What is Business Ethics

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What is Business Ethics?
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Business Ethics

• The application of general ethical concepts to
  the unique situations confronted in business. It
  asks what is right or wrong behavior in business
  and what principles or rules can be used as
  guidance in business situations.

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Two Characteristics

• Tells people what they ought to do
• Set of principles or rules

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Ready for a case?

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• You are at home. Its evening. Someone knocks on
  your door. Its somebody who works for you, hes
  worked with you for a number of years. He says,
  Im really sorry to bother you at home, but Ive
  got some really fabulous news. This individual
  lives just a couple miles away. And he says, I
  wanted you to be one of the first to know. My
  wife and I have been looking for a home and we
  really think we have found the house of our
  dreams. Its really expensive, we are going to
  have to take some money out of the kids college
  funds, but this is just a fabulous home, and you
  know you are my boss, and you are the best boss
  Ive ever had.... Im sure many of you have had
  this experience. The best boss I can even
  imagine having.

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• So you nod politely and in the back of your mind
  you know that there is a layoff coming and that
  this individuals name is on that list. By buying
  this house, hes not only putting himself on the
  brink of financial calamity, hes going to be
  taking a plunge over it.

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• Now what do you do? You know the layoff is
  coming. As a corporate officer, you have a duty
  of confidentiality to the corporation. Youre not
  supposed to disclose the coming layoffs piecemeal
  to your friends. Thats supposed to be announced
  when everything is set up legally, when the HR
  work is done, at a point in time that senior
  executives decide.

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• But this person is a friend. You owe this person
  a lot. Surely you have an obligation, I think, to
  help them out. And what if the person happens to
  go a little bit further and says, Do you think I
  ought to do this? And of course what youre
  thinking is Youre crazy if you do this. And
  you are supposed to tell the truth, right? This
  is not a right versus wrong situation. Youve got
  three obligations here to your friend, to the
  truth, and the duty of confidentiality to your
  organization.

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Dr. Bobs comments on the Weve Found A House
Case

• The easy way out of that situation is, dont
  look for wiggle room, stick to the rules. And
  remember, we had three rules you could apply. You
  had the rule of the duty of confidentiality.
• And so what do you say to your friend? Great.
  Thats fabulous, congratulations. I wish you and
  your family the best. And you try to paste a
  smile on your face that doesnt look too fake,
  because you know youre helping to send him over
  the precipice.

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• Or, you say, simple rule, tell the truth. So
  you blurt out the truth. And you swear this
  person to confidence, of course. And you hope
  that the old piece of advice that says, Best
  friends only tell their own best friends doesnt
  come into play. And you havent violated
  confidentiality, and youre not going to get in
  trouble for it. OK?

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• Or you say, This is my friend. Friends have to
  help friends. Theres going to be a layoff and
  your name is on it.

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• I would argue that in a case like that,
  following the rules is hardly leadership, barely
  ethical. Youve got to find a way to have a
  little bit of wiggle room.
• Following the rules in a world full of rules,
  and oft-conflicting rules, can be a cop out.

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• What I am saying is
• in a complicated situation, recognize your
  conflicted loyalties and look for a creative
  solution that allows you to show respect for all
  of them even if you have to bend the rules.

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• 25. Ethics is as much a temperament as a set of
  principles.

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• When the ethical temperament is present, people
  can lead quietly.
• What usually matters are careful, thoughtful,
  small, practical efforts by people working far
  from the limelight.
• In short, quiet leadership is what moves and
  changes the world.

