Class
Issues related to honesty also arise because business is sometimes regarded as a game governed by its own rules rather than those of society as a whole. Author Eric Beversluis suggests honesty is a problem because people often reason along these lines: (Pg. 59)
1. Business relationships are a subset of human relationships governed by their own rules that in a market society involve competition, profit maximization, and personal advancement within the organization. 2. Business can therefore be considered a game people play, comparable in certain respects to competitive sports such as basketball or boxing. 3. Ordinary ethics rules and morality do not hold in games like basketball or boxing. (What if a basketball player did unto others as he would have them do unto him? What if a boxer decided it was wrong to try to injure another person?) 4. Logically, then, if business is a game like basketball or boxing, ordinary ethical rules do not apply.
Equal Employment Opportunity Commission (Pg. 68)
A company in the United States can be sued if it (1) refuses to hire an individual, (2) maintains a system of employment that unreasonably excludes an individual from employment, (3) discharges an individual, or (4) discriminates against an individual with respect to hiring, employment terms, promotion, or privileges of employment as they relate to the definition of discrimination. Nearly 89,000 charges of discrimination were filed with the Equal Employment Opportunity Commission (EEOC) in 2014.
Conflict Of Interest (Pg. 65)
A conflict of interest exists when an individual must choose whether to advance his or her own interests, those of the organization, or those of some other group. The three major bond rating agencies—Moody's, Standard & Poor's, and Fitch Ratings—analyze financial deals and assign letters (such as AAA, B, CC) to represent the quality of bonds and other investments. Prior to the financial meltdown, these rating agencies had significant conflicts of interest. The agencies earned as much as three times more for grading complex products than for corporate bonds. They also competed with each other for rating jobs, which contributed to lower rating standards. Additionally, the companies who wanted the ratings were the ones paying the agencies. Because the rating agencies were highly competitive, investment firms and banks would "shop" the different agencies for the best rating. Conflicts of interest were inevitable.
Dual Relationships (Pg. 70)
A key ethical issue associated with sexual harassment is dual relationships. A dual relationship is defined as a personal, loving, and/or sexual relationship with someone with whom you share professional responsibilities. Dual relationships where the relationship could potentially cause a direct or indirect conflict of interest or a risk of impairment to professional judgment can be an ethical or even legal issue.41 Another important factor in these cases is intent. If the sexual advances in any form are considered mutual, then consent is created. The problem is unless the employee or employer gets something in writing before the romantic action begins, consent can always be questioned, and when it comes to sexual harassment, the alleged perpetrator must prove mutual consent. When relationships end, the potential for ethical conflicts increases.
Moral Dilemma (Pg. 8)
A moral dilemma is defined as a situation where the person is faced with multiple choices, all of which are undesirable as defined by the person. Only when a person's morals influence his or her performance on the job does it involve a dimension within the business ethic.
Stakeholder Groups (Internal and External) (Pg. 29)
A stakeholder framework identifies the internal stakeholders (employees, boards of directors, and managers) and the external stakeholders (customers, special interest groups, regulators, and other groups) who agree, disagree, collaborate, and engage in normal business transactions. Most ethical issues exist because of conflicts about what is right and wrong among and within stakeholder groups. This framework allows an organization to identify, monitor, and respond to the needs, values, and expectations of different stakeholder groups.
Value Dilemma (Pg. 8)
A value dilemma is the same as a moral dilemma, only that the individual's beliefs are grounded in societal norms. Only when a person's morals influence his or her performance on the job does it involve a dimension within the business ethic.
Specific Types of Observed Misconduct (Pg. 58)
Abusive behavior, Lying to employees, Conflicts of interest, Violating company Internet use policies, Discrimination, Health or safety violations, Lying to outside stakeholders, Retaliation against someone who reported misconduct, Falsifying time reports or hours worked, Stealing/theft, Employee benefit violations, and Delivery of substandard products
Abusive Or Intimidating Behavior (Pg. 62)
Abusive or intimidating behavior is another common ethical problem for employees, but what does it mean to be abusive or intimidating? These terms refer to many things—physical threats, false accusations, being annoying, profanity, insults, yelling, harshness, ignoring someone, and unreasonableness—and their meaning differs from person to person. It is important to understand that within each term there is a continuum.
Accountability (Pg. 41-42)
Accountability is an important part of corporate governance. Accountability refers to how closely workplace decisions align with a firm's stated strategic direction and its compliance with ethical and legal considerations. A clear delineation of accountability helps employees, customers, investors, government regulators, and other stakeholders understand why and how the organization identifies and achieves its goals.
Accounting Fraud (Pg. 71)
Accounting fraud usually involves a corporation's financial reports, in which companies provide important information on which investors and others base decisions involving millions of dollars. If the documents contain inaccurate information, intentional or not, lawsuits and criminal penalties may result.
Adam Smith, Founder of Capitalism, Invisible Hand, Six Psychological Motives, Perfect or Inalienable Rights. (Pg. 39)
Adam Smith, one of the founders of capitalism. Smith developed the concept of the Invisible Hand and explored the role of self-interest in economic systems; however, he went on to explain that the "common good is associated with Six Psychological Motives and that each individual has to produce for the common good, with values such as Propriety, Prudence, Reason, Sentiment and promoting the happiness of mankind." He distinguished justice as consisting of Perfect or Inalienable Rights, such as the right to property, from beneficence, consisting of imperfect rights that should be performed but cannot be forced.
Great Society (Pg. 11)
After Kennedy came President Lyndon B. Johnson and the "Great Society," a series of programs that extended national capitalism and told the business community the U.S. government's responsibility was to provide all citizens with some degree of economic stability, equality, and social justice.
What are the rewards for being more ethical and socially responsible in business? (Pg. 16)
Among the rewards for being more ethical and socially responsible in business are increased efficiency in daily operations, greater employee commitment, increased investor willingness to entrust funds, improved customer trust and satisfaction, and better financial performance.
Ethical Dilemma (Pg. 61)
An ethical dilemma is a problem, situation, or opportunity that requires an individual, group, or organization to choose among several actions that have negative outcomes. There is not a right or ethical choice in a dilemma, only less unethical or illegal choices as perceived by any and all stakeholders.
Ethical Issue (Pg. 61)
An ethical issue is a problem, situation, or opportunity that requires an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical. In this section, we classify ethical issues in relation to misuse of company time and resources, abusive or intimidating behavior, lying, conflicts of interest, bribery, corporate intelligence, discrimination, sexual harassment, fraud, financial misconduct, insider trading, intellectual property rights, and privacy issues.
Insider training (Pg. 76)
An insider is any officer, director, or owner of 10 percent or more of a class of a company's securities. There are two types of insider trading: illegal and legal. Illegal insider trading is the buying or selling of stocks by insiders who possess information that is not yet public. This act, which puts insiders in breach of their fiduciary duty, can be committed by anyone who has access to nonpublic material, such as brokers, family, friends, and employees. In addition, someone caught "tipping" an outsider with nonpublic information can also be found liable. To determine if an insider gave a tip illegally, the SEC uses the Dirks test that states if a tipster breaches his or her trust with the company and understands that this was a breach, he or she is liable for insider trading.
