POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

TOPIC 1

BUSINESS ETHICS AND ETHICAL DECISION MAKING

Members:

Diones, Monica

Eala, Charis

Marfil, Princes Gave

Mendoza, Laarnie Ann

Miñoza, Ronilyn

Rodriguez, Richel

Rullan, Johanna

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Topical Overview

 The Nature of Business Ethics

 Ethics

 Business Ethics

 Principles

 Values

 Characteristics of Business Ethics

 Foundation of Business Ethics

 Ethical Issues in Business

 Ethical Issue

 Types of Ethical Issues in Business

 How to avoid Ethical Issues in Business

 Stanford Financial, Mini-mid-off, and Innocent Investor Sample

 Understanding the Ethical Decision-making Process

 Individual Factors

 Organizational Relationship

 Opportunity

Objectives:

 To define & describe the importance of business ethics.

 To understand the diverse and complex nature of existing and emerging ethical issues.

 To discuss the individual factors that influence ethical or unethical decisions.

 To explore the effect of organizational relationships on ethical decision making.

 To evaluate the role of opportunity in ethical or unethical decisions.

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THE NATURE OF BUSINESS ETHICS

 ETHICS - relates to choices & judgments about acceptable standards of conduct that guide

the behavior of individuals and groups.

 BUSINESS ETHICS - comprises the principles & standards that guide the behavior of

individuals and groups in the world of business. It relates to rules, standards, and moral

principles of what is right or wrong in specific situations.

 PRINCIPLES – specific & pervasive boundaries for behavior that is universal & absolute.

Ex. Freedom of speech, principles of justice, & equal rights to civil liberties.

 VALUES – are used to develop norms that are socially enforced.

Ex. Integrity, Accountability, Trust

Characteristics of Business Ethics

1. Code of Conduct

2. Based on Moral and Social Values

3. Gives Protection to Social Groups

4. Provides Basic Framework

5. Voluntary

It is vital to recognize that business ethics goes beyond legal issues. Ethical business

decisions foster trust in business relationships and trust is a key factor in improving productivity and

achieving success in most organizations.

Some businesspeople choose to behave ethically because of enlightened self-interest or the

expectation that “ethics pays.” They want to act responsibly and assume that the public and customers

will reward the company for its ethical actions.

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FOUNDATIONS OF BUSINESS ETHICS

Because all individuals and groups within a company may not have embraced the same set of

values, there is always the possibility of ethical conflict. The legal ramifications of some issues and

situations may be obvious, but questionable decisions and actions more often result in disputes that

must be resolved through some type of negotiation or even litigation. When ethical disputes wind up

in court, the costs and distractions associated with litigation can be devastating to a business.

“Codifying ethical standards into meaningful policies that spell out what is and is not

acceptable gives businesspeople an opportunity to reduce the probability of behavior that could create

legal problems.”

ETHICAL ISSUES IN BUSINESS

ETHICAL ISSUE – 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. There are also issues related to business decisions that harm consumers, (products that

cause obesity), or that encourage socially unacceptable behavior in children (alcohol consumption).

Types of Ethical Issues in Business

1. Discrimination

Discrimination is not just unethical; in many cases, it is also illegal. There are statutes

to protect employees from discrimination based on age, gender, race, religion, disability, and

more. Nonetheless, the gender and race pay gaps show that discrimination is still rampant.

Other common instances of discrimination include firing employees when they reach a

certain age or giving fewer promotions to people of ethnic minorities.

2. Harassment

The second major ethical issue businesses face is harassment, which is often related

to racism or sexism. This can come in the form of verbal abuse, sexual abuse, teasing, racial

slurs, or bullying. Harassment can come from anyone in the company, as well as from

customers. In particular, it is an ethical issue for the business if a supervisor is aware of

harassment from a client and takes no action to prevent it.

In addition to causing a toxic workplace, harassment can cause employees to leave

the company prematurely — a second reason some businesses lack diversity. Harassment can

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have a long-term impact on employees: psychologically, in terms of earnings, and even

impacting a person’s entire career path.

3. Unethical Accounting

Publicly traded companies may engage in unethical accounting to appear more

profitable than they actually are. In other cases, an accountant or bookkeeper may change

records to skim off the top.