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Relativism
Egoism
The 4 Concepts of Ethics
Utilitarianism
Deontologism
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Relativism

• There is no universal standard by which morality
  can be judged
• What is correct for one society may be wrong for
  another
• Ethics and morality are relative

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Egoism

• One ought to act in his or her own self interest
• Ethical behavior is that which promotes ones own
  self interest
• Does not mean should not obey laws - only do so
  if in self interest

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Utilitarianism

• The morality of an action can be determined by
  its consequences
• An action is ethical if it promotes the greatest
  good for the greatest number

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Utilitarianism Example

• Harry Truman and Decision to Drop Bomb on Japan

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Deontologism

• Derived from the Greek word for Duty
• Actions are not justified by their consequences.
  Factors other than good outcomes determine the
  rightness of actions

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Utilitarianism Vs. Deontologism

• Utilitarianism - The ends justify the means
• Deontologism - It is the means which are important

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Ethical Tests

• 1. Is It Legal? I Ethical - Legal II
  Ethical - Illegal III Unethical -
  Legal IV Unethical - Illegal
• I and IV Easy
• II and III Difficult

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Ethical Tests

• 2. Benefit Cost Test Do the benefits
  exceed the costs to whomsoever they accrue?
• 3. Categorical Imperative
• Are you willing to allow everyone to practice
  the proposed action or do you want to be a
  special case?

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Ethical Tests

• 4. Light of Day Test What would be your
  reaction if the action were brought out into the
  open for public scrutiny?
• 5. Do Unto Others Test Golden Rule - If you
  would like others to do the same to you -
  passes the test

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Ethical Tests

• 6. Ventilation Test Seek out others views.
  Discuss the 5 tests with them. If others feel
  it is OK - passes the test

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Ethical Dilemmas in Business

• Conflict of Interest
• Have two interests - cannot purse one
• without having negative impact on other
• Two Types Private Interest Conflicts with
  Corporate Business Interest Conflicts with Public

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Conflict of Interest Mini Case

• Personnel Director
• Brother - in - law out of work
• Lackluster performer
• Unemployment about to run out - will loose
  house
• Sister asks you to recommend him for job
• What would you do?

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Whistleblowing

• Act of disclosing wrongdoing in an organization
• Like blowing a whistle to call attention to a
  thief
• Types Internal External

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Can Cause Bitterness in Organization

• Dissent - Must speak out against others in
  organization
• Breach of Loyalty - Perceived as one who violates
  confidentiality and loyalty
• Accusation - Singles out specific individuals as
  threats to organization or the public

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Possible Retaliation

• Fired
• Blacklisted
• Transferred to undesirable locations
• Lifestyles, sex lives and mental stability
  questioned
• Physical abuse and murder possible

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Failure to Reveal Wrongdoing

• Severe problems for society or organization
• Can be implicated as an accessory before or after
  the fact

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Ethics of Whistleblowing

• When is it ethical to reveal wrongdoing ?
• When is it ethical to remain silent?

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Whistleblowing Example

• In charge of Quality Control
• Company makes parts for automobile brakes
• Find defect in brake part
• Could cause failure in brakes
• Failure not certain
• May take many years to develop

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Whistleblowing Example (cont.)

• Go to VP of Production, your boss
• He tells you to overlook defect - company may
  loose too much money
• What would you do?

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Cautious Approach to Whistleblowing

• 1. Make sure situation involves an imminent
  threat to society or to the business
• 2. Document all allegations
• 3. Examine internal whistleblowing first
• 4. Should you remain anonymous?
• 5. Get another job first!!!

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Bribery

• A payment, usually to a public official, to
  induce that person to either do something
  improper or to influence decisions or actions
• Extortion - same as bribery - recipient of
  payment initiates transaction

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Case

• International consulting firm - designs and
  supervises construction of hydroelectric power
  generating systems
• Your proposal is far superior to any
  other technically lowest bid
• To get job, must deposit 250,000 in officials
  personal Swiss bank account

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Should you pay the money?

• Foreign Corrupt Practices Act of 1997
• Grease payment allowed
• Standard Practice in most foreign countries
• Results in lost business opportunities for US
  companies
• American tax dollars may be used to pay bribe

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Bluffing and Deception

• Negotiating a labor contract
• Plant has experienced losses over past several
  years - not clear why
• Want concessions from labor
• Tell labor that plant will be closed if no
  concessions are made. In reality , no such plans
  contemplated
• Is This Ethical?

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Managerial Implications

• Top Management Leadership Organizational
  Culture
• Realistic Goal Setting
• Ethics Audit
• Code of Ethics
• Ethics Committee