© 2013 Cengage Learning. All Rights Reserved. 1 Part Two: Ethical Issues and the Institutionalization of Business Ethics Chapter 3: Emerging Business Ethics Issues Chapter 3: Emerging Business Ethics Issues

Recognizing an Ethical Issue An ethical issue is a problem, situation, or opportunity that requires an individual or group to choose among actions  New ethical issues are emerging constantly  Can be difficult to recognize ethical issues Failure to do so puts corporations at risk Is a problem in industries where winning is perceived to be a game © 2013 Cengage Learning. All Rights Reserved. 2

3 Specific Types of Observed Misconduct

Honesty Honesty: Truthfulness or trustworthiness  Telling the truth to the best of your knowledge  Dishonesty: A lack of integrity, incomplete disclosure, or an unwillingness to tell the truth Issues related to honesty arise when people perceive business as something where normal rules do not apply © 2013 Cengage Learning. All Rights Reserved. 4

Fairness and Integrity  Fairness: The quality of being just, equitable, and impartial  Equality: How wealth or income is distributed  Reciprocity: Occurs when an action that has an effect upon another is returned  Optimization: The tradeoff between equity and efficiency  Integrity: Uncompromising adherence to ethical values  One of the most important terms relating to virtue © 2013 Cengage Learning. All Rights Reserved. 5

Ethical Issues and Dilemmas in Business  An ethical dilemma is a problem, situation, or opportunity that requires an individual or group to chose among several wrong or unethical actions  There is no ethical choice © 2013 Cengage Learning. All Rights Reserved. 6

7 Shareholder Issues

Misuse of Company Resources The leading form of observed misconduct  Can range from unauthorized use of equipment and computers to embezzling company funds  Time theft costs organizations hundreds of billions in lost productivity annually © 2013 Cengage Learning. All Rights Reserved. 8

Abusive or Intimidating Behavior One of the most common ethical problems  Can be physical threats, false accusations, profanity, insults, harshness, ignoring someone, or unreasonableness  Intent is important in determining abuse Bullying is a growing problem Is associated with a hostile workplace © 2013 Cengage Learning. All Rights Reserved. 9

10 Actions Associated with Bullies

Lying Three types of lies  Joking without malice  Commission lying is creating a false perception with words that deceive the receiver  Creating noise  Omission lying is intentionally not informing channel members of problems relating to a product that affects awareness, intention, or behavior © 2013 Cengage Learning. All Rights Reserved. 11

Conflicts of Interest Exist when an individual must choose whether to advance his/her personal interests, those of the organization, or some other group  Individuals must separate personal interests from business dealings © 2013 Cengage Learning. All Rights Reserved. 12

Bribery The practice of offering something in order to gain an illicit advantage  Different types of bribery  Active bribery: The person who promises or gives the bribe commits the offense  Passive bribery: An offense committed by the official who receives the bribe Facilitation payments: Legal as long as they are small © 2013 Cengage Learning. All Rights Reserved. 13

Corporate Intelligence The collection and analysis of information on  Markets  Technologies  Customers and competitors  Socioeconomic and external political trends Three intelligence models Passive monitoring system for early warning Tactical field support Support dedicated to top management strategy © 2013 Cengage Learning. All Rights Reserved. 14

Corporate Intelligence  Hacking  System hacking  Remote hacking  Physical hacking  Social engineering  Shoulder surfing  Password guessing  Dumpster diving  Whacking  Phone eavesdropping © 2013 Cengage Learning. All Rights Reserved. 15

Discrimination Is illegal in the U.S.  A company can be sued for discrimination if it  Refuses to hire an individual for discriminatory reasons  Unreasonably excludes an individual from employment  Unreasonably discharges an individual  Discriminates against an individual with respect to hiring, employment terms, promotion, or privileges © 2013 Cengage Learning. All Rights Reserved. 16

Discrimination (continued)  Equal Employment Opportunity Commission (EEOC)  The Age Discrimination in Employment Act  Affirmative Action Programs  Efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against © 2013 Cengage Learning. All Rights Reserved. 17

