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Chapter 2

Contemporary Issues in Business


Ethics
Understanding Business Ethics
Stanwick and Stanwick
1st Edition
Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Ethical Thoughts
Ethical Decision-making isnt an option
today. Its an obligation in business, in
education, in government, in our daily
lives.
William C. Butcher Retired Chairman of
Chase Manhattan Corporation

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Bono Searches for a Tax Rate


Promogroup helps individuals and companies
with high incomes to shelter the tax exposure of
that income.
Hosts an impressive list of clients Mick Jagger,
Keith Richards, Charlie Watts, Elvis Presleys
estate, and Bono
Bono is known for his stance on global causes
becoming known as an activist for poverty,
climate change, AIDS awareness

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Bono Searches for a Tax Rate


Establishes a a Dutch holding company for its
clients the revenue from the royalties of any
other intellectual property sent to the holding
company is exempt from taxes.
A vast majority of the clients who set up these
holding companies have as their sole motivation
to achieve either tax minimization or tax
avoidance
Only viable for artists who are not US Citizens

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Bono Searches for a Tax Rate


Concern is that these tax shelters used by Bono
are completely inconsistent with Bonos stance
on helping developing countries mover from
poverty conditions
Argument is that Bono cannot demand that
resources be given to antipoverty campaigns
while he is not giving the resources to the
governments so they can implement those
campaigns

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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History of Business Ethics


Ethical Climates are created by individual
judgments
Knowing the corporate stand on certain
aspects can contribute to managements
creation of a strong ethical culture
Ethics began with Aristotle, Socrates, and
Plato

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History of Business Ethics


1960s:
Period of social unrest
Employees and employers began to have a
real adversarial relationship
Environment, drug use among employees
began to be dilemmas for employers
Birth of CSR movement corporations began
to establish codes of ethics

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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History of Business Ethics


1970s:
US economy suffered a recession
Unemployment rate rose dramatically
Scandals among defense contractors and
corporations that led to a sense of value centered
ethics
Human rights and environmental issues became
important
Companies began to cover-up their wrongdoings
rather than deal with the issues

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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History of Business Ethics


1980s:
Financial fraud surfaced through the savings
and loan scandal
Loyalty to employers decreased dramatically
Ethics Resource Center helped establish the
first business ethics office at General
Dynamics in 1985

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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History of Business Ethics


1990s:
An outgrowth of global opportunities for
companies
Unsafe work practices, child labor issues,
environmental issues began gaining
prominence
Financial mismanagement

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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History of Business Ethics


2000s:
Financial mismanagement problems,
intellectual property theft, cybercrime,
personal privacy surfaced
Passage of Sarbanes Oxley Act of 2002
attempted to control the financial
mismanagement issues eroding the integrity
and confidence of corporations and their
stakeholders.

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Integrity
A firm adherence to a code of especially moral
or artistic values
Organizational commitment generates an
attitude where employees can be passionate
about their efforts and the overall commitment of
the firm
Based on employees continuous efforts to
balance their personal values with the
requirements to perform their jobs effectively
throughout their careers

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Integrity Heuristics
Publicity test based on whether an individual would be
comfortable if his or her actions were publicized in a
newspaper or on television
Trusted friend test would an individual be comfortable
telling his best friend about his actions
Reciprocity test treat others as you would like to be
treated
Universality test whether the individual would consider
it acceptable behavior if someone else did the same
action
Obituary test would you want to look back in hindsight
and be comfortable with the decision

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Behaviors of High Integrity


Possess Humility
Maintain Concern for the
Greater Good
Be Truthful
Fulfill Commitments
Strive for Fairness
Take Responsibility
Have Respect for the
Individual

Celebrate the Good


Fortune of Others
Develop Others
Reproach Unjust Acts
Be forgiving
Extend Self for Others
How People Develop
Ethical Behavior

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Ethics is not..

Religion or religious piety


Law
A game
A matter of feeling good or right

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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The Ethical Cycle


Examine:
Moral problem statement
Problem analysis
Options for actions
Ethical judgment
Reflection
Morally acceptable action

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Using Ethical Decisions to Build


Character
The Ethical Cycle helps employees understand
who they are from an ethical perspective.
Must consider defining moments these
moments do not have a correct response, but
help form, reveal and test
Who am I?
Who are we?
Who is the company?

