Business Ethics

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Business Ethics

• Unit Three

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Business Ethics Is a Component of Social
Responsibility

• Business ethics comprises principles and
  standards that guide behavior in business.
• Social responsibility refers to an organizations
  obligation to maximize its positive impact on
  stakeholders and to minimize its negative impact.
• The dimensions of social
  responsibility are legal, economic,
  ethical, and philanthropic.

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Corporate Citizenship...

• Corporate citizenship expresses the extent to
  which businesses strategically meet the economic,
  legal, ethical and philanthropic responsibilities
  placed on them by various stakeholders.
• How does the firm act on its commitment to the
  corporate citizenship philosophy? Does it
  measure the extent to which it
  follows through by
  implementing initiatives?

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Economic Issues...

• relate to how resources for the production of
  goods and services are to be distributed within a
  system.
• Issues of concern
• the economyinflation, recession, unemployment
  rates, pollution control and environmental
  constraints
• employee responsibilities
• competition

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Competitive Issues...

• Intense competition can make managers feel their
  survival is being threatened.
• Unacceptable acts may be viewed as acceptable.
• Large firms sometimes exert unfair competitive
  pressures on smaller competitors
• sustained price cuts
• discriminatory pricing
• price wars

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Legal and Regulatory Issues...

• Laws and regulations are established by the
  government to set minimum standards of acceptable
  behavior.
• Laws are passed because society does
  not always trust business to
  act in its best interest.

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Types of Laws...

• Civil law defines the rights and duties of
  individuals and organizations.
• Criminal law prohibits specific actions and
  imposes punishment for breaking the law.
• The difference between the two is enforcement.
• Criminal laws are enforced by the state
  or nation.
• Civil laws are enforced by individuals
  (generally in court).

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How are business ethics disputes generally
resolved?
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Business ethics disputes are generally
resolved through lawsuits.

• Most laws affecting business fall into one of
  five categories
• laws regulating competition (prevent restraint of
  trade)
• laws protecting consumers (safety, disclosure)
• laws protecting equity safety (discrimination,
  workplace safety, equal employment practice)
• laws protecting the environment (air, water,
  noise)
• laws that encourage ethical conduct (Federal
  Sentencing Guidelines for Organizations,
  Sarbanes-Oxley Act)

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Keys to Managing Ethics Programs

• Managers must consider the values and principles
  of all key stakeholders of the organization.
• The role and support of top management is
  critical.
• Top management and key stakeholders must address
  ethical issues affecting the organization on an
  ongoing basis.

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Philanthropic Issues

• involve businesss contribution to the local
  community and society.
• Quality of life issues
• responsible production of goods and services
• technology improvementsyet not damaging to the
  environment or jeopardizing personal privacy
• Philanthropic issues
• making the local community a better place to live
• Strategic philanthropy
• synergistic and mutually beneficial use of a
  companys core competencies and resources to deal
  with social issues

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Ethics as a Force in Social Responsibility

• Business ethics embodies standards, norms and
  expectations that reflect the concerns of major
  stakeholders.
• Consumers, employees and shareholders all
  have concerns about what is fair and just.
• Ethics goes beyond compliance with
  laws and regulations.
• Such behavior has been associated with profits.
• It goes beyond the firms wants and needs.
• It should evolve from the culture of the
  organization.

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Definition

• Corporate Social responsibility is the managerial
  obligation to take action that protects and
  improves the welfare of society as a whole and
  organizational interests as well.

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Corporate Social Responsibility

• Represents the notion that corporations have an
  obligation to constituent groups in society other
  than shareholders and beyond that prescribed by
  law or contract. It considers both the best
  interests of the company and its relationship
  with the community and society in general.

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Social Responsibility

• Drucker
• Be responsible for your impact, planned or
  unplanned.

• Grandma
• Clean up your own mess!

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Socially Responsible Strategies

• Evaluate the social merits of each corporate and
  business strategy. For each strategy, ask these
  questions
• What social good does the strategy create?
• Does it create any public or stakeholder risks or
  harm?
• Is it controversial?
• Develop socially responsive specific strategies
  by adopting specific strategies towards all key
  stake-holders of the firm. Such strategies
  pursue multiple stakeholder objectives rather
  than simple profitability objectives.