Sexual Harassment A repeated, unwanted behavior of a sexual nature perpetrated upon an individual by another  Hostile work environment  The conduct was unwelcome  The conduct was severe, pervasive, and regarded by claimant as hostile/offensive  The conduct was such that a reasonable person would find it hostile or offensive © 2013 Cengage Learning. All Rights Reserved. 18

Dual Relationship A personal, loving, and/or sexual relationship with someone with whom you share professional responsibilities  A key ethical issue in sexual harassment Unethical dual relationship: The relationship causes a conflict of interest or impairment of professional judgment © 2013 Cengage Learning. All Rights Reserved. 19

To Avoid Sexual Misconduct, a Firm Needs 1.Statement of policy 2.Definition of sexual harassment 3.Non-retaliation policy 4.Specific procedures for prevention 5.Establish, enforce, and encourage victims to report 6.Establish a reporting procedure 7.Timely reporting requirements to the proper authorities © 2013 Cengage Learning. All Rights Reserved. 20

Environmental Issues Are becoming significant concerns in business  Air pollution: Gases and particulates in the air that can linger or be carried long distances by winds  The Kyoto Protocol: An international treaty on climate change that commits nations to reducing greenhouse gas emissions  Water pollution: Results from dumping sewage and toxic chemicals in places where they can filter into water supplies © 2013 Cengage Learning. All Rights Reserved. 21

Environmental Issues (continued)  Recycling: The reprocessing of materials, especially steel, aluminum, paper, glass, rubber, and some plastics  Consumers consider recycling to be the most important thing they can do to live “greener” lives  Alternative energy: Is considered “green” because it produces fewer emissions and creates less pollution WindHydropower SolarBiofuels GeothermalNuclear © 2013 Cengage Learning. All rights reserved. 22

© 2013 Cengage Learning. All Rights Reserved. 23 Consumers’ Favorite Green Practices

Fraud Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression  Accounting fraud  Misrepresentation of company’s financial reports  Dramatic changes in accounting field  Increased competition and pressures to perform can create opportunities for misconduct  Accountants should abide by a strict code of ethics © 2013 Cengage Learning. All Rights Reserved. 24

Marketing Fraud The process of dishonestly creating, distributing, promoting, and pricing products  Puffery: Exaggerated advertising claims, blustering, and boasting  Can be difficult to distinguish from fraud  Implied falsity: An advertising message that misleads, confuses, or deceives the public  Literally false: Claims can be divided into tests prove and bald assertions (non-establishment claims) © 2013 Cengage Learning. All Rights Reserved. 25

Consumer Fraud  When consumers attempt to deceive businesses for personal gain  Price tag switching, item switching, or lying to obtain discounts  Collusion involves an employee who helps a consumer commit fraud  Duplicity involves a consumer duping a store  Guile is associated with a person who uses tricks to obtain an unfair advantage © 2013 Cengage Learning. All Rights Reserved. 26

Financial Misconduct  The failure to understand and manage ethical risks was a key problem in the recent financial crisis  Many firms rewarded risk-taking  Difficult-to-understand financial instruments and murky accounting played roles  Government calls for reform  Stricter controls on hedge funds and other instruments  Greater transparency  Dodd-Frank Wall Street Reform and Consumer Protection Act © 2013 Cengage Learning. All Rights Reserved. 27

Insider Trading  Two types of insider trading  Legal insider trading: Involves legally buying and selling stock in an insider’s own company, but not all the time  Illegal insider trading: The buying or selling of stocks by insiders who possess material that is not public © 2013 Cengage Learning. All Rights Reserved. 28

Intellectual Property Rights and Privacy Involve the legal protection of intellectual properties  Books, movies, software  Can be difficult to enforce  Many privacy issues in the business world  Employee use of technology  Consumer privacy  Can be challenging for businesses today to meet the needs of consumers while protecting privacy Identity theft is a growing problem © 2013 Cengage Learning. All Rights Reserved. 29

The Challenge of Determining Ethical Issues in Business  Most ethical issues become visible through stakeholder concerns  Determining ethical issues is a challenge  Changing societal standards over time The ethical decision making process starts when ethical issue awareness occurs and a discussion begins © 2013 Cengage Learning. All Rights Reserved. 30