for social programs).

One executive must be put in charge of the firm’s agenda. (this individual will follow the programs, make sure it is done, and consistent with the company policy).

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

27


Managing social responsibility programs 2

Managing social responsibility programs [2]

  • The company must conduct (make) occasional social audit. We need to follow up with the programs, if the company pay to train unemployed people, then firm must check back if those people did graduate and find a job, otherwise we change this program.

    Social audit (المراجعه الاجتماعية ): systematic analysis of a firm’s success in using funds earmarked (allocated) for meeting its social responsibility goals.

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

28


Social responsibilities and the small business 1

Social responsibilities and the small business.[1]

Whether the business small or large, managers will face ethical, legal, social and environmental responsibilities.

Small business managers must be committed to these responsibilities.

Most of the decision small business managers will face related to there individual ethics. (like would I refuse to sale or call the police if a customer used stolen credit card)

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

29


Social responsibilities and the small business 2

Social responsibilities and the small business.[2]

  • But what about social responsibilities, can the small business afford support social programs, like free students training, or sponsorship of a sport team.

  • Ethics and social responsibilities are decisions faced by all managers in all organization, regardless of size and rank.

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

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