BUS 220-Ethics in Contemporary Organizations Midterm
What new offices were created by Dodd-Frank and Consumer Protection Act?
-Office of Financial Research -Financial Stability Oversight Council -Consumer Financial Protection Bureau
What are some laws promoting equity and safety?
-Title VII of Civil Rights Act -Equal Employment Opportunity Commission (EEOC) -Affirmative action programs -The Equal Pay Act -Americans with Disabilities Act -Occupational Safety and Health Administration (OSHA) makes inspections to ensure a safe working environment
amount of competition in an industry can be determined/described according to...
-barriers to enter industry -available substitutes produced by competitors -power of industry rivals over customers -power of industry rivals' suppliers over the industry rivals
ethics contribute to...
-committed employees (concerns safe work environment, competitive salaries, benefits, fulfillment of contracts) -investor loyalty (investors concerned with reputation, company needs investors' trust and confidence to succeed) -customer satisfaction (the more socially responsible the increase in customer trust, trust required for relationships) -profits
21st Century in Business Ethics
-continued corporate non-compliance -increased public/political demand for improved ethical standards -Sarbanes-Oxley Act (2002) -FSGO reforms -Dood-Frank Wall Street Reform and Consumer Protection Act (2010)
What are the four factors that go into making an ethical decision
-ethical issue intensity -individual factors -organizational factors -opportunity
A company can be sued for discrimination if it...
-refuses to hire an individual for discriminatory reasons -unreasonably excludes an individual from employment -unreasonably discharges an individual -discriminates against an individual with respect to hiring, employment terms, promotion or privileges
Amendments made to FSGO in 21st century
-required that a business governing authority be well informed about ethics program
Federal Sentencing Guidelines for Organizations (FSGO)
-set tone for compliance -preventative actions against misconduct -company could avoid/minimize potential penalties
Before 1960s
-theological discussions of ethics emerged
elements of virtue that are most important in business transaction
-trust -self control -empathy -fairness -truthfulness -learning -gratitude -civility -moral leadership
3 types of lying
1) joking without malice 2) commission lying-creating false perception with words that deceive receiver 3) omission lying-intentionally not informing channel members of problems relating to a product that affects awareness, intention or behavior
3 dimensions of institutionalization
1) voluntary practices (beliefs, values, contractual obligations of business; philanthropy) 2) core practices (documented best practices, often encouraged by legal and regulatory forces and trade associations) 3) mandated boundaries (externally imposed boundaries of conduct like laws)
Top 3 most untrusted industries
1. Financial Services 2. Banks 3. Media
The Virtue ethics approach to business
1. good corporate ethics programs encourage individuals virtue and integrity 2. by the employee's role in the community/organization, these virtues for a good person 3. an individuals ultimate purpose is to serve society's demands and the public good and be rewarded in their career 4. well-being of the community goes hand in hand with individual excellence
3 approaches to stakeholder theory are...
1. normative 2. descriptive 3. instrumental
6 stages of cognitive moral development
1. punishment and obedience 2. individual instrumental purpose and exchange 3. mutual interpersonal expectations, relationships and conformity 4. social system and conscience maintenance 5.prior rights, social contract or utility 6. universal ethical principles
Top 3 trusted industries
1. technology 2. automotive 3. food and beverage
ethical-issue intensity
perceived relevance or importance of an ethical issue to the individual, work group or org.
dual relationship
personal, loving or sexual relationship with someone whom you share professional responsibilities
idealism
places value on ideas and ideals as products of the mind; positive correlation b/w this and ethical decision making
What seeks to improve financial regulation, increase oversight, and prevent excessive risk-taking , deceptive practices and lack of oversight?
Dodd-Frank Wall Street Reform and Consumer Protection Act
values
Enduring beliefs and ideals that are socially enforced -Teamwork, trust and integrity
Observed Misconduct In The Workplace
Misuse of company resources Abusive behavior Harassment Accounting fraud Conflicts of interest Defective products Bribery Employee theft
Top 5 most common office supply stolen by employees
post-it, tape, scissors, toilet paper, copier paper
five categories of laws
Regulating competition Protecting consumers Promoting equity and safety Protecting the environment Incentives to encourage organizational compliance programs to deter misconduct
principles
Specific and pervasive boundaries for behavior that should not be violated -Human rights, freedom of speech and justice
True or False, in business people make decisions differently than at home?
