BBM 416 - Business Ethics - Introductory Notes

MOI UNIVERSITY
BBM 416: Business Ethics

Second Semester: 2022/2023
Topic 1: Business Ethics
DR. JAPHETH K. KOGEI

japheth1@gmail.com
Tel: 0717-179-646
Objectives of the Topic
2
Defining Ethics
Ethical Behavior and Good Business
Business Values
Principles of Ethical Decision Making
Using Decision Making Skills for Ethical Decisions
Codes of Ethics
Principles for Business
Defining Ethics
3
Ethics is not a code of conduct in writing — it is a

spirit of trust and an attitude of honesty and fairness
that finds its source in the heart of people.
Ethics has nothing to do with rules, but everything

to do with attitude.
Defining Ethics
Study of right and wrong, good and bad, moral

judgment
The principles of conduct governing an individual or

group; concerns for what is right or wrong, good or bad
The study of fundamental principles that defines values

and determines moral duty and obligation.
Wednesday, April 5, 2023

Japheth K. Kogei: japheth1@gmail.com
4
Key questions in ethics include:
What is it right (or wrong) to do?
Do the intentions behind an action determine its

goodness or does the actual outcome of the action
matter more?
Are there any universal ethical rules? (discuss)

5
Ethics is NOT:
Ethics is not the same as feelings.


Ethics is not religion.
Ethics is not following the law.


Ethics is not following culturally accepted norms.
Ethics is not science.

6
Ethical Terms and Concepts
7
A company’s code of ethics sets out its standards for

an ethical organisation as well as individual conduct,
and consists of two essential components:
 A statement of values, e.g. a mission statement or any short
document (e.g. a credo) setting out a company’s core values,
and
 A code of conduct, i.e. a longer, compliance-oriented
document setting out more specific principles and rules
regarding best practices, addressing issues such as conflicts
of interests and acceptance of gifts and the like.
Ethical Behavior Is Good for Business
Ethical business practices include ensuring that the

highest legal and moral standards are observed in your
relationships with the people in your business
community. This includes the customer.
A reputation for ethical decisions builds trust in a

business, among business associates and suppliers.
The Managers is a role model for employees. If your

behavior includes lying to customers, taking money
out of the cash register, or taking home some of the
inventory or supplies, you cannot be surprised if your
employees follow your lead.
8
Why Behave Ethically?
Managers should behave ethically to avoid harming

others.
 Managers are responsible for protecting and nurturing
resources in their charge.
Unethical managers run the risk for loss of
reputation.
 This is a valuable asset to any manager!
 Reputation is critical to long term management success.
 All stakeholders are judged by reputation.

9
Individual and Organizational Ethics
 Values
 Basic beliefs about what one should or should not do, and what
is and is not important
 An individual’s basic convictions of what is right and wrong
 Leadership, culture, incentive/compensation plans help shape

individual ethical behavior

10
Individual and Organizational Ethics
11
 Organizational Culture
 Represent the values and behaviors common to the organization
 Tend to develop over long periods of time
 Ethics codes and policies provide signals of top management’s

desires in organizational culture
04/05/23
Business Values
1. Morality
To act in a moral way, i.e. to do what is good and right, involving
self—restraint and discipline, in terms of accepted social norms.
2. Honesty
To talk straight and to walk one’s talk - no lies.
3. Integrity
No double standards.
4. Equity
To act in a fair way, i.e. there is no unjustified enrichment at the
expense of another. No acceptance of bribes.

