© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1 Chapter 3 Emerging Business Ethics Issues Part Two Ethical Issues and the Institutionalization of Business Ethics

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 2 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

3 Specific Types of Observed Misconduct © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Source: Ethics Resource Center, 2011 National Business Ethics Survey: Workplace Ethics in Transition (Arlington, VA: Ethics Resource Center, 2012), 39. Behavior2011 (%)2009 (%) Misuse of company time33n/a Abusive behavior2122 Lying to employees2019 Company resource abuse2023 Violating company Internet use policies16n/a Discrimination1514 Conflicts of interest1516 Inappropriate social networking14n/a Health or safety violations1311 Lying to outside stakeholders12 Stealing129 Falsifying time reports or hours worked12n/a Employee benefit violations1211 Sexual harassment117

 Integrity: Uncompromising adherence to ethical values  One of the most important terms relating to virtue 4 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 5 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 6 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 7 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

8 Shareholder Issues © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1. Core values 2. Shareholder participation in electing directors 3. Executive compensation 4. Legal compliance 5. Lobbying and political activities 6. Reputation management 7. Integrity in collecting and managing data 8. Supply chain relationships and human rights

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 9 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 10 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

11 Actions Associated with Bullies © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1. Spreading rumors to damage others 2. Blocking others’ communication in the workplace 3. Flaunting status or authority to take advantage of others 4. Discrediting others’ ideas and opinions 5. Use of s to demean others 6. Failing to communicate or return communication 7. Insults, yelling, and shouting 8. Using terminology to discriminate by gender, race, or age 9. Using eye or body language to hurt others or their reputations 10. Taking credit for others’ work or ideas Source: Adapted from Cathi McMahan, “Are You a Bully?” Inside Seven, California Department of Transportation Newsletter, June 1999, 6.

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 12 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 13 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 14 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

The collection and analysis of information on…  Markets  Technologies  Customers and competitors  Socioeconomic and external political trends 15 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Three intelligence models  Passive monitoring system for early warning  Tactical field support  Support dedicated to top management strategy 16 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Hacking  System hacking  Remote hacking  Physical hacking  Social engineering  Shoulder surfing  Password guessing  Dumpster diving  Whacking  Phone eavesdropping 17 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 18 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 19 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 20 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 21 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 22 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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 23 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

24 Initial Detection of Operational Frauds © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Source: Association of Certified Fraud Examiners, Report to the Nations on Occupational Fraud and Abuse: 2012 Global Fraud Study, 14.

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 (establishment claims) and bald assertions (non-establishment claims) 25 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 26 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 27 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 28 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Involve the legal protection of intellectual properties  Books, movies, software  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 29 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 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 30 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.