Processes For Managing Important Concerns (Pg. 47)
An organization that develops effective corporate governance and understands the importance of business ethics and social responsibility in achieving success should also develop processes for managing these important concerns. Although there are different approaches to this issue, we provide basic steps found effective in utilizing the stakeholder framework to manage responsibility and business ethics. The steps include (1) assessing the corporate culture, (2) identifying stakeholder groups, (3) identifying stakeholder issues, (4) assessing organizational commitment to social responsibility, (5) identifying resources and determining urgency, and (6) gaining stakeholder feedback. These steps include getting feedback from relevant stakeholders in formulating organizational strategy and implementation.
Corporate social responsibility (Pg. 11)
An organization's obligation to maximize its positive impact on stakeholders and minimize its negative impact. Philosophers increased their involvement, applying ethical theory and philosophical analysis to structure the discipline of business ethics. Companies became more concerned with their public image, and as social demands grew, many businesses realized they needed to address ethical issues more directly.
Consumer Financial Protection Bureau (CFPB) (Pg. 99)
Another agency the Dodd-Frank Act created was the Consumer Financial Protection Bureau (CFPB), an independent agency within the Federal Reserve System that "regulate[s] the offering and provision of consumer financial products or services under the Federal consumer financial laws."
What related issues must societies work on to make change for the better?
As societies work to create change for the better, they must address issues related to law, ethics, and the required level of compliance necessary for government and business to serve the public interest.
Public Company Accounting Oversight Board (Pg. 97)
At the heart of the Sarbanes-Oxley Act (SOX) is the Public Company Accounting Oversight Board that monitors accounting firms auditing public corporations and establishes standards and rules for auditors in accounting firms.
Board Members (Pg. 41)
Board members have an obligation to request information, conduct research, use accountants and attorneys, and obtain the services of ethical compliance consultants to ensure the corporations in which they have an interest are run in an ethical manner. The National Association of Corporate Directors, a board of directors' trade group, has helped formulate a guide for boards to help them do a better job of governing corporate America. Directors share a duty of loyalty, which means all their decisions should be in the best interests of the corporation and its stakeholders. Officer compensation packages present a challenge for directors, especially those on the board who are not independent. Directors have an opportunity to vote for others' compensation in return for their own increased compensation. Directors' knowledge about the investments, business ventures, and stock market information of a company creates issues that could violate their duty of loyalty. Insider trading of a firm's stock has specific rules, and violations should result in serious punishment. The obligations of directors and officers for legal and ethical responsibility interface and fit together based on their fiduciary relationships.
Hacking (Pg. 68)
Breaking into a computer network to steal information./System hacking: Assumes the attacker already has access to a low-level, privileged-user account./Remote hacking: Involves attempting to remotely penetrate a system across the Internet./Physical hacking: Requires the hacker to enter a facility physically and find a vacant unsecured workstation with an employee's login and password./Social engineering: Tricking individuals into revealing their passwords or other valuable corporate information./Shoulder surfing: Someone simply looks over an employee's shoulder while he or she types a password./Password guessing: When an employee is able to guess a person's password after finding out personal information about him or her./Dumpster diving: Digging through trash to find trade secrets. An employee obtains several organizational charts from a rival business by digging through that organization's trash./Whacking: Using wireless hacking to break into a network. An intruder uses a radio to tap into a wireless network to access unencrypted data./Phone eavesdropping: Using a digital recording device to monitor and record a fax line. A person records a message from a fax line and recreates an exact copy of the message by playing back the recording.
Bribery (Pg. 66)
Bribery is the practice of offering something (often money) in order to gain an illicit advantage from someone in authority. Gifts, entertainment, and travel can also be used as bribes. The key issue regarding whether or not something is considered bribery is whether it is used to gain an advantage in a relationship. Bribery can be defined as an unlawful act, but it can also be a business ethics issue in that an industry or even national culture may include such payments as standard practice.
Business Ethics (Pg.4)
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.
How do businesses make new rules?
Businesses must no longer develop strategies based on past practices; they begin with petabytes of information and look for relationships and correlations to discover the new rules of business. Future ethical issues revolve around the acquisition and sales of information.
Harry S. Truman's Fair Deal
By the 1950s, the NEW DEAL evolved into PRESIDENT HARRY S. TRUMAN'S FAIR DEAL, a program that defined such matters as civil rights and environmental responsibility as ethical issues that businesses had to address.
Collusion (Pg. 58)
Collusion is a secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose. "Deceitful purpose" is the relevant phrase in regard to business ethics, as it suggests trickery, misrepresentation, or a strategy designed to lead others to believe something less than the whole truth. Collusion violates the general business value of honesty that is one of the three foundational values that are used to identify ethical issues.
Lying (Pg. 64)
Commission lying is creating a perception or belief by words that intention- ally deceive the receiver of the message—for example, lying about being at work, expense reports, or carrying out work assignments. Commission lying also entails intentionally creating "noise" within the communication that knowingly confuses or deceives the receiver. Noise can be defined as technical explanations the communicator knows the receiver does not understand. It can be the intentional use of communication forms that make it difficult for the receiver to actually hear the true message. Using legal terms or terms relating to unfamiliar processes and systems to explain what was done in a work situation facilitate this type of lie.
Consumer Protection Laws (Pg. 11)
Consumer activists also helped secure passage of consumer protection laws such as the Wholesome Meat Act of 1967, the Radiation Control for Health and Safety Act of 1968, the Clean Water Act of 1972, and the Toxic Substance Act of 1976.
Consumer Fraud (Pg. 74)
Consumer fraud occurs when consumers attempt to deceive businesses for their own gain.
Control
Control is the process of auditing and improving organizational decisions and actions.
Control (Pg. 42)
Control is the process of auditing and improving organizational decisions and actions.
Core Practices (Pg. 86)
Core Practices are documented best practices, often encouraged by legal and regulatory forces as well as industry trade associations.
Shareholder Issues (Pg. 61)
Core values, Shareholder participation in electing directors, Equitable compensation strategies, Ethical and legal compliance, Community and regulatory integrity, Reputation management, Big data and cybersecurity, and Supply chain relationships and human rights
Covert Marketing (Pg. 38)
Covert marketing occurs when companies use promotional tools to make consumers believe the promotion is coming from an independent third party rather than from the company. Often companies are forced to disclose to consumers if they are paying another entity to promote their products. However, as with many business ethics issues, some advertising practices skirt the line between ethical and questionable behavior. For instance, some believe promotions embedded into television programs without informing consumers are a type of covert marketing that warrants greater consumer protection.
Corporate Intelligence (Pg. 66)
Defined broadly, corporate intelligence (CI) is the collection and analysis of information on markets, technologies, customers, and competitors, as well as on socioeconomic and external political trends. There are three distinct types of intelligence models: a passive monitoring system for early warning, tactical field support, and support dedicated to top- management strategy.
