ETHICS

• Ethics

  A conception of right and wrong conduct. Tells us whether our behavior is moral or immoral. Deals with fundamental human relationships—how we think and behave toward others and want them to think and behave toward us
• Ethical Principles


  Guides to moral behavior
• Sources of Ethics


  • Religious beliefs
  • Family institution
  • Education
  • Community/neighborhood
  • Media influences
  • Intuition
• Ethical Relativism


  Concept which holds that ethical behavior should be defined by various periods in time in history, a society's traditions, the special circumstances of the moment, or personal opinion. No universal ethical standards. Depends on how you frame the issue and which lens you look through
• Laws


  Society's formal written rules about what constitutes right and wrong conduct in various spheres of life. Ethical concepts are more complex than written rules of law
• Business Ethics


  The application of general ethical perspectives to business behavior
• Since 2000 about half of all employees surveyed reported ongoing observations of unethical behavior at work. In 2020, the most common unethical practice was conflict of interest. Other unethical practices included abusive behavior, safety and health violations, and corruption. Globally, 29 percent of employees reported such pressure
• Practical Reasons for Business to be Ethical

  • To enhance business performance
  • To comply with legal requirements
  • To prevent or minimize harm
  • To meet demands of business stakeholders
  • To promote personal morality
• Research shows


  Strong link between ethics and financial performance
• Overriding principle that business should "do no harm"
• Consumers are more inclined to purchase the products

  When businesses signal a long-term concern for all stakeholders
• Knowing one works in a supportive ethical climate contributes to a sense of psychological security
• Four Primary Reasons for Ethical Problems in Business

  • Personal gain and selfish interest
  • Competitive pressure on profits
  • Conflicts of interest
  • Cross-cultural contradictions
• Egotistical mentality


  Selfish interest versus others' interests
• Bottom-line mentality


  Firm's interest versus others' interests
• Favoritism mentality


  Multiple obligations or loyalties
• Ethnocentric mentality


  Company's interests versus diverse cultural traditions and values
• New CEOs tend to be more self-interested and short-term focused
• Recent study: today's managers place slightly more importance on moral values > competency values
• Spirituality in the Workplace


  Personal belief in a supreme being, religious organization, power of nature or some other life-guiding force. Organizations accommodate their employees to meet their spiritual and religious needs
• Stages of Moral Development

  • Stage 1: Ego-centered
  • Stage 2: Reward seeking
  • Stage 3: Group-centered
  • Stage 4: Society- and law-centered
  • Stage 5: Principle-centered
  • Stage 6: Principle-centered
• Most managers make decisions based on criteria in levels three and four. Senior leaders often demonstrate higher stages of moral reasoning than typical managers
• Virtue Ethics


  Character traits that a good person should possess, theorizing that moral values will direct the person toward good behavior
• List of Moral Values Across Time

  • Plato and Aristotle: Courage, Self-control, Generosity, etc.
  • St. Thomas Aquinas: Faith, Hope, Charity, etc.
  • Benjamin Franklin: Cleanliness, Silence, Industry, etc.
  • Robert Solomon: Trust, Toughness
• Utilitarian reasoning


  Overall amount of good that can be produced by an action or a decision. Compare benefits and costs of a decision, policy or action
• Human Rights


  Person or group is entitled to something or to be treated in a certain way. Examples are right to life, safety, and due process
• Justice


  Benefits and burdens are distributed equally, according to some accepted rule. Social Justice: society's income and wealth are distributed among the people in fair proportions
• Applying Ethical Reasoning to Business Activities


  1. Do all of the above ethics approaches (virtues, utility, rights, justice) lead to the same decision?

  2. If all the answers are "Yes", the proposed action is ethical

  3. If all the answers are "No", the action is not ethical and needs to be reconsidered

  4. If "Yes" and "No" answers are mixed, you must decide which takes priority
• Moral Intensity


  The extent of the issue-related moral imperative in a situation
• Moral Intensity: Five Dimensions

  • Magnitude of consequences
  • Proximity
  • Social consensus
  • Probability of effect
  • Temporal immediacy
• Corporate Culture


  A blend of ideas, customs, traditional practices, company values, and shared meanings to help define normal behavior for everyone who works in a company
• Ethical Climate


  The unspoken understanding among employees of what is and is not acceptable behavior, based on the expected standards and norms
• Components of Ethical Climates

  • Egoism (self-centered approach)
  • Benevolence (concern for-others approach)
  • Principle (integrity approach)
• Business Ethics Across Organizational Functions

  • Accounting Ethics
  • Financial Ethics
  • Marketing Ethics
  • Information Technology Ethics
  • Supply Chain Ethics
• Accounting Ethics


  Financial records must be audited by a certified professional accounting firm. Requirements include responsibilities, public interest, integrity, objectivity and independence, due care. Conflict of interest between self-interest and interests of others
• Financial Ethics


  Responsibilities to manage the firm's assets and raising capital. Self-regulation as the best path for ethical compliance
• Marketing Ethics


  Issues emphasize consumer privacy, honesty and transparency in advertising
• Information Technology Ethics


  Ethical challenges involve invasions of privacy, collection and storage of personal/business information, confidentiality of electronic communication, copyright protection
• Professional accounting firm


  Requirements of the accounting function
• Requirements of the accounting function

  • Responsibilities
  • Public interest
  • Integrity
  • Objectivity and independence
  • Due care