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What is ethical behavior and why is it important to business? The ethical value proposition Laws, policies and ethics Evidence that good ethics means good business Is ethical behavior improving? Teaching ethics—the Ethics Maturity Model
Conducting one’s life in complete accord with a firmly held set of values and principles
These principles may be derived from religious beliefs, philosophical understanding, etc. Application should be in all areas of one’s life: personal, family, business, social, etc. “Integrity” is the consistent application of ethical behavior.
Foundations of Ethical Behavior Treat others as you would be treated Respect Honesty Trust .
Is There a Universal Ethical Standard? Yes—In Principle Are you comfortable with a world with your standards? Christian principle: The Golden Rule “Do unto others as you would have them do unto you.” Luke 6:29-38 “Thou shalt love thy neighbor as thyself.” Luke 10:27 .
Taught in All Cultures Judaism: Islam: What you hate. Confucius: What you do not want done to yourself. Aristotle: We should behave to our friends as we wish our friends to behave to us. Plato: May I do to others as I would that they should do unto me. do not do to others. do not do to anyone. Hinduism: Do nothing to thy neighbor which thou wouldst not have him do to thee. Sikhism: Treat others as you would be treated yourself. No one of you is a believer until he loves for his brother what he loves for himself. Buddhism: Hurt not others with that which pains thyself. TREAT PEOPLE THE WAY YOU WANT THEM TO TREAT YOU .
etc! Duplication Party B .Bad Ethics Increases Transaction Costs Security Regulators Lawyers Delays Party A Trade Testing Interest Etc.
Costs of collecting taxes 6. Some marketing/advertising costs 10.) 3. consumer protection agencies 11. Lack of investment from outside investors. Costs for institutions like better business bureaus. fences. Some costs of bankruptcy 12. Physical protection (locks. etc. . A substantial portion of attorney and court system costs 4. A substantial portion of accounting/auditing costs 8. tourists 1. vaults. Some welfare costs 5. electronic security. Wasted/misused investment funds 7. A large fraction of costs for regulators and examiners 9.Societal Costs of Unethical Behavior Law enforcement and other security personnel 2.
Loss of employees—especially the more ethical 5. Costs of bankruptcy 1. Increased costs of security 3. difficulty in raising funds. Loss of reputation 6. Loss of investor confidence (lower stock price. . Higher costs of debt 8. Increased legal costs 7. Regulatory intrusion 10.Business Costs of Unethical Behavior Loss of physical assets 2. Loss of customers—especially those who value ethics 4. problems with lenders) 9.
Covey’s preface to Business with Integrity. xx) . p.What is the Cost of Lack of Integrity in the US? Employee fraud Time theft Industrial espionage Counterfeiting Employee dishonesty Identity theft $400 B $230 B $200 B $200 B $120 B $ 50 B (Quoted in Stephen R.
Levels of Constraints on Behavior Ethical Behavior Tied to Set of Values Professional Standards Legal Requirements .
Ethical Issues Relating to Business Honesty—communication and behavior consistent with facts Disclosure of information Promises/commitments Laws and professional standards Representation of others like shareholders (applies to board members) Unfair competition Refrain from bribes and excessive gifts (that sway judgment) Avoid quid pro quo transaction (a more or less equal exchange) Comply with “anti-trust” laws (these relate to pricing. monopolistic practices) .
sex.Ethical Issues Relating to Business Just compensation Respect intellectual property (product piracy) Treat employees fairly Respecting rights of others Treat others with fairness and respect regardless of age. and subordinates Respect the community you operate in by paying fair share of economic costs you create Respect others and future generations by treating the environment well . women. religion. ethnic group. etc. especially children.. economic status.
not one individual) Improves competitive nature of a country’s economy Fair competition .Why Ethical Behavior Adds Value Better information Trust from investors Lower costs for audits. controls. investigations Better allocation of resources Customers will be more loyal (RC Willey example) Lower costs from suppliers (automotive company example) Attracting and retaining better employees Lowers cost of business in economy Leads to better decision-making (do what’s best for firm.
entrepreneurial economy Attracts and retains better employees Draws upon talents of wider set of individuals Develops long-term respect from the community (Godfrey study) Maintains the environment for long-term value to all (Costa Rica) Rights of others It’s the right thing to do! .Why Ethical Behavior Adds Value Just compensation Creates a more vibrant.