Directors, Duty Of Loyalty (Pg. 41)
Directors have a duty to avoid ethical misconduct and provide leadership in decisions to prevent ethical misconduct in the organization. Directors are not generally held responsible for negative outcomes if they have been informed and diligent in their decision making. Directors share a Duty Of Loyalty, which means all their decisions should be in the best interests of the corporation and its stakeholders. The obligations of directors and officers for legal and ethical responsibility interface and fit together based on their fiduciary relationships. Ethical values should guide decisions and buffer the possibility of illegal conduct. With increased pressure on directors to provide oversight for organizational ethics, there is a trend toward directors receiving training to increase their competency in ethics programs development, as well as other areas. As issues increase, more pressure is placed on the board's audit committee to address anything related to risk. While their primary role has been financial reporting, today boards are responsible for issues such as whistle-blower claims, cybersecurity, and bribery. Automated systems to monitor and measure the occurrence of ethical issues within organizations are increasingly used in this oversight process.
Directors Violation of Duty of Loyalty (pg. 41)
Directors' knowledge about the investments, business ventures, and stock market information of a company creates issues that could violate their duty of loyalty. Insider trading of a firm's stock has specific rules, and violations should result in serious punishment. The obligations of directors and officers for legal and ethical responsibility interface and fit together based on their fiduciary relationships. Ethical values should guide decisions and buffer the possibility of illegal conduct. With increased pressure on directors to provide oversight for organizational ethics, there is a trend toward directors receiving training to increase their competency in ethics programs development, as well as other areas. As issues increase, more pressure is placed on the board's audit committee to address anything related to risk. While their primary role has been financial reporting, today boards are responsible for issues such as whistle-blower claims, cybersecurity, and bribery. Automated systems to monitor and measure the occurrence of ethical issues within organizations are increasingly used in this oversight process.
Discrimination (Pg. 67)
Discrimination on the basis of race, color, religion, sex, marital status, sexual orientation, public assistance status, disability, age, national origin, or veteran status is illegal in the United States. Additionally, discrimination on the basis of political opinions or affiliation with a union is defined as harassment. Discrimination remains a significant ethical issue in business despite decades of legislation attempting to outlaw it.
Dishonesty (Pg. 60)
Dishonesty can be broadly defined as a lack or absence of integrity, incomplete disclosure, and an unwillingness to tell the truth. Lying, cheating, and stealing are actions usually associated with dishonest conduct. The causes of dishonesty are complex and relate to both individual and organizational pressures. Many employees lie to help achieve performance objectives. For example, they may be asked to lie about when a customer will receive a purchase. Lying can be defined as (1) untruthful statements that result in damage or harm; (2) "white lies," which do not cause damage but instead function as excuses or a means of benefitting others; and (3) statements obviously meant to engage or entertain without malice. These definitions become important in the remainder of this chapter.
Corporate Governance (Pg. 38)
Effective corporate governance creates a compliance and ethics culture so employees feel integrity is at the core of competitiveness. Corporate governance also helps establish the integrity of all relationships. A governance system without checks and balances creates opportunities for top managers to indulge self-interest before those of important stakeholders. Corporate governance normally involves strategic decisions and actions by boards of directors, business owners, top executives, and other managers with high levels of authority and accountability.
Ethical Awareness (Pg. 115)
Ethical awareness is the ability to perceive whether a situation or decision has an ethical dimension. Costly problems can be avoided if employees are able to first recognize whether a situation has an ethical component. However, ethical awareness can be difficult in an environment when employees work in their own areas of expertise with the same types of people. It is easier to overlook certain issues requiring an ethical decision, particularly if the decision becomes a routine part of the job. This makes it important for organizations to train employees on how to recognize the potential ethical ramifications of their decisions. Familiarizing employees with company values and training them to recognize common ethical scenarios can help them develop ethical awareness.
Ethical Culture (Pg. 15)
Ethical culture is acceptable behavior as defined by the company and industry. Ethical culture is the component of corporate culture that captures the values and norms an organization defines and is compared to by its industry as appropriate conduct. THE GOAL of an ethical culture is to minimize the need for enforced compliance of rules and maximize the use of principles that contribute to ethical reasoning in difficult or new situations. Ethical culture is positively RELATED TO workplace confrontation over ethics issues, reports to management of observed misconduct, and the presence of ethics hotlines. TO DEVELOP BETTER Ethical Corporate Cultures, many businesses communicate core values to their employees by creating ethics programs and appointing ethics officers to oversee them. An ethical culture CREATES shared values and support for ethical decisions and is driven by the ethical leadership of top management. Investors also recognize that an ethical culture provides a foundation for efficiency, productivity, and profits.
Ethical Issue Intensity (Pg. 115)
Ethical issue intensity can be defined as the relevance or importance of an event decision in the eyes of the individual, workgroup, and/or organization. It is personal and temporal in character to accommodate values, beliefs, needs, perceptions, the special characteristics of the situation, and the personal pressures prevailing at a particular place and time.
Ethics (Pg. 5)
Ethics is defined as behavior or decisions made within a groups' values. The field of business ethics deals with questions about whether specific conduct and business practices are acceptable. By its very nature, the field of business ethics is controversial, and there is no universally accepted approach for resolving its dilemmas. The terms morals, principles, values, and ethics are often used interchangeably, and you will find this is true in companies as well. Ethics is defined as behavior or decisions made within a groups' values. The important concept in business ethics is that right and wrong behavior is defined by the group, which might be a company or an industry. Because the Supreme Court defined companies as having limited individual rights, it is logical such groups have an identity that includes core values.
External Control (Pg. 40)
External control of the corporation resides not only with government regulators but also with key stakeholders including employees, consumers, and communities, which exert pressure for responsible conduct.
Fairness (Pg. 60)
Fairness is the quality of being just, equitable, and impartial. Fairness clearly overlaps with the concepts of justice, equity, and equality. There are three fundamental elements that motivate people to be fair: equality, reciprocity, and optimization. In business, equality is about the distribution of benefits and resources. This distribution could be applied to stakeholders or the greater society.
Federal Sentencing Guidelines for Organizations (FSGO) (PG. 12)
Federal Sentencing Guidelines for Organizations (FSGO), approved by Congress in November 1991, set the tone for organizational ethical compliance programs in the 1990s. The guidelines, which were based on the six principles of the DII, broke new ground by codifying into law incentives to reward organizations for taking action to prevent misconduct, such as developing effective internal legal and ethical compliance programs. Provisions in the guidelines mitigate penalties for businesses striving to root out misconduct and establish high ethical and legal standards. On the other hand, under FSGO, if a company lacks an effective ethical compliance program and its employees violate the law, it can incur severe penalties. The guidelines focus on firms taking action to prevent and detect business misconduct in cooperation with government regulation.
Fiduciaries, Duty Of Care (Pg. 41)
Fiduciaries are persons placed in positions of trust that act on behalf of the best interests of the organization. They have what is called a Duty Of Care, or a duty of diligence, to make informed and prudent decisions.
Morals (Pg. 4)
For our purposes, morals refer to a person's personal philosophies about what is right or wrong. The important point is that when one speaks of morals, it is personal or singular. Morals, your philosophies or sets of values of right and wrong, relate to you and you alone. You may use your personal moral convictions in making ethical decisions in any context.
Boards Of Directors
For public corporations, Boards Of Directors hold the ultimate responsibility for their firms' success or failure, as well as the ethics of their actions.
