BUSINESS ETHICS

Members: Ngo Thu Dung

Pham Van Anh
Pham Thi Hong Nhung
 Outline

I. Theory of business ethics

II. Aspects of business ethics
III. Business ethics in global economy
& in Vietnam.
IV. Case study
 Definitions

Theory
Terms
 What is ethics?
• A branch of philosophy involving systematizing, defending, and
recommending concepts of right and wrong behavior.
• Deal with fundamental questions
“What is fair?”
“What is just?”
“What is the right thing to do in this situation?”
• Involves an active process of applying values, which may range
from religious principles to customs and traditions.
 The relationship between
Law and Ethics
• The law is an expression of the ethical beliefs of
our society.
• Law and ethics are not the same thing.
 An action might be unethical, yet not
necessarily illegal.
 Similarly, just because an act is illegal does
not necessarily mean it is immoral
 ETHICS
__________________________________
 Rules of conduct
 Comes from people’s awareness of
what is right and wrong
 Moral codes which every person must  Are enforced by governments to its
conform to
 Does not carry any punishment to
anyone who violates it
 Comes from within a person’s moral
values
http://www.differencebetween.net
LAW
__________________________________
 Rules developed by governments in
order to provide balance in society and
protection to its citizens.
people.
 Codifications of ethics meant to
regulate society.
 Will punish anyone who happens to
violate it.
 Are made with ethics as a guiding
principle.
What is business ethics?
• Principles and standards which guide behavior in
the world of business
• “Right” or “wrong”, “acceptable” or
“unacceptable” behavior within the organizations
• Determined by key stakeholders
 The history of business ethics
• Business ethical norms reflect the norms of each historical
period.
• The term 'business ethics' came into common use in the
United States in the early 1970s
• The Society for Business Ethics was started in 1980
• Firms started highlighting their ethical stature in the late
1980s and early 1990s, possibly trying to distance themselves
from the business scandals of the day, such as the savings and
loan crisis
 Business ethics and Corporate Social
Responsibility
• Corporate social responsibility (CSR), is

the idea that business has a duty to serve

society in general as well as the financial
interests of stockholders.
• Business ethics: Principles and standards

which guide behavior in the world of business

Are these two different disciplines?
• BE - origins in behavioral and philosophical
studies; more individually focused

• CSR - origins in strategic management theory;

more firm-wide focus
BUT
Both fields require an understanding and
acceptance of social/moral values, and apply
these to business situations
Carroll’s model of corporate social responsibility

Philanthropic
Responsibilities

Ethical
Responsibilities

Source: Carroll (1991)

Legal
Responsibilities

Economic
Responsibilities
 Economic responsibilities
• Business organizations were created as economic
entities provide goods and services to societal members
• Consumers: Its principal role was produce good and
services that they needed and wanted with high quality,
affordable cost, delivery,….
• Employees: providing safe and healthy working
environment, promotions, adopting fair labor policies,
employee privacy,…
• Firm’s owners: preserve and develop the values and
properties,…
 Legal responsibilities
• The firm’s obligations to comply with the laws
that regulate business activities
• There are 5 aspects:
 competitive adjustment
 Protect consumers’ rights
 Protect environment
 Safety and justice
 Prevent the illegal acts
 Ethical responsibilities
• the company’s notion of right and proper
business behavior.
• Economic and legal responsibilities fairness
and justice
• Ethical responsibilities activities expected by
firms or society, not codified in law
• Expressed in firm’s
missions and strategies
 Philanthropic responsibilities
• Encompassing those actions that are in
response to society’s expectation: actively
engage in acts to promote human welfare or
goodwill
• Discretionary or voluntary on the part of
businesses even though the society wants
every firm to have this responsibilities
 Role of business ethics in corporate
governance
Consumers’
and
employees’
trust

The
Business employees’ Profit
ethics loyalty

Consumers’
satisfaction

Firm’s image
II. Aspects of business ethics

Reviewing function of
enterprises

Reviewing relations with

the stakeholders
1. Reviewing function of enterprises

Enterprises

Human
Audit -
Resources Marketing
Finance
Management
 A.Ethics in HRM
1. In recruitment, appointment and employment

+ Discriminate: race, gender, religion, age…

not always right.

