Test 1 - CH 1-3 & Right Values

Legal Insider Trading

Involves legally buying and selling stock in an insider's own company, but not all the time.

Misuse of Company Resources

Most common form of observed misconduct. Can range from unauthorized use of equipment and computers to embezzling company funds. Time theft costs organizations hundreds of billions in lost productivity annually.

Reciprocity

Occurs when an action that has an effect upon another is returned.

Corporate Governance (social responsibility issue)

Research shows corporate governance has a strong positive relationship with social responsibility.

Illegal Insider Trading

The buying or selling of stocks by insiders who possess material that is not public.

Corporate Intelligence

The collection and analysis of information on... Markets Technologies Customers and competitors Socioeconomic and external political trends

Consumer Protection (social responsibility issue)

The company has the responsibility of taking precautions to prevent consumer harm.

Corporate Governance

The development of formal systems of accountability, oversight, and control.

Bribery

The practice of offering something in order to gain an illicit advantage.

Fairness

The quality of being just, equitable, and impartial.

T/F - Only 10 percent of employees observe abusive behavior in the workplace.

False. 21% of employees observe abusive behavior in the workplace.

Reputation

One of an organization's greatest intangible assets with tangible value. Difficult to quantify but very important. A single negative incident can influence an organization's image and reputation instantly and for years afterwards.

Abusive or Intimidating Behavior

One of the most common ethical problems. Can be physical threats, false accusations, profanity, insults, harshness, ignoring someone, or unreasonableness. Intent is important in determining abuse. Bullying is a growing problem and is associated with a hostile workplace.

3 P's of Sustainability

People, planet, & profit.

4 Social Responsibility Issues

Social, consumer protection, sustainability, & corporate governance.

Demands for Accountability & Transparency

Stakeholders demands that boards are accountable and transparent. Directors offer expertise, competence, and diverse perspectives to strategic decisions. Qualified, knowledgeable, diverse, unbiased boards can prevent misconduct.

Active Bribery

The person who promises or gives the bribe commits the offense.

Control (corporate governance)

The process of auditing and improving organizational decisions and actions.

Unethical Dual Relationship

The relationship causes a conflict of interest or impairment of professional judgment.

Optimization

The tradeoff between equity and efficiency.

Stakeholders

Those who have a stake or claim in some aspect of a company's products, operations, markets, industry, and outcomes.

Primary Stakeholders

Those whose continued association is absolutely necessary for a firm's survival.

T/F - Stakeholders provide resources that are more or less crucial to a firm's long-term success.

True.

T/F - Time theft is the most commonly observed form of misconduct.

True.

T/F - Key ethical issues in an organization relate to fraud, discrimination, honesty and fairness, conflicts of interest, and privacy.

True. Fraud, discrimination, honesty and fairness, conflicts of interest, and privacy are some key ethical issues that businesses face.

T/F - Business ethics contributes to investor loyalty.

True. Many studies have shown that trust and ethical conduct contribute to investor loyalty.

T/F - An ethical culture is based upon the norms and values of the company.

True. Norms and values help create an organizational culture and are key in supporting or not supporting ethical conduct.

T/F - The stakeholder perspective is useful in managing social responsibility and business ethics.

True. The six steps of implementing the stakeholder perspective are: 1. assessing the corporate culture, 2. identifying stakeholder groups, 3. identifying stakeholder issues, 4. assessing organizational commitment to social responsibility, 5. identifying resources and determining urgency, 6. gaining stakeholder feedback. (pg. 48-51)

T/F - Business ethics deals with right or wrong behavior within a particular organization.

True. This is the basic definition of business ethics.

Honesty

Truthfulness or trustworthiness. Telling the truth to the best of your knowledge. Issues related to honesty arise when people perceive business as something where normal rules do not apply.

Integrity

Uncompromising adherence to ethical values. One of the most important terms relating to virtue.

Legal (social responsibility)

Abiding by all laws and government regulations.

Philanthropic (social responsibility)

"Giving back" to society. Part of your goal as a company should be to give back to the community you generated profit from.

Benefits to creating an ethical climate in an organization?

1. stronger employee commitment 2. investor loyalty 3. higher base of customer satisfaction 4. ethical companies are generally more profitable

Accountability (corporate governance)

How closely workplace decisions align with a firm's strategic direction.