Honesty (Pg. 59)
Honesty refers to truthfulness or trustworthiness. To be honest is to tell the truth to the best of your knowledge without hiding anything. Confucius defined an honest person as junzi, or one who has the virtue ren. Ren can be loosely defined as one who has humanity. Yi is another honesty component and is related to what we should do according to our relation- ships with others. Another Confucian concept, li, relates to honesty but refers to the virtue of good manners or respect. Finally, zhi represents whether a person knows what to say and what to do as it relates to honesty. The Confucian version of Kant's Golden Rule is to treat your inferiors as you would want your superiors to treat you. As a result, virtues such as familial honor and reputation for honesty become paramount.
ISO 19600
ISO 19600 is a global compliance management standard that addresses risks, legal requirements, and stakeholder needs. Companies that choose to abide by ISO 19600 can use these standards to improve their approaches to compliance management, which can reassure stakeholders of their commitment toward ethics and compliance.
Implied falsity (Pg. 73)
Implied falsity means the message has a tendency to mislead, confuse, or deceive the public. Advertising claims that use implied falsity are those that are literally true but imply another message that is false. I
Consumers' Bill of Rights (Pg. 10)
In 1962, President John E. Kennedy delivered a "Special Message on Protecting the Consumer Interest" that outlined four basic consumer rights: the right to safety, the right to be informed, the right to choose, and the right to be heard. These came to be known as the Consumers' Bill of Rights. The modern consumer movement is generally considered to have begun in 1965 with the publication of Ralph Nader's Unsafe at Any Speed that criticized the auto industry as a whole, and General Motors Corporation (GM) in particular, for putting profit and style ahead of lives and safety.
Stakeholders (Pg. 29) / What do Stakeholders Provide? (Pg. 31)
In a business context, customers, shareholders, employees, suppliers, government agencies, communities, and many others who have a "stake" or claim in some aspect of a company's products, operations, markets, industry, and outcomes are known as STAKEHOLDER. Businesses engage and influence these groups, but these groups also have the ability to engage and influence businesses; thus, the relationship between companies and their stakeholders is a two-way street. Stakeholders PROVIDE resources critical to a firm's long-term success. These resources may be tangible and intangible. Shareholders, for example, supply capital; suppliers offer material resources or intangible knowledge; employees and managers grant expertise, leadership, and commitment; customers generate revenue and provide loyalty with word-of-mouth promotion; local communities provide infrastructure, and the media transmits positive corporate images.
Equality (Pg. 60)
In business, equality is about the distribution of benefits and resources. This distribution could be applied to stakeholders or the greater society.
Progressive Movement (Pg. 10)
In the 1920s, the progressive movement attempted to provide citizens with a "living wage," defined as income sufficient for education, recreation, health, and retire- ment. Businesses were asked to check unwarranted price increases and any other practices that would hurt a family's living wage. In the 1930s came the New Deal that specifically blamed business for the country's economic woes.
New Deal (Pg. 10)
In the 1930s came the New Deal that specifically blamed business for the country's economic woes. By the 1950s, the NEW DEAL evolved into PRESIDENT HARRY S. TRUMAN'S FAIR DEAL, a program that defined such matters as civil rights and environmental responsibility as ethical issues that businesses had to address.
Defense Industry Initiative on Business Ethics and Conduct (DII) (Pg.12)
In the 1980s, the Defense Industry Initiative on Business Ethics and Conduct (DII) was developed to guide corporate support for ethical conduct. This effort established a method for discussing best practices and working tactics to link organizational practice and policy to successful ethical compliance. The DII includes six principles. First, the DII supports codes of conduct and their widespread distribution. These codes of conduct must be understandable and cover their more substantive areas in detail. Second, member companies are expected to pro- vide ethics training for their employees as well as continuous support between training periods. Third, defense contractors must create an open atmosphere in which employees feel comfortable reporting violations without fear of retribution. Fourth, companies need to perform extensive internal audits and develop effective internal reporting and volun- tary disclosure plans. Fifth, the DII insists that member companies preserve the integrity of the defense industry. And sixth, member companies must adopt a philosophy of public accountability.
Stakeholder Interaction Model (Pg. 31)
In this stakeholder interaction model, there are reciprocal relationships between the firm and a host of stakeholders. In addition to the fundamental input of investors, employees, and suppliers, this approach recognizes other stakeholders and explicitly acknowledges that dialogue exists between a firm's internal and external environments. Corporate social responsibility actions that put employees at the center of activities gain the support of both external and internal stakeholders.
Integrity (Pg. 59)
Integrity is one of the most important and oft-cited elements of virtue and refers to being whole, sound, and in an unimpaired condition. Integrity is a global value that relates to all activities, not just business issues. Integrity relates to product quality, open communication, transparency, and relationships. Therefore, it is a foundational value for managers to build an ethical internal organizational culture. In an organization, integrity means uncompromising adherence to a set or group of values. It is connected to acting ethically; in other words, there are substantive or normative constraints on what it means to act with integrity. An organization's integrity usually rests on its enduring values and unwillingness to deviate from standards of behavior as defined by the firm and industry. Integrity complements honesty, which becomes the glue that holds business relationships together to make everything else more effective and efficient.
Intellectual Property (Pg. 77)
Intellectual property rights involve the legal protection of intellectual property such as music, books, and movies. Laws such as the Copyright Act of 1976, the Digital Millennium Copy- right Act, and the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 were designed to protect the creators of intellectual property. However, with the advance of technology, ethical issues still abound for websites.
What dose Negative Publicity, Lawsuits, and Fines do to a company?(Pg. 17)
Investors also recognize that an ethical culture provides a foundation for efficiency, productivity, and profits. Investors know, too, that NEGATIVE PUBLICITY, LAWSUITS, and FINES can lower stock prices, diminish customer loyalty, and threaten a company's long-term viability. Many companies accused of misconduct experienced dramatic declines in the value of their stock when concerned investors divested.
WHO DETERMINES if whether a specific action or standard is ETHICAL or UNETHICAL?
Investors, Employees, Customers, Interest groups, the Legal System, and the Community often determine whether a specific action or standard is ethical or unethical. Although these groups influence the determination of what is ethical or unethical for business, they also can be at odds with one another. Even though this is the reality of business and such groups may not necessarily be right, their judgments influence society's acceptance or rejection of business practices.
Who often DETERMINES whether a SPECIFIC ACTION or STANDARD is ETHICAL or UNETHICAL FOR BUSINESS?
Investors, employees, customers, interest groups, the legal system, and the community often determine whether a specific action or standard is ethical or unethical. Even though this is the reality of business and such groups may not necessarily be right or be at odds with each other, their judgments influence society's acceptance or rejection of business practices.
Dodd-Frank Wall Street Reform AND Consumer Protection Act (Pg.14)
It was designed to make the financial services industry more ethical and responsible. This complex law required regulators to create hundreds of rules to promote financial stability, improve accountability and transparency, and protect consumers from abusive financial practices.The Dodd-Frank Wall Street Reform and Consumer Protection Act addressed some of the issues related to the financial crisis and recession. The Dodd-Frank Act was the most sweeping financial legislation since the Sarbanes-Oxley Act and possibly since laws put into effect during the Great Depression.