+ Respect private and personal rights

 apply for necessary situations

+ Exploit labor – brains

2. In performance appraisal

3. In protecting employees:

+ Ensure labor safety

+ Sexual harassment in work – place

 HP - Hire detective tracking employees
- Mrs. Patricia Dunn(President of Hewlett-Packard)
official resigned after scandals about hiring detectives
tracking employees.(9/2006)
- Some HP’s secret reports were come out to the press. To
investigate employees who leaked information, company
hired detectives recording conversations between
journalists and members in board of directors.
Reviewing this situation in ethics side, US’s experts didn’t
accept. Under the pressure of public, Mrs. Dunn resigned.
http://vnexpress.net/
 B. Ethics in Marketing
Marketing and consumers’ protection movement
“Guideline for consumers’ protection” of UN
1. Satisfied basic needs
2. Be safe
3. Provided essential info.
4. Selected
Rights 5. Listened and shared ideas
6. Compensated
7. Educated about consumption
8. Had a sustainable and healthy envir.
http://www.hccwto.org.vn/vn/view/news-details/huong-dan-cua-lien-hop-quoc-ve-bao-ve-nguoi-tieu-dung.html
 B. Ethics in Marketing
Amoral marketing behaviors
Amoral adverts Amoral sales Amoral tricks
with rivals

-Engaging consumers -Fraud sales -Fixed cost

to try products -Fraud packages and -Unfair divided market

- Taking advantages of labels. -Devaluation

mistaken belief about

products.
-Advertising with
equivocal message
Multi Level Marketing
 C. Ethics in Audit and Finance
• Unfair competition

• Under the pretence of auditors

• Complex rules and laws

2. Reviewing relations with stakeholders

Enterprise
s

Customer
s

Owners Rivals

Employee
s
 III. BE in global economy and in Vietnam
1. a. Corruption and bribe in global economy
Worldwide Corruption Perceptions ranking of countries(2011)

Rank Country Rank Country

1 New Zealand 172 Burundi, Venezuela, Equatorial Guinea

2 Denmark 175 Iraq, Haiti

3 Finland 177 Sudan, Turkmenistan, Uzbekistan

4 Sweden 180 Afghanistan, Myanmar

5 Singapore 182 North Korea, Somalia

http://en.wikipedia.org/wiki/Corruption_Perceptions_Index
 1. a.Corruption and bribe in global economy
In many cultures, bribe is accepted as a biz behavior.
(Mexico – la mordida, South Africa – dash, Middle East –
baksheesh, Germany – schimengeld,…)
Main Money for Commissions for Distribution in Cash spending
bribes work more agents politics
favourably

Example In Italia, Northrop(US) In 1971, the United Brands

bustarella(an spent $30million Petroleum spent
envelop with for consultancies, a Corporation of $2.5million via
some money) part of this money Persian Gulf accouts in Swiss
helps goods is for govt. officials spent $3million banks for
delivery more to have prior for South Korea Honduran
effectively and chance in buying Democratic Party officials to
easily. military planes… because this party decrease taxes
was threatened. for bananas.
 1. b.Corruption and bribe in VN
- According to Transparency International:Vietnam ranked
112rd country in the world perceiving corruption.
- Published by VCCI (4/4/2012):
+ 69% of bizs considered to be victims of corruption
+ Each enterprise spends 1-5% for bribe ( biz registration
procedures, land taxes, custom, social insurance…)
+ 50% of bizs says“must have good relationship with banks
and give money to be slippery for credit officials” can get
supported capital from govt.
+ Biz considers bribe is default in transactions, even it can
be called “bribe culture”.
http://en.wikipedia.org/wiki/Corruption_Perceptions_Index
http://moj.gov.vn/ct/tintuc/lists/thongtinkhac/view_detail.aspx?ItemID=5266
 2. a. Discrimination in global economy
In the world, discrimination ( religion and gender)
exists everywhere.
1. In England, staffs of East India are paid lower
salary than other ones.
2. In Japan, women rarely have opportunities to
promote a higher position.
3. In Germany, Turkish workers aren’t granted as
German citizens, though they belongs to 2rd
German generation.
 2. a. Discrimination in global economy