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Common Areas of Social Responsibilities

• Urban Affairs
• Consumer Affairs
• Environmental Affairs
• Employment Practices

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Pros and Cons

• Public expects it now.
• Long run self interest.
• Avoid regulation.
• Dilute responsibility to shareholders.
• Lack of understanding.
• Increases business power to disadvantage of
  public.

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Businesses should

• Perform legally required activities.
• Consider voluntary activities beyond legal
  minimums.
• Inform stakeholders of extent of involvement.

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Federal Agencies

• Discrimination Issues
• Ensures employers holding federal contracts do
  not discriminate.
• Formulates and enforces environmental standards.
• Promotes clarity of product labeling to reduce
  consumer misunderstanding.
• Regulates safety and health conditions in the
  workplace.

• Equal Employment Opportunity
• Office of Federal Compliance Programs
• Environmental Protection Agency
• Consumer Product Safety Commission
• OSHA

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Social Responsiveness

• The degree of effectiveness and efficiency an
  organization displays in pursuing its social
  responsibilities.
• Social responsiveness is pragmatic -- managers
  scan the environment, identify changing morals
  and attitudes, and modify organizational
  practices to align with the prevailing standards.

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Stakeholders Obligations

• Owners - Stockholders
• Suppliers
• Banks/Lenders
• Government Agencies
• Employees Unions
• Customers
• Competitors
• Local communities society at large.

• Increase value of the organization.
• Deal with them fairly.
• To repay debts.
• To abide by laws.
• Safe working environment negotiate fairly with
  unions.
• To provide safe products.
• To compete fairly refrain from restraints of
  trade.
• To avoid business practices that harm the
  environment.

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Meeting Social Responsibilities

• Incorporate social goals into annual planning
  process.
• Seek comparative industry norm for social
  programs.
• Present reports to stakeholders.
• Experiment with different approaches for
  measuring.
• Attempt cost/benefit analysis.

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Seths Approaches

• Social Obligation
• Obey the laws -- economic purposes.
• Social Responsibility
• Economic societal goals.
• Social Responsiveness
• Both goals plus obligation to anticipate societal
  problems and actively work to prevent them.

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Planning for Social Responsibility

• Environmental forecasts
• economic
• political
• technological
• social
• competitive

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Integration of Social Responsibility and Planning
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The Social Audit

• A Progress Report
• Process of taking measurements of social
  responsibility to assess organizational
  performance in the social responsibility area.
• Elements are monitoring, measuring and appraising
  performance.

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Elements of a Social Audit
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How society can help business meet social
obligations

• Set rules that are clear and consistent.
• Keep the rules technically feasible.
• Make the rules economically feasible.
• Make the rules prospective, not retrospective.
• Make the rules goal-setting, not procedure
  proscribing.

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Understanding Ethical Behavior

• Ethics are moral obligations that usually govern
  our conduct, and are the standards or behavior by
  which others usually judge us.
• Ethics separate right from wrong.
• Morals are our rules or habits, developed from
  cultural values and norms, and define our
  character.

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Ethics Defined

• Ethics are the moral principals and values that
  govern the actions and decisions of an individual
  or group.
• Ethics serve as guidelines on how to act rightly
  and justly when faced with moral dilemmas.

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Classifying business decisions according to
ethical and legal relationships
Ethical
Ethicality
Illegal
Legal
Legality
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Reasons to practice ethics

• Can enhance productivity.
• Positive impact on external stakeholders.
• Minimize governmental regulation.

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Understanding Ethical Behavior
Societal culture and norms.
Personal moral philosophy ethical behavior.
Business culture industry practices.
Organizational culture expectations.
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Organizational factors influencing ethical
judgments

• The extent of ethical problems in the
  organization.
• Top-management actions on ethics.
• Organizational role.

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Codes of Ethics...

• are formal statements of what an organization
  expects in the way of ethical behavior
• will not solve every dilemma
• provide rules guidelines
• reflects senior managements desire for
  compliance with values, rules policies in
  support of an ethical climate
• should be specific enough to be reasonably
  capable of preventing misconduct

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Manleys Six Steps to Implement a Code of
Ethics

• distribute the code comprehensively employees,
  subsidiaries, associated companies
• assist in interpretation understanding
• specify managements role in implementation
• make employees responsible for understanding
• establish grievance procedures
• provide a conclusion or closing statement

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High Level Oversight

• ethics officers or committees are responsible for
  oversight of the ethics/compliance program
• coordinate program with top management
• develop, revise disseminate the code
• develop effective communication
• establish audits control systems
• provide consistent enforcement of standards
• review modify the program to improve
  effectiveness

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Effective Communication of Ethical Standards...