Labeling Issues (Pg. 73)
Labeling issues are even murkier. For example, Kroger agreed to remove the term "raised in a humane environment" from its packages of Simple Truth chicken when it was discovered that the chickens, supplied by Perdue Farms, were raised in traditional factory farm environments.54 Additionally, marketers of chia seeds are focused on making accurate claims about the nutritional characteristics of chia seeds on their labeling but are careful not to make claims about their impact on health. Despite their nutritional benefits, the body only processes a small amount of the nutrients. This makes it more complex to tie actual health benefits to consumption of chia seeds.
Civil Law (Pg. 89) (Dodd-Frank Act)
Laws are categorized as either civil or criminal. Civil Law defines the rights and duties of individuals and organizations (including businesses). The primary difference between criminal and civil law is the state or nation enforces criminal laws, whereas individuals (generally, in court) enforce civil laws. Criminal and civil laws are derived from four sources: the U.S. Constitution (constitutional law), precedents established by judges (common law), federal and state laws or statutes (statutory law), and federal and state administrative agencies (administrative law). Federal administrative agencies established by Congress control and influence business by enforcing laws and regulations to encourage competition and to protect consumers, workers, and the environment. The Consumer Financial Protection Bureau was established through the Dodd-Frank Act after the latest financial crisis, which resulted in many consumers losing their homes. State and local laws and regulatory agencies also exist to achieve these objectives.
Criminal Law (Pg. 89) (Dodd-Frank Act)
Laws are categorized as either civil or criminal. Criminal law not only prohibits specific actions—such as fraud, theft, or securities trading violations—but also imposes fines or imprisonment as punishment for breaking the law. The primary difference between criminal and civil law is the state or nation enforces criminal laws, whereas individuals (generally, in court) enforce civil laws. Criminal and civil laws are derived from four sources: the U.S. Constitution (constitutional law), precedents established by judges (common law), federal and state laws or statutes (statutory law), and federal and state administrative agencies (administrative law). Federal administrative agencies established by Congress control and influence business by enforcing laws and regulations to encourage competition and to protect consumers, workers, and the environment. The Consumer Financial Protection Bureau was established through the Dodd-Frank Act after the latest financial crisis, which resulted in many consumers losing their homes. State and local laws and regulatory agencies also exist to achieve these objectives.
Pro-competitive Legislation (Pg. 91)
Laws have been passed to prevent the establishment of monopolies, inequitable pricing practices, and other practices that reduce or restrict competition among businesses. These laws are sometimes called Pro-competitive legislation because they were enacted to encourage competition and prevent activities that restrain trade.
Consumer Protection Law (Pg. 91)
Laws that protect consumers require businesses to provide accurate information about their goods and services and follow safety standards. The first consumer protection law was passed in 1906, partly in response to a novel by Upton Sinclair.
Classical economic Theorist Quote (Pg. 39)
Legal and economic responsibilities are generally accepted as the most important determinants of performance. "If this is well done," said classical economic theorists, "profits are maximized more or less continuously and firms carry out their major responsibilities to society." Some economists believe if companies address economic and legal issues they satisfy the demands of society and trying to anticipate and meet additional needs would be almost impossible.
Mandated Boundaries (Pg. 87)
Mandated boundaries are externally imposed levels of appropriate conduct, such as laws, rules, and regulations. For example, antitrust and consumer protection laws create boundaries of propriety that must be respected by companies. Failure to do so results in civil and criminal penalties.
Marketing Fraud (Pg. 72)
Marketing fraud—the process of dishonestly creating, distributing, promoting, and pricing products—is another business area that generates potential ethical issues. False or misleading marketing communications destroy customers' trust in a company. Lying, a major ethical issue involving communication, is a potentially significant problem. In both external and internal communications, it causes ethical predicaments because it destroys trust.
Milton Friedman Quote (Pg. 39)
Milton Friedman has been quoted as saying "the basic mission of business [is] ... to produce goods and services at a profit, and in doing this, business [is] making its maximum contribution to society and, in fact, being socially responsible."
Moral Intensity (Pg. 117)
Moral intensity relates to individuals' perceptions of social pressure and the harm they believe their decisions will have on others.
Philanthropy (Pg. 86)
Most firms engage in strategic Philanthropy—giving back to communities and causes. There is strong evidence to suggest that voluntary corporate social responsibility practices provide benefits to stakeholders and increases performance.2 In addition, research has demonstrated that when both ethical and legal responsibilities are respected through core practices, economic performance benefits.
Native Advertising
Native advertising has become another issue. Native advertising blends digital advertisements or company promotions with content on the website where it is featured. The pro- motion has the look and feel of the content. Critics claim that native advertising might confuse consumers if they cannot tell the difference between an advertisement and legitimate content.44 Companies must be knowledgeable about consumer protection laws and recognize whether their practices could be construed as deceptive or unfair.
Corrupt Organizational Culture (Pg. 15)
On the other hand (from ethical culture), corrupt organizational cultures SUPPORT unethical behavior. These cultures have been IDENTIFIED AS creating negative values and norms such as "the ends justify the means." In these cultures, ethical employees may be punished for failure to engage in unethical activities. Regulators want firms to focus on their culture to avoid excessive risk-taking and unethical behavior. There is a fundamental belief that an ethical culture will lead to good behavior.
What are the DIFFERENCES BETWEEN an ORDINARY DECISION and an ETHICAL ONE? (Pg. 5)
One difference between an ordinary decision and an ethical one lies in "the point where the accepted rules no longer serve, and the decision-maker is faced with the responsibility for weighing values and reaching a judgment in a situation which is not quite the same as any he or she has faced before." Another difference relates to the amount of emphasis decision-makers place on their own values and accepted practices within their company.
Executive Compensation (Pg. 46)
One of the biggest issues corporate boards of directors face is Executive Compensation. In fact, most boards spend more time deciding how much to compensate top executives than they do ensuring the integrity of the company's financial reporting systems. How executives are compensated for their leadership, organizational service, and performance has become a controversial topic.
Optimization (Pg. 60)
Optimization is the trade-off between equity (equality) and efficiency (maximum productivity). Discriminating on the basis of gender, race, or religion is generally considered unfair because these qualities have little bearing upon a person's ability to do a job. The optimal way to hire is to choose the employee who is the most talented, proficient, educated, and able. Ideas of fairness are sometimes shaped by vested interests. One or both parties in the relationship may view an action as unfair or unethical because the outcome was less beneficial than expected.
Oversite (Pg. 41-42)
Oversight provides a system of checks and balances that limit employees' and managers' opportunities to deviate from policies and strategies aimed at preventing unethical and illegal activities.
Passive Bribery (Pg. 66)
Passive bribery is an offense committed by the official who receives the bribe. It is not an offense, however, if the advantage was permitted or required by the written law or regulation of the foreign public official's country, including case law.
Primary Stakeholders (Pg. 31)
Primary stakeholders are those whose continued association and resources are absolutely necessary for a firm's survival. These include employees, customers, and shareholders, as well as the governments and communities that provide necessary infrastructure. It is important for managers to recognize that while primary groups may present more day-to-day concerns, secondary groups cannot be ignored or given less consideration in the ethical decision-making process because they have legitimacy. Sometimes a secondary stakeholder can have as much—if not more—power to influence outcomes than a primary stakeholder.
