Busi 390 alc 2

Dumping

occurs when companies sell products in foreign markets at low prices that do not cover all the costs of the products. Price differentials, gouging, and dumping create ethical issues because some groups of consumers have to pay more than a fair price for products.

Ethical Relativism

the belief that only one culture defines ethical behavior for the whole globe with no exceptions.

cultural relativism

the concept that morality varies from one culture to another, and business practices are therefore differentially defined as right or wrong by particular cultures.

Stakeholder Orientation

the degree to which a firm understands and addresses stakeholder demands three sets of activities (1) the organization-wide generation of data about stakeholder groups and assessment of the firm's interactions with these groups, (2) the distribution of this information throughout the firm, and (3) the organization's responsiveness as a whole to this information.

code of ethics

the most comprehensive and consists of general statements, sometimes altruistic or inspirational, that serve as principles and the basis for rules of conduct. A code of ethics generally specifies methods for reporting violations, disciplinary action for violations, and a structure of due process.

self-reference criterion

the tendency to view other cultures through the lens of our own culture, (we verses them mentality)

World Trade Organization (WTO)

was established in 1995 at the Uruguay round of negotiations of the General Agreement on Tariffs and Trade (GATT). he WTO addresses economic and social issues involving agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards, food sanitation regulations, services, and intellectual property. It also provides legally binding ground rules for international commerce and trade policy. The organization attempts to reduce barriers to trade between and within nations and settle trade disputes.

codes of conduct

which are formal statements that describe what an organization expects of its employees. Such statements may take three different forms: a code of ethics, a code of conduct, and a statement of values. A code of conduct is a written document that may contain some inspirational statements but usually specifies acceptable or unacceptable types of behavior. A code of conduct is more akin to a regulatory set of rules and, as such, tends to elicit less debate about specific actions. One problem with codes of conduct is that they tend to be developed without broad-based participation from stakeholders.

statement of values

which serves the general public and also addresses distinct groups such as stakeholders. Values statements are conceived by management and are fully developed with input from all stakeholders. Despite our distinctions, it is important to recognize that these terms are often used interchangeably.

values orientation

which strives to develop shared values. Although penalties are attached, the focus is more on an abstract core of ideals such as respect and responsibility. Instead of relying on coercion, the company's values are seen as something to which people willingly aspire.

Habits of Strong Ethical Leaders

1.) Strong Personal Character 2.) a passion to Do Right 3.) Proactive 4.) Consider Stakeholders' Interest 5.) Are role models for the organization's values 6.) are transparent and actively involved in organizational decision-making 7.) are competent managers who take a holistic view of the Firm's ethical culture

compliance orientation.

A compliance orientation creates order by requiring that employees identify with and commit to specific required conduct. It uses legal terms, statutes, and contracts that teach employees the rules and penalties for noncompliance.

how a company might address discrimination

Develop a company policy on discrimination Communicate the policy internally and externally Determine benchmarks for activities in which discrimination can arise Determine indicators of possible noncompliance Establish methods for identifying noncompliance Develop a plan and implement the plan

money laundering

consists of using or transferring illegally received funds in a financial transaction to conceal their source of ownership or to facilitate illegal activity.

shareholder model of corporate governance

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 firms' 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, where ownership (investors) and control (managers) are separate. Investors cannot directly monitor all the actions and decisions of managers, for they do not have the same information as the managers. the shareholder model has been criticized for its somewhat singular focus because other stakeholders also "invest" in a company; suppliers, creditors, customers, employees, business partners, the community, and others invest their resources into a company

international Organization for Standardization (ISO)

has tried to establish a corporate responsibility standard, the ISO 26000. Although the ISO 26000 has been demoted to a guideline rather than a standard, the discussion and debate surrounding the process is valuable. Whereas corporate responsibility needs quantitative credibility, significant aspects are more qualitative in nature: employee satisfaction, customer motivations, company values, and ethical decision-making processes, for instance. All, to some extent, can be broken down into quantitative data, but the essence of them cannot. However, they also shift constantly, which makes yesterday's survey an addition to today's recycle bin.

Primary stakeholders

hose whose continued association is absolutely necessary for a firm's survival; these include employees, customers, investors, and shareholders as well as the governments and communities that provide necessary infrastructure.

Organizational factors

includes the resources and capabilities of the marketing organization A corporate culture can be defined as a set of values beliefs goals norms and ways of solving problems that the members or or employees of an organization share

executive compensation

is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentives such as stock awards and options. One of the biggest issues that 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. One area for board members to consider is the extent to which executive compensation is linked to company performance. Plans that base compensation on the achievement of several performance goals, including profits and revenues, are intended to align the interests of owners with management. one of the biggest issues that corporate bords of directors face

Social responsibility

is an organization's obligation to maximize its positive impact on stakeholders and to minimize its negative impact. Social responsibility can be viewed as a contract with society, whereas business ethics involves carefully thought-out rules or heuristics of business conduct that guide decision-making.

