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Business Ethics

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Title: Business Ethics


1
Business Ethics
  • Unit Three

2
Business Ethics Is a Component of Social
Responsibility
  • Business ethics comprises principles and
    standards that guide behavior in business.
  • Social responsibility refers to an organizations
    obligation to maximize its positive impact on
    stakeholders and to minimize its negative impact.
  • The dimensions of social
    responsibility are legal, economic,
    ethical, and philanthropic.

3
Corporate Citizenship...
  • Corporate citizenship expresses the extent to
    which businesses strategically meet the economic,
    legal, ethical and philanthropic responsibilities
    placed on them by various stakeholders.
  • How does the firm act on its commitment to the
    corporate citizenship philosophy? Does it
    measure the extent to which it
    follows through by
    implementing initiatives?

4
Economic Issues...
  • relate to how resources for the production of
    goods and services are to be distributed within a
    system.
  • Issues of concern
  • the economyinflation, recession, unemployment
    rates, pollution control and environmental
    constraints
  • employee responsibilities
  • competition

5
Competitive Issues...
  • Intense competition can make managers feel their
    survival is being threatened.
  • Unacceptable acts may be viewed as acceptable.
  • Large firms sometimes exert unfair competitive
    pressures on smaller competitors
  • sustained price cuts
  • discriminatory pricing
  • price wars

6
Legal and Regulatory Issues...
  • Laws and regulations are established by the
    government to set minimum standards of acceptable
    behavior.
  • Laws are passed because society does
    not always trust business to
    act in its best interest.

7
Types of Laws...
  • Civil law defines the rights and duties of
    individuals and organizations.
  • Criminal law prohibits specific actions and
    imposes punishment for breaking the law.
  • The difference between the two is enforcement.
  • Criminal laws are enforced by the state
    or nation.
  • Civil laws are enforced by individuals
    (generally in court).

8
How are business ethics disputes generally
resolved?
9
Business ethics disputes are generally
resolved through lawsuits.
  • Most laws affecting business fall into one of
    five categories
  • laws regulating competition (prevent restraint of
    trade)
  • laws protecting consumers (safety, disclosure)
  • laws protecting equity safety (discrimination,
    workplace safety, equal employment practice)
  • laws protecting the environment (air, water,
    noise)
  • laws that encourage ethical conduct (Federal
    Sentencing Guidelines for Organizations,
    Sarbanes-Oxley Act)

10
Keys to Managing Ethics Programs
  • Managers must consider the values and principles
    of all key stakeholders of the organization.
  • The role and support of top management is
    critical.
  • Top management and key stakeholders must address
    ethical issues affecting the organization on an
    ongoing basis.

11
Philanthropic Issues
  • involve businesss contribution to the local
    community and society.
  • Quality of life issues
  • responsible production of goods and services
  • technology improvementsyet not damaging to the
    environment or jeopardizing personal privacy
  • Philanthropic issues
  • making the local community a better place to live
  • Strategic philanthropy
  • synergistic and mutually beneficial use of a
    companys core competencies and resources to deal
    with social issues

12
Ethics as a Force in Social Responsibility
  • Business ethics embodies standards, norms and
    expectations that reflect the concerns of major
    stakeholders.
  • Consumers, employees and shareholders all
    have concerns about what is fair and just.
  • Ethics goes beyond compliance with
    laws and regulations.
  • Such behavior has been associated with profits.
  • It goes beyond the firms wants and needs.
  • It should evolve from the culture of the
    organization.

13
Definition
  • Corporate Social responsibility is the managerial
    obligation to take action that protects and
    improves the welfare of society as a whole and
    organizational interests as well.

14
Corporate Social Responsibility
  • Represents the notion that corporations have an
    obligation to constituent groups in society other
    than shareholders and beyond that prescribed by
    law or contract. It considers both the best
    interests of the company and its relationship
    with the community and society in general.

15
Social Responsibility
  • Drucker
  • Be responsible for your impact, planned or
    unplanned.
  • Grandma
  • Clean up your own mess!

16
Socially Responsible Strategies
  • Evaluate the social merits of each corporate and
    business strategy. For each strategy, ask these
    questions
  • What social good does the strategy create?
  • Does it create any public or stakeholder risks or
    harm?
  • Is it controversial?
  • Develop socially responsive specific strategies
    by adopting specific strategies towards all key
    stake-holders of the firm. Such strategies
    pursue multiple stakeholder objectives rather
    than simple profitability objectives.