Stakeholder Model of Corporate Governance

A broader view of the purpose of business. Includes satisfying concerns of primary stakeholders including employees, suppliers, regulators, communities and special interest groups.

Dual Relationship

A personal, loving, and/or sexual relationship with someone with whom you share professional responsibilities.

Ethical Dilemma

A problem, situation, or opportunity that requires an individual or group to chose among several wrong or unethical actions.

Ethical Issue

A problem, situation, or opportunity that requires an individual, group, or organization to choose among several actions that must be evaluated as right or wrong.

Sexual Harassment

A repeated, unwanted behavior of a sexual nature perpetrated upon an individual by another.

Oversight (corporate governance)

A system of checks and balances to minimize opportunities for misconduct.

Passive Bribery

An offense committed by the official who receives the bribe.

Social Responsibility

An organization's obligation to maximize its positive impact on stakeholders and minimize its negative impact.

Equality

How wealth or income is distributed.

Sustainability (social responsibility issue)

Businesses can no longer afford to ignore the natural environment as a stakeholder.

Discrimination

Is illegal in the U.S. A company can be sued for discrimination if it... 1. Refuses to hire an individual for discriminatory reasons 2. Unreasonably excludes an individual from employment 3. Unreasonably discharges an individual 4. Discriminates against an individual with respect to hiring, employment terms, promotion, or privileges

Facilitation Payments

Legal as long as they are small.

Business Ethics

Compromises organizational principles, values, and norms that may originate from individuals, organizational statements, or from the legal system that primarily guide individual and group behavior in business.

6 Primary Stakeholders

Customers, investors, employees, suppliers, government agencies, & communities. These are vitally important because they have the power to withdraw their resources at anytime if they do not like the environment. Essential to survival.

Executive Compensation

Many boards spend more time discussing compensation than ensuring integrity of financial reporting systems. This is a big deal today.

Economic (social responsibility)

Maximizing stakeholder wealth and/or value. It is important first and foremost to generate a reasonable profit over a sustained period of time.

Social (social responsibility issue)

Deals with concerns that affect the welfare of our entire society, associated with the common good.

Secondary Stakeholders

Do not typically engage in transactions with the firm and are not essential to a firm's survival.

4 Levels of Social Responsibility

Economic, legal, ethical, and philanthropic.

Values

Enduring beliefs and ideals that are socially enforced. ex: teamwork, trust, integrity

Conflicts of Interest

Exist when an individual must choose whether to advance his/her personal interests, those of the organization, or some other group. Individuals must separate personal interests from business dealings.

T/F - Three primary stakeholders are customers, special interest groups, and media.

False. Although customers are primary stakeholders, special interest groups and the media are usually considered secondary stakeholders.

T/F - Business ethics focuses mostly on personal ethical issues.

False. Business ethics focuses on organizational concerns (legal and ethical-employees, customers, suppliers, society).

T/F - Investments in business ethics do not support the bottom line.

False. Ethics initiatives create consumer, employee, and shareholder loyalty and positive behavior that contribute to the bottom line.

T/F - Fraud occurs when a false impression exists, which conceals facts.

False. Fraud must be purposeful rather than accidental, and exists when deception and manipulation of facts are concealed to create a false impression that causes harm.

T/F - The trend is away from cultural or ethically based initiatives to legal initiatives in organizations.

False. Many businesses are communicating their core values to their employees by creating ethics programs and appointing ethics officers to oversee them.

T/F - The most significant influence on ethical behavior in an organization is the opportunity to engage in unethical behavior.

False. Other influences such as corporate culture have more impact on ethical decisions within an organization.

T/F - Business can be considered a game people play, like basketball or boxing.

False. People are not economically self-sufficient and cannot withdraw form the game of business.

T/F - Social responsibility in business refers to maximizing the visibility of social involvement.

False. Social responsibility refers to an organization's obligation to maximize its positive impact on society and minimize its negative impact.

Ethical (social responsibility)

Following standards of acceptable behavior as judged by stakeholders.

Shareholder Model of Corporate Governance

Founded in classic economic precepts. Maximizing wealth for investors and owners.

Secondary Stakeholder Examples

Media, trade associations, & special interest groups.