True
True or False, women are more ethical than men
True
Kant
argued that goodwill is applied toward accomplishment and accomplishment is the only thing that's good
descriptive stakeholder theory
focuses on actual behavior, addressing decisions and strategies in stakeholder relationships
ethical dilemma
a problem, situation or opportunity that requires an individual or group to chose among several wrong or unethical actions
what is one of the most common ethical problems?
abusive or intimidating behavior -can be physical, false accusations, profanity, insults, bullying
ethical culture
acceptable behavior as defined by the company and industry -creates shared values and support for ethical decisions-driven by top management -goal: minimize need for enforced compliance and maximize utilization of principles/ethical reasoning in difficult or new situations
act deontologists
actions are our power bases on which to judge morality -"action" -past experiences are more important than rules -rules serve only as guidelines in decision-making
Dodd-Frank Wall Street Reform and Consumer Protection Act
addressed some issues related to financial crisis and recession -designed to make financial services industry more ethical and responsible 0requries regulators to create hundreds of rules to promote financial stability, improve accountability and transparency and protect customers
implied fraud
advertising message that misleads, confuses or deceives the public
corporate social responsibility
an organizations obligation to maximize positive impact and minimize negative impact on stakeholders -philosophers increased their involvement -businesses concerned with public image -conferences held and centers developed
fraud
any purposeful communication that deceives, manipulates or conceals fats in order to create a false impression
virtue ethics
argues that ethical behavior involves not only adhering to conventional mural standards but also considering what a mature person with a "good" moral character would deem appropriate in given situation
Aristotle
argues that happiness is intrinsically good and goodness is universal
risk assessors
assess financial risk and express that risk through letter ratings from "AAA" to "C"
economic value orientation
associated with values quantified by monetary means, if an act produces more value for its effort, then should be accepted as ethical
normative relativism
assumes ones opinion is good as another
distributive justice
based on the evaluation of the outcomes or results of a business relationship
interactional justice
based on the relationships between organizational members including the way employees and management treat one another
ethical issues that emerged in the 1970s
bribery, price collusion, environment, deceptive advertising, product safety
stakeholder model of corporate governance
broader view of purpose of business -includes satisfying concerns of primary stakeholders including employees, suppliers, regulators, communities and special interest groups
What is one of the most important areas of business today?
building relationships
1970s
business ethics emerged as field -corporate social responsibility
sustainability issues
businesses can no longer afford to ignore the natural environment as a stakeholder
illegal insider trading
buying or selling of stocks by insiders who possess material that is not public
literally false
claims can be divided into tests establishment claims and non-establishment claims
Global Ethical Culture
collaborative efforts to establish goals and set minimum levels of ethical behavior -ex. European Union, NAFTA, MERCOSUR, WTO
corporate intelligence
collection and analysis of information on markets, technologies, customers and competitors, socioeconomic and external political trends -3 models: passive monitoring system for early warning, tactical field support, support dedicated to top management strategy -ex: hacking, social engineering, shoulder surfing, password guessing, dumpster diving
legal insider trading
involves legally buying and selling stock in an insiders own company but not all the time
consumer protection issues
company has the responsibility of taking precautions to prevent consumer harm
business ethics
comprises organizations 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 -As important as functional areas of business -Questions whether practices are acceptable -There are no universally accepted approaches for resolving issues
interlocking directorate
concept of board members being linked to more than one company
utilitarianism
concerned with consequences for everybody, the greatest good for the greatest amount of people
rule deontologists
conformity to general moral principles determines ethicalness -"do unto other as you would have them do unto you"
procedural justice
considers the processes and activities that produce a particular outcome
1980s
consolidation -business ethics became acknowledged field of study and firms est. ethics committees -seminars/conferences held -DII President Reagan introduced self-regulation that changed rules of business
Milton Friedman
contends that the market will reward or punish companies for unethical conduct without the need for government regulation -this is the most widely accepted economic system in market-driven societies
Sarbanes-Oxley Act
created to address the loss of confidence in financial reporting and corporate ethics -most far-reaching change in organizational control and accounting regulations since 1934 -made securities frauds a crime -increased penalties for corporate fraud -created accounting oversight board that created codes of ethics for financial reporting and develop transparency 0requires top executives to sign off on their firms' financial reports
elements of an ethical culture
culture is in the center; values, norms, artifacts, behavior encircle culture; voluntary actions, governance, core practices, legal compliance is the outer portion
social issues
deals with concerns that affect the welfare of our entire society, associated with the common good
relativist perspective
definitions of ethical behavior are derived subjectively from the experiences of individuals and groups -very subjective -forms include: descriptive, meta-ethical and normative