17
Common Areas of Social Responsibilities
  • Urban Affairs
  • Consumer Affairs
  • Environmental Affairs
  • Employment Practices

18
Pros and Cons
  • Public expects it now.
  • Long run self interest.
  • Avoid regulation.
  • Dilute responsibility to shareholders.
  • Lack of understanding.
  • Increases business power to disadvantage of
    public.

19
Businesses should
  • Perform legally required activities.
  • Consider voluntary activities beyond legal
    minimums.
  • Inform stakeholders of extent of involvement.

20
Federal Agencies
  • Discrimination Issues
  • Ensures employers holding federal contracts do
    not discriminate.
  • Formulates and enforces environmental standards.
  • Promotes clarity of product labeling to reduce
    consumer misunderstanding.
  • Regulates safety and health conditions in the
    workplace.
  • Equal Employment Opportunity
  • Office of Federal Compliance Programs
  • Environmental Protection Agency
  • Consumer Product Safety Commission
  • OSHA

21
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22
Social Responsiveness
  • The degree of effectiveness and efficiency an
    organization displays in pursuing its social
    responsibilities.
  • Social responsiveness is pragmatic -- managers
    scan the environment, identify changing morals
    and attitudes, and modify organizational
    practices to align with the prevailing standards.

23
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24
Stakeholders Obligations
  • Owners - Stockholders
  • Suppliers
  • Banks/Lenders
  • Government Agencies
  • Employees Unions
  • Customers
  • Competitors
  • Local communities society at large.
  • Increase value of the organization.
  • Deal with them fairly.
  • To repay debts.
  • To abide by laws.
  • Safe working environment negotiate fairly with
    unions.
  • To provide safe products.
  • To compete fairly refrain from restraints of
    trade.
  • To avoid business practices that harm the
    environment.

25
Meeting Social Responsibilities
  • Incorporate social goals into annual planning
    process.
  • Seek comparative industry norm for social
    programs.
  • Present reports to stakeholders.
  • Experiment with different approaches for
    measuring.
  • Attempt cost/benefit analysis.

26
Seths Approaches
  • Social Obligation
  • Obey the laws -- economic purposes.
  • Social Responsibility
  • Economic societal goals.
  • Social Responsiveness
  • Both goals plus obligation to anticipate societal
    problems and actively work to prevent them.

27
Planning for Social Responsibility
  • Environmental forecasts
  • economic
  • political
  • technological
  • social
  • competitive

28
Integration of Social Responsibility and Planning
29
The Social Audit
  • A Progress Report
  • Process of taking measurements of social
    responsibility to assess organizational
    performance in the social responsibility area.
  • Elements are monitoring, measuring and appraising
    performance.

30
Elements of a Social Audit
31
How society can help business meet social
obligations
  • Set rules that are clear and consistent.
  • Keep the rules technically feasible.
  • Make the rules economically feasible.
  • Make the rules prospective, not retrospective.
  • Make the rules goal-setting, not procedure
    proscribing.

32
Understanding Ethical Behavior
  • Ethics are moral obligations that usually govern
    our conduct, and are the standards or behavior by
    which others usually judge us.
  • Ethics separate right from wrong.
  • Morals are our rules or habits, developed from
    cultural values and norms, and define our
    character.

33
Ethics Defined
  • Ethics are the moral principals and values that
    govern the actions and decisions of an individual
    or group.
  • Ethics serve as guidelines on how to act rightly
    and justly when faced with moral dilemmas.

34
Classifying business decisions according to
ethical and legal relationships
Ethical
Ethicality
Illegal
Legal
Legality
35
Reasons to practice ethics
  • Can enhance productivity.
  • Positive impact on external stakeholders.
  • Minimize governmental regulation.

36
Understanding Ethical Behavior
Societal culture and norms.
Personal moral philosophy ethical behavior.
Business culture industry practices.
Organizational culture expectations.
37
Organizational factors influencing ethical
judgments
  • The extent of ethical problems in the
    organization.
  • Top-management actions on ethics.
  • Organizational role.

