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  1. Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 5 Business Ethics and Ethical Decision Making

  2. Business Ethics • Principles and standards that guide the behavior of individuals and groups in the world of business • Managers, employees, consumers, industry associations, government regulators, business partners, and special interest groups all contribute to business ethics. • Principles and standards tend to change over time. • Business ethics goes beyond legal issues.

  3. American Distrust of Financial Services Industry

  4. Foundations of Business Ethics • Ethical conflict in the organization dictates the need for organizational ethics policies and procedures. • Many ethics conflicts are resolved through negotiation or litigation. • Personal morality is often not sufficient to help people navigate through difficult legal issues. • Antitrust, conflict of interest, etc.

  5. Ethical Issues in Business • An ethical issue is a problem, situation, or opportunity requiring an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical. • Ethical issues: • Honesty and fairness • Conflict of interest • Fraud • Discrimination • Information technology

  6. Specific Types ofMisconduct Observed

  7. Abusive or Intimidating Behavior • Abusive or intimidating behavior is the most common ethical problem for employees. • It can mean anything from physical threats, false accusations, annoying a coworker, profanity, insults, yelling, harshness, to ignoring someone, or being unreasonable.

  8. Actions Associated with Bullies

  9. Lying • To be honest is to tell the truth to the best of your ability. Lying relates to distorting the truth. • Three major types of lies: • Joking without malice, white-lie told in order notto hurt someone’s feelings • Lying by commission, creating a perception orbelief by words that intentionally deceives • Lying by omission, intentionally notinforming the receiver of material facts

  10. Conflict of Interest • A conflict of interest arises when an individual must choose whether to advance his or her own personal interests, those of the organization, or those of some other group. • Organizations often prohibit employees from accepting bribes, personalpayments, gifts, or special favors.

  11. Fraud • Fraud is any false communication that deceives, manipulates or conceals facts in order to create a false impression or damage others. • Types of fraud • Accounting fraud • Marketing fraud

  12. Greatest Fraud Risks for Companies

  13. Consumer Fraud • Consumer fraud occurs when consumers attempt to deceive businesses for their own gain. It involves intentional deception to derive an unfair economic advantage by an individual or group over an organization. • For example • Shoplifting • Price-tag switching • Lying to obtain age-related and other discounts • Taking advantage of return policies by returningclothing that has been worn

  14. Discrimination • Affirmative action programs involve efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against on the basis of race, gender or other characteristics. • Discrimination is still a significant ethical issue forty years after the passage of Title VII of the Civil Rights Act. • Sexual harassment can be defined as any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another.

  15. Information Technology • As the use of the Internet increases, the areas of concern related to its use have increased. • For example • Monitoring employee use of available technology • Consumer privacy • Site development and online marketing • Legal protection of intellectual property such as music, books, and movies

  16. Personal Misconduct in the Workplace

  17. The Ethical Decision Making Process • Factors that influence the ethical decision-making process include: • Individual factors • Organizational relationships • Opportunity • The strongest factor influencing employee behavior is organizational relationships. • Role of peers and coworkers in impacting workplace behavior

  18. Moral Philosophies • Consequentialism • A decision is right or acceptable if it helps achievethe desired results • Egoism • Maximizing one’s own self-interest • Utilitarianism • Greatest good for the greatest number of people • Ethical formalism • Focuses on the rights of the individual • Justice theory • Evaluations of fairness

  19. Stages of Moral Development • Punishment and obedience • Individual instrumental purpose and exchange • Mutual interpersonal, expectation, relationships, and conformity • Social justice and conscience maintenance • Prior rights, social contract, or utility • Universal ethical principles

  20. Kohlberg’s Model • People progress through the previous six stages. • Cognitive moral development should be viewed as a continuum. • People’s moral beliefs and behavior change as they gain education and experience. • There are universal values by whichpeople in the highest level of moraldevelopment abide.

  21. Social Needs that Motivate Ethical/Unethical Behavior • Need for achievement • Preference for goals that are well defined and moderately challenging • Need for affiliation • Inclination to work with others in the organization rather than alone • Need for power • Desire to influence and control others

  22. Corporate Culture • Values, beliefs, goals, norms, and rituals shared by members or employees of an organization • What is important? • How do we treat each other? • How do we do things around here? • Conveyed through employeehandbooks, codes of ethics, memos,and ceremonies

  23. Corporate Culture (cont.) • Gives members meaning and offers direction about how to behave and deal with problems • Ethical climate • Part of corporate culture that relates to an organization’s expectations about appropriate conduct and focuses specifically on issues of right and wrong

  24. Significant Others • Superiors, peers, and subordinates in the organization who influence the ethical decision-making process • CEO, who establishes the ethical tone for the organization • Obedience to authority accounts for employees following superior’s directives. The more employees are exposed to unethical activity by co-workers, the more likely they are to also behave unethically.

  25. Opportunity • Conditions that limit barriers or provide rewards: • Financial gain • Recognition • Promotion • Positive feelings from a job well done • Usually relates to employees’ immediate job context • Where they work • With whom they work • The nature of the work

  26. How to Create EthicalRelationships in Business • Listen and learn. • Identify the ethical issue. • Create and analyze options. • Identify the best options. • Explain decision and resolve any differences that may arise.

  27. Creating an Ethical Climate • Top managers, employees, and stakeholders must support the philosophy that all organizations have responsibilities that extend beyond legal and economic obligations. • Members of the organization must be willing to share their values about workplace ethics.

  28. Creating an Ethical Climate (cont.) • Ethical concerns should be incorporated into strategic planning. • Management must develop a mechanism for assessing its progress in making ethical decisions that contribute to social responsibility.