V New Ethical Issues Are Emerging Constantly

Chapter 3

Recognizing an Ethical Issue

An ethical issue is a problem, situation, or opportunity that requires an individual or group to choose among actions

 New ethical issues are emerging constantly

 Can be difficult to recognize ethical issues

Failure to do so puts corporations at risk

• Is a problem in industries where winning is perceived to be a game

Honesty

Honesty: Truthfulness or trustworthiness

 Telling the truth to the best of your knowledge

 Dishonesty: A lack of integrity, incomplete disclosure, or an unwillingness to tell the truth

Issues related to honesty arise when people perceive business as something where normal rules do not apply

Fairness and Integrity

 Fairness: The quality of being just, equitable, and impartial

 Equality: How wealth or income is distributed

 Reciprocity: Occurs when an action that has an effect upon another is returned

 Optimization: The tradeoff between equity and efficiency

 Integrity: Uncompromising adherence to ethical values

 One of the most important terms relating to virtue

Ethical Issues and Dilemmas in Business

 An ethical dilemma is a problem, situation, or opportunity that requires an individual or group to chose among several wrong or unethical actions

 There is no ethical choice

Misuse of Company Resources

The leading 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

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

• Is associated with a hostile workplace

Three types of lies

 Joking without malice

 Commission lying is creating a false perception with words that deceive the receiver

 Creating noise

 Omission lying is intentionally not informing channel members of problems relating to a product that affects awareness, intention, or behavior

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

Bribery

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

 Different types of bribery  Active bribery: The person who promises or gives the bribe commits the offense

 Passive bribery: An offense committed by the official who receives the bribe

Facilitation payments: Legal as long as they are small

Corporate Intelligence

The collection and analysis of information on

 Markets

 Technologies

 Customers and competitors

 Socioeconomic and external political trends

Three intelligence models

• Passive monitoring system for early warning

• Tactical field support

• Support dedicated to top management strategy

Corporate Intelligence

 Hacking

 System hacking

 Remote hacking

 Physical hacking

 Social engineering

 Shoulder surfing

 Password guessing

 Dumpster diving

 Whacking

 Phone eavesdropping

Discrimination Is illegal in the U.S.

 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

Discrimination (continued)

 Equal Employment Opportunity Commission (EEOC)

 The Age Discrimination in Employment Act

 Affirmative Action Programs

 Efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against

Sexual Harassment

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

 Hostile work environment

 The conduct was unwelcome

 The conduct was severe, pervasive, and regarded by claimant as hostile/offensive

 The conduct was such that a reasonable person would find it hostile or offensive

Dual Relationship

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

 A key ethical issue in sexual harassment

Unethical dual relationship: The relationship causes a conflict of interest or impairment of professional judgment

To Avoid Sexual Misconduct, a Firm Needs

1. Statement of policy 2. Definition of sexual harassment

3. Non-retaliation policy

4. Specific procedures for prevention

5. Establish, enforce, and encourage victims to report

6. Establish a reporting procedure

7. Timely reporting requirements to the proper authorities

Environmental Issues

Are becoming significant concerns in business

 Air pollution: Gases and particulates in the air that can linger or be carried long distances by winds

 The Kyoto Protocol: An international treaty on climate change that commits nations to reducing greenhouse gas emissions

 Water pollution: Results from dumping sewage and toxic chemicals in places where they can filter into water supplies

Environmental Issues (continued)

 Recycling: The reprocessing of materials, especially steel, aluminum, paper, glass, rubber, and some plastics

 Consumers consider recycling to be the most important thing they can do to live “greener” lives

 Alternative energy: Is considered “green” because it produces fewer emissions and creates less pollution

Wind Hydropower

Solar Biofuels

Geothermal Nuclear

Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression  Accounting fraud

 Misrepresentation of company’s financial reports

 Dramatic changes in accounting field

 Increased competition and pressures to perform can create opportunities for misconduct

 Accountants should abide by a strict code of ethics

Marketing Fraud

The process of dishonestly creating, distributing, promoting, and pricing products

 Puffery: Exaggerated advertising claims, blustering, and boasting

 Can be difficult to distinguish from fraud

 Implied falsity: An advertising message that misleads, confuses, or deceives the public

 Literally false: Claims can be divided into tests prove and bald assertions (non-establishment claims)

Consumer Fraud

 When consumers attempt to deceive businesses for personal gain

 Price tag switching, item switching, or lying to obtain discounts

 Collusion involves an employee who helps a consumer commit fraud

 Duplicity involves a consumer duping a store

 Guile is associated with a person who uses tricks to obtain an unfair advantage

Financial Misconduct

 The failure to understand and manage ethical risks was a key problem in the recent financial crisis

 Many firms rewarded risk-taking

 Difficult-to-understand financial instruments and murky accounting played roles

 Government calls for reform

 Stricter controls on hedge funds and other instruments

 Greater transparency  Dodd-Frank Wall Street Reform and Consumer Protection Act

Insider Trading

 Two types of insider trading

 Legal insider trading: Involves legally buying and selling stock in an insider’s own company, but not all the time

 Illegal insider trading: The buying or selling of stocks by insiders who possess material that is not public

Intellectual Property Rights and Privacy

Involve the legal protection of intellectual properties

 Books, movies, software

 Can be difficult to enforce

 Many privacy issues in the business world

 Employee use of technology

 Consumer privacy

 Can be challenging for businesses today to meet the needs of consumers while protecting privacy

Identity theft is a growing problem

The Challenge of Determining Ethical Issues in Business

 Most ethical issues become visible through stakeholder concerns

 Determining ethical issues is a challenge

 Changing societal standards over time

The ethical decision making process starts when ethical issue awareness occurs and a discussion begins