<p> Chapter 3</p><p>Recognizing an Ethical Issue</p><p>An ethical issue is a problem, situation, or opportunity that requires an individual or group to choose among actions</p><p> New ethical issues are emerging constantly</p><p> Can be difficult to recognize ethical issues</p><p>Failure to do so puts corporations at risk</p><p>• Is a problem in industries where winning is perceived to be a game </p><p>Honesty</p><p>Honesty: Truthfulness or trustworthiness</p><p> Telling the truth to the best of your knowledge</p><p> Dishonesty: A lack of integrity, incomplete disclosure, or an unwillingness to tell the truth</p><p>Issues related to honesty arise when people perceive business as something where normal rules do not apply</p><p>Fairness and Integrity</p><p> Fairness: The quality of being just, equitable, and impartial</p><p> Equality: How wealth or income is distributed</p><p> Reciprocity: Occurs when an action that has an effect upon another is returned</p><p> Optimization: The tradeoff between equity and efficiency</p><p> Integrity: Uncompromising adherence to ethical values</p><p> One of the most important terms relating to virtue</p><p>Ethical Issues and Dilemmas in Business</p><p> An ethical dilemma is a problem, situation, or opportunity that requires an individual or group to chose among several wrong or unethical actions</p><p> There is no ethical choice</p><p>Misuse of Company Resources</p><p>The leading form of observed misconduct</p><p> Can range from unauthorized use of equipment and computers to embezzling company funds</p><p> Time theft costs organizations hundreds of billions in lost productivity annually</p><p>Abusive or Intimidating Behavior</p><p>One of the most common ethical problems </p><p> Can be physical threats, false accusations, profanity, insults, harshness, ignoring someone, or unreasonableness</p><p> Intent is important in determining abuse</p><p>Bullying is a growing problem</p><p>• Is associated with a hostile workplace</p><p>Lying</p><p>Three types of lies</p><p> Joking without malice</p><p> Commission lying is creating a false perception with words that deceive the receiver</p><p> Creating noise</p><p> Omission lying is intentionally not informing channel members of problems relating to a product that affects awareness, intention, or behavior</p><p>Conflicts of Interest</p><p>Exist when an individual must choose whether to advance his/her personal interests, those of the organization, or some other group</p><p> Individuals must separate personal interests from business dealings</p><p>Bribery</p><p>The practice of offering something in order to gain an illicit advantage</p><p> Different types of bribery  Active bribery: The person who promises or gives the bribe commits the offense</p><p> Passive bribery: An offense committed by the official who receives the bribe</p><p>Facilitation payments: Legal as long as they are small</p><p>Corporate Intelligence</p><p>The collection and analysis of information on </p><p> Markets</p><p> Technologies</p><p> Customers and competitors</p><p> Socioeconomic and external political trends</p><p>Three intelligence models</p><p>• Passive monitoring system for early warning</p><p>• Tactical field support</p><p>• Support dedicated to top management strategy</p><p>Corporate Intelligence</p><p> Hacking</p><p> System hacking</p><p> Remote hacking</p><p> Physical hacking</p><p> Social engineering </p><p> Shoulder surfing</p><p> Password guessing </p><p> Dumpster diving </p><p> Whacking </p><p> Phone eavesdropping</p><p>Discrimination Is illegal in the U.S.</p><p> A company can be sued for discrimination if it</p><p> Refuses to hire an individual for discriminatory reasons</p><p> Unreasonably excludes an individual from employment</p><p> Unreasonably discharges an individual</p><p> Discriminates against an individual with respect to hiring, employment terms, promotion, or privileges</p><p>Discrimination (continued)</p><p> Equal Employment Opportunity Commission (EEOC)</p><p> The Age Discrimination in Employment Act</p><p> Affirmative Action Programs</p><p> Efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against </p><p>Sexual Harassment</p><p>A repeated, unwanted behavior of a sexual nature perpetrated upon an individual by another</p><p> Hostile work environment</p><p> The conduct was unwelcome</p><p> The conduct was severe, pervasive, and regarded by claimant as hostile/offensive</p><p> The conduct was such that a reasonable person would find it hostile or offensive</p><p>Dual Relationship</p><p>A personal, loving, and/or sexual relationship with someone with whom you share professional responsibilities</p><p> A key ethical issue in sexual harassment</p><p>Unethical dual relationship: The relationship causes a conflict of interest or impairment of professional judgment</p><p>To Avoid Sexual Misconduct, a Firm Needs</p><p>1. Statement of policy 2. Definition of sexual harassment</p><p>3. Non-retaliation policy</p><p>4. Specific procedures for prevention</p><p>5. Establish, enforce, and encourage victims to report</p><p>6. Establish a reporting procedure</p><p>7. Timely reporting requirements to the proper authorities</p><p>Environmental Issues</p><p>Are becoming significant concerns in business</p><p> Air pollution: Gases and particulates in the air that can linger or be carried long distances by winds</p><p> The Kyoto Protocol: An international treaty on climate change that commits nations to reducing greenhouse gas emissions</p><p> Water pollution: Results from dumping sewage and toxic chemicals in places where they can filter into water supplies</p><p>Environmental Issues (continued)</p><p> Recycling: The reprocessing of materials, especially steel, aluminum, paper, glass, rubber, and some plastics</p><p> Consumers consider recycling to be the most important thing they can do to live “greener” lives</p><p> Alternative energy: Is considered “green” because it produces fewer emissions and creates less pollution</p><p>Wind Hydropower</p><p>Solar Biofuels</p><p>Geothermal Nuclear</p><p>Fraud</p><p>Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression  Accounting fraud</p><p> Misrepresentation of company’s financial reports</p><p> Dramatic changes in accounting field</p><p> Increased competition and pressures to perform can create opportunities for misconduct</p><p> Accountants should abide by a strict code of ethics</p><p>Marketing Fraud</p><p>The process of dishonestly creating, distributing, promoting, and pricing products</p><p> Puffery: Exaggerated advertising claims, blustering, and boasting</p><p> Can be difficult to distinguish from fraud</p><p> Implied falsity: An advertising message that misleads, confuses, or deceives the public</p><p> Literally false: Claims can be divided into tests prove and bald assertions (non-establishment claims)</p><p>Consumer Fraud</p><p> When consumers attempt to deceive businesses for personal gain</p><p> Price tag switching, item switching, or lying to obtain discounts</p><p> Collusion involves an employee who helps a consumer commit fraud</p><p> Duplicity involves a consumer duping a store</p><p> Guile is associated with a person who uses tricks to obtain an unfair advantage</p><p>Financial Misconduct</p><p> The failure to understand and manage ethical risks was a key problem in the recent financial crisis</p><p> Many firms rewarded risk-taking</p><p> Difficult-to-understand financial instruments and murky accounting played roles</p><p> Government calls for reform</p><p> Stricter controls on hedge funds and other instruments</p><p> Greater transparency  Dodd-Frank Wall Street Reform and Consumer Protection Act</p><p>Insider Trading</p><p> Two types of insider trading</p><p> Legal insider trading: Involves legally buying and selling stock in an insider’s own company, but not all the time </p><p> Illegal insider trading: The buying or selling of stocks by insiders who possess material that is not public</p><p>Intellectual Property Rights and Privacy</p><p>Involve the legal protection of intellectual properties</p><p> Books, movies, software</p><p> Can be difficult to enforce</p><p> Many privacy issues in the business world</p><p> Employee use of technology</p><p> Consumer privacy</p><p> Can be challenging for businesses today to meet the needs of consumers while protecting privacy</p><p>Identity theft is a growing problem</p><p>The Challenge of Determining Ethical Issues in Business</p><p> Most ethical issues become visible through stakeholder concerns</p><p> Determining ethical issues is a challenge</p><p> Changing societal standards over time</p><p>The ethical decision making process starts when ethical issue awareness occurs and a discussion begins</p>