Control

is the process of auditing and improving organizational decisions and actions. Control processes also provide feedback on whether decisions have achieved the desired results and if future decisions could be improved to provide even better results.

Transactional Leaders

leaders who attempt to create employee satisfaction through negotiating or "bartering" for desired behaviors or levels of performance. Transactional leaders focus on ensuring that required conduct and procedures are implemented. Their negotiations to achieve desired outcomes result in a dynamic relationship with subordinates in which reactions, conflict, and crisis influence the relationship more than ethical concerns.

Six values for disireble code of ethics

(1) trustworthiness, (2) respect, (3) responsibility, (4) fairness, (5) caring, and (6) citizenship

Framework for Ethical Decision Making Mdodel

(ethical issue intensity * individual factors * organizational factors *Opportunity) leads to business ethics evaluations and intentions leads to ethical or unethical behavior

Systems to Monitor and Enforce Ethical Standards

-External audit or review of company activities -Role-playing exercises and questionnaires -Providing awareness about an internal system that allows employees to report misconduct -Case-management services and software -Consistent enforcement of standards and taking necessary disciplinary action

Five top recommendations to CEOs for rebuilding trust and confidence in American firms

1 1 Making customers the top priority 2 2 Assuming personal responsibility and accountability 3 3 Communicating openly and frequently with customers 4 4 Handling crises more honestly 5 5 Sticking to the code of business ethics no matter what

Common Mistakes in Designing and Implementing an Ethics Program

1 1 Not having a clear understanding of the goals of the program from the beginning 2 2 Not setting realistic and measurable program objectives 3 3 Senior management's failure to take ownership of the ethics program 4 4 Developing program materials that do not address the needs of the average employee 5 5 Transferring a domestic program internationally 6 6 Designing a program as a series of lectures

Minimum requirements for ethical compliance

1 1 Standards and procedures, such as code of ethics, that are reasonably capable of detecting and preventing misconduct 2 2 High-level personnel who are responsible for an ethics and compliance program 3 3 No substantial discretionary authority given to individuals with a propensity for misconduct 4 4 Standards and procedures communicated effectively via ethics training programs 5 5 Establishment of systems to monitor, audit, and report misconduct 6 6 Consistent enforcement of standards, codes, and punishment 7 7 Continuous improvement of the ethical compliance program

Stakeholder framework

1 1 Step 1: Assessing the corporate culture 2 2 Step 2: Identifying stakeholder groups 3 3 Step 3: Identifying stakeholder issues 4 4 Step 4: Assessing organizational commitment to social responsibility 5 5 Step 5: Identifying resources and determining urgency 6 6 Step 6: Gaining stakeholder feedback

Areas of cultural difference

1) One significant area of cultural difference is language. 2) Cultural differences in body language can also lead to misunderstandings. 3) Perceptions of time may likewise differ from country to country. 4) Different religious values also impact culture.

Ethics Officers are responsible for:

1) assessing the needs and risks that an organization-wide ethics program must address; 2) developing and distributing a code of conduct or ethics; 3) conducting training programs for employees; 4) establishing and maintaining a confidential service to answer employees' questions about ethical issues; 5) making sure that the company is in compliance with government regulations; 6) monitoring and auditing ethical conduct; 7) taking action on possible violations of the company's code, and 8) reviewing and updating the code

Six Leadership Styles

1. Coercive: the coercive leader demands instantaneous obedience and focuses on achievement, initiative, and self-control. Although this style can be very effective during times of crisis or during a turnaround, it otherwise creates a negative climate for organizational performance. 2. Authoritative: the authoritative leader, considered to be one of the most effective styles, inspires employees to follow a vision, facilitates change, and creates a strong positive performance climate. 3. Affiliative: the affiliative leader values people, their emotions and needs, and relies on friendship and trust to promote flexibility, innovation, and risk-taking. 4. Democratic:the democratic leader relies on participation and teamwork to reach collaborative decisions. This style focuses on communication and creates a positive climate for achieving results. 5. Pacesetting: the pacesetting leader can create a negative climate because of high standards that he or she sets. This style works best for attaining quick results from highly motivated individuals who value achievement and take the initiative. 6. Coaching: the coaching leader builds a positive climate by developing skills to foster long-term success, delegates responsibility, and is skillful in issuing challenging assignments.