12
Business Values
13
5. Equality
Individuals and businesses should not be faced with unfair
discrimination, but rather with equal opportunity to compete and to
collaborate with their peers in all forms of social and business activities.
6. Excellence
To establish standards, goals and targets, and to recognize and reward
achievement and results in relation to these standards. To ensure quality.
7. Enterprise
The opportunity to express ones initiatives, innovations and ideas and
entrepreneurial activities in an encouraging environment.
Business Values cnt'd..
14
8. Justice
To reward and compensate fairly for positive results and to
reprimand and penalize for negative and destructive results.
9. Independence
Individuals and businesses have the right to determine their own
personal ambitions and goals within the framework of society’s
standards.
10. Authority
To act within predetermined and agreed levels of authority.
11. Responsibility
To act within the appropriate requirement of care and due
diligence, e.g. no accounting irregularities. A responsible citizen
obeys the law and behaves in an upright fashion.
15
12. Accountability
To account for one’s actions, to accurately record one’s actions
and to account to the shareholders responsibly for one’s actions.
13. Transparency of information
‘To report one’s actions, performance and results in an
understandable way to shareholders and stakeholders, and to
make appropriate information available to shareholders and
stakeholders.
14. Caring
Respect for the individual.
15. Keeping one’s promise
One’s word is one’s bond.
16
16. Loyalty
Reliable and trustworthy commitment to employees and persons
with whom one has dealings.
17. Fairness
Treating people properly and not taking advantage of them.
18. Respect for others
Respect in relationships between superior and subordinate, and
between the business and its suppliers and customers.
Principles of Ethical Decision Making
17
Principle of Long-term Principle of Utilitarian

Self-interest Benefits
Principle of Personal Principle of Individual

Virtue Rights
Principle of Religious Principle of Distributive

Injunctions Justice
Principle of Government
Requirements
Japheth K. Kogei: japheth1@gmail.com Wednesday, April 5, 2023

Principle of Long-Term Self-interest
People should never take any action that is not in

their or their organization’s long-term self-interest
The key is long-term, not short-term interests

18
Principle of Personal Virtue
People should never do anything that is not honest,

open, and truthful, and which they would not be
glad to see reported in the newspapers or on TV

19
Principle of Religious Injunctions
People should never take an action that is unkind or

that harms a sense of community, such as the
positive feelings that come from working together to
accomplish a commonly accepted goal.

20
Principle of Government Requirements
The law represents the minimal moral standards of

society
People should never take any action that violates the

law.

21
Principle of Utilitarian Benefits
People should never take any action that does not

result in greater good for society
People should do whatever creates the greatest good

for the greatest number

22
Principle of Individual Rights
People should never take any action that infringes

on others’ agreed-on rights
Consider those affected by a decision and try to

find a solution that does not sacrifice the rights of
any of the affected persons

23
Principle of Distributive Justice
People should never take any action that harms the

least among us in some way e.g. the poor, the
uneducated, and the unemployed

24
Views of Ethical Decision-Making
Decisions are Decision makers

Decisions made concerned with seek to impose
solely on the basis respecting and pro- and enforce rules
of outcomes or tecting basic rights fairly and
consequences of individuals impartially

25
A Basic Model of Ethical Decision Making
Identify
26 Identify
the the
problem constituents
Make Analyze Diagnose

your your the
choice options situation
Act
Japheth K. Kogei: japheth1@gmail.com Wednesday, April 5, 2023
 1. Identify the problem. What makes it an ethical
problem? Think in terms of rights, obligations, fairness,
relationships, and integrity. How would you define the
problem if you stood on the other side of the fence?
 2. Identify the constituents. Who has been hurt? Who

could be hurt? Who could be helped? Are they willing
players, or are they victims? Can you negotiate with them?
 3. Diagnose the situation. How did it happen in the first

place? What could have prevented it? Is it going to get
worse or better? Can the damage now be undone?
27
 4. Analyze your options. Imagine the range of possibilities.

Limit yourself to the two or three most manageable. What are the
likely outcomes of each? What are the likely costs? Look to the
company mission statement or code of ethics for guidance.
 5. Make your choice. What is your intention in making this

decision? How does it compare with the probable results? Can
you discuss the problem with the affected parties before you act?
Could you disclose without qualm your decision to your boss, the
CEO, the board of directors, your family or society as a whole?
 6. Act. Do what you have to do. Don't be afraid to admit errors.