• provides guidance for ethical standards
  activities that integrate the functional areas of
  business
• helps employees identify ethical issues
  provides a means to address resolve them
• can help reduce criminal, civil administrative
  consequences including
• fines, penalties, judgments, etc.

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Ethics Training Programs Should...

• reflect organizational size, culture, values,
  management style employee base
• improve employee understanding of ethical issues
• influence the organizational culture, significant
  others, opportunity in the ethical
  decision-making process
• overall, provide for recognition of ethical
  issues, understanding of culture values, and
  influence ethical decision making

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Monitoring, Auditing, Enforcing Ethical
Standards...

• an internal system for employees to report
  misconduct is an opportunity to register ethical
  concerns
• ethics hot lines
• questionnaires may be used to serve as benchmarks
• corrective actions provide standards punishment
• consistent enforcement is critical

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Continuous Improvement

• if a company has determined that its ethical
  performance has not been satisfactory, management
  may want to recognize the way ethical decisions
  are made
• a decentralized organization may be centralized
  (perhaps temporarily) so that top-level managers
  can ensure that ethical decisions are made
• a centralized organization may be decentralized
  (perhaps temporarily) so that lower level
  managers can make more decisions

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Bad AppleBad Barrel Theory

• bad applethe notion that blame for unethical
  behavior rests with a few unsavory individuals
  (difficult for organizations to influence
  ethical decision making)
• bad barrelviews that people are not inherently
  ethical or unethical, but are influenced by the
  corporate culture surrounding them (more
  organizational control)

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Codes of Ethics

• Avoid employee confusion in decision-making.
• Force discussion about what is right and wrong in
  issues that may arise.

Our Company Code of Ethics
1. Do good. 2. See 1.
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Why have a Code of Ethics?

• to define accepted/acceptable behaviors
• to promote high standards of practice
• to provide a benchmark for members to use for
  self evaluation
• to establish a framework for professional
  behavior and responsibilities
• as a vehicle for occupational identity
• as a mark of occupational maturity"

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• A Certified Healthcare Business Consultant is
  actively engaged in practice management business
  consulting.
• A Certified Healthcare Business Consultant will
  conduct himself/herself with integrity, high
  moral purpose, and in the best interest of
  his/her clients.
• A Certified Healthcare Business Consultant shall
  not, for personal advantage, subordinate his/her
  judgment to others or exploit client
  relationships.
• A Certified Healthcare Business Consultant will
  assume only those responsibilities for which
  he/she is qualified and he/she will utilize
  personnel who are capable of discharging such
  functions.
• A Certified Healthcare Business Consultant will
  regard all information acquired in serving
  his/her clients as strictly confidential.

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RULES OF PROFESSIONAL CONDUCT

• Certified Healthcare Business Consultants are
  dedicated to the highest professional standards.
  Each one subscribes to, and is bound by, the
  following Rules of Professional Conduct
• A Certified Healthcare Business Consultant shall
  conduct himself/herself in accordance with the
  published Code of Ethics, or equivalent
  standards.
• Consistent with the Code of Ethics, or equivalent
  standards, a Certified Healthcare Business
  Consultant shall make full disclosure, upon
  request, to the Board of Examiners, of all
  business activities involving the manner in which
  he/she services his/her clients.
• A Certified Healthcare Business Consultant shall
  provide clients advanced written disclosure of
  any potential conflict of interest.

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Cont.

• 5. Certified Healthcare Business Consultants
  may use the professional designation, Certified
  Healthcare Business Consultant, or the
  abbreviation, CHBC, but only in a dignified and
  judicious manner. The only proper use of the
  professional designation in advertising media
  shall be the designation itself. In printed
  advertising media, the professional designation
  shall be used only after the name of the holder
  of such designation appearing in such media and
  in type no larger than the type used in his/her
  name. The professional designation shall not be
  used in the text in such advertising.