Four levels of social responsibility

1. Economic: maximizing stakeholder wealth and or value 2. Legal: abiding by all laws and government regulations 3. Ethical: following standards of acceptable behavior as judge by stakeholders 4. Philanthropic: giving back to society

Ethics Training and Communication

A major step in developing an effective ethics program is implementing a training program and communication system to educate employees about the firm's ethical standards. A significant number of employees report they frequently find such training useful. Training can educate employees about the firm's policies and expectations, relevant laws and regulations, and general social standards. Training programs can make employees aware of available resources, support systems, and designated personnel who can assist them with ethical and legal advice. They can also empower employees to ask tough questions and make ethical decisions. Many companies are now incorporating ethics training into their employee and management development training efforts. Ethical decision-making is influenced by corporate culture, by coworkers and supervisors, and by the opportunities available to engage in unethical behavior. Ethics training can affect all three types of influence. If adequately and thoughtfully designed, ethics training can ensure everyone in the organization (1) recognizes situations that might require ethical decision making, 2) understands the values and culture of the organization, and (3) can evaluate the impact of ethical decisions on the company in the light of its value structure. If ethics training is to be effective, it must start with a foundation, a code of ethics, a procedure for airing ethical concerns, line and staff involvement, and executive priorities on ethics that are communicated to employees. Managers from every department must be involved in the development of an ethics-training program. Training and communication initiatives should reflect the unique characteristics of an organization: its size, culture, values, management style, and employee base. It is important for the ethics program to differentiate between personal and organizational ethics. To be successful, business ethics programs should educate employees about formal ethical frameworks and models for analyzing business ethics issues. Then, employees can base ethical decisions on their knowledge of choices rather than on emotions. Some of the goals of an ethics-training program might be to improve employees' understanding of ethical issues and their ability to identify them, to inform employees of related procedures and rules, and to identify the contact person who could help them resolve ethical problems. Most experts agree that one of the most effective methods of ethics training is exercises in resolving ethical dilemmas that relate to actual situations employees may face in their jobs. A relatively new training device is behavioral simulation, which gives participants a short, hypothetical ethical-issue situation to review. Each participant is assigned a role within a hypothetical organization and is provided varying levels of information about the scenario. Participants then must interact to develop recommended courses of action representing short-term, mid-term, and long-term considerations. Research indicates that "the simulation not only instructs on the importance of ethics but on the processes for managing ethical concerns and conflict." Top executives must communicate with managers at the operations level (in production, sales, and finance, for instance) and enforce overall ethical standards within the organization. It is most important to help employees identify ethical issues and give them the means to address and resolve such issues in ambiguous situations. In addition, employees should be offered direction on how to seek assistance from managers, the ethics officer, or other designated personnel when resolving ethical problems. Although training and communication should reinforce values and provide employees with opportunities to learn about rules, they represent just one part of an effective ethics program. Moreover, ethics training will be ineffective if conducted solely because it is required or because it is something that competing firms are doing. If ethical performance is not a part of regular performance appraisals, this sends the message that ethics is not an important component of decision-making. For ethics training to make a difference, employees must understand why it is conducted, how it fits into the organization, and what their own role in implementing it is.

Reasons to Study business ethics

An individual's personal values and morality are only one factor in the ethical decision making process Being a good person and having sound personnel athex may not be sufficient to handle ethical issues that arise in a business organization Business strategy decisions involve complex and detailed discussions in a high level of personal moral development that may not prevent an individual from violating the law and an organizational context The values people learn from family religion and school may not provide specific guidelines for complex business decisions

Cultural differences etc.

Cultural differences can also become liabilities when firms transfer personnel. Consequently, large corporations spend thousands of dollars to ensure that the employees they send abroad are culturally prepared. Due to long-term interactions and repeated business dealings, as well as cultural values, many times "foreigners" are treated differently than "locals", just like "tourists" (who may never be seen again) might be taken advantage of compared to "locals."

Discrimination good and bad

Businesses around the world benefit by acknowledging and attempting to curb discrimination, including a decrease in employee turnover; people who believe they are hired, promoted, and treated according to their skills and abilities rather than their personal characteristics or beliefs are more likely to remain loyal. In turn, this can reduce the costs of hiring and training new employees. Productivity also improves when jobs are filled with loyal and qualified employees. Additionally, when companies hire a diverse local work force, they are more likely to enjoy the goodwill and support of the communities surrounding their facilities. Companies that take steps to eliminate discrimination may receive favorable attention from such stakeholders as labor and women's rights groups, enhancing the reputation of the firm overall, as well as its brands.

Ethical Culture

Can be viewed as the character of the decision making process that employees use to determine whether their responses to ethical issues are right or wrong ethical culture is used to describe the component of corporate culture that captures the rules and principles and organization defines as appropriate conduct

price gouging

but when prices increase beyond the level needed to meet the costs of these additional expenses, an ethical issue emerges. Increasing prices in this way is sometimes referred to as price gouging.