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Ethical Managers are Able to Make


Their Own Rules
Ethical decisions have to consider and
balance the interests of all vested
stakeholders in the company
Business organizations must contemplate
how their actions impact overall society
A realistic evaluation of the ethical conduct
of a firm is not what is said in the code of
ethics, but what is done in everyday
actions
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Is Everyone Unethical?

Underlying assumption: people are always


aware of their own behavior
Unintentional unethical behavior can take
place, in part, due to the illusion of objectivity
Four avenues to develop unintentional
unethical behavior:
1.
2.
3.
4.

Implicit prejudice
In group favoritism
Claiming credit for others actions
Conflicts of interest

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Benefits for Paying Attention to


Ethical Issues in the Workplace
Attention to business ethics has substantially improved
society
Ethics programs help maintain a moral course in
turbulent times
Ethics programs cultivate strong teamwork and
productivity
Ethics programs support employee growth and meaning
Ethics programs are an insurance program; they help
ensure that policies are legal
Ethics programs help manage values associated with
quality management, strategic planning, and diversity
management
Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Benefits for Paying Attention to


Ethical Issues in the Workplace
Ethics programs promote a strong public image
Overall benefits: legitimizing managerial
actions, strengthening the coherence and
balance of the companys culture, improving
trust in relationships, supporting consistency,
cultivating sensitivity to the impact of the
companys messages
Formal attention to ethics in the workplace is the
right thing to do
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Knowing Right from Wrong


Ethics training programs help employees
make decisions in difficult situations
A group of faceless stakeholders is
encountered in the sense that the
persons responsible for making the ethical
decisions in global corporations may know
many many stakeholder groups affected
by ethical/unethical decisions
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Rationalizing Unethical Behaviors


Ethical Tests to use for a business decision:
Transparency refers to deciding if one accepts
having others know what one has decided
Effect- refers to determining who the decision affects
or impacts
Fairness refers to determining if the decision would
be considered fair by those affected by it

Discretionary actions (those you cannot change)


and nondiscretionary actions (laws and
regulations, public and employee safety,
truthfulness of records and statements)
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Texas Instruments Ethics Test


1.
2.
3.
4.
5.
6.
7.

Is the action legal?


Does it comply with our values?
If you do it, will you feel bad?
How will it look in the newspaper?
If you know its wrong, dont do it.
If youre not sure, ask.
Keep asking until you get an answer.
Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Monitoring Reputations
Professionals may feel that a small
violations is all right and will begin to justify
all ethical lapses, no matter the size.
A companys reputation in the marketplace
can be thought of as a competitive
advantage if it is a positive reputation
Once tarnished, it is difficult to restore.

Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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Striving for Ethical Behavior What


Makes People Make Bad Decisions?
They do not feel loyal to the organization.
They feel pressure to succeed, as defined by
the organization.
They feel entitled.
They believe that the rules do not apply to them.
They do not view the act as illegal.
They feel pressured by their peers.
They lack resources.

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Reasons Managers Make Sure Their


Firms Operate in an Ethical Manner
1. They are protecting the brand and
reputation.
2. It is the right thing to do.
3. It is used to establish customer trust and
loyalty.
4. It increases the level of investor
confidence.
5. It helps in developing public acceptance
and recognition.
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Top Five Reasons that Drive


Business Ethics - 2005
1.
2.
3.
4.
5.

Corporate Scandals
Marketplace Competition
Demands by Investors
Pressure from Customers
Globalization

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Top Five Reasons that Will Drive


Business Ethics - 2010
1.
2.
3.
4.
5.

Globalization
Marketplace Competition
Pressure from Customers
Corporate Scandals
Demands by Investors

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Questions for Thought


1. Do you personally think ethics is an
important topic to discuss in business
schools? Explain.
2. Examine they myths given in Table 2-1.
Do you agree that these are all valid
myths? Why or why not?
3. Assuming everyone makes mistakes in
life, are ethical mistakes considered the
worst mistakes to make? Explain.
Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall

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All rights reserved. No part of this publication


may be reproduced, stored in a retrieval system,
or transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording,
or otherwise, without the prior written permission
of the publisher. Printed in the United States of
America.
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