Be as bold in confronting a problem as you were in causing it.
28
Practical Steps to Ethical Decision Making
Selecting and Hiring Ethical Employees
Codes of Ethics
Ethics Training
Ethical Climate

29
Selecting and Hiring Ethical Employees
Increase ethical behaviors by hiring more ethical

employees
Testing for ethics

 Overt integrity tests
 estimate employee honesty by directly asking job applicants what
they think or feel about theft or about punishment of unethical
behaviors.
 Personality-based integrity tests

 indirectly estimate employee honesty by measuring
psychological traits such as dependability and conscientiousness.
30
Codes of Ethics
Corporate statements on ethics
The relationship between codes and behavior

depend on:
 companies communicating the codes to others both within
and outside the company
 companies developing practical ethical standards and

procedures specific to the company’s line of business

31
Reasons for Code of Ethics
Increases public confidence in business.
Less potential for government regulation due

to self-control activities.
Provides a guideline for acceptable conduct.
Provides for a response for unethical

behavior.
32
Why Have a Code of Ethics?
33
To define accepted/acceptable behaviours;
To promote high standards of performance;
 To provide a benchmark for directors and staff
to use for self-evaluation;
To establish a framework for behaviour and
responsibilities;
 As a vehicle for occupational identity, and
As a mark of occupational maturity.
Steps in Developing a Code of Ethics
34
Step 1: Select the top five to ten ethical values that reflect the priorities
of the corporation, e.g. honesty, transparency, equality, integrity,
morality, etc.
Step 2: Establish the organization's rules to manage ethics, e.g. start with a list
of dos and don’ts. Define the organization's operating values and
behaviours, e.g. excellence, enterprise, authority, accountability, equity,
etc
Step 3: Establish an ethics committee to manage and monitor the process.
Step 4: Undertake training to clarify ethical and operational values and

enhance ethical awareness by employees.
Steps in Developing a Code of Ethics
35
Step 5: Establish an ongoing communication channel for the code, for

use by employees. Have an ethics help-line.
Step 6: Enforce the code consistently and uniformly.
Step 7: Measure and audit the effectiveness of the ethics programme.
Step 8: Review and refine the code, where necessary, to enhance its
effectiveness and improve its moral standards.
Step 9: The code should be launched and initiated publicly by the board
of directors and senior management.
Ethics Training
Develop employee awareness about ethics
Achieve credibility with employees
Teach employees a practical model of ethical

decision making

36
Establishing An Ethical Climate
The first step in establishing an ethical climate is for

managers to act ethically themselves.
 Managers who decline to accept lavish gifts from company
suppliers; who only use the company phone, fax, and copier for
business and not personal use; or who keep their promises to
employees, suppliers, and customers encourage others to
believe that ethical behavior is normal and acceptable.
A second step in establishing an ethical climate is for

top management to be active in the company ethics
program.

37
Establishing An Ethical Climate
A third step is to put in place a reporting system

that encourages managers and employees to report
potential ethics violations.
 Whistleblowing, that is, reporting others’ ethics violations,
is a difficult step for most people to take. Potential
whistleblowers often fear that they will be punished rather
than the ethics violators.
The final step in developing an ethical climate is

for management to fairly and consistently punish
those who violate the company’s code of ethics.

38
Ethical Climate
Japheth K. Kogei: japheth1@gmail.com 39 Wednesday, April 5, 2023

PRINCIPLES FOR BUSINESS
 A principle is a rule; a guiding conduct norm.
 Laws and market forces are necessary but insufficient guides

for conduct.
 Responsibility for the policies and actions of business and

respect for the dignity and interests of its stakeholders are
fundamental.
 Shared values, including a commitment to shared prosperity,

are as important for a global community as for communities of
smaller scale.

40
41
For these reasons, and because business can be a

powerful agent of positive social change, some
researchers have offered a set of principles as a
foundation for dialogue and action by business
leaders in search of business responsibility.
The principles are rooted in two basic ethical

ideals: Kyosei and human dignity.
04/05/23
 The Japanese concept of Kyosei means living and working

together for the common good, enabling cooperation and
mutual prosperity to coexist with health and fair competition.
 "Human Dignity" refers to the sacredness or value of each

person as an end, not simply as a means to the fulfillment of
others' purposes or even majority prescription.
 The principles are structured into general and specific. The

seven general principles seek to clarify the spirit of kyosei and
human dignity while the six specific stakeholder principles are
concerned with practical application.