Benefits of Business Ethics

Employee commitment, investor loyalty, customer satisfaction, profits Employee commitment—employee commitment comes from the employees believe that their future is tide to that of the organization and are willing to make personal sacrifices for the organization. The more companies dedicated to taking care of its employees, the more likely it is that the employee will take care of the organization. investor loyalty— Investors today are increasingly concerned about the ethics, social responsibility, and reputation of the companies in which they invest. Investors recognize that an ethical climate provides a foundation for efficiency, productivity, and profits, well negative publicity, lawsuits, and fines can lower stock prices, diminish customer loyalty, and threaten the company's long term viability customer satisfaction— research indicates that a majority of consumers place social responsibility ahead of brand reputation or in fact financial factors when forming impressions of companies; consumers may avoid the products of a company they perceive as irresponsible. A strong organizational ethical environment usually focuses on the core value of placing the customer's interest first profits -- many studies have found a positive relationship between corporate social responsibility and business performance. Companies convicted of misconduct experience a significantly lower return on assets and return on sales than firms that have not faced such charges.

Advancing human rights principles

Engage in an open dialog with workers and management. Be aware of human rights issues and concerns in each country in which the company engages in business. Adopt the prevailing legal standard but seek to embrace a "best practices" approach and standard.

boards of directors

For public corporations, boards of directors hold the ultimate responsibility for their firms' success or failure as well as for the ethics of their actions. This governing authority is being held responsible by the 2004 amendments to the FSGO for creating an ethical culture that provides leadership, values, and compliance. The members of a company's board of directors assume legal responsibility for the firm's resources and decisions, and they appoint its top executive officers. The traditional approach to directorship assumed that board members managed the corporation's business. Research and practical observation have shown that boards of directors rarely, if ever, perform the management function. First, boards meet only a few times a year, which precludes them from managing effectively. In addition, the complexity of modern organizations mandates full attention on a daily basis. Thus, boards of directors are concerned primarily with monitoring the decisions made by senior company managers. These include choosing top executives, assessing their performance, helping set strategic direction, and ensuring that oversight, control, and accountability mechanisms are in place. In summary, board members assume ultimate authority for their organization's effectiveness and subsequent performance.

Business relativist

For the business relativist, there may be no ethical standards except for the ones in the transaction culture, or none at all. Such individuals may adjust to the ethics of a particular foreign culture or use their own culture as a defense against something perceived as unethical in a foreign country. The disadvantage is that they may be in conflict with their own individual moral standards and perhaps with their own culture's values and legal system. As business becomes more global and multinational corporations proliferate, the chances of ethical conflict increase.

social responsibility

From the perspective of social responsibility, business ethics embodies standards, norms, and expectations that reflect a concern of major stakeholders, including consumers, employees, shareholders, suppliers, competitors, and the community. In other words, these stakeholders have concerns about what is fair, just, or in keeping with respect to stakeholders' rights. Many businesspeople and scholars have questioned the role of ethics and social responsibility in business. Legal and economic responsibilities are generally accepted as the most important determinants of performance.

Individual Factors

Gender: extensive research shows that in many aspects there are no differences between men and women; But when differences are found, women are generally more ethical than men. Education: the number of years spent in pursuit of academic knowledge is also significant factor in ethical decision making process. Nationality: nationality is the legal relationship between a person and the country in which they are born or had become a naturalized citizen. Research about nationality and ethics suggests that there are significant differences regarding what is considered right and wrong and different nationality based cultures. Age: age is another individual factor that has been studied as it relates to business ethics. Several decades ago, it was believed that age was positively correlated with ethical decision making. However recent research suggests that there is probably more of a complex relationship between ethics and age. Locus of control: this factor relates to the individual differences in relation to a generalized belief about how one is affected by internal versus external events or reinforcements. Those who believe that external control (that is externals) see themselves as going with the flow because that is all they can do. Conversely, those who believe in internal control believe they control the events in their lives by their own effort and skill.

Harmful products

Governments in advanced industrialized nations have banned the sale of certain products that are considered harmful. However, some companies in those nations continue to sell those products in other countries where they remain legal. Other ethical issues involve the export of tobacco products and dumping of hazardous waste materials in less-developed countries. Some products that are not harmful in some countries may be so in others because of issues related to literacy, unsanitary conditions, and cultural values. The concern is growing over safe drinking water, genetically modified products, and tainted foodstuffs entering the food chain.

Continuous Improvement of the Ethics Program

Improving the system that encourages employees to make more ethical decisions differs little from implementing any other type of business strategy. Implementation requires designing activities to achieve organizational objectives using available resources and existing constraints. Implementation translates a plan for action into operational terms and establishes a means by which an organization's ethical performance will be monitored, controlled, and improved. A firm's ability to plan and implement ethical business standards depends in part on how it structures resources and activities to achieve its ethical objectives. People's attitudes and behavior must be guided by a shared commitment to the business rather than mere obedience to traditional managerial authority. Encouraging diversity of perspectives, disagreement, and the empowerment of people helps align the company's leadership with its employees. If a company determines that its ethical performance has been less than satisfactory, executives may want to reorganize how certain kinds of decisions are made. For example, a decentralized organization may need to centralize key decisions, at least for a time, so that upper managers can ensure the decisions are ethical. In other companies, decentralizing important decisions may be a better way to attack ethical problems so that lower-level managers, familiar with the forces of the local business environment and local culture and values, can make more decisions. Whether the ethics function is centralized or decentralized, the key need is to delegate authority in such a way that the organization can achieve ethical performance.

facilitating payments

In many cultures, giving bribes, also known as facilitating payments, is an acceptable business practice.

