DEPARTMENT OF BUSINESS
MANAGEMENT
BUSINESS ETHICS (MBM 703)
Upon successful completion of this
course, the student will be able to:
• Understand ethical principles related to business settings
• Analyze situational information and apply principles to
evaluate ethical dilemmas
• Identify multiple issues and concerns of relevance to ethical
dilemmas, and evaluate the impact each of these may have
on approaches to, and resolution of, the dilemma
• Identify multiple approaches to resolve and formulate possible
solutions to ethical dilemmas, understanding the pros and cons of
each approach
• Understand the impact courses of action to remedy ethical
dilemmas have on individuals in organizations themselves, and
society as a whole
• Gain an appreciation of recent ethical dilemmas in today’s business
environment, through practical study and critical analysis
• Demonstrate competencies to better enable handling of ethical
challenges in business settings
UNIT 1
BUSINESS ETHICS
‘Survival of the thiefest not survival of the fittest’
Why a Global Interest in Business
Ethics
• Corporate sector engine for growth-no one needs to
invest in an ethical company
• The need to make corporations viable destinations for
investment in a competitive global market
• The realisation that good ethics has “an economic
payoff”- mo investors come, employees, suppliers
wants to supply
5
Forces - Interest
- Corporate Scandals
• High corporate scandals and failures
– Examples: Enron, World Com, The Maxwell Group,
Barrings Bank, United Merchant Bank, FNBS, ENG
etc.
• The fight against corruption, bribery and
abuse of corporate power
6
Forces - Interest
- Market Volatility
• Market volatility and instability experienced
highlights implications of corrupt practices
• Political instability in middle east driven in
part by social media
• Changes in capital flows and money from
US to and europe to far east and india
7
- Society’s Perspective
(License to Operate)
Forces - Interest
• Corporations as creatures of law exist
because society recognizes them – if you
are unethical customers wont buy.
8
- Society’s Perspective
(License to Operate) Cont
Forces - Interest
• Society gives a license to operate – society
can demonstrate against us
• Enterprises, be they public or private are
organs of society. Belong to society so
should act ethically
9
Forces - Interest
- Shareholder Activism
• Share owners demand corporate democracy,
transparency & protection of minority’s
interests- they invest in orgs and they invest
their money they need to see how their
money is being used.
• Institutional investors insist on high standards
of corporate governance eg NSSA
• A survey by management consultancy firm Mc
Kinsey: substantial premium placed on good
corporate ethics by shareholders
10
Forces - Interest
- Ethical investors
• Forcing corporations to re-think corporate
governance and ethics practices
11
Forces - Interest
- Ethical investors (cont)
• “We as Africans have to accept, willingly or
unwillingly, that we are members of a
borderless world.” –Mervyn King (SA)
12
Forces- interest- Reputational Agents
• The rise of reputational agents
• -careers managers/executive directors whose
survivals based on rep
Forces-interest- Reputational Agents
(cont)
• Markets f(x) on infor and trust as a result we
incur reputational risk.
• Lack of ethics breeds corruption, money
laundering, bribery and abuse of corporate
power.
• Africa losing abt 80 bhidza over corruption
• This includes $$$ siphoned from projects and
programmes in Africa and stashed away in
foreign banks in the west.
Forces - Interest
- The Principal/Agent
Problem
Separation of Ownership From Control
• Interest of managers and shareowners
could simply differ
• The Baumol, Marris, Williamson models of
management behaviour
16
Forces - Interest
- Baumol, Marris Williamson
Models (Assumptions)
• There is conflict of interest between
shareowners and management
• Shareowners
– profit maximization
• Management
– Risk averse
– Not preoccupied with profit maximisation beyond
the threshold expected by shareowners
17
Forces - Interest
- Baumol, Marris Williamson
Models (Assumptions)
• Management
– Have discretion with respect to objectives of the
firm
– Not pre-occupied with producing the output level
that maximises profit.
18
Forces - Interest
- Williamson Model
(Assumptions)
• Found in unitary organized firms
• Subject to a profit constraint expected by
shareowners
• Beyond that constraint, managers use discretion and
are utility maximisers, whose motives are
– Financial rewards
– Prestige: company cars, lavish offices, large staff
– Power
– Security
19
Forces - Interest
- Williamson Model
(Assumptions)
• Found in unitary organized firms
• Subject to a profit constraint expected by
shareowners
• Beyond that constraint, managers use discretion and
are utility maximisers, whose motives are
– Financial rewards
– Prestige: company cars, lavish offices, large staff
– Power
– Security
20
Forces - Interest
- Reputational Agents
• The rise of reputational agents
– Career Managers/Executive Directors whose
survival is based on good reputation
21
Forces - Interest
- Reputational Agents(cont)
• In this regard Andrew Sheng, Chairperson,
Securities and Futures Commission, Hong
Kong observers: “that markets function on
information and trust, as a result we incur
reputational risk.