Principles (Pg. 4)
Principles are specific and pervasive boundaries for behavior that should not be violated. Principles often become the basis for rules. Some examples of principles could include human rights, freedom of speech, and the fundamentals of justice.
Stakeholders as a foundational theory R. Edward Freeman (Pg.11)
R. Edward Freeman was among the first scholars to pioneer the concept of stakeholders as a foundational theory for business ethics decisions. Freeman defined stakeholders as "any group or individual who can affect or is affected by the achievement of the organizations objectives."21 Freeman's defense of stakeholder theory had a major impact on strategic management and corporations' views of their responsibilities. Business ethics were also a prominent concern within leading companies such as General Electric, Hershey Foods, General Motors, IBM, Caterpillar, and S. C. Johnson & Son, Inc.
Reciprocity (Pg. 60)
Reciprocity is an interchange of giving and receiving in social relationships. Reciprocity occurs when an action that has an effect upon another is reciprocated with an action that has an approximately equal effect. It is the return of favors approximately equal in value. For example, reciprocity implies workers be compensated with wages approximately equal to their effort. Walmart tried to display ethical reciprocity by increasing the wages it paid to its lowest level employees to $10 per hour and begin paying bonuses. It is estimated that $157 million in bonuses have been paid to its 850,000 employees.
Active Bribery (Pg. 66)
Related to the ethics of bribery is the concept of active corruption or active bribery, meaning the person who promises or gives the bribe commits the offense.
Reputation (Pg. 37)
Reputation is one of the organization's greatest intangible assets with tangible value. The value of a positive reputation is difficult to quantify, but it is important. A single negative incident can influence perceptions of a corporation's image and reputation instantly and for years afterward. Corporate reputation, image, and brands are more important than ever and are among the most critical aspects of sustaining relationships with constituents including investors, customers, employees, media, and regulators. Although an organization does not control its reputation in a direct sense, its actions, choices, behaviors, and consequences influence stakeholders' perceptions of it.
Secondary Stakeholders (Pg. 31)
Secondary stakeholders do not typically engage directly in transactions with a company and are therefore not essential to its survival. These include the media, trade associations, and special interest groups like the American Association of Retired People (AARP), a special interest group working to support retirees' rights such as health care benefits. It is important for managers to recognize that while primary groups may present more day-to-day concerns, secondary groups cannot be ignored or given less consideration in the ethical decision-making process because they have legitimacy. Sometimes a secondary stakeholder can have as much—if not more—power to influence outcomes than a primary stakeholder.
Sexual Harassment (Pg. 69)
Sexual harassment can be defined as any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another. It may be verbal, visual, written, or physical and can occur between people of different genders or those of the same gender. Displaying sexually explicit materials "may create a hostile work environment or constitute harassment, even though the private possession, reading, and consensual sharing of such materials is protected under the Constitution." Nearly 30 percent of the charges filed with the EEOC involve sexual harassment or pregnancy discrimination. Sexual harassment includes unwanted sexual approaches (including touching, feeling, or groping) and/or repeated unpleasant, degrading, or sexist remarks directed toward an employee with the implied suggestion that the target's employment status, promotion, or favorable treatment depend on a positive response and/or cooperation.
Facilitations Payments (Pg. 66)
Small facilitation payments made to obtain or retain business or other improper advantages do not constitute bribery payments for U.S. companies in some situations. Such payments are often made to induce public officials to perform their functions, such as issuing licenses or permits.
Social Entrepreneurship (Pg. 106)
Social entrepreneurship occurs when an entrepreneur founds an organization with the purpose of creating social value. Social entrepreneurs desire to find a solution to a social problem rather than to simply earn profits. These types of organizations, also called social enterprises, can be for-profit, nonprofit, government-based, or hybrids.
Social Responsibility, What are the four levels of social responsibility?, What are ISSUES generally associated with social responsibility that can be separated into FOUR general categories? (Pg. 37)
Social responsibility is an ethical theory in which individuals are accountable for fulfilling their civic duty, and the actions of an individual must benefit the whole of society. In this way, there must be a balance between economic growth and the welfare of society and the environment. There are FOUR LEVELS of social responsibility—economic, legal, ethical, and philanthropic. PHILANTHROPIC: "giving back" to society. ETHICAL: following standards of acceptable behavior as judged by stakeholders. LEGAL: abiding by all laws and government regulations. ECONOMIC: maximizing stakeholder wealth and/or value. ISSUES generally associated with Social Responsibility can be separated into four general categories: Social Issues, Consumer Protection, Sustainability, and Corporate Governance.
Privacy Issues
Some privacy issues that must be addressed by businesses include the monitoring of employees' use of available technology and consumer privacy. Current research suggests that even when businesses use price discounts or personalized services in exchange for information, consumers remain suspicious. However, certain consumers are still willing to provide personal information despite the potential risks.
Strategic Philanthropy (Pg. 106)
Strategic philanthropy is the synergistic and mutually beneficial use of an organization's core competencies and resources to deal with key stakeholders so as to bring about organiza- tional and societal benefits. It uses, as all do, the profit motive but argues that philanthropy must have a long-term positive impact.
Reagan-Bush Era (Pg. 12)
The 1980s ushered in the Reagan-Bush era, with the accompanying belief that self-regulation, rather than regulation by the government, was in the public's interest. Many tariffs and trade barriers were lifted and businesses merged and divested within an increasingly global atmosphere. Thus, while business schools were offering courses in business ethics, the rules of business were changing at a phenomenal rate because of less regulation. Corporations that once were nationally based began operating internationally and found themselves mired in value structures where accepted rules of business behavior no longer applied.
Age Discrimination in Employment Act (Pg. 68)
The Age Discrimination in Employment Act specifically outlaws hiring practices that discriminate against people 40 years of age or older, as well as those that require employees to retire before the age of 70. The act prohibits employers with 20 or more employees from making employment decisions, including decisions regarding the termination of employment, on the basis of age or as a result of policies requiring retirement after the age of 40. Despite this legislation, charges of age discrimination persist in the workplace. Age discrimination accounts for approximately 23 percent of the complaints filed with the EEOC. Given the fact that nearly one-third of the nation's workers are 55 years old or over, many companies need to change their approach toward older workers.
Better Business Bureau (B.B.B.) (Pg. 86)
The Better Business Bureau (BBB) is a leading self-regulatory body that provides directions for managing customer disputes and reviews advertising cases.
Ethics Resource Center (ERC)
The Ethics Resource Center (ERC) conducts the Ethics & Compliance Initiative Global Business Ethics Survey (GBES) that measures the risk and promotion of workplace integrity. Sample sizes average of 1,000 employees per country and gather reliable data on key ethics and compliance outcomes to help identify and better understand the ethical issues that are important to employees.
Food and Drug Administration (FDA) (Pg. 94)
The Federal Trade Commission sued POM Wonderful, maker of pomegranate juice products, for misleading advertising. Specifically, the FTC found that POM's claims that pomegranate juice can help lower the risk of heart disease, erectile dysfunction, and prostate cancer were unsubstantiated and based on faulty evidence. The FTC further ordered that POM could not make health claims about its products without evidence from two human clinical trials. This is the FTC's attempt to adopt the more stringent standards used by the Food and Drug Administration (FDA) to approve drugs.
