MGMT 308 - Chapter 6

Business Ethics Across Organizational Functions

- Accounting Ethics - Financial Ethics - Marketing Ethics - Information Technology Ethics

Two Ethics Approaches

- Compliance-based approach - Integrity-based approach Both approaches have been found to lessen unethical conduct, but in somewhat different ways.

ethics reporting mechanism

1) provide interpretations of proper ethical behavior involving conflicts of interest and the appropriateness of gift giving 2) create an avenue to make known to the proper authorities allegations of unethical conduct 3) give employees and other corporate stakeholders a way to discover general information about a wide range of work related topics

Corporate culture:

A blend of ideas, customs, traditional practices, company values, and shared meanings

Ethics Policies or Codes:

As a guidance to managers and employees to solve ethical dilemma In U.S. policies tend to be instrumental, providing rules and procedures. In Japan policies tend to be combination of legal compliance and company values.

Corporate Ethics Awards

Awarded to companies for efforts in creating and improving their ethical performance and serve as role models. Demonstrate that firms can be financially successful and ethically focused. Ethisphere Magazine: honors firms based on Ethical Quotient (EQ). The Foundation for Financial Service Professionals sponsors the American Business Ethics Awards (ABEA).

Integrity-based approach:

Combines concern for law with employee responsibility Promotes acting with integrity and conduct business with honesty and fairness

Top Management Commitment and Involvement:

Critical to fostering employee ethical behavior

Accounting Ethics

Critically important component of every business firm. Financial records must be audited by a certified professional accounting firm. Requirements of the accounting function: Responsibilities Public interest Integrity Objectivity and independence Due care Conflict of interest Conflict with self-interest (of the accounting firm) and the interests of others (shareholders and the public).

Ethics in a Global Economy

Doing business in global context brings up host of complex ethical challenges. Bribery: a questionable or unjust payment often to a government official to ensure or facilitate a business transaction. International watchdog agency, Transparency International, publishes a survey of countries' levels of corruption. Bribe-taking more likely in countries with low per capita income, low salaries for government officials, and less income variation.

Information Technology Ethics

Ethical challenges in this field involve: Invasions of privacy The collection and storage of, and access to, personal and business information Copyright protection regarding software, music, and intellectual property

Ethical Criteria: Benevolence (concern-far-other approach)

Focus of individual person = Friendship Organization = Team interest Society = Social responsibiliy

Ethical Criteria: Principal (integrity approach)

Focus of individual person = Personal morality Organization = Company rules and procedures Society = Laws and professional codes

Ethical Criteria: Egoism (self-centered approach)

Focus of individual person = Self-Interest Organization= Company interest Society= Economic efficiency

Ethics Training Programs:

Generally the most expensive and time-consuming element of an ethics program Found mostly in larger business organizations Online or Web-based training more common, but may not be as effective as face-to-face

Ethics and Compliance Officers:

Many created as early as the 1980s Membership in professional association, Ethics and Compliance Officers Association, doubled between 2000 and 2004 Recently more are reporting to the firm's CEO

Marketing Ethics

Marketing: advertising, distributing, and selling products. Issue in marketing ethics emphasizes honesty and fairness in advertising, especially toward children. Example: Good Start Gentle formula by Gerber Products Company American Marketing Association (AMA) code of ethics: Do no harm Foster trust Embrace ethical values

Ethics Reporting Mechanisms:

Often called the "helpline" or "hotline" Purposes: To provide interpretations of proper ethical behavior To create avenue for reporting unethical conduct To provide information-sharing tool Executives tend to use the helpline more often than middle managers

Financial Ethics

Responsibilities to manage the firm's assets and raising capital. Example of ethical issues: Wells Fargo and JP Morgan Chase were accused of accepting kickbacks LIBOR financial scandal Self-regulation as the best path for ethical compliance.

Compliance-based approach:

Seeks to avoid legal sanctions Emphasizes the threat of detection and punishment

Efforts to Curtail Bribery on the Global Level

The Institute of Business Ethics (IBE) Say No Toolkit in 2014 Advises organizations on how to combat bribery and corruption Numerous efforts to prohibit bribery: U.S. Foreign Corrupt Practices Act (FCPA) The United Kingdom's Bribery Act prohibits bribery Anti-Bribery Law in Brazil and India Organization's culture and ethical work climate play a central role in encouraging employees to act ethically.

Ethical climate:

The unspoken understanding among employees of what is and is not acceptable behavior. - Based on the expected standards and norms. - Multiple climates (or subclimates) can exist within one organization.

Corporate culture:

To help define normal behavior for everyone who works in a company.

Building Ethics Safeguard Into the Company

To improve the quality of a company's ethical performance you have to change the culture so that ethics is part of everyday decision-making. To do so means institutionalizing ethics or building ethics safeguards in to everyday routines

Ethics Programs and Policies

Top Management Commitment and Involvement Ethics Policies or Codes Ethics programs must be widely distributed and associated with ethics training

corporate culture

is a blend of ideas, customs, traditional practices, company values, and shared meanings that help define normal behavior for everyone who works in a company.

Bribery

is a questionable or an unjust payment often to a government official to ensure or facilitate a business transaction

employee ethics training

most expensive and time-consuming element of an ethics program

ethics and compliance officer (ECO)

often called the Chief compliance officer (CCO), or the chief integrity officer (CIO)

ethical climate

represents an unspoken understanding among employees of what is and is not acceptable behavior based on the expected standards or norms used for ethical decision making.

U.F. Foreign Corrupt Practices Act (FCPA)

since 1977 they have prohibited executives of U.S.-based companies from paying bribes to foreign government officials, political parties, or political candidates

ethics policies or codes

to provide guidance to managers and employees when they encounter and ethical dilemma