42
Principle 1. The Responsibilities of Business:
Beyond Shareholders Toward Stakeholders
 The value of a business to society is the wealth and
employment it creates and the marketable products and
services it provides to consumers at a reasonable price
commensurate with quality.
 To create such value, a business must maintain its own

economic health and viability, but survival is not a sufficient
goal.
 Businesses have a role to play in improving the lives of all

their customers, employees, and shareholders by sharing
with them the wealth they have created.
 Suppliers and competitors as well should expect businesses

to honor their obligations in a spirit of honesty and fairness.
43
Principle 2. The Economic and Social Impact of Business: Toward
Innovation, Justice, and World Community
 Businesses established in foreign countries to develop,
produce, or sell should also contribute to the social
advancement of these countries by creating productive
employment and helping raise the purchasing power of their
citizens.
 Businesses also should contribute to human rights, education,

welfare, and vitalization of the countries in which they
operate.
 Businesses should contribute to economic and social

development not only in the countries in which they operate,
but also in the world community at large. Through effective
and prudent use of resources, free and fair competition, and
emphasis upon innovation in technology, production
methods, marketing, and communications. Wednesday, April 5, 2023
44
Principle 3. Business Behavior: Beyond the Letter
of the Law Toward a Spirit of Trust
While accepting the legitimacy of trade secrets,

businesses should recognize that sincerity, candor,
truthfulness, the keeping of promises, and
transparency contribute not only to their own
credibility and stability but also to the smoothness
and efficiency of business transactions, particularly
on the international level.

45
Principle 4. Respect for Rules
To avoid trade frictions and to promote freer trade,

equal conditions for competition, and fair and
equitable treatment for all participants, businesses
should respect international and domestic rules.
In addition, they should recognize that some

behavior, although legal, may still have adverse
consequences.

46
Principle 5. Support for Multilateral Trade
Businesses should support the multilateral trade

systems of the GATT/World Trade Organization
and similar international agreements.
They should cooperate in efforts to promote the

progressive and judicious liberalization of trade,
and to relax those domestic measures that
unreasonably hinder global commerce, while
giving due respect to national policy objectives.

47
Principle 6. Respect for the Environment
A business should protect and, where possible,

improve the environment, promote sustainable
development, and prevent the wasteful use of
natural resources.

48
Principle 7. Avoidance of Illicit Operations
A business should not participate in or condone

bribery, money laundering, or other corrupt
practices; indeed, it should seek cooperation with
others to eliminate them.
It should not trade in arms or other materials used

for terrorist activities, drug traffic, or organized
crime.

49
Principle 8. Customers
In treating all customers with dignity, we have a

responsibility to:
Provide our customers with the highest quality
products and services consistent with this
requirement;
Treat our customers fairly in all aspects of our

business transactions, including a high level of
service and remedies for their dissatisfaction;

50
Principle 8. Customers
51
Make every effort to ensure that the health and

safety of our customers, as well as the quality of their
environment, will be sustained or enhanced by our
products and services;
Assure respect for human dignity in products

offered, marketing, and advertising; and
Respect the integrity of the culture of our customers.
04/05/23
Principle 9. Employees
In the dignity of every employee and in taking

Employee interests seriously, we have a
responsibility to:
Provide jobs and compensation that improve
workers' living conditions;
Provide working conditions that respect each

employee's health and dignity;
Be honest in communications with employees and

open in sharing information, limited only by legal
and competitive restraints;
52
53
Engage in good-faith negotiations when conflict

arises;
Avoid discriminatory practices and guarantee

equal treatment and opportunity in areas such as
gender, race, and religion;
Promote in the business itself the employment of

differently-abled people in places of work where
they can be genuinely useful;
04/05/23
Listen to and, where possible, act on employee
suggestions, ideas, requests, and complaints;
Protect employees from avoidable injury and illness
in the workplace;
Encourage and assist employees to develop relevant

and transferable skills and knowledge; and
Be sensitive to serious unemployment problems

frequently associated with business decisions, and
work with governments, employee groups, other
agencies, and each other in addressing these
dislocations.
54
Principle 10. Owners / Investors
In honoring the trust our investors place in us, we

have a responsibility to:
Apply professional and diligent management in
order to secure a fair and competitive return on our
owners' investment, and disclose relevant
information to owners/investors subject only to
legal requirements and competitive restraints;
Disclose relevant information to owners'/investors'

investment;

55
Principle 10. Owners / Investors
56
Conserve, protect, and increase the owners'/

investors' assets; and
Respect owners'/investors' requests, suggestions,

complaints, and formal resolutions.
04/05/23
Principle 11. Suppliers
Our relationship with suppliers and subcontractors

must be based on mutual respect.
We have a responsibility to:

