The Importance of Business Ethics An Overview of Business Ethics

Disclaimer I am NOT presenting you with this information to influence you, I am presenting this information to inform you so that you can make your own decisions and be educated consumers

Business Ethics Ethics is a part of decision making at all levels of work and management Just as important as functional areas of business Deals with questions of whether practices are acceptable There is no universally accepted approach for resolving issues

Business Ethics Defined Comprises principles, values, and standards that guide behavior in the world of business Ethical decisions occur when accepted rules no longer serve and decision makers must weigh values and reach a judgment Values and judgments are critical in ethical decisions Principles: In regards to ethics, specific boundaries for behavior are not universal and absolute (up to a company to decide) Freedom of speech, civil liberties are musts but there are loopholes Values: Used to develop socially enforced norms Integrity, accountability, trust

A Crisis in Business Ethics Nearly half of employees observe misconduct in the workplace After the financial crisis, business decisions and activities have come under scrutiny The financial sector has not regained stakeholder trust to this day

Americans’ Trust in Business Sectors (% of respondents who say they trust the following business categories)

Specific Issues Misuse of company resources Abusive behavior Harassment Accounting fraud Conflicts of interest Defective products Bribery Employee theft

The Reasons for Studying Business Ethics Having good individual values/morals is not enough to stop ethical misconduct If you think it but don’t act it solves nothing Ethics training helps provide collective agreement in diverse organizations If businesses get together and make agreements it has great potential to beneficial (or harmful) Business ethics decisions can be complicated Business owners want to maximize their profits 1st and foremost

A Timeline of Ethical and Socially Responsible Concerns Source: Adapted from “Business A Timeline of Ethical and Socially Responsible Concerns 1960s 1970s 1980s 1990s 2000s Environmental issues Employee militancy Bribes and illegal contracting prices Sweatshops and unsafe working conditions in third-world countries Cybercrime Civil rights issues Human rights issues Influence peddling Rising corporate liability for persona damages (for example, cigarette companies) Financial misconduct Increasing employee-employer tension Covering up rather than correcting issues Deceptive advertising Financial mismanagement and fraud Global issues, Chinese product safety Changing work ethic Disadvantaged consumers Financial fraud (for example, savings and loan scandal) Organizational ethical misconduct Sustainability Rising drug use Transparency issues Intellectual property theft Ethics Timeline,” Ethics Resource Center, http://www.ethics.org/resources/business-ethics-timeline.asp (accessed May 27, 2009). Copyright © 2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave. N.W., Suite 400, Washington, DC, 2006, www.ethics.org.

Before 1960: Ethics in Business Theological discussions of ethics emerged Religious schools began to teach social ethics concern for morality in business workers’ rights living wages

The 1960s: The Rise of Social Issues in Business Social consciousness emerged Increased anti-business sentiment JFK’s Consumer Bill of Rights— a new era of consumerism Right to safety, to be informed, to choose, and to be heard Consumer reports made available Consumer protection groups fought for legislation changes Ralph Nader

The 1970s: Business Ethics as an Emerging Field Business professors began to write about social responsibility An organization’s obligation to maximize positive impact and minimize negative impact on stakeholders Businesses concerned with public image Conferences held and centers developed Issues: Bribery Deceptive advertising Price collusion Product safety Environment

The Federal Sentencing Guidelines for Organizations Standards and procedures for preventing misconduct High level of oversight Care in delegation of authority (effective management) Effective communication between workers Effective Employee training Systems to monitor, audit, and report misconduct Consistent enforcement and continuous improvement

The 21st Century: A New Focus Continued issues with corporate non-compliance Public/political demand for improved ethical standards Sarbanes-Oxley Act (2002) Most extensive ethics reform Increased accounting regulations (companies were caught lying) Dodd-Frank Wall Street Reform and Consumer Protection Act (2009) Aimed at making the financial industry more transparent/responsible (fraud was occurring and still is) A firm’s greatest danger is not discovering misconduct early (the longer is takes to discover, the bigger the hole you need to get out of)

Organizational Ethical Culture Ethical culture: The component of corporate culture that captures the values and norms that an organization defines as appropriate Creates shared values Goal is to: Minimize need for enforced compliance Maximize utilization of principles/ethical reasoning

The Role of Organizational Ethics in Performance Source: Adapted from “Business The Role of Organizational Ethics in Performance