stakeholder orientation
degree to which a firm understands and addresses stakeholder demands -involves activities that facilitate and maintain value with stakeholders 1) generation of data about stakeholder groups 2) distribution of that info 3) responsiveness of the organization as a whole
categorical imperative
developed by Immanuel Kant -if you feel comfortable allowing everyone int he world to see you commit an act and if you rationale for acting in a particular manner is suitable to become a universal principle guiding behavior, the committing that act is ethical
secondary stakeholders
do not typically engage in transaction with the firm and are not essential to a firm's survival ex: media, trade associates, special interest groups
Sarboanes-Oxley Act (SOX)
est. a system of federal oversight of corporate accounting practices -Public Company Accounting Oversight Board (PCAOB) authority to monitor accounting firms that audit public companies -reduces conflict of interest and increases accountability -some legal protection for whistleblowers -Jumpstart Our Business Startups (JOBS) Act
puffery
exaggerated advertising claims, blustering, and boasting
instrumental stakeholder theory
examines stakeholder relationships and describes outcomes for particular behaviors
conflicts of interest
exist when an individual must choose whether to advance his/her personal interests, those of the organization or some other group
corporate citizenship
extent to which businesses strategically meet their economic, legal, ethical and philanthropic responsibilities -4 interrelated dimensions: 1) strong sustained economic performance 2) rigorous compliance 3) ethical actions beyond what is legally required 4) voluntary contribution to advance reputation and stakeholder commitment
managers with ____________go with the flow because that's all they can do
external locus of control
financial misconduct
failure to understand and mange ethical risks regarding money
justice
fair treatment and due reward in accordance with ethical legal standards including disposition to deal with perceived injustices of others 3 types: distributive, procedural and interactional
Adam Smith
father of free-market capitalism; professor of logic and moral philosophy; wrote treatise "The Theory of Moral Sentiments"; believed business was and should be guided by morals of good people
corporate governance
formal system of accountability and control of ethical and socially responsible behavior
corporate governance
formal systems of accountability, oversight, and control
Defense Industry Initiative on Business Ethics and Conduct (DII)
foundation for the Federal Sentencing Guidelines for Organizations to come in 1990s
shareholder model of corporate governance
founded in classic economic precepts -maximizing wealth for investors and owners
legal compliance
government est. laws/regulations -laws involving consumer safety and environmental protection demanded by stakeholders
FTC's Bureau of Consumer Protection
guards against unfair, deceptive, fraudulent practices
stakeholder framework
helps identify internal and external stakeholders -helps monitor and respond to needs, values and expectations of stakeholder groups
role of board of directors
holds final responsibility for its firms success, failure and ethicality of actions -stakeholders demand them to be transparent -spend lots of time discussing compensation
accountability
how closely workplace decisions align with a firms strategic direction
normative approach to ethical decision making
how organizational decision maker should approach an issue -fairness and justice are highly important -core values -takes into account political realities outside of legal realm in form of industry standards
white collar crime
illegal acts committed for personal or organizations gain by abusing the trust and authority associated with given position -educated criminals
1990s
institutionalization of business ethics -continued support for self-regulation and free trade -health-related issues more regulated -FSGO
what is one of the most important terms relating to virtue?
integrity
managers with ______________ believe they can control events; masters of their destinies and trust in their capacity to influence their environment
internal locus of control
What triggers the ethical decision making process
issue intensity
dishonesty
lack of integrity, incomplete disclosure or an unwillingness to tell the truth
What establish he basic ground rules for responsible business activities?
laws
facilitation payments
legal as long as they are small
Two main principles of justice
liberty principle and difference principle
accountants
measure and disclose financial info to public -assure accuracy
what is the leading form of observed misconduct?
misuse of company resources ex: time theft
deontology
moral philosophies that focus on the rights of individuals and intentions associated with particular behavior rather than its consequences -equal respect to all -"purpose" -should not infringe on individual rights even for greater good -also known as nonconsequentialism
What goes into institutionalization of business ethics
must embed values, norms and artifacts in organization, industry or society
reputation
one of an organization's greatest intangible assets with tangible value -difficult to quantify but very important -one negative incident can ruin image for years after
John Rawls
one of the most influential philosophers in his research on how principles support the concept of justice
What has stronger influence on employees than individual values
organizational culture
social responsibility
organizations obligation to maximize its positive impact on stakeholders and minimize its negative impact -4 levels: economic, legal, ethical, philanthropic
gatekeepers
overseers of business actions -ex: accountants, regulators, lawyers
bribery
practice of offering something in order to gain an illicit advantage -active: person who promises or gives bribe commits the offense -passive: offense committed by the official who receives the bribe
What do laws regulating competition do?