Foreign Corrupt Practices Act (Pg. 11)
The Foreign Corrupt Practices Act was passed during his administration, making it illegal for U.S. businesses to bribe government officials of other countries. Today, this law is the highest priority of the U.S. Department of Justice.
What does the GLOBAL BUSINESS ETHICS SURVEY (GBES) measure? (Pg. 6) (workplace integrity)
The GBES measures WORKPLACE INTEGRITY as the pressure to compromise organizational standards, observed misconduct, reporting of misconduct when observed, and retaliation against reports.
Workplace Integrity (Pg. 6)
The GBES measures workplace integrity as the pressure to compromise organizational standards, observed misconduct, reporting of misconduct when observed, and retaliation against reports.
Nixon Administration's Watergate Scandal (NAWS) (Pg. 11)
The Nixon administration's Watergate scandal focused public interest on the importance of ethics in government.
Occupational Safety and Health Administration (OSHA) (Pg. 96)
The Occupational Safety and Health Administration (OSHA) enforces the act and makes regular surprise inspections to ensure businesses maintain safe work- ing environments.
Sarbanes-Oxley Act (Pg. 13)
The Sarbanes-Oxley Act, the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934. The new law made securities fraud a criminal offense and stiffened penalties for corporate fraud. It also created an accounting oversight board that requires corporations to establish codes of ethics for financial reporting and to develop greater transparency in financial reports to investors and other interested parties. Additionally, the law requires top executives to sign off on their firms' financial reports and risk fines and long prison sentences if they misrepresent their companies' financial positions. The legislation further requires company executives to disclose stock sales immediately and prohibits companies from giving loans to top managers.
The Stakeholder Model Of Corporate Governance (Pg. 44)
The Stakeholder Model Of Corporate Governance adopts a broader view of the purpose of business. Although a company certainly has a responsibility for economic success and viability to satisfy its stockholders, it must also answer to other stakeholders, including employees, suppliers, government regulators, communities, and the special interest groups with which it interacts. Because of limited resources, companies must determine which of their stakeholders are primary. Once the primary groups are identified, managers must implement the appropriate corporate governance mechanisms to promote the development of long-term relationships. This approach entails creating governance systems that consider stakeholder welfare in tandem with corporate needs and interests. Patagonia, Yahoo!, and Google all use the stakeholder model of corporate governance to direct their business activities. Although these two approaches represent the ends of a continuum, the reality is the shareholder model is a more restrictive precursor to the stakeholder orientation. Many businesses evolved into the stakeholder model as a result of government initiatives, consumer activism, industry activity, and other external forces.
World's Most Ethical Companies index
The World's Most Ethical Companies index was developed through methodology designed by a committee of leading attorneys, professors, and organization leaders. The companies in this index performed as well as—and often better than—companies on the Standard & Poor's 500 index over 5- and 10-year periods.55 These results provide strong evidence that corporate concern for ethical conduct is becoming a part of strategic planning toward obtaining the outcome of higher profitability. Rather than being just a function of compliance, ethics is becoming an integral part of management's efforts to achieve competitive advantage.
The FIRST BOOK ON BUSINESS ETHICS was published in 1937 by Frank Chapman Sharp and Philip G. Fox. 4 SECTIONS/FOUR SECTIONS (Pg. 10)
The authors separated their book into four sections: fair service, fair treatment of competitors, fair price, and moral progress in the business world. This early textbook discusses ethical ideas based largely upon economic theories and moral philosophies. This earliest business ethics textbook demonstrates the necessity of the ethical treatment of different stakeholders.
Literally False (Pg. 73)
The characterization of an advertising claim as literally false can be divided into two subcategories: tests prove (establishment claims), when the advertisement cites a study or test that establishes the claim; and bald assertions (non-establishment claims), when the advertisement makes a claim that cannot be substantiated, as when a commercial states a certain product is superior to any other on the market.
Interlocking Directorate (Pg. 45)
The concept of board members being linked to more than one company is known as an interlocking directorate. The practice is not considered illegal unless it involves a direct competitor.
Stakeholders Orientation, What three sets of activities dose it comprise of? (Pg. 32)
The degree to which a firm understands and addresses stakeholder demands can be referred to as a Stakeholder Orientation. A Stakeholder Orientation involves "activities and processes within a system of social institutions that facilitate and maintain value through exchange relationships with multiple stakeholders." This orientation comprises three sets of activities: (1) the organization-wide generation of data about stakeholder groups and assessment of the firm's effects on these groups, (2) the distribution of this information throughout the firm, and (3) the responsiveness of the organization as a whole to this information. Stakeholder orientation is not complete without including activities that address stakeholder issues. Although the purpose of a stakeholder orientation is to maximize positive outcomes that meet stakeholder needs, the support stakeholders have for companies they perceive to be socially responsible also serve to enhance the firms' profitability.
Cause-Related Marketing (Pg. 105)
The first attempts by organizations to coordinate organizational goals with strategic phil- anthropic giving emerged with cause-related marketing in the early 1980s. Cause-related marketing ties an organization's product(s) directly to a social concern through a marketing program. More than 80 percent of customers claim they view firms more positively when they support issues that they care about. Many marketing directors feel that cause-related marketing will increase in the near future.
Corporate Governance/Ethical issues related to the role of the board of directors/Corporate Managers
The formal system of business accountability and control of ethical and socially responsible behavior is corporate governance. In theory, the board of directors provides oversight for all decisions and the use of resources. Ethical Issues Related to the Role of the Board of Directors, relationships with shareholders, internal control, risk management, and executive compensation. Ethical leadership is associated with socially responsible corporate governance. Corporate governance is the fourth major issue of corporate social responsibility. Corporate governance involves the development of formal systems of accountability, oversight, and control. Strong corporate governance mechanisms remove the opportunity for employees to make unethical decisions. Research has shown that corporate governance has a positive relationship with social responsibility. Effective corporate governance creates a Compliance and ethics culture so employees feel integrity is at the core of competitiveness. Corporate governance also helps establish the integrity of all relationships. A Governance System without checks and balances creates opportunities for top managers to indulge in self-interest before those of important stakeholders. Corporate governance normally involves Strategic Decisions and actions by boards of directors, business owners, top executives, and other managers with high levels of authority and accountability. Corporate Managers engage in dialogue with shareholder activists when the firm is large, responsive to stakeholders, the CEO is the board chair, and there are few large institutional investors that control significant shares of stock.
Perception of Ethical Issue Intensity (Pg. 177)
The perception of ethical issue intensity can be influenced by man- agement's use of rewards and punishments, corporate policies, and corporate values to sensitize employees. In other words, managers can affect the degree to which employees perceive the importance of an ethical issue through positive and/or negative incentives.