Ethics Contributes to Employee Commitment Commitment comes from employees who are invested in the organization Employees willing to make personal sacrifices for the organization The more company dedication to ethics, the greater the employee dedication Concerns include a safe work environment, competitive salaries and benefits packages, and fulfillment of contractual obligations Collective Bargaining allowed by companies

Ethics Contributes to Investor Loyalty Companies perceived by their employees as being honest are more profitable Ethical climates in organizations provide a platform for Efficiency Productivity Profitability

Ethics Contributes to Customer Satisfaction Consumers respond positively to socially concerned businesses Being good can be profitable Customer satisfaction dictates business success Research shows a strong relationship between ethical behavior and customer satisfaction

Ethics Contributes to Profits Corporate concern for ethical planning is being integrated with strategic planning Goal= Maximizes profitability Corporate citizenship is positively associated with Return on investment and assets Sales growth

Scenario 1 The price of gasoline yesterday was $4.50 per gallon. Today, the price of gasoline went down. Your gasoline supplier expects you to lower the price today for your customers to $4.25 per gallon. But your biggest competitor across the street has not lowered their prices - they’re making an extra 25 cents per gallon profit from their customers. Do you lower your price now, or do you wait until the other store lowers their price? Why?

Scenario 2 Your recently found a very old but unopened box of Twinkies in the back office of the snack shop. Normally, if food is expired you’re supposed to throw it away and report is as lost/damaged/expired goods. But because Twinkies went out of business, this box is very valuable and you could take it home and sell it on Ebay for a lot of money. But who does it really belong to - you or your business? What is the right thing to do? What would you do?

Scenario 3 Mr. Jones is a good customer. He always buys his gasoline at your station, and you have known him for years. He needs to get gas, but he forgot his wallet at home in his other pants pocket. There is a line of customers waiting to pay for their gas. What is the right thing to do? What do you do in this situation?

Do you the consumer care? Question 1 How important is advertising to you when selecting where to shop?

Do you the consumer care? Question 2 How important is the popularity of the brand to you when buying a good or selecting where to shop?

Do you the consumer care? Question 3 How important is being fashionable to you when selecting what to buy or where to shop?

Do you the consumer care? Question 4 How important is the shopping environment to you when selecting where to shop?

Do you the consumer care? Question 5 How important is customer care to you when selecting what to buy or where to shop?

Do you the consumer care? Question 6 How important is the physical location of a store to you when selecting where to shop?

Do you the consumer care? Question 7 How important are promotions/ discounts to you when selecting what to buy or where to shop?

Do you the consumer care? Question 8 How important is the quality of a product or store to you when selecting what to buy or where to shop?

Do you the consumer care? Question 9 How important is the value of your money for what you purchase when selecting what to buy or where to shop?

Do you the consumer care? Question 10 How important is a company’s ethical practices to you when selecting what to buy or where to shop?

Do you the consumer care? Question 11 How important is it if a company test their products on animals to you when selecting what to buy or where to shop?

Companies that test on animals Vicks Aveeno Glade Lysol Clorox L’oreal Dove Listerine Avon Head & Shoulders Pampers Estee Lauder Vaseline Almay Arm and Hammer Kiehls Maybelline Caress Aquafresh Revlon Windex Tide Mary Kay Old Spice Pantene Tesemme Johnson and Johnson Cover Girl Secret Mac Chapstick Source: Peta

Do you the consumer care? Question 12 How important is it if a company mistreats its workers to you when selecting what to buy or where to shop?

Companies that mistreat their employees Family Dollar Target Walmart Disney Microsoft H&M Forever 21 Merril Lynch Apple Sears DJ Houghton Source: Listverse

Do you the consumer care? Question 13 How important is it if a company uses child labor to you when selecting what to buy or where to shop?

Companies that still use child labor Gap Nestle H&M Phillip Morris Walmart Victoria’s Secret Apple Gap Disney Forever 21 Hershey’s Source: The Business Insider and List Verse

Do you the consumer care? Question 14 How important is it if a company harms the environment when making their products to you when selecting what to buy or where to shop?

Companies that harm the environment Archer Daniels Midland (agriculture) AES (energy) PPL (energy) Progress Energy Duke Energy First Energy Southern Energy Consol Energy ConAgra Foods NRG Energy Peabody Energy Source: Business Insider

Do you the consumer care? Question 15 How important is it if a company uses harmful chemicals in their products to you when selecting what to buy or where to shop?

Household products that are harmful Non-stick cook ware Plastic bottles (BPA) Some Cleaning supplies Chemical Insecticides Some Antibacterial products Chemical Fertilizer Some Light bulbs that contain mercury Source: Alternet