prevent monopolies, inequitable pricing, other practices that reduce or restrict competition -also known as procompetitive legislation
normative stakeholder theory
principles and values help identify ethical guidelines that dictate how to treat stakeholders
ethical issue
problem, situation, opportunity that requires an individual or group to choose among actions
control
process of auditing and improving organizational decisions and actions
marketing fraud
process of dishonestly creating, distributing, promoting and pricing products -types: puffery, implied falsity, literally false
criminal law
prohibits specific actions and imposes punishments for breaking the law -state or nation enforces this
meta-ethical relativism
proposes people see situations form own perspectives
fairness
quality of being just, equitable, impartial -equality: how wealth or income is distributed -reciprocity: occurs when an action that has an effect upon another is returned -optimization: tradeoff b/w equity and efficiency
morals
refer to a person's personal philosophies about what is right or wrong -personal singular
ethical culture
reflects whether the firm has an ethical conscience; is a function of many factors
FDA
regulates food safety, human drugs, tobacco
moral intensity
relates to a persons perception of social pressure and the harm their decision will have on others
locus of control
relates to individual differences in relation to a general belief about how one is affected by internal versus external events or enforcements
descriptive relativism
relates to observations of other cultures
sexual harassment
repeated, unwanted behavior of a sexual nature perpetrated upon an individual by another -creates hostile work environment
What do laws protecting consumers do?
require businesses to provide accurate info about products and services and follow safety standards -some groups have higher levels of legal protection
corporate governance issues
research shows corporate governance has strong positive relationship with social responsibility
egoism
right or acceptable behavior in terms of consequences to individual -make decisions that maximize own self-interests -varies person to person -this type of business tends to be unethical, short-term oriented and willing to take advantage of opportunity for gain
Consumer Bill of Rights
right to safety, right to be informed, right to choose, right to be heard
corporate culture
set of values, norms, and artifacts that members of an organization share
views of corporate governance
shareholder model and stakeholder model
cognitive moral development
shows that individuals can change their values through value/moral development -6 stages -developed by Kholberg
1960s
social consciousness emerged -JFK's Consumer Bill of Rights -consumer protection groups fought for legislation changes (ex. Ralph Nadar criticized auto industry and GM in particular for putting profit ahead of lives and safety )
social responsibility issues
social, consumer protection, sustainability, corporate governance
moral philosophy
specific principles or values people use to decide what is right and wrong -different from business ethics -3 orientations: economic value orientation, idealism, realism
liberty principle
states that each person has basic rights that are compatible to the basic liberties of others
difference principle
states that economic and social equalities (or inequalities) should be arranged to provide the most benefit to the least-advantaged members of society
teleology
stipulates acts are morally right or acceptable if they produce some desired result , such as realization of self-interest or utitlity -"purpose," "end" -many of these theories are considered consequentialism -two examples are egoism and utilitarianism
strategic philanthropy
synergistic and mutually beneficial use of core competencies and resources to deal with stakeholders, benefit the company and society
nonconsequentialism
system based on respect for people
oversight
system of checks and balances to minimize opportunities for misconduct
enlightened egoism
take long term perspective and allow for well-being of others though their own self-interests remain paramount -ex: person who reports unethical accounting actions, not because it's unethical, but because it will promote them
unethical dual relationship
the relationship causes a conflict of interest or impairment of professional judgment
civil law
the rights and duties of individuals and organizations -individuals enforce this
consequentialism
the worth of behavior by looking at consequences that follow
stakeholders
those who have a stake or claim in some aspect of a company's products, operations, markets, industry and outcomes ex: customers, employees, government agencies, investors, suppliers, communities -this relationship is a two way street
primary stakeholders
those whose continued association is absolutely necessary for a firm's survival ex: employees, customers, investors, governments
veil of ignorance
thought experiment that examined how individual would formulate principles if they did not know what their future position in society would be
cause-related marketing
ties an organization's products to a social concern through a marketing program
what is the purpose of stakeholder orientation?
to maximize positive outcomes that meet stakeholders needs -stakeholders support companies they perceive to be socially responsible
________ is the glue that holds businesses and their stakeholders together
trust
honesty
truthfulness or trustworthiness
integrity
uncompromising adherence to ethical values
Federal Sentencing Guidelines for Organizations
urges organizations to develop and implement compliance programs
realism
view that external world exists independent of our perceptions; not naturally kind, naturally self-interested and competitive; everyone guided by own self interest -this belief is linked with unethical decision making
consumer fraud
when consumer attempt to deceive business for personal gain -collusion: when employee helps consumer commit fraud -duplicity: involved a consumer duping a store -guile: is associated with a person who uses tricks to obtain an unfair advantage
immediate job context
where employees work, with whom they work, the nature of their work
six spheres of influence
workplace, family, religion, legal system, community, profession