4. Health and Safety

Another type of ethical issue that is often protected by law is health and safety.

Companies may decide to cut corners to reduce costs or perform tasks faster. As well as

injuries, failing to take workers’ safety into account can lead to psychosocial risks (like job

insecurity or lack of autonomy), which can cause work-related stress.

5. Abuse of Leadership Authority

Abuse of power often manifests as harassment or discrimination. However, those in a

leadership role can also use their authority to pressure employees to skip over some aspects

of proper procedure to save time (potentially putting the employee at risk), punish workers

who are unable to meet unreasonable goals, or ask for inappropriate favors.

In addition, abuse of authority can extend beyond the workforce. Managers can use

their position to change reports, give themselves credit for the work of a subordinate, misuse

expenses, and accept gifts from suppliers or clients.

6. Nepotism and Favoritism

Nepotism is when a company hires someone for being a family member. Favoritism

occurs when a manager treats an employee better than other workers for personal reasons.

Not only are nepotism and favoritism unfair, but they are also disheartening to employees.

Workers often find they have to work much harder to receive a promotion or other rewards.

7. Privacy

Employees have recently found that the distinction between work life and personal

life has become less clear. This is mainly due to the advances in technology. For one thing,

employers may punish for posts on social media, particularly if they complain about work

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conditions or the company as a whole. Employers may even fire workers who post

controversial statements that go against company values.

Another ethical issue surrounds the use of devices belonging to the company.

Employers can now monitor all worker activity on laptops and cellphones. Whereas this is

supposed to check that employees are sticking to work-related activities during the business

day, some employers take it further, tracking keystrokes and reading emails. The question is

where to draw the line between monitoring and spying.

8. Corporate Espionage

The opposite to the above can also happen workers can misuse company data. An

employee may steal intellectual property or provide a competitor with information about a

client. Usually, this is for monetary purposes, but it can also help an employee secure a

position at another firm.

How to Avoid Ethical Issues in Business

 Create Company Policies

Make sure employees read company policies when they start working at your

business. Include both a privacy policy and a social media policy. The first should tell

workers what computer activity and other information you will be able to access; the second

should lay out how you expect employees to behave publicly on social media.

 Monitor Only Pertinent Information on Laptops and Other Devices

It may be necessary to track employee activity to some extent (particularly if you are

concerned that workers are spending too much work time on personal activities — which, in

itself, can be an unethical behavior). However, you do not want to go overboard and create a

culture of distrust.

 Provide Ongoing Training

This should cover aspects like harassment prevention. It is worthwhile seeking

outside support for this from a reputable agency or professional, as low-quality training can

even make the problem worse.

 Require Employees to Sign a Nondisclosure Agreement

Employees should sign a nondisclosure agreement before they start working with any

sensitive information. To create an effective deterrent, specify that violating agreements will

result in severe penalties.

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 Create a Meritocracy

Strive to create a meritocracy where you reward employees according to

performance.

 Take an Active Role in Daily Activities

Become as involved as you are able in the day-to-day activities at your company.

This could help you detect harassment in its early stages and prevent theft, whether monetary

or of company materials.

 Double Check Your Books on a Regular Basis

By checking your books regularly, you will notice if anyone is stealing from you. In

the case you do detect theft, you will need to decide whether firing the employee is enough or

if it’s also necessary to report the crime to the law enforcement.

STANFORD FINANCIAL, MINI-MID-OFF, and INNOCENT INVESTOR SAMPLE

Stanford Financial

 Founded by Allen Stanford

 Headquarters: Houston, Texas, United States

 Ceased Operation: February 17, 2009

 Privately held international group of financial services companies

 A federal judge ruled that R. Allen Stanford, accused of defrauding thousands of investors in

a $7 billion Ponzi scheme.

Mini-mid-off

 The fielding position on the offside closest to the bowler

 Fielder in this position

INNOCENT INVESTOR

 Analyze the best investments and help your money work for you.

 Helps you to protect from the negative effects of information around management fraud and

dishonesty coming from companies in which they made investments in.

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 No matter how Complicated Finance & Stock Market is, "Innocent Investor" will help you to

Understand Everything about it.