- In America:
Discrimination is a serious problem in the
United States between whites and African
American.
President Obama.
 2. b. Discrimination in VN
In February – 2012, Vietnam has a successful
dialogue on the Convention against Racial
Discrimination.

http://baodientu.chinhphu.vn/Home/Viet-Nam-doi-thoai-ve-Cong-uoc-chong-phan-biet-chung-toc/20122/130600.vgp
http://giaoduc.net.vn/NTD-thong-thai/10-nu-doanh-nhan-giau-co-thanh-dat-o-Viet-Nam/122623.gd?i=4
3. Other problems
- Human rights
- Price discrimination
- Environment
- Technology
IV. Case study
 The last supper
by Leonardo da Vinci

The boy who had been chosen as a

model of God
… only after 7 years …
has made ​himself the perfect image
of the most cruel sinner.
 An exemplar of superb ethical behavior

…several decades later…

its reputation in jeopardy

- Clip 1
- Clip 2
- Clip 3
1. The Johnson & Johnson Tylenol Crisis
 The Tylenol Crisis
Q1. How do you think about the seriousness of this
issue? Why?
Q2. What should be the first action of J&J to be
taken first?
Q3. How should the company response to
Poisoned products in the market.
Victims’ families.
The public.
Q4. What should the company do to avoid the
recurrence of the crisis in the future?
 The Tylenol Crisis

Question 1 - The seriousness of this issue

It’s very serious. Because :
– Seven people died after using J&J products.
– The negative influence created by the
media (TV, newspaper, magazines) on the
population was so pervasive that if the
company had buried its head into the sand,
it would have put an end to its business.
 The Tylenol Crisis

Question 2 -The first action

- The first action should be taken is to

immediately alert consumers across the nation,
via the media, not to consume any type of
Tylenol product until the case is determined.

- Additionally, the company should stop the

production and advertising of Tylenol.
 The Tylenol Crisis

Question 3 - Response to poisoned products

- Withdraw all Tylenol capsules from the
store shelves in Chicago and the surrounding
area.
- By withdrawing all Tylenol, even though
there was little chance of discovering more
cyanide laced tablets; Johnson & Johnson
showed that they were not willing to take a
risk with the public's safety, even if it cost
the company millions of dollars.
 The Tylenol Crisis

Question 3 – Response to victims’ families:

- Offer some form of compensation to help
victims of the crisis. Johnson & Johnson
provided the victim's families counseling and
financial assistance even though they were
not responsible for the product tampering.
- Negative feelings by the public against
Johnson & Johnson were lessoned as the
media showed them take positive actions to
help the victim's families.
 The Tylenol Crisis
Question 3 – Response to the public
- Firstly, the company used the media to issue a
national alert to tell the public not to use the
Tylenol product. In the first week of the crisis J & J
established a 1-800 hot line to respond to inquiries
from customers concerning safety of Tylenol.
- Establish a toll-free line for news organizations to
call and receive pre-taped daily messages with
updated statements about the crisis.
- Several major press conferences were held at
corporate headquarters to public the situation.
 The Tylenol Crisis

Question 4 - Avoid the recurrence in the future

- Use the new tamper resistant packaging.

Tylenol became the first product in the industry
to use the new tamper resistant packaging just 6
months after the crisis occurred

- Develop new random inspection procedures

before the shipment of Tylenol to retailers.
 Recent changes
Read the second part in the case study and
answer the following questions:
1. What damages that the company has to
suffer after those issues?

2. What lessons can we draw from J&J’s case?

 Recent changes
1. Damages that the company has to suffer:
Reduce in sales figure and revenue.
Lose customer’s trust.
Somehow ruin the company’s image.
 2. Lessons can we draw from J&J’s case:
Never underestimate the influence of ethics in
doing business.
Although reputation needs a long period of time
to be earned, it can take only one second to lose.