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Business Ethics Chapter 7-10

Terms in this set (67)

A good corporate culture is measured by:
A demonstration by the board and upper management to strong controls through their communications and actions,
A good corporate culture is measured by:
Encouragement for employees to have hands on involvement in the internal control system,
A good corporate culture is measured by:
Empowerment of employees to report policy exceptions anonymously.
A good corporate culture is measured by:
The expectation of employees to be "in the communication loop" through corrective actions and other communications.
The problem with measurement of corporate culture:
Is the emphasis on measurement of risk, not ethics.
There are three common elements of corporate culture:
1) culture is shared among individuals belonging to a group or society,
(2) culture is formed over a long time, and
(3) culture is relatively stable.
Corporate Culture
Is as associated with success or failure as it is with goodwill.
Corporate Culture
Has an impact on the ethical decision making process of those in business.
2 dimensions are used to describe an organization's corporate culture:
(1) concern for people
(2) concern for performance.
Four basic organizational cultures:
(1) Apathetic Culture
(2) Caring Culture
(3) Exacting Culture
(4) Integrative Culture
Cultural Audit
An assessment of the organization's values that is conducted by outside consultants but may be performed internally as well.
Ethical culture
Is an important component of corporate culture.
Culture is an important factor in ethical decision making in an organization.
If a company's sole focus is profit:
Then stakeholders' values will suffer.
If the organization values ethical behavior:
It will reward it.
An organization's failure to monitor or manage its culture:
May foster unethical behavior.
Competitive orientation may result:
A less ethical corporate culture.
Apathetic Culture
Minimal concern for either people or performance; individuals focus on their own self-interests.
Caring Culture
High concern for people but minimal concern for performance.
Exacting Culture
Little concern for people but high concern for performance.
Integrative Culture
Combines high concern for people and performance.
The Problem with this approach:
Lack of long term focus on values and integrity.
Values Based Ethical Culture:
Relies upon an explicit mission statement that defines the firm as well as how customers and employees should be treated.
Differential Association
People learn ethical or unethical behavior when interacting with others. "You are only as good as the company you keep."
Associating with others, along with the opportunity to act unethical:
Major influences on ethical decision making.
Differential association:
Influences ethical decision making, and superiors have a strong influence on the ethics of their subordinates. Studies have shown that employees, especially young managers, go along with their superiors' moral judgments.
Whistle Blowing
Conflict occurs when employees believe that they know the right course of action but their work group or company promotes a different or unethical decision. Employees in that instance may decide to follow their own values and refuse to participate in the unethical behavior. If they conclude they cannot discuss it they may go outside the organization and become whistle blowers.
Whistle Blowing
Exposing wrongful conduct to outsiders. The term can also be used to describe internal reporting of misconduct to management.
All have whistle blowing protections:
Sarbanes-Oxley, the Corporate Fraud and Criminal Fraud Accountability Act, and the Federal Sentencing Guidelines
Two main factors lead to employees not reporting misconduct:
(1) perceived lack of corrective action
(2) fear of retaliation.
Reward Power
Refers to a person's ability to influence the behavior of others by offering something desirable. ("carrot dangling") In the short run, it is not effective as coercive power.
Coercive Power
The opposite of reward power; relies on fear to change behavior.It has been found to be more effective in changing behavior in the short run than the long run. A counterbalance.
Relationships under this power break down over time.
Legitimate Power
Stems from the belief that a certain person has the right to exert influence and others have an obligation to accept it. Titles and positions of authority that organizations bestow on individuals appeal to this traditional view of power.
Staunch loyalty to authority figures can be seen in corporations that have strong, charismatic leaders with centralized structures.
Expert Power
Derived from a person's knowledge; stems from a superior's credibility with subordinates. Credibility and expert power is positively related to the number of years a person has worked in a firm or industry.
May cause ethical problems when it is used to manipulate others or to gain unfair advantage.
Referent Power
May exist when one person perceives that his or her goals or objectives are similar to another's objectives and goals.
The second person may attempt to exert influence on the other person to take actions that will lead both to achieve their objectives.
Some sort of empathy must exist between the two individuals for this to work.
Motivating Ethical Behavior
A leader's ability to motivate subordinates plays a key role in maintaining an ethical organization.
Centralized
Decision making authority is concentrated in the hands of top-level managers and little authority is delegated to lower levels.
Centralized Organizations
Responsibility rests with top level managers.
High risk decisions and whose lower level managers are not highly skilled in decision making.
Centralized Organizations
Because of their top down approach, and the distance between employee and decision maker, centralized organizational structures can lead to unethical acts.
(2) Decentralized Organizations
Decision making authority is delegated as far down the chain of command as possible.
Very few formal rules, and coordination and control are usually informal and personal.
Unethical behavior
Is possible in either a centralized or decentralized organization.
Formal Groups
As an assembly of individuals that has an organized structure accepted explicitly by the group.
Work Groups and Teams
Are used to subdivide duties within a functional area of the company.
Informal Groups
Two or more individuals with a common interest but without organizational structure.
Ethics Audits
A systematic evaluation of an organization's ethics program to determine its effectiveness.
Benefits of Ethics Auditing
Stakeholders and working relationships with stakeholders.
Verification:
The process of verifying the results of the ethics audit should involve standard procedures that control the reliability and validity of the information.
Ethics Audit Report
Reports should be formal and should be addressed to relevant internal parties (e.g, upper management and the board of directors) and, if approved, to external stakeholders.

The report should include the purpose of the audit, the methods used, the role of the auditor, and any guidelines followed by the auditor.
The report is more meaningful if it is integrated with other company information such as financial reports.
Global Business
Business transactions across national boundaries.
Bimodal Wealth Distribution
Occurs when the middle class shrinks, resulting in highly concentrated wealth and large numbers of poor. This can result in instability in a nation!
Framing Effect
The way something is presented to a consumer can affect his/her choice.
Global Common Values
Values that are shared across most cultures that are derived from major religions.
Global Common Values
Examples:
Integrity, family and community unity, equality, honesty.
Country Cultural Values
Values that are specific to groups, sects, regions, or countries that express actions, behavior and intent.
The self-reference criterion
Unconscious reference to one's own cultural values,experiences, and knowledge.
Cultural relativism
Which is the concept that morality varies from one culture to another.
Dumping
The business practice of charging high prices in the home country and lower prices in foreign markets at low prices (often below cost).
Human Rights
As inherent dignity with equal and inalienable rights as the foundation for freedom, justice, and peace in the world.
Freedom of Religion and Privacy
Two ethical issues that are dealt with differently in a variety of countries!
Health Care
Ethical Issue - Is it a right or a privilege or both?
Labor
Many people no longer work in their homelands, so how should they be treated? Should they be treated as citizens of their own country or as a multinational employee?
Global Ethical Issues in Labor
Gender Pay equality, executive pay, forced labor (ex. Unocal) and child labor.
Sustainable Development
Achieving human goals for development while preserving the earth's resources.
World Trade Organization ("WTO"):
Established in 1995 to administer and/or facilitate global trade agreements and deal with tariffs for goods.
MNCs
Represent the highest level of international business commitment throughout the world.
Ethical Problem
Situations with MNCs whereby only a small fraction of the ultimate sale price of natural and human resources comes back to the host country!
Ethical Issue with MNCs
Exploitation of labor markets of host countries and inadequate wages. Companies in host countries argue the most productive workers in their countries go to work for MNCs, leaving them with lower skilled and lower producing workers.
Ethical Issue with MNCs
Unfair competition and negotiation of lower tax rates.
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