The Responsibility of the Corporation as a Moral Agent

Increasingly, corporations are viewed not merely as profit-making entities but also as moral agents that are accountable for their conduct to their employees, investors, suppliers, and customers. Companies are more than the sum of their parts or participants. Because corporations are chartered as citizens of a state and/or nation, they generally have the same rights and responsibilities as individuals. Through legislation and court precedents, society holds companies accountable for the conduct of their employees as well as for their decisions and the consequences of those decisions. Publicity in the news media about specific issues such as employee benefits, executive compensation, defective products, competitive practices, and financial reporting contribute to a firm's reputation as a moral agent. Viewed as moral agents, companies are required to obey the laws and regulations that define acceptable business conduct. However, it is important to acknowledge that they are not human beings who can think through moral issues. Because companies are not human, laws and regulations are necessary to provide formal structural restraints and guidance on ethical issues. Although individuals may attempt to abide by their own values and moral philosophy, as employees they are supposed to act in the company's best interests. Thus, the individual as a moral agent has a moral obligation beyond that of the corporation because it is the individual, not the company, who can think responsibly through complex ethical issues. Though obviously not a person, a corporation can be considered a societal moral agent that is created to perform specific functions in society and is therefore responsible to society for its actions. Because corporations have the characteristics of agents, responsibility for ethical behavior is assigned to them as legal entities as well as to the individuals or work groups they employ. A corporate culture without values and appropriate communication about ethics can facilitate individual misconduct. As such, companies may be punished for wrongdoing and rewarded for good business ethics. The Federal Sentencing Guidelines for Organizations (FSGO) holds corporations responsible for conduct they engage in as an entity. Some corporate outcomes cannot be tied to one individual or even a group, and misconduct can be the result of a collective pattern of decisions supported by a corporate culture. Therefore, corporations can be held accountable, fined, and even receive the death penalty when they are operating in a manner inconsistent with major legal requirements. Some organizations receive such large fines and negative publicity that they must go out of business because there is no way to survive under these pressures. On the other hand, companies that have been selected as the top corporate citizens receive awards and positive publicity for being responsible moral agents in our society. One major misunderstanding in studying business ethics is to assume that a coherent ethical corporate culture will evolve through individual interpersonal relationships. Because ethics is often viewed as an individual matter, many reason the best way to develop an ethical corporate culture is to provide character education to employees or to hire individuals with good character and sensitize them to ethical issues. This assumes that ethical conduct will develop through company-wide agreement and consensus. Although these assumptions are laudable and have some truth, the companies that are responsible for most of the economic activity in the world employ thousands of culturally diverse individuals who will never reach agreement on all ethical issues. Many ethical business issues are complex close calls, and the only way to ensure consistent decisions that represent the interests of all stakeholders is to require ethical policies. Implementing a centralized corporate ethics program can provide a cohesive, internally consistent set of statements and policies representing the corporation as a moral agent.

The Need for Organizational Ethics Programs

It is nearly impossible to know all relevant laws - Ethics programs increase ethical awareness Organizations can become bad barrels - Pressures to succeed create opportunities rewarding unethical decisions Established ethics programs help employees determine what behaviors are acceptable - Top management must integrate these codes, values and standards into the corporate culture One reason why ethics programs are required in one form or another is to help sensitize employees to the potential legal and ethical issues within their work environments. Recent ethics scandals in U.S. business have destroyed trust in top management and significantly lowered the public's trust of business. Understanding the factors that influence the ethical decision-making process can help companies encourage ethical behavior and discourage undesirable conduct. Fostering ethical decision-making within an organization requires terminating unethical persons and improving the firm's ethical standards. To promote legal and ethical conduct, an organization should develop an organizational ethics program by establishing, communicating, and monitoring the ethical values and legal requirements that characterize its history, culture, industry, and operating environment. Without such programs, uniform standards, and policies of conduct, it is difficult for employees to determine what behaviors are acceptable within a company. In the absence of such programs and standards, employees generally will make decisions based on their observations of how their coworkers and superiors behave. A strong ethics program includes a written code of conduct, an ethics officer to oversee the program, careful delegation of authority, formal ethics training, rigorous auditing, monitoring, enforcement, and revision of program standards. Without a strong program, problems likely will occur. Although there are no universal standards that can be applied to organizational ethics programs, most companies develop codes, values, or policies to provide guidance on business conduct. However, it would be naive to think that simply having a code of ethics would solve all the ethical dilemmas a company might face. Indeed, most of the companies that have experienced ethical and legal difficulties in recent years have had formal ethics codes and programs. The problem is that top managers have not integrated these codes, values, and standards into their firms' corporate culture where they can provide effective guidance for daily decision-making. To satisfy the public's escalating demands for ethical decision-making, companies need to develop plans and structures for addressing ethical considerations. Some directions for improving ethics have been mandated through regulations, but companies must be willing to have in place a system for implementing values and ethics that exceeds the minimum requirements. Five top recommendations to CEOs for rebuilding trust and confidence in American firms include making customers the top priority, assuming personal responsibility and accountability, communicating openly and frequently with customers, handling crises more honestly, and sticking to the code of business ethics no matter what.