22
Forces - Interest
- Fight Against Poverty
• Lack of accountability and transparency breed
corruption, money laundering, bribery and
abuse of corporate power.
• In Zimbabwe Minister of Justice Patrick
Chinamasa was quoted in the Daily of 23
August 2000 saying. “Africa is losing more that
4 trillion US$80 billion each year to corruption
23
Forces - Interest
- Fight Against Poverty
(cont)
• …This includes money siphoned from projects
and programmes in Africa and stashed away in
foreign banks in the West
24
1.1 Definitions
•
It comprises principles and standards that guide behavior in the world of business – this that shld
not and be done at a company
•
It can also be defined as right or wrong, acceptable or unacceptable within an organization. ( Ferrell
O. C. and Fraedrich, John and Ferrell Hides in their book Business Ethics.)
•
Business ethics is about building relationships of trust between people and organizations an
absolutely essential ingredient to conduct business successfully especially in the long term – how
you treat customers and suppliers.
•
Carl Skoogland says; ethics are the ground rules about how you are going to relate to other people,
the expectations and understanding that define how you are going to deal with others. By others
we mean our customers, suppliers, the government, communities but most of all one another.
1.2 Common unethical issues
•
Canvassing for jobs: soliciting for information before getting interviewed.
•
Bribery: e.g. ZIMRA officials get paid for someone not to pay duty(see case study)
•
Nepotism - hukamanism
•
Sexual harassment ( see Case study) 2 Kings chapter 1
•
Conflict of interest – declare conflict of interest
•
Abuse of power/authority(see Case study)
•
Discrimination: unequal opportunities, race, tribe.
•
Underhand dealing – companies declaying two profits, under invocing and under weighing
•
Under invoicing
•
Underweighing of commodities
•
Constructive dismissal – post being advertised when u are there
1.2 Common unethical issues cont.
•
Tax evasions(see case study: Fraud)
•
Deceptive advertising eg enhancers, tonners(diprozona),coke “adds life”,surf ,axe perfume( even
angels couldn’t resist)
•
Some issues are legal but unethical
•
Insider trading of stocks – rampant at stock exchange….. Telling your frends to buy shares of your
company you are working for
•
Selling defective products
•
Intelligence gathering – happens in recipes company and stealing
•
Lying and withholding information
•
Misreporting time worked
•
Overpricing of goods and services
•
Breaking environmental and safety laws( see ZBC report dvd)
Common unethical issues cont
•
•
•
•
•
•
•
•
•
Company resource abuse (23%)
Abusive or intimidating behavior toward employee (22%)
Lying to employees (19%)
Email or internet abuse (18%)
Conflicts of interest (16%)
Discrimination (14%)
Lying to outside stakeholders 12%)
Employee benefit violations (11%) eg caps & zimglass
Employee privacy breach (10%) eg checking on fb how your
employee
• Employee hiring practices (10%)
• Falsifying time or expenses (10%)
•
cont
• The percentage of employees engaged in theft is a
staggering 60 percent. In addition to the usual pilfering
of pens and paper, the most common employee
misuses of corporate assets for personal use are:
• Email 63%
• Web Browser 45%
• Fax Machine 45%
• Software 33%
• Mail/Overnight Delivery 23%
• Wireless Phone 22%
1.3 Benefits of Managing Ethics at the Work
Place
1) Attention to business ethics has substantially improved society
•
Some decades ago child labor was not condemned
•
Disabled workers were condemned to poverty
•
Employees were dismissed based on personalities eg Police ,and influence was
applied through intimidation and harassment, society then reacted and demanded
that business place high value on fairness and equal rights
•
Anti-trust laws were instituted, government agencies were established and women
were organized
2) Ethics programmes help maintain a morale course in turbulant
times
• During times of change, there is often no clear morale campus to guide leaders
through complex conflicts about what is right or wrong. Continuing attention to
ethics in the work place sensitizes leaders and staff on how they should act.
3) Ethics programmes cultivate strong team work and productivity
•
They align employee behaviors with those top priority ethical values preferred by
the leaders of the organization.
•
Own going attention and dialogue regarding value in the work place builds
openness and integrity which are critical ingredients of strong teams in the work
place
•
Employees feel strong alignment between their values and those of the
organization. They react with strong motivation and performance.
4) Ethics programmes support employees growth and meaning
•
Attention to ethics in the work place helps employees face reality both good and
bad in the organization and themselves. Inductions, no short cuts
•
Employees feel full confidence, they can admit and deal with whatever comes their
way
5) Ethics programmes promote a strong public image. The fact that an
organization regularly gives attention to its ethics can portray a strong
public image in the long term
•
Bob Dum the president and CEO of San Francisco Based Business for Social
Responsibility said ethical values consistently applied are the corner stones in
building a commercially successful and socially responsible business.
6)
Managers ethical values in the work place legitimizes managerial actions, improves
trusts and relationships between individuals and groups, supports greater consistency
in standards and qualities of products and cultivates greater sensitivity to the impact
of the enterprises value and messages.