Seek fairness and truthfulness in all of our
activities,;
Ensure that our business activities are free from
coercion and unnecessary litigation;
Foster long-term stability in the supplier
relationship in return for value, quality,
competitiveness, and reliability;
57
Principle 11. Suppliers
58
Share information with suppliers and integrate

them into our planning processes;
Pay suppliers on time and in accordance with

agreed terms of trade;
Seek, encourage, and prefer suppliers and

subcontractors whose employment practices
respect human dignity.
04/05/23
Principle 12. Competitors
We have a responsibility to:

 Promote competitive behavior that is socially and
environmentally beneficial and demonstrates mutual respect
among competitors;
 Refrain from either seeking or participating in questionable

payments or favors to foster open markets for trade and
investment;
 Secure advantages;
 Respect both tangible and intellectual property rights; and
 Refuse to acquire commercial information by dishonest or

unethical means, such as industrial espionage.
59
Principle 13. Communities
We believe that as global corporate citizens, we can

contribute to such forces of reform and human rights as
are at work in the communities in which we operate.
We therefore have a responsibility in those communities

to:
Respect human rights and democratic institutions, and
promote them whenever practicable;
Recognize governments' legitimate obligation to the

society at large and support public policies and practices
that promote human development through harmonious
relations between business and other segments of society;
60
Support peace, security, diversity, and social

integration;
Respect the integrity of local cultures; and
Be a good corporate citizen through charitable

donations, education and cultural contributions,
and employee participation in community and civic
affairs

61
62
Collaborate with those forces in the community
dedicated to
 raising standards of health,
 education,
 workplace safety, and
 economic well-being;
Promote and stimulate sustainable development

and play a leading role in preserving and enhancing
the physical environment and conserving the earth's
resources;
04/05/23
Questions?
END

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MOI UNIVERSITY

BBM 416: Business Ethics

DR. JAPHETH K. KOGEI

Ethics is not a code of conduct in writing — it is a

Ethics has nothing to do with rules, but everything

Study of right and wrong, good and bad, moral

The principles of conduct governing an individual or

The study of fundamental principles that defines values

Wednesday, April 5, 2023

What is it right (or wrong) to do?

Do the intentions behind an action determine its

Are there any universal ethical rules? (discuss)

Wednesday, April 5, 2023

Ethics is not the same as feelings.

Ethics is not following the law.

Ethics is not science.

A company’s code of ethics sets out its standards for

Ethical business practices include ensuring that the

A reputation for ethical decisions builds trust in a

The Managers is a role model for employees. If your

Managers should behave ethically to avoid harming

Wednesday, April 5, 2023

 An individual’s basic convictions of what is right and wrong

 Leadership, culture, incentive/compensation plans help shape

Wednesday, April 5, 2023

 Tend to develop over long periods of time

 Ethics codes and policies provide signals of top management’s

Wednesday, April 5, 2023

Principle of Long-term Principle of Utilitarian

Principle of Personal Principle of Individual

Principle of Religious Principle of Distributive

Japheth K. Kogei: japheth1@gmail.com Wednesday, April 5, 2023

People should never take any action that is not in

The key is long-term, not short-term interests

Wednesday, April 5, 2023

People should never do anything that is not honest,

Wednesday, April 5, 2023

People should never take an action that is unkind or

Wednesday, April 5, 2023

The law represents the minimal moral standards of

People should never take any action that violates the

Wednesday, April 5, 2023

People should never take any action that does not

People should do whatever creates the greatest good

Wednesday, April 5, 2023

People should never take any action that infringes

Consider those affected by a decision and try to

Wednesday, April 5, 2023

People should never take any action that harms the

Wednesday, April 5, 2023

Decisions are Decision makers

Wednesday, April 5, 2023

Make Analyze Diagnose

 2. Identify the constituents. Who has been hurt? Who

 3. Diagnose the situation. How did it happen in the first

 4. Analyze your options. Imagine the range of possibilities.

 5. Make your choice. What is your intention in making this

 6. Act. Do what you have to do. Don't be afraid to admit errors.

Selecting and Hiring Ethical Employees

Wednesday, April 5, 2023

Increase ethical behaviors by hiring more ethical

Testing for ethics