Pollution and the Natural Environment

Many countries are working together to create alliances and standards for environmental responsibility to minimize the negative effects of pollution. Some countries are taking legal action against polluting firms in an effort to defend air and water quality. In some countries, however, groups have lobbied governments to increase the level of pollution they allow. For organizations to thrive globally, their governments should form joint agreements that set reasonable emission standards for members. Many pollution-control efforts have relatively short payback periods and have a long-term positive effect on profitability. In contrast, violating environmental initiatives has both human and financial costs, with the human costs being the health hazards associated with pollution.

Accountability and Transparency

Just as improved ethical decision-making requires more of employees and executives, so too are boards of directors feeling greater demands for accountability and transparency. In the past, board members were often retired company executives or friends of current executives, but the trend today is toward "outside directors" who have little vested interest in the firm before assuming the director role. Inside directors are corporate officers, consultants, major shareholders, or others who benefit directly from the success of the organization. Directors today are increasingly chosen for their expertise, competence, and ability to bring diverse perspectives to strategic discussions. Outside directors are also thought to bring more independence to the monitoring function because they are not bound by past allegiances, friendships, a current role in the company, or some other issue that may create a conflict of interest. Many of the corporate scandals uncovered in recent years might have been prevented if each of the companies' boards of directors had been better qualified, more knowledgeable, and less biased. There is a difficult balance between selecting board members who are knowledgeable about a firm and its industry through their own direct expertise and having board members who can view things from an entirely independent and objective perspective. The former group may lack independence and be less likely to ask why certain decisions are being made, while the latter may not have the background to fully understand the interrelationships between the company and many of the stakeholders. CONTINUE

Transformational Leaders

Leaders who strive to raise employees' level of commitment and foster trust and motivation. Transformational leaders promote activities and behavior through a shared vision and common learning experience. As a result, they have a stronger influence on coworker support for ethical decisions and building an ethical culture than do transactional leaders. Transformational ethical leadership is best suited for organizations that have higher levels of ethical commitment among employees and strong stakeholder support for an ethical culture.

Global Values

Many theorists have tried to establish a set of global or universal ethical standards. These efforts show a pattern of shared values, such as truthfulness, integrity, fairness, and equality, which suggests a universal set of ethics that can be applied to business across the globe. The Caux Round Table in Switzerland, in collaboration with business leaders in other European countries, Japan, and the United States, has created an international ethics code. The shared values assume we all have basic rights and responsibilities that must be adhered to when doing business. If there is a universal set of ethics, why then do business people have trouble understanding what is ethical and unethical? Research suggests there is variation between cultures and values, but there also appears to be consensus on sets of core values that many cultures may have, including integrity, altruism, collective motivation, and encouragement. When someone from another culture mentions words such as integrity or democracy, most listeners feel reassured because these are familiar concepts. Differences surface when someone from another culture explains what these concepts mean from the perspective of his or her culture. The concern is to develop not only the legal limitations for behavior but also incentives for self-regulation and ethical conduct that are acceptable in a global business environment. The key to improving global and legal performance is determining the relationship between national differences in individual moral philosophies and the corporate core values in management systems.