38
Codes of Ethics...
  • are formal statements of what an organization
    expects in the way of ethical behavior
  • will not solve every dilemma
  • provide rules guidelines
  • reflects senior managements desire for
    compliance with values, rules policies in
    support of an ethical climate
  • should be specific enough to be reasonably
    capable of preventing misconduct

39
Manleys Six Steps to Implement a Code of
Ethics
  • distribute the code comprehensively employees,
    subsidiaries, associated companies
  • assist in interpretation understanding
  • specify managements role in implementation
  • make employees responsible for understanding
  • establish grievance procedures
  • provide a conclusion or closing statement

40
High Level Oversight
  • ethics officers or committees are responsible for
    oversight of the ethics/compliance program
  • coordinate program with top management
  • develop, revise disseminate the code
  • develop effective communication
  • establish audits control systems
  • provide consistent enforcement of standards
  • review modify the program to improve
    effectiveness

41
Effective Communication of Ethical Standards...
  • provides guidance for ethical standards
    activities that integrate the functional areas of
    business
  • helps employees identify ethical issues
    provides a means to address resolve them
  • can help reduce criminal, civil administrative
    consequences including
  • fines, penalties, judgments, etc.

42
Ethics Training Programs Should...
  • reflect organizational size, culture, values,
    management style employee base
  • improve employee understanding of ethical issues
  • influence the organizational culture, significant
    others, opportunity in the ethical
    decision-making process
  • overall, provide for recognition of ethical
    issues, understanding of culture values, and
    influence ethical decision making

43
Monitoring, Auditing, Enforcing Ethical
Standards...
  • an internal system for employees to report
    misconduct is an opportunity to register ethical
    concerns
  • ethics hot lines
  • questionnaires may be used to serve as benchmarks
  • corrective actions provide standards punishment
  • consistent enforcement is critical

44
Continuous Improvement
  • if a company has determined that its ethical
    performance has not been satisfactory, management
    may want to recognize the way ethical decisions
    are made
  • a decentralized organization may be centralized
    (perhaps temporarily) so that top-level managers
    can ensure that ethical decisions are made
  • a centralized organization may be decentralized
    (perhaps temporarily) so that lower level
    managers can make more decisions

45
Bad AppleBad Barrel Theory
  • bad applethe notion that blame for unethical
    behavior rests with a few unsavory individuals
    (difficult for organizations to influence
    ethical decision making)
  • bad barrelviews that people are not inherently
    ethical or unethical, but are influenced by the
    corporate culture surrounding them (more
    organizational control)

46
Codes of Ethics
  • Avoid employee confusion in decision-making.
  • Force discussion about what is right and wrong in
    issues that may arise.

Our Company Code of Ethics
1. Do good. 2. See 1.
47
Why have a Code of Ethics?
  • to define accepted/acceptable behaviors
  • to promote high standards of practice
  • to provide a benchmark for members to use for
    self evaluation
  • to establish a framework for professional
    behavior and responsibilities
  • as a vehicle for occupational identity
  • as a mark of occupational maturity"

48
  • A Certified Healthcare Business Consultant is
    actively engaged in practice management business
    consulting.
  • A Certified Healthcare Business Consultant will
    conduct himself/herself with integrity, high
    moral purpose, and in the best interest of
    his/her clients.
  • A Certified Healthcare Business Consultant shall
    not, for personal advantage, subordinate his/her
    judgment to others or exploit client
    relationships.
  • A Certified Healthcare Business Consultant will
    assume only those responsibilities for which
    he/she is qualified and he/she will utilize
    personnel who are capable of discharging such
    functions.
  • A Certified Healthcare Business Consultant will
    regard all information acquired in serving
    his/her clients as strictly confidential.

49
RULES OF PROFESSIONAL CONDUCT
  • Certified Healthcare Business Consultants are
    dedicated to the highest professional standards.
    Each one subscribes to, and is bound by, the
    following Rules of Professional Conduct
  • A Certified Healthcare Business Consultant shall
    conduct himself/herself in accordance with the
    published Code of Ethics, or equivalent
    standards.
  • Consistent with the Code of Ethics, or equivalent
    standards, a Certified Healthcare Business
    Consultant shall make full disclosure, upon
    request, to the Board of Examiners, of all
    business activities involving the manner in which
    he/she services his/her clients.
  • A Certified Healthcare Business Consultant shall
    provide clients advanced written disclosure of
    any potential conflict of interest.

50
Cont.
  • 5. Certified Healthcare Business Consultants
    may use the professional designation, Certified
    Healthcare Business Consultant, or the
    abbreviation, CHBC, but only in a dignified and
    judicious manner. The only proper use of the
    professional designation in advertising media
    shall be the designation itself. In printed
    advertising media, the professional designation
    shall be used only after the name of the holder
    of such designation appearing in such media and
    in type no larger than the type used in his/her
    name. The professional designation shall not be
    used in the text in such advertising.
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