 Innocent investors fight a $40 million Ponzi scheme. Multiple investors unknowingly

invested in what was later discovered to be a Ponzi scheme, which captured over $40 million

in investors' funds and was featured in Episode 41 of CNBC's "American Greed."

UNDERSTANDING THE ETHICAL DECISION-MAKING PROCESS

E th ica l o r U n e th ica l

Individual
Factors
D e cisio n

Organization
Relationship

Opportunity

I. INDIVIDUAL FACTORS

“If today’s students are tomorrow’s leaders, there is likely to be a correlation between

acceptable behavior today and tomorrow, adding to the argument that the leaders of today must be

prepared for the ethical risks associated with this downward trend.”

A. Moral Philosophies

- Principles, or rules, that individuals apply in deciding what is right or wrong.

Q: What is the difference between moral philosophies and business ethics?

A: Moral philosophies are person-specific, whereas business ethics is based on decisions in groups or

those made when carrying out tasks to meet business objectives.

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Classification of Moral Philosophy

1. Consequentialism – A class of moral philosophy that considers a decision right or

acceptable if it accomplishes95 a desired result (pleasure, knowledge, career growth, the

realization of self-interest, or utility)

Two Important Consequentialist Philosophies:

Egoism - a philosophy that defines right or acceptable conduct in terms of the

consequences for the individual.

Utilitarianism - concerned with seeking the greatest good for the greatest number of

people.

2. Ethical Formalism – A class of moral philosophy that focuses on the rights of

individuals and on the intentions associated with a particular behavior rather than on its

consequences.

3. Justice Theory – Relates to evaluation of fairness or the disposition to deal with

perceived injustices of others.

Three Types of Justice:

1. Distributive Justice – evaluates the outcomes or results of business

relationships.

2. Procedural Justice – assesses the processes and activities employed to

produce an outcome or results. It is associated with group cohesiveness and

helping others’ behaviors.

3. Interactional Justice – evaluates the communication processes used in the

business relationship.

Two Possible Reasons of Using Different Moral Philosophies:

a. In the business arena, some goals and pressures for success differs from the goals and

pressures in a person’s Life outside of work.

b. The corporate culture where they work.

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B. Stage of Moral Development

1. The stage of punishment and obedience . An individual defines right as literal obedience

to rule sand authority and responds to rules in terms of the physical power of those who

determine such rules.

2. The stage of individual instrumental purpose & exchange. An individual defines

right as that which serves his or her own needs.

3. The stage of mutual interpersonal expectation, relationships, & conformity. An

individual emphasizes others over himself or herself.

4. The stage of social justice and conscience maintenance. A person in this stage

determines what is right by considering duty to society as well as to other specific people.

5. The stage of prior rights, social contract, or utility. An individual is concerned with

upholding the basic rights, values, and legal contracts of society.

6. The stage of universal ethical principles. An individual believes that there are

inalienable rights that are universal in nature & consequence. (Ex. Justice &equality)

II. ORGANIZATIONAL RELATIONSHIPS

“The culture of the organization, as well as superiors, peers, and subordinates, can have a

significant impact on the ethical decision-making process.”

Organizational Culture

- Also known as “Corporate Culture.”

- A set of values, norms, and artifacts shared by members or employees of an organization.

- It answers the questions: “What is important?”; “How do we treat each other?”; and “How do

we do things around here?”

Ethical Climate

- Part of corporate culture that relates to organization’s expectations about appropriate conduct

that focuses specifically on issues of right and wrong.

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Significant Others

- Include superiors, peers, and subordinates in the organization who influence the ethical

decision-making process.

Most experts agree that the chief executive officer establishes the ethical tone for the entire firm.

Lower-level managers obtain their cues from top managers, and they in turn impose some of their

personal values on the company.

III. OPPORTUNITY

- A set of conditions that limit barriers or provide rewards-financial gain, recognition,

promotion, or simply the good feeling from a job well done.

Activity Questions:

1. Define business ethics in your own words and explain its importance to an organization.

2. What are the major ethical issues that business faces today? Discuss and give possible

solutions to each issue.

3. In the business world, if ethical issues are not resolved, what is going to happen to the

organization? And as an employee, what are the actions you’re going to take to prevent such

unfavorable outcome in your company?

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