LEGAL AND ETHICAL ISSUES IN BUSINESS

• What is ethics, and why is it important to act according to a code of principles?

• Why is business ethics becoming increasingly important?

• What are corporations doing to improve business ethics?

• Why are corporations interested in fostering good business ethics?

• What approach can you take to ensure ethical decision making?

What is Ethics?

• Moral code

– Set of rules

– Establishes boundaries of generally accepted behavior

– Different rules often have contradictions.

• Morality

– Social conventions about right and wrong

– Widely shared

• Morality may vary by:

– Age

– Cultural group

– Ethnic background

– Religion

– Gender

Definition of Ethics

• Ethics is a set of beliefs about right and wrong behavior

• Ethical behavior conforms to generally accepted social norms.

• Virtues

– Habits that incline people to do what is acceptable.

• Vices

– Habits of unacceptable behavior

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 • Value system

– Scheme of moral values

Ethics in the Business World

• Risk is the product of multiplying the likelihood of an event by the impact of its occurrence.

• Risks associated with inappropriate behavior have increased due to

– Globalization

– Heightened vigilance by

• Employees

• Shareholders

• Regulatory agencies

Why Fostering Good Business Ethics Is Important

• To gain the goodwill of the community

• To create an organization that operates consistently.

• To produce good business

• To protect the organization and its employees from legal action

• To avoid unfavorable publicity

Gaining the Goodwill of the Community

• Basic responsibilities to society

– Declared in formal statement of company’s principles or beliefs.

– Include:

• Making contributions to charitable organizations and nonprofit institutions

• Providing benefits for employees in excess of legal requirements

• Choosing economic opportunities that might be more socially desirable than

profitable.

• Goodwill that socially responsible activities create can make it easier for
corporations to conduct business.

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 • Suppliers and other business partners prefer companies that operate in a fair
and ethical manner.

• Bad ethics can lead to bad business results.

Avoiding Unfavourable Publicity

• Public reputation of company strongly influences.

– Value of its stock

– How consumers regard products and services

– Degree of oversight received from government agencies.

– Amount of support and cooperation received from business partners.

Appointing a Corporate Ethics Officer

• Corporate ethics definition includes:

– Ethical conduct

– Legal compliance

– Corporate social responsibility

• Corporate ethics officer

– Is a senior level manager?

– Provides vision and direction in business conduct.

– Tries to establish an environment that encourages ethical decision making.

• Responsibilities include:

– Complete oversight of the ethics function

– Collecting and analyzing data

– Developing and interpreting ethics policy

– Developing and administering ethics education and training

– Overseeing ethics investigations

Conducting Social Audits

• Social audit

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 – Identifies ethical lapses committed in the past.

– Sets directives for avoiding similar missteps in the future

Including Ethical Criteria in Employee Appraisals

• Some companies base a portion of employee performance evaluations on:

– Treating others fairly and with respect

– Operating effectively in a multicultural environment

– Accepting personal accountability

– Continually developing themselves and others

– Operating openly and honestly with suppliers, customers, and other employees

When Good Ethics Result in Short-Term Losses

• Operating ethically does not always guarantee business success.

• Organizations that operate outside the United States

– Deal with a “business as usual” climate

– Are placed at a significant competitive disadvantage.

• Hope good ethics will prove to be good business in the long term.

Creating an Ethical Work Environment

• Good employees sometimes make bad ethical choices.

• May be encouraged to do “whatever it takes” to get the job done.

• Employees must have a knowledgeable and potent resource available to discuss perceived
unethical practices.

Professional Codes of Ethics

• A professional code of ethics states the principles and core values that are essential to the work
of a particular occupational group.

• Main parts:

– Outlines what the professional organization aspires to become.

– Lists rules and principles by which members of the organization are expected to abide.

• Benefits for individual, profession, and society

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 – Improves ethical decision making.

– Promotes high standards of practice and ethical behavior

– Enhances trust and respect from the public.

– Provides an evaluation benchmark

How Management Can Affect Employees’ Ethical Behaviour

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Manager’s Checklist ON Ethical Issues

Ethical Decision Making

• Get the facts!

• Identify stakeholders and their positions.

• Consider the consequences of a decision.

• Weigh various guidelines and principles.

• Develop and evaluate options.

• Review a decision.

• Evaluate the results of a decision.

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Summary on ethics

• Ethics is a set of beliefs about right and wrong behaviour.

• Ethics in business is becoming more important because the risks associated with inappropriate
behavior have grown.

• Corporations want to protect themselves and their employees from legal action.

• 7-step approach to ethical decision making

• Trends contributing to the risk of using information technology unethically include:

• Growth of the Internet

• Ability to capture and store vast amounts of personal data online.

• Greater reliance on information systems

Legals Issues in Business (When is a practice legal or illegal?)

• Registration of your business with government authorities and professional bodies or business
associations
• Obtaining necessary Licenses to operate and use of licensed software.
• Abiding by the legal framework of countries you conduct business.
• Distinguishing Between a Bribe and a Gift

• Certification - Indicates a professional possesses a particular set of skills, knowledge, or abilities

in the opinion of a certifying organization.
• Intellectual Property
o Term used to describe works of the mind.
o Distinct and “owned” or created by a person or group.
o Key Intellectual Property Issues
▪ Plagiarism
▪ Reverse engineering (not always illegal)

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 ▪ Open-source code
▪ Competitive intelligence (not always illegal)
▪ Cybersquatting
▪

• Copyright law

o Protects authored works.

o Grant’s creators of original works the right to

▪ Distribute

▪ Display

▪ Perform

▪ Reproduce work.

▪ Prepare derivative works based upon the work.

▪ Author may grant exclusive right to others.

o Types of work that can be copyrighted.

▪ Architecture

▪ Art

▪ Audiovisual works

▪ Choreography

▪ Drama

▪ Graphics

▪ Literature

▪ Motion pictures

▪ Music

▪ Pantomimes

▪ Pictures

▪ Sculptures

▪ Sound recordings

▪ Other intellectual works

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 o

• Patent laws

o Protect inventions.

o Grant of property rights to inventors

o Permits an owner to exclude the public from making, using, or selling the protected
invention.

o Allows legal action against violators.

o Prevents independent creation.

o Extends only to the United States and its territories and possessions.

• Trade secret laws

o Help safeguard business information critical to an organization’s success.

o Represents something of economic value.

o Requires an effort or cost to develop.

o Some degree of uniqueness or novelty

o Generally unknown to the public and Kept confidential.

• Trademark law

o Trademark’s owner has the right to prevent others from using the same mark.

▪ Or confusingly similar mark

• Cyber squatters

o Registered domain names for famous trademarks or company names

o Hopes the trademark’s owner would buy the domain name for a large sum of money

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