Corporate Governance Provides Formalized Responsibility to Stakeholders

Most businesses, and often courses taught in colleges of business, operate under the belief that the purpose of business is to maximize profits for shareholders. In 1919 the Michigan Supreme Court in the case of Dodge v. Ford Motor Co. ruled that a business exists for the profit of shareholders, and the board of directors should focus on that objective. On the other hand, the stakeholder model places the board of directors in the central position to balance the interests and conflicts of the various constituencies. External control of the corporation includes not only government regulation but also key stakeholders including employees, consumers, and communities that exert pressures for responsible conduct. Many of the obligations to balance stakeholder interest have been institutionalized in legislation that provides incentives for responsible conduct. The Federal Sentencing Guidelines for Organizations (FSGO) provides incentives for developing an ethical culture and efforts to prevent misconduct. Today, the failure to balance stakeholder interests can result in a failure to maximize shareholders' wealth. Most firms are moving more toward a balanced stakeholder model as they see that this approach will sustain the relationships necessary for long-term success. Both directors and officers of corporations are fiduciaries for the shareholders. Fiduciaries are persons placed in positions of trust who use due care and loyalty in acting on behalf of the best interests of the organization. There is a duty of care, also called a duty of diligence, to make informed and prudent decisions. Directors have a duty to avoid ethical misconduct in their director role and to provide leadership in decisions to prevent ethical misconduct in the organization. Directors are not held responsible for negative outcomes if they are informed and diligent in their decision-making. This means they have an obligation to request information, research, use accountants and attorneys, and obtain the services of ethical compliance consultants. The duty of loyalty means that all decisions should be in the interests of the corporation and its stakeholders. Conflicts of interest exist when a director uses the position to obtain personal gain (usually at the expense of the organization).

Social Responsibility

Much evidence shows that social responsibility, including business ethics, is associated with increased profits. Social responsibility contributes to employee commitment and customer loyalty-vital concerns of any firm trying to increase profits. It should be obvious from this discussion that ethics and social responsibility cannot be just a reactive approach to issues as they arise. Only if firms make ethical concerns a part of their foundation and incorporate ethics in their business strategy can social responsibility as a concept be embedded in daily decision-making. A description of corporate ethical responsibility should include rights and duties, consequences and values, all of which refer to specific strategic decisions. The ethical component of business strategy should be capable of providing an assessment of top management, workgroup, and individual behavior as it relates to ethical decisions.

multinational corporation

Multinational corporations (MNCs) operate on a global scale with significant ties to multiple nations. A MNC's strategy focuses on opportunities throughout the world. Because of their size and financial power, MNCs have been the subject of much ethical criticism, and their impact on the countries in which they do business has been hotly debated. Many times they create jobs and opportunities for individuals in developing countries, lower the prices for consumers worldwide, ensure access to high technology, shift pollution away from where consumers live, and achieve higher levels of quality. (Does the mobile phone you own fit this description? Critics believe that the size and power of MNCs creates ethical issues related to the exploitation of both natural and human resources. Critics accuse MNCs of exploiting labor markets of host countries. Some labor leaders believe it is unfair for MNCs to transfer jobs abroad where wage rates are lower. The activities of MNCs may also raise issues of unfair competition if they use their size and power to put small local firms out of business. Although MNCs are not inherently unethical, their size and power can seem threatening to less-developed countries and smaller corporations.

Opportunity factors

Opportunity describes the conditions in an organization that limit or permit ethical or unethical behavior. Opportunity results from conditions that either provide rewards, weather internal or external, or fail to erect barriers because of unethical behavior. Opportunity relates to individuals immediate job contacts: where they work, whom they work with, and the nature of that work.

Value Versus Compliance Program

Research into compliance-based and values-based approaches reveals that both types of programs can interact or work toward the same end, but a values orientation influences employees and creates ethical reasoning among employees. Values-based programs increase employees' awareness of ethics at work, their integrity, their willingness to deliver bad news to supervisors, and the perception that better decisions are made. Compliance-based programs are linked to employees' awareness of ethical issues at work, to their perception that decision-making is better because of the program, and to their explicit knowledge of rules and expectations that makes decision-making easier. In the final analysis, both orientations can be used to help employees and managers; however, it appears that a values-based program may be better for companies in the long run. Table 3 includes the minimum requirements for ethical compliance programs.

Major corporate governance issues

Shareholder rights Risk management Executive compensation Auditing and control Board of directors' composition CEO selection and termination decisions Integrity of financial reporting Shareholder participation and input level Compliance with corporate governance reform CEO's role in board decisions Organizational ethics programs

