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ethics

Terms in this set (105)

business ethics
Comprises organizational principles, values, and norms that may originate from individuals, organizational statements, or from the legal system that primarily guide individual and group behavior in business.
morals
Refer to a person's personal philosophies about what is right or wrong. personal and singular
principles
Specific and pervasive boundaries for behavior that should not be violated

Human rights, freedom of speech and justice
values
enduring beliefs and ideals that are socially enforced

Teamwork, trust and integrity
values and judgements
_________play a critical role when we make ethical decisions
ethical decisions
occur when accepted rules no longer serve and decision makers must weigh values and reach a judgment
ethics
______is a part of decision making at all levels of work and management

As important as functional areas of business

Questions whether practices are acceptable

There are no universally accepted approaches for resolving issues
reason to study ethics
Having good individual morals is not enough to stop ethical misconduct
reason to study ethics
Ethics training helps provide collective agreement in diverse organizations
reason to study ethics
Business ethics decisions can be complicated
reason to study ethics
Helps to identify ethical issues when they arise and recognize the approaches available to resolve them
protestants and catholics
theological discussions of ethics emerged they were worried about ethics when conducting business
social conciousness
emerged in 1960s

increased anti-business sentiment

jfk's consumers bill of rights: right to safety, right to be informed, to choose and be heard
corporate social responsibility
an organization's obligation to maximize positive impact and minimize negative impact on stakeholders
corporate responsibility issues
Bribery
Deceptive advertising
Price collusion
Product safety
Environment
Defense Industry Initiative on Business Ethics and Conduct (DII)
Foundation for the Federal Sentencing Guidelines for Organizations to come in the 1990's
ethical culture
acceptable behavior as defined by the company and industry

Creates shared values and support for ethical decisions - driven by top management
benefits of business ethics
employee commitment, investor loyalty, customer satisfaction, profits
effective relationships
building ______ is one of the most important areas of business today
stakeholder framework
Helps identify internal and external stakeholders

Helps monitor and respond to needs, values, and expectations of stakeholder groups
corporate governance
The formal system of accountability and control of ethical and socially responsible behavior
stakeholders
Those who have a stake or claim in some aspect of a company's products, operations, markets, industry, and outcomes

Customers
Investors
Employees
Suppliers
Government agencies
Communities
normative, descriptive, instrimental
three approaches to stakeholder theory
normative
Principles and values help identify ethical guidelines that dictate how to treat stakeholders
descriptive
Focuses on actual behavior, addressing decisions and strategies in stakeholder relationships
instrumental
Examines stakeholder relationships and describes outcomes for particular behaviors
primary stakeholders
those whose continued association is absolutely necessary for a firm's survival

Employees, customers, investors, governments, and communities
secondary stakeholders
do not typically engage in transactions with the firm and are not essential to a firm's survival

Media, trade associations, and special interest groups
stakeholder orientation
The degree to which a firm understands and addresses stakeholder demands

Involves activities that facilitate and maintain value with stakeholders

Generation of data about stakeholder groups

Distribution of that information

Responsiveness of the organization as a whole
social responsibility
An organization's obligation to maximize its positive impact on stakeholders and minimize its negative impact
4 levels of social responsibility
Economic
Legal
Ethical
Philanthropic
economic sr
maximize stakeholder wealth
legal sr
abiding all laws and government regulations
ethical sr
following standards of acceptable behavior as judged by stakeholders
philanthropic
giving back to society
corporate citizenship
The extent to which businesses strategically meet their economic, legal, ethical, and philanthropic responsibilities
reputation
is one of an organization's greatest intangible assets with tangible value

Difficult to quantify but very important

A single negative incident can influence an organization's image and reputation instantly and for years afterwards
social issues
social responsibility issues that deals with concerns that affect the welfare of our entire society, associated with the common good
consumer protection issues
social responsibility issues where the company has the responsibility of taking precautions to prevent consumer harm
sustainability issues
social responsibility issues when a businesses can no longer afford to ignore the natural environment as a stakeholder
corporate governance issues
social responsibility issues when research shows corporate governance has a strong positive relationship with social responsibility
shareholder model
Founded in classic economic precepts
Maximizing wealth for investors and owners
stakeholder model
A broader view of the purpose of business
Includes satisfying concerns of primary stakeholders including employees, suppliers, regulators, communities and special interest groups
interlocking directorate
the concept of board members being linked to more than one company
executive compensation
Many boards spend more time discussing compensation than ensuring integrity of financial reporting systems

How closely linked is it to company performance?

Does performance-linked compensation encourage executives to focus on short-term performance at the expense of long-term growth?
recognizing an ethical issue
a problem, situation, or opportunity that requires an individual or group to choose among actions

New ethical issues are emerging constantly

Can be difficult to recognize ethical issues
integrity honesty and fairness
what are the three foundational values?
integrity
Uncompromising adherence to ethical values
One of the most important terms relating to virtue
honesty
Truthfulness or trustworthiness

Telling the truth to the best of your knowledge
dishonesty
A lack of integrity, incomplete disclosure, or an unwillingness to tell the truth
fairness
The quality of being just, equitable, and impartial

equaility, reciprocity, optimization
equality
How wealth or income is distributed
reciprocity
Occurs when an action that has an effect upon another is returned
optimization
The tradeoff between equity and efficiency
ethical issue
a problem, situation, or opportunity that requires an individual or group to chose among several wrong or unethical actions
conflict of interest
Exist when an individual must choose whether to advance his/her personal interests, those of the organization, or some other group

