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