Global Compact (Pg. 15) (Chapter 10 as well)
The purpose of the Global Compact is to create openness and alignment among business, government, society, labor, and the United Nations. Companies that adopt this code agree to integrate the 10 PRINCIPLES into their business practices, publish their progress toward these objectiThe purpose of the Global Compact is to create openness and alignment among business, government, society, labor, and the United Nations. Companies that adopt this code agree to integrate the 10 PRINCIPLES into their business practices, publish their progress toward these objectives on an annual basis, and partner with others to advance broader objectives of the UN.ves on an annual basis, and partner with others to advance broader objectives of the UN.
In 1962, President JOHN E. KENNEDY delivered a "SPECIAL MESSAGE ON PROTECTION THE CONSUMER INTEREST" that outlined four basic consumer rights.
The right to safety, the right to be informed, the right to choose, and the right to be heard. These came to be known as the Consumers' Bill of Rights.
FTC's Bureau of Consumer Protection (Pg. 94)
The role of the FTC's Bureau of Consumer Protection is to protect consumers against unfair, deceptive, or fraudulent practices. The bureau, which enforces a variety of consumer protection laws, is divided into five divisions. The Division of Enforcement monitors compliance with and investigates violations of laws, including unfulfilled holiday delivery promises by online shopping sites, employment opportunities fraud, scholarship scams, misleading advertising for health care products, high-tech and telemarketing fraud, data security, and financial practices.
Shareholder Model Of Corporate Governance/ Ownership (Investors) and Control (Managers) are separate (Pg. 43)
The shareholder model of corporate governance is founded in classic economic precepts, including the goal of maximizing wealth for investors and owners. For publicly traded firms, corporate governance focuses on developing and improving the formal system for maintaining performance accountability between top management and the firm's shareholders. Thus, a shareholder orientation should drive a firm's decisions toward serving the best interests of investors. Underlying these decisions is a classic agency problem, in which ownership (investors) and control (managers) are separate. Managers act as agents for investors, whose primary goal is increasing the value of the stock they own. However, investors and managers are distinct parties with unique insights, goals, and values with respect to the business. Managers, for example, may have motivations beyond stockholder value, such as market share, personal compensation, or attachment to particular products and projects. Because of these potential differences, corporate governance mechanisms are needed to align investor and management interests. The shareholder model has been criticized for its singular purpose and focus because there are other ways of "investing" in a business. Suppliers, creditors, customers, employees, business partners, the community, and others also invest their resources into the success of the firm. Although these two approaches represent the ends of a continuum, the reality is the shareholder model is a more restrictive precursor to the stakeholder orientation. Many businesses evolved into the stakeholder model as a result of government initiatives, consumer activism, industry activity, and other external forces.
What are the basic steps found effective in utilizing the stakeholder framework to manage responsibility and business ethics? (Pg. 47)
The steps include (1) assess- ing the corporate culture, (2) identifying stakeholder groups, (3) identifying stakeholder issues, (4) assessing organizational commitment to social responsibility, (5) identifying resources and determining urgency, and (6) gaining stakeholder feedback. These steps include getting feedback from relevant stakeholders in formulating organizational strategy and implementation.
Corporate Citizenship (Pg. 36)
The term corporate citizenship is often used to express the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders. Corporate citizenship has four interrelated dimensions: strong sustained economic performance, rigorous compliance, ethical actions beyond what the law requires, and voluntary contributions that advance the reputation and stakeholder commitment of the organization. A firm's commitment to corporate citizenship indicates a strategic focus on fulfilling the social responsibilities its stakeholders expect. Corporate citizenship involves acting on the firm's commitment to corporate citizenship philosophy and measuring the extent to which it follows through by actually implementing citizenship initiatives.
Stakeholders Theory
There are three approaches to stakeholder theory: normative, descriptive, and instrumental approaches. The normative approach identifies ethical guidelines that dictate how firms should treat stakeholders. Normative stakeholder theory affirms that stakeholders have legitimacy and a right to engage organizations. Principles and values provide direction for normative decisions. The descriptive approach focuses on the firm's behavior and usually addresses how decisions and strategies are made for stakeholder relationships. The instrumental approach to stakeholder theory describes what happens if firms behave in a particular way.5 This approach is useful because it examines relationships involved in the management of stakeholders including the processes, structures, and practices that implement stakeholder relationships within an organization. The survival and performance of any organization is a function of its ability to create value for all primary stakeholders and its attempt to do this fairly, not favoring one group over the others.
Hostile Work Environment
To establish sexual harassment, an employee must understand the definition of a hostile work environment, for which three criteria must be met: the conduct was unwelcome; the conduct was severe, pervasive, and regarded by the claimant as so hostile or offensive as to alter his or her conditions of employment; and the conduct was such that a reason- able person would find it hostile or offensive. To assert a hostile work environment, an employee need not prove it seriously affected his or her psychological well-being or that it caused an injury; the decisive issue is whether the conduct interfered with the claimant's work performance.
Affirmative Action (Pg. 69)
To help build workforces that reflect their customer base, many companies have initiated affirmative action programs, which involve efforts to recruit, hire, train, and pro- mote qualified individuals from groups that have traditionally been discriminated against on the basis of race, gender, or other characteristics. Such initiatives may be imposed by federal law on an employer that contracts or subcontracts for business with the federal government, as part of a settlement agreement with a state or federal agency, or by court order.3
Values (Pg. 5)
Values are enduring beliefs and ideals that are socially enforced. Several desirable or ethical values for business today are teamwork, trust, and integrity. Such values are often based on organizational or industry best practices.
Voluntary Practice (Pg. 86)
Voluntary Practices include the beliefs, values, and voluntary contractual obligations of a business. All businesses engage in some level of commitment to voluntary activities to benefit both internal and external stakeholders.
Sustainability
We define sustainability as the potential for the long-term well-being of the natural environment, including all biological entities, as well as the mutually beneficial interactions among nature and individuals, organizations, and business strategies. With major environmental challenges such as global warming and the passage of new environmental legislation, businesses can no longer afford to ignore the natural environment as a stakeholder. Companies with an effective environmental management system certified by ISO 14001—an international environmental management standard—tend to have improved financial performance in the long run.45 Even industries traditionally considered high in pollution, such as the oil and gas industry, are investing in sustainable practices like alternative energy. Sustainability is a major ethical issue.
Fraud
When individuals engage in intentional deceptive practices to advance their own interests over those of the organization or some other group, they are committing fraud. In general, fraud is any purposeful communication that deceives, manipulates, or conceals facts in order to harm others. Fraud can be a crime and convictions may result in fines, imprisonment, or both.
Puffery (Pg. 9) What is PUFFERY and is it considered acceptable by law?
While misleading advertising violates the law, puffery—or an exaggerated claim that customers should not take seriously—is considered acceptable. Puffery can be defined as exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely upon and is not actionable under the Lanham Act. For example, the National Advertising Division ruled that Tropicana's promotional claims to be the "world's best fruit and vegetable juice" is an example of puffery rather than misleading advertising.50 However, the lines between puffery and deceptive advertising can be murky.
Corporate Culture (Pg. 5)
Within this culture, there are rules and regulations—both written and unwritten—that determine what decisions employees consider right or wrong as it relates to the firm. The ethical component of a corporate culture relates to the values, beliefs, and established and enforced patterns of conduct employees use to identify and respond to ethical issues.