An Effective Ethics Program

Some corporate cultures provide opportunities for, or reward, unethical conduct. In such cases, the company may face penalties and the loss of public confidence if one of its employees breaks the law. Companies need to assess their key risk areas and to customize a compliance program that will address these risks and satisfy key effectiveness criteria. Concerns about unsafe working conditions may be very important for some companies but not an issue in others. At the heart of the FSGO is a "carrot-and-stick" philosophy. Companies that act to prevent misconduct by establishing and enforcing ethical and legal compliance programs may receive a "carrot" and avoid penalties should a violation occur. The ultimate "stick" is the possibility of being fined or put on probation if convicted of a crime. Organizational probation involves using consultants onsite to observe and monitor a company's legal compliance efforts as well as to report the company's progress toward avoiding misconduct to the U.S. Sentencing Commission. The FSGO also requires federal judges to increase fines for organizations that continually tolerate misconduct and to reduce or eliminate fines for firms with extensive compliance programs that are making due diligence attempts to abide by legal and ethical standards. Until the guidelines were formulated, courts were inconsistent in holding corporations responsible for employee misconduct. There was no incentive to build effective programs to encourage employees to make ethical and legal decisions. Now companies earn credit for creating ethics programs that meet a rigorous standard. The effectiveness of a program is determined by its design and implementation. It must deal effectively with the risk associated with a particular business and has to become part of the corporate culture. An ethics program can help a firm avoid civil liability, but the company still bears the burden of proving it has an effective program. A program developed in the absence of misconduct will be much more effective than one imposed as a reaction to scandal or prosecution. A legal test of a company's ethics program is possible when an individual employee is charged with misconduct. The court system or the U.S. Sentencing Commission evaluates the organization's responsibility for the individual's behavior during the process of an investigation. If the courts find the company contributed to the misconduct or failed to show due diligence in preventing misconduct, then the firm may be convicted and sentenced. The Sarbanes-Oxley Act of 2002 established new requirements for corporate governance to prevent fraudulent behavior in business. The heart of this act is an accounting oversight board that establishes financial reporting requirements including instituting a code of conduct for senior financial officers.

Ethical Issue Intensity

The intensity of an ethical issue relates to its perceived importance to the decision maker. Ethical issue intensity then can be defined as the relevance or importance of an ethical issue in the eyes of the individual, workgroup, and slash or organization. The individual sense of the situation's moral intensity increases the individuals perceptiveness regarding ethical problems, which in turn reduces his or her own it intention to act unethically. Positive or negative incentivize incentives can affect the perceived importance of an ethical issue

Philosophical Foundations

The utilitarian approach suggests decisions should be made that result in the greatest good for the greatest number of people, while minimizing any negative consequences to others. The moral rights approach suggests that every human being has some fundamental rights that must always be protected, and that no decision should infringe upon these fundamental rights. The justice approach suggests that decisions should be guided by impartial standards of fairness inequity. There is distributive and procedural juristic

Corporate Governance

To remove the opportunity for employees to make unethical decisions, most companies have developed formal systems of accountability, oversight, and control Effective corporate governance starts with a board of directors, but to be completely effective must be implemented through policies and procedures that help guide decisions and gather data on the impact of decisions.

Ethics Training and Communication

Training programs educate employees about: • The firm's policies and expectations • Relevant laws, regulations, and social standards • Available resources and social support systems Empowers employees to ask tough questions and to make sound ethical decisions Initiatives should reflect the organization's size, culture, values, management style, and employee base.

The Business of Business

Using the groundwork laid by the logicians and philosophers business professors began to teach and write about corporate social responsibility, and organisations obligation to maximize its positive impact on stakeholders and to minimize its negative impact

price discrimination

When a firm charges different prices to different groups of customers,

stakeholder model of corporate governance

adopts a broader view of the purpose of business adopts a broader view of the purpose of business. Although a company has a responsibility for economic success and viability to satisfy its stockholders, it also must answer to other stakeholders. At times, these stakeholders have interests that converge, while at times they may diverge. A community may enjoy the benefits of a growing company and workforce and the positive impact on jobs and tax revenues. But increased traffic congestion and higher levels of pollution could cause a community to limit a company's growth. As another example, paying employees unusually well may make them happy and attract the best individuals, but higher costs may have to be passed on to consumers, lead to lower prices for suppliers, and/or smaller returns to investors. Hence there is a need to maintain a balanced approach to all stakeholders. Once the primary groups have been identified, managers must then 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

Secondary stakeholders

do not typically engage in transactions with a company and thus are not essential for its survival; these include the media, trade associations, and special-interest groups

Corporate Citizenship

often used to express the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their 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 that its stakeholders expect of it.

Reputation

one of an organization's greatest intangible assets with tangible value. The value of a positive reputation is difficult to quantify, but it is very important. A single negative incident can influence perceptions of a corporation's image and reputation instantly and for years afterwards. 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, financial analysts, media, and government watchdogs. It takes companies decades to build a great reputation, yet just one slip can cost a company dearly. Although an organization does not control its reputation in a direct sense, its actions, choices, attitudes, behaviors, and consequences do influence the reputation that exists in perceptions of stakeholders.

Oversight

provides a system of checks and balances that limit employees' and managers' opportunities to deviate from policies and strategies and that prevent unethical and illegal activities

Stakeholder interaction model

reciprocal relationships between the firm and a host of stakeholders

Accountability

refers to how closely workplace decisions are aligned with a firm's stated strategic direction and its compliance with ethical and legal considerations.

Intellectual property

refers to ideas and creative materials people develop to solve problems, carry out applications, educate, and entertain others. A patent is a legal document issued to an inventor that grants the right to exclude others from using or selling the product for a period of time. A copyright is a protection that covers published and unpublished literary, scientific, and artistic works.