5-1 Ethics 5 5

To examine the role of ethical behavior in business finance. 2. To illustrate the role of unethical behavior in the downfall of business. 3. To describe the need for ethical practices in business finance.

5-3 Ethics Ethics: a set of beliefs about right and wrong. Ethics guide people in dealings with stakeholders and others, to determine appropriate actions. Managers often must choose between the conflicting interest of stakeholders.

5-4 Stakeholders Stakeholders: people or groups that have an interest in the organization. Stakeholders include employees, customers, shareholders, suppliers, and others. Stakeholders often want different outcomes and managers must work to satisfy as many as possible.

5-5 Ethics Are guidelines for human behavior Are the moral code by which individuals live and conduct business Help individuals decide how to act in situations where moral issues are concerned Set standards for moral behavior

5-6 Ethics Vary from person to person Do not solely rely on the basis of an act being legal or illegal Can be viewed as a moral philosophy Are generally termed gray areas

5-7 Business Ethics Study the behavior and morals in a business situation Are determined mainly by the business owner’s principles and values Should be practiced by all individuals in a business Reflect the beliefs of an organization Are tied directly to a businesses reputation Can be expressed in a code of ethics

5-8 Code of Ethics Code of Ethics: set of rules for guiding the actions of employees or members of an organization Is a set of ethical behavior guidelines which govern the day-to-day activities of a profession or organization Describe the appropriate conduct for a business Can be used to defend a company against criminal action if an employee violates the law Can be written or unwritten

5-9 Unwritten Codes of Ethics Are the customs of a business Are ways of completing tasks which are generally accepted practices Are passed through the business verbally from employee to employee example: an employee knows the Internet at work is not to be used for personal matters

5-10 Written Codes of Ethics Are considered formal codes of ethics Allow a company to have a “hard copy” of the procedures it condones Are mainly found within large businesses example: an employee must sign a confidentiality agreement prior to employment in order to prevent them from leaking company information

5-11 Developing a Code of Ethics Can be completed by: brainstorming ethical dilemmas discussing potential solutions writing a set of general guidelines improving the code in place

5-12 Why Behave Ethically? Managers should behave ethically to avoid harming others. Managers are responsible for protecting and nurturing resources in their charge. Unethical managers run the risk for loss of reputation. This is a valuable asset to any manager! Reputation is critical to long term management success. All stakeholders are judged by reputation.

5-13 Guidelines for Writing a Code of Ethics 1)Determine the purpose of the code 2)Tailor the code to the needs and values of the organization 3) Consider involving employees from all levels of the company in writing the code 4) Determine the rules or principles that all members of the organization will be expected to adhere to 5) Include information about how the code will be enforced 6) Determine how the code will be implemented and where it will be published or posted 7) Determine how and when the code will be reviewed and revised

5-14 Results of Illegal Unethical Practices Include the following: jail sentences  length is directly related to the severity of the crime hefty fines  amount is linked to the cost of the crime community service removal from leadership positions irreparable damage to those affected by the practices

5-15 Guidelines When considering the ethics of business situations, you can follow these guidelines: Is the action legal? Does the action violate professional or company standards? Who is affected by the action and how?

5-16 Results of Unethical Practices Include the following: damage to reputation loss of trustworthiness decrease in employee morale negatively viewed by customers

5-17 Managing Diverse Workforces The workforce has become much more diverse during the last 30 years. Diversity refers to differences among people such as age, gender, race, religion. Diversity is an ethical and social responsibility issue.

5-18 Types of Diversity Figure 5.5 CapabilitiesDisabilities Socioeconomicbackground Sexualorientation Religion Ethnicity Race Gender Age

5-19 Manage Diversity Distributive Justice: dictates members be treated fairly concerning pay raises, promotions, office space and similar issues. These rewards should be assigned based on merit and performance. A legal requirement that is becoming more prevalent in American business. Procedural Justice: Managers should use fair practices to determine how to distribute outcomes to members. This involves how managers appraise worker performance or decide who to layoff.

5-20 Diversity Makes Business Sense Diverse employees provide new, different points of view. Customers are also diverse. Still, some employees may be treated unfairly. Biases: systematic tendencies to use information in ways that result in inaccurate perceptions. Stereotypes: inaccurate beliefs about a given group.

5-21 How to Manage Diversity Increase diversity awareness: managers need to become aware of their own bias. Understand cultural differences and their impact on working styles. Practice effective communication with diverse groups. Be sure top management is committed to diversity.

5-22