Why is Dishonesty Increasing? Modeling Labeling Honesty .
business. entertainment “heroes” Good models are rare Home….Why Is Dishonesty Increasing? Bad Modeling/Lack of Good Modeling Lack of Positive Labeling Makes up our news— more explicit than ever Focus of TV/movies Dishonest “leaders” Sports.average family spends 10 hours less time together a week than 20 years ago Vocabulary of kindergarten children Schools Churches .
” Once you’re in jail and you start feeling the animosity the other prisoners have toward white-collar guys. “you’re no different than us. ZZZZ Best .” I somehow felt we were different and I started noticing every white collar guy I did talk to began every sentence with: “all I did was.Confession of Fraudulent Executive Even when put in jail.” “you use other words. I didn’t feel like a “criminal. where they say to you.” Even the word “embezzlement” is a nice word…they said “you’re a thief. that’s what I do to” and that hit me like a ton of bricks.” “you’re just a thief. Mike Morze. you lie to people and take their money.
Personal Integrity.Can Ethical Values be Taught? Level 1: The Foundation Personal Ethical Understanding Right/wrong. Respect for Others . Honesty. Fairness.
fair play.) can help Difficult to “back fill” in adulthood . respect for rights of others. honesty.Personal Ethical Understanding Concepts of right and wrong. etc. schools. personal integrity Best learned in the home at an early age— and follow-up is needed throughout life Institutions (churches.
Misleading Advertising.Level 2: Application to Business Application of Ethics to Business Situations Fraudulent Practices. Honesty. Fairness. Personal Integrity. Respect for Others . Unfairness Personal Ethical Understanding Right/wrong.
training .Application of Ethics to Business Situations Fraudulent practices. unfairness Can be taught in management education and organizations—provided students have a personal understanding of ethics Taught by modeling (cases and personal example are helpful) Can be reinforced by policies. codes of ethics. misleading advertising.
Application of Ethics to Business Situations Businesses can teach through proper modeling: “Companies also have to further strengthen ethics management and social responsibility activities to improve their public image’’ Korean Commerce-Industry-Energy Minister Lee Hee-beom .
Level 3: Ethical Courage Ethical Courage Willingness to Pay the Price for Ethics Application of Ethics to Business Situations Fraudulent Practices. Fairness. Unfairness Personal Ethical Understanding Right/wrong. Respect for Others . Personal Integrity. Misleading Advertising. Honesty.
it helps to have “practiced” ethical behavior over many years—especially in small things .Ethical Courage It is not sufficient to simply understand ethical principles One must have the courage to pay a price for being ethical Examples can be helpful—case studies showing people willing to stand up for ethical principles Again.
Respect for Others . Fairness. Unfairness Personal Ethical Understanding Right/wrong. Honesty.Level 4: Ethical Leadership Ethical Leadership Helping Others to be Ethical Ethical Courage Willingness to Pay the Price for Ethics Application of Ethics to Business Situations Fraudulent Practices. Personal Integrity. Misleading Advertising.
study of successful organizations Includes Developing an organizational climate that fosters ethical behavior Structuring policies that encourages ethics Behaving ethically while facing the pressures of leadership . problem solving.Ethical Leadership The ability and willingness to encourage others to behave ethically Can be taught through cases.
The Importance of Ethical Leadership Honest Employees Will be Honest Always Swing Group Could Go Either Way Dishonest Employees Policies Won’t Help Much Ethical Leadership will significantly impact an organization since the vast majority. in this view. can be influenced to behave ethically. .
Importance of Ethical Leadership Honest Employees Will be Honest Always Swing Group Could Go Either Way Dishonest Employees Policies Won’t Help Much Strong Ethical Leadership—induces the middle group to behave as if they were the honest employees. .
Importance of Ethical Leadership Dishonest Employees Honest Employees Will be Honest Always Policies Won’t Help Much Swing Group Could Go Either Way Weak Ethical Leadership—permits the middle group to behave as if they were the dishonest employees. .
Which Way Will Your Organization Swing? .
“Good Ethics Means Good Business” .
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