7)
Ethics programmes help avoid criminal acts of omission
•
Ethical programmes tend to detect violation easily so that they can be reported or
addressed. In some case when an organization when it is aware of actual or
potential and does not report it to appropriate authority this can be considered a
criminal act
An organization can lower potential fines if it had made efforts to operate ethically
•
and can lower fines
8) Formal attention to ethics is the right thing to do.
Competitive Advantages of Ethical
Organizations
Ethical organizations, compared to unethical
organizations, are more likely to :
• Attract and retain high-quality employees
• Attract and retain high-quality customers
• Attract and retain high-quality suppliers
• Attract and retain high-quality investors
• Earn good will with community members and
government officials
cont
Organizations that attract and retain high quality employees,
customers, suppliers, and investors and earn good will with
community members and government officials are more
likely to have
• Greater trustworthy information for decision making
• Higher product and service quality
• Higher levels of employee productivity
• Less employee theft
• Less need for employee supervision.
• Increased flexibility from stakeholders in times of
emergency – you can pay in advance and good will be
delivered.
Costs Associated with Unethical
Behavior
•
•
•
•
•
•
Legal costs
Employee theft
Monitoring costs
Reputation cost
Abusive treatment costs
Recruitment and turnover costs
1.4 Managing Ethics in the Work Places
1.4.1 Guidelines for Managing Ethics in the Work Place
•
Recognize that managing ethics is a process
•
The bottom line of an ethics programme is accomplishing preferred behavior in
the work place
•
Make ethics decisions in groups and make the decisions public and appropriate
•
Integrate ethics management with other management practices e.g. when
developing the values during strategies include values preferred in the work place
when developing personal policies reflect on ethical values you had like to be
punishment in the work place and then produce policies to curb these behaviors
1.4.1 Guidelines for Managing Ethics in the Work Place
cont.
•
Use cross functional teams when developing and implementing the ethics
management programmes to enhance a sense of ownership through participation
•
Value forgiveness – help people recognize and address their mistakes and then to
continue operate ethically.
•
Note that trying to operate ethically and making a few mistakes is better than not
trying at all
CASE STUDY
FRAUD
Pg 51
1.4.2 How Managers Manage Ethics in the Work Place
The Code of Ethics
•
As an organization we should establish a code of ethics and decision rules.
•
A code of ethics is a formal document that states an organization’s values and ethical rules it
expects its employees to follow. This should be specific enough to show employees the spirit in
which they are supposed to do things yet loose enough to allow for freedom of judgment.
•
Establish an ethics committee
•
Policies, systems and procedures to be in place
•
Whistle blowing
•
Managers should lead by example
•
Reward and punishments systems should be fair and equal to everybody
•
Carry out ethical audits
1.4.2 How Managers Manage Ethics in the Work Place
.
cont
•
Carry out ethical training
•
Carry out performance appraisals based on ethical audits
•
Set goals which are SMART
•
Introduce toll free numbers
1.4.3 Possible Solutions
•
Top management should establish clear policies that encourage ethical behavior
•
Management must assume responsibility for disciplining wrong doing doers
•
Company can provide a mechanism for whistle blowing as a matter of policy
•
Come up with an ethics programme which promote preferred behavior in the work place
•
Make ethics decisions in groups and make decision public
•
Help people recognize and address their mistakes and support them to continue to try and operate
ethically
•
Recognize that managing ethics is a process and not an event
•
Set up programme to teach employees to deal with moral problems in business
- give it time
1.4.4 Description of a Highly Ethical Organization
(Characteristics) Mark Pastin
In his book Hard Problems of Management (1986) he came up with 4 characteristics
•
They are at ease interacting with diverse stakeholder groups
•
They are obsessed with fairness
•
Responsibility is individual rather than collective with individuals assuming
personal responsibility for actions of the organization
•
They see their activities in terms of purpose. This purpose is a way of operating
that members of the organization highly valued and this purpose ties the
organization
UNIT 2
ETHICAL ISSUES IN BUSINESS
2.1 Sources of Pressure to Compromise Standards
•
Peer pressure
•
Pressure from supervisors when they set unrealistic targets
•
Greed
•
Revenge e.g. volunteering confidential information to competitor
•
You do it because others are doing it
•
The absence of code of conduct
•
lack of moral conscience
•
if managers do not get the tone right then subordinates will do the same.
2.2 Why people don’t report misconducts
•
They will have connived
•
Fear of victimization
•
Fear of being ignored .if I report they will not do anything
•
Lack of proper reporting channels or procedures
•
What do I benefit from “it” rather keep quiet
•
You might be taken as the trouble maker
•
You might be taken as a snitch
2.3 Classification of ethical issues
1. Conflict of interest
2. Honest and fairness
3. Communications
4. Organization relationships
1. Conflict of interest
• It exists when an individual must choose whether to advance