Moral Choices Facing Employees Unit 8 Ethical Awareness

Objectives - Employees’ obligations to the firm, company loyalty, and the problem of conflicts of interest. - Insider trading or use of proprietary data. - Domestic and foreign bribery, gifts, kickbacks. - Obligations to third parties and the problem of conflict of duties and divided loyalties.

Obligations to the Firm  Loyalty to the firm: The employment contract governs employer-employee relationships and provides a framework for respective obligations of employer and employee.  The notion of company loyalty is commonplace, considered a coherent and legitimate concept.  Loyalty requires reciprocity, and workers commonly believe that it is up to the company to earn and retain their loyalty.

Obligations of Workers Every worker shall have the following obligations: 1. To perform in person the work specified in his contract of employment. 2. To follow instructions given by the employer based on the terms of the contract and work rules. 3. To handle with due care all instruments and tools entrusted to him for work. 4. To report for work always in fit mental and physical conditions. 5. Employees shall put forth honest effort in the performance of their duties. 6. Employees shall adhere to all laws and regulations that provide equal opportunity for all other employees regardless of race, color, religion, gender, national origin, age, or handicap.

 How do we cultivate an ethical institution : 1.Emphasize good internal control. 2.Promote an ethical environment.  How can we facilitate a high level of integrity in our department: 1.Tell people what is expected of them. 2.Set the example. 3.Give the message and repeat it often.

Abuse of Official Position Using one’s official position for personal gain or other unethical utilities. Abuse of an official position includes: 1.employing an immediate family member. 2.Using corporate funds for private purposes such health club memberships, extravagant parties, vacation travel, etc. 3.Conflict of interest. 4.Inside traders. 5.Bribes and Kickbacks.

Abuse of Official Position  Conflicts of interest: A potential conflict exists when there is a possibility that an individual’s outside financial interests could directly and significantly affect the individual’s professional actions or decisions.  Employees should promptly extricate themselves from such conflicts or avoid them from the start.

Abuse of Official Position Insider trading: Refers to the significant facts that have not yet made public and are likely to affect stock prices. It is unaccepted ethically. Critics of insider trading argue that: (a) It is unfair. (b) It can injure other investors. (c) It undermines public confidence in the stock market. Defenders say that it performs a necessary and desirable economic function. But executives who do this put their own interests before those of the company and its shareholders.

Bribes and Kickbacks  Bribe: a remuneration for the performance of an act that is inconsistent with the work contract or the nature of assigned task – can be money, entertainment, gifts, or preferential treatment.  Kickback: a form of bribery that involves a percentage payment to a person who is able to influence or control a source of income.

Bribes and Kickbacks  The Foreign Corrupt Practices Act (FCPA) of 1977 made it illegal for some international companies such as (American companies) to engage in bribery overseas.  It dictates rigid fines and prison sentences for corporate officials engaging in bribery overseas.  It requires that corporations establish strict accounting and auditing controls to guard against the creation of slush funds from which bribes can be paid.

Bribes and Kickbacks  Bribery and payoffs are common business practices in other nations – but this does not imply that they are morally acceptable in those nations.  Permitting U.S. companies to engage in foreign bribery encourages something in other countries that we consider too harmful to tolerate at home.  So to allow bribery overseas is to apply a double moral standard.

Gifts and Entertainment  Gifts and entertainment are familiar in business practices and customer relations worldwide.  But they can raise conflict-of-interest problems and can border on bribery.  Knowing where to draw the line is not always easy.

Gifts and Entertainment  Seven factors that an ethical employee should consider before accepting gifts: (1)The value of the gift (or entertainment). (2)Its purpose. (3)The circumstances under which it is given. (4)The position and sensitivity to influence of the person receiving the gift. (5)Accepted business practices in the industry. (6)Company policy. (7)What the law says.

Conclusion: Knowing our Code of Ethics, anticipating ethical predicaments, and being able to document and provide a rationale for our actions are keys to successful, ethical practice.

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