Individuals must separate personal interests from business dealings
bribery
The practice of offering something in order to gain an illicit advantage
active bribery
the person who promises or gives the bribe commits the offense
passive bribery
in offense committed by the official who receives the bribe
facilitation payment
Legal as long as they are small
fraud
Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression
accounting fraud
Misrepresentation of company's financial reports

Dramatic changes in accounting field

Increased competition and pressures to perform can create opportunities for misconduct

Accountants should abide by a strict code of ethics
marketing fraud
process of dishonestly creating, distributing, promoting, and pricing products

Puffery: Exaggerated advertising claims, blustering, and boasting

Can be difficult to distinguish from fraud

Implied falsity: An advertising message that misleads, confuses, or deceives the public

Literally false: Claims can be divided into tests prove (establishment claims) and bald assertions (non-establishment claims)
consumer fraud
When consumers attempt to deceive businesses for personal gain

Price tag switching, item switching, or lying to obtain discounts

Collusion involves an employee who helps a consumer commit fraud

Duplicity involves a consumer duping a store

Guile is associated with a person who uses tricks to obtain an unfair advantage
illegal insider trading
The buying or selling of stocks by insiders who possess material that is not public
legal insider trading
Involves legally buying and selling stock in an insider's own company, but not all the time
intellectual property rights
Involve the legal protection of intellectual properties
Books, movies, software
legal compliance
Government established laws/regulations

Set minimum standards for responsible behavior

Stakeholders demanded laws involving consumer safety and environmental protection

Laws help businesses determine what society believes at a certain time, but laws change

Telling employees to 'obey the law' is meaningless without training in legal risk areas
civil law
defines the rights and duties of individuals and organizations
Individuals (in court) enforce civil laws
criminal law
prohibits specific actions and imposes punishments for breaking the law

State or nation enforces criminal laws
constituational, common, statutory, administrative
four types of criminal law
constitutional law
branch of law dealing with formation, construction, and interpretation of constitutions
common law
Legal system based on custom and court rulings (judicial)
statutory law
Law enacted by Congress, or by state legislatures or local legislative bodies.
administrative law
Law that governments enact to regulate industries, businesses, and professionals.
sarbanes-oxley
Established a system of federal oversight of corporate accounting practices

PCAOB, auditor independance, ceo/cfo personal liability
PCAOB
authority to monitor accounting firms that audit public companies
auditor independence
there are a number of key sarbanes oxley provisions regarding public accounting firms' independence from the publicly traded firms they audit
dodd frank act
Seeks to improve financial regulation, increase oversight, and prevent excessive risk-taking, deceptive practices and lack of oversight

Created new offices: The Office of Financial Research, The Financial Stability Oversight Council, Consumer Financial Protection Bureau (CFPB)

Instituted a whistle-blower bounty program
strategic philanthropy
the synergistic and mutually beneficial use of core competencies and resources to deal with stakeholders, benefit the company and society
federal sentencing guidelines
federal standards used by judges in determining mandatory sentence terms for those convicted of federal crimes
ethical decision making framework
issue intensity, individual factors, organizational factors, opportunity
issue intensity
The perceived relevance or importance of an ethical issue to the individual, work group, and/or organization

Reflects the ethical sensitivity of the individual and/or work group

Triggers the ethical decision making process
moral intensity
Relates to a person's perception of social pressure and the harm his/her decision will have on others
individual factors
People base ethical decisions on their own values & principles of right or wrong

Values: learned through socialization; are subjective; vary across cultures

Good personal values: decrease unethical behavior, increase positive work behavior
factors influence ethical behavior
affect ethical decision making:

gender: (women are more ethical than men)
education
work experience
nationality
age
locus of control
relates to individual differences in relation to a general belief about how one is affected by internal vs. external events/reinforcements
external locus
Managers with _______of control go with the flow because that's all they can do
internal locus
Managers with ________ of control believe they can control events; are masters of their destinies and trust in their capacity to influence their environment
organizational factors
Organizational culture has a stronger influence on employees than individual values
-corporate culture
corporate culture
a set of values, norms, and artifacts that members of an organization share
ethical culture
reflects whether the firm has an ethical conscience; is a function of many factors
significant others
those who have influence in a work group
obedience to authority
helps to explain why many employees unquestioningly follow superior's orders
opportunity
The conditions in an organization that limit/permit ethical/unethical behavior
normative approach
how organizational decision makers should approach an issue
descriptive approach
normative approach is different from a ____________ that examines how organizational decision makers approach ethical decision making
core values
_________ are central to an organization and provide direction for action
institutions
_______ are important in establishing a foundation for normative values

Organizations face certain normative pressures from different _________to act a certain way
-Internally and/or externally
-Sort institutions into three categories: Political, economic, and social
social institutions
_______ include religion, education, and individuals such as the family unit
political institutions
________can take place within the organization

An ethical organization has policies and rules in place to determine appropriate behavior
political, economic, social institutions
When values from _______, __________, and _________are embedded into organizational culture to provide incentives 4 appropriate behavior, firms tend to act more socially responsible
liberty and difference
2 main principles of justice
liberty principle
(equality principle): States that each person has basic rights compatible to basic liberties of others
difference principle
States that economic and social equalities (or inequalities) should be arranged to provide most benefit to least-advantaged members of society

-Does not advocate complete elimination of inequalities in society
-The most ethical decision seeks to benefit and not harm disadvantaged populations
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