Ch 2

Part Two Ethical Issues and

the Institutionalization of Business Ethics

Chapter 3 Emerging

Business Ethics Issues

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Learning Objectives

• Define ethical issues in the context of organizational ethics

• Examine ethical issues as they relate to the basic values of honesty, fairness, and integrity

• Delineate misuse of company resources, abusive and intimidating behavior, lying, conflicts of interest, bribery, corporate intelligence, discrimination, sexual harassment, fraud, financial misconduct, insider trading, intellectual property rights, and privacy as business ethics issues

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Ethical Awareness

• People make ethical decisions when they find an ethical component in a particular issue or situation.

• Failure to acknowledge or be aware of ethical issues is hazardous to an organization.

• Ethical issues involve a group, a problem, or an opportunity that requires introspection and investigation before a decision can be made.

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‹#› Foundational Values for

Identifying Ethical Issues (1 of 3)

• Integrity: Element of virtue, an unimpaired condition. Integrity relates to product quality, open communication, transparency, and relationships.

• Honesty: Truthfulness or trustworthiness. To tell the truth to the best of your knowledge without hiding anything.

• Confucius defined an honest person as junzi, or one who has the virtue ren.

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‹#› Foundational Values for

Identifying Ethical Issues (2 of 3)

• Honesty • Ren: One who has humanity. • Yi: What one should do according to the

relationships with others. • Li: Good manners or respect. • Zhi: Whether a person knows what to say and

what to do as it relates to honesty.

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‹#› Foundational Values for

Identifying Ethical Issues (3 of 3)

• Honesty • The Confucian version of Kant’s Golden Rule is to treat

your inferiors as you would want your superiors to treat you.

• Virtues such as familial honor and reputation for honesty are paramount.

• Lying: (1) Untruthful statements that result in damage or harm; (2) “white lies,” which do not cause damage but instead function as excuses or a means of benefitting others; and (3) statements obviously meant to engage or entertain without malice.

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Foundational Values Continued

• Fairness: Just, equitable, and impartial. • Three fundamental elements that motivate people

to be fair: 1. Equality: The distribution of benefits and

resources. 2. Reciprocity: An interchange of giving and

receiving in social relationships. 3. Optimization: Trade-off between equity

(equality) and efficiency (maximum productivity).

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Ethical Issues in Business (1 of 19)

• Misuse of Company Time and Resources • Abusive or Intimidating Behavior: Actions such

as physical threats, false accusations, and yelling. Meaning differs from person to person.

• Bullying: Creates hostile environment. Workplace bullying is strongly associated with sleep disturbances, as well as depression, fatigue, increased sick days, and stomach problems.

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Ethical Issues in Business (2 of 19)

• Lying 1. Joking without malice. 2. Commission lying: Creating a perception or

belief by words that intentionally deceive the receiver of the message.

3. Omission lying: Intentionally not informing others of any differences, problems, safety warnings, or negative issues relating to the product or company that significantly affect awareness, intention, or behavior.

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Ethical Issues in Business (3 of 19)

• Conflicts of Interest: Individual chooses either to advance his or her own interests, those of the organization, or those of some other group.

• Bribery: Offering something (often money) in order to gain an illicit advantage from someone in authority.

• Active bribery: The person who promises or gives the bribe commits the offense.

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Ethical Issues in Business (4 of 19)

• Bribery • Passive bribery: Offense committed by an official

who receives the bribe. • Not an offense if the advantage was permitted or

required by the written law or regulation of the foreign public official’s country, including case law.

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Ethical Issues in Business (5 of 19)

• Bribery • Small facilitation payments: Payments made to

obtain or retain business or other improper advantages—do not constitute bribery payments for U.S. companies in some situations.

• Often made to induce public officials to perform their functions.

• Illegal in the United Kingdom.

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Ethical Issues in Business (6 of 19)

• Corporate Intelligence: Collection and analysis of information on markets, technologies, customers, and competitors, as well as on socioeconomic and external political trends.

• Three types: • Passive monitoring system for early warning. • Tactical field support. • Support dedicated to top-management strategy.

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Ethical Issues in Business (7 of 19)

• Discrimination: On the basis of race, color, religion, sex, marital status, sexual orientation, public assistance status, disability, age, national origin, or veteran status is illegal in the United States.

• Discrimination on the basis of political opinions or affiliation with a union is defined as harassment.

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Ethical Issues in Business (8 of 19)

• Discrimination • Equal Employment Opportunity Commission • Age Discrimination in Employment Act: Illegal to

discriminate against people 40 years of age or older, as well as those that require employees to retire before the age of 70.

• Affirmative Action Programs: Involve efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against on the basis of race, gender, or other characteristics.

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Ethical Issues in Business (9 of 19)

• Affirmative Action Programs and Supreme Court Standards

1. There must be a strong reason for developing an affirmative action program.

2. Affirmative Action Programs must apply only to qualified candidates.

3. Affirmative Action Programs must be limited and temporary and therefore cannot include “rigid and inflexible quotas.”

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Ethical Issues in Business (10 of 19)

• Sexual Harassment: Any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another.

• May be verbal, visual, written, or physical. • Can occur between people of different genders or

those of the same gender. • The law is primarily concerned with the impact of

the behavior and not its intent (Title VII of the Civil Rights Act of 1964).

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Ethical Issues in Business (11 of 19)

• Sexual Harassment • Hostile work environment—three criteria must

be met. The conduct was: 1. Unwelcome. 2. Severe, pervasive, and regarded by the claimant

as so hostile or offensive as to alter his or her conditions of employment.

3. Such that a reasonable person would find it hostile or offensive.

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Ethical Issues in Business (12 of 19)

• Sexual Harassment • Hostile work environment • Employee need not prove the harassment

seriously affected his or her psychological well- being or that it caused an injury.

• Decisive issue is whether the conduct interfered with the claimant’s work performance.

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Ethical Issues in Business (13 of 19)

• Sexual Harassment • Dual relationship: A personal, loving, and/or

sexual relationship with someone with whom you share professional responsibilities.

• If the sexual advances in any form are considered mutual, then consent is created.

• Unless the employee or employer gets something in writing before the romantic action begins, consent can always be questioned.

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‹#› Ways to Avoid Sexual

Misconduct (1 of 2)

1. Establish a statement of policy naming someone in the company as ultimately responsible for preventing harassment at the company.

2. Establish a definition of sexual harassment that includes unwelcome advances, requests for sexual favors, and any other verbal, visual, or physical conduct of a sexual nature; that provides examples of each; and reminds employees the list of examples is not all-inclusive.

3. Establish a non-retaliation policy that protects complainants and witnesses.

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‹#› Ways to Avoid Sexual

Misconduct (2 of 2)

1. Establish specific procedures for prevention of such practices at early stages. If in writing, they are expected by law to train employees in accordance with them, measure their effects, and ensure the policies are enforced.

2. Establish, enforce, and encourage victims of sexual harassment to report the behavior to authorized individuals.

3. Establish a reporting procedure. 4. Make sure the firm has timely reporting requirements to

the proper authorities.

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Ethical Issues in Business (14 of 19)

• Fraud: Any purposeful communication that deceives, manipulates, or conceals facts in order to harm others. Can be a crime; convictions may result in fines, imprisonment, or both.

• Accounting fraud: Usually involves a corporations’ financial reports.

• Fraud triangle: Pressure, opportunity, and rationalization.

• Marketing fraud: Dishonestly creating, distributing, promoting, and pricing products.

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Ethical Issues in Business (15 of 19)

• Fraud • Puffery: Exaggerated advertising, blustering, and

boasting upon which no reasonable buyer would rely upon and is not actionable under the Lanham Act.

• Implied falsity: The message has a tendency to mislead, confuse, or deceive the public.

• Literally true but imply a false message.

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Ethical Issues in Business (16 of 19)

• Fraud • Literally false • Tests prove (establishment claims): Advertisement

cites a study or test that establishes the claim. • Bald assertions (nonestablishment claims):

Advertisement makes a claim that cannot be substantiated.

• Labeling Issues • Kroger agreed to remove “raised in a humane

environment” from its packages of chicken.

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Ethical Issues in Business (17 of 19)

• Consumer Fraud: When consumers attempt to deceive businesses for their own gain.

• Shoplifting • Collusion: An employee assists the consumer in

fraud. • Duplicity: Consumer stages an accident in a store and

then seeks damages against the store for its lack of attention to safety.

• Guile: A person who is crafty or understands right/wrong behavior but uses tricks to obtain an unfair advantage.

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Ethical Issues in Business (18 of 19)

• Insider Trading: An insider is any officer, director, or owner of 10 percent or more of a class of a company’s securities.

• Illegal insider trading: The buying or selling of stocks by insiders who possess information that is not yet public.

• Legal insider trading: Legally buying and selling stock in an insider’s own company, but not all the time. Insiders are required to report their insider transactions within two business days of the date the transaction occurred.

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Ethical Issues in Business (19 of 19)

• Intellectual Property Rights: Legal protection of intellectual property—music, books, and movies.

• Copyright Act of 1976 • Digital Millennium Copyright Act of 1998 • Digital Theft Deterrence and Copyright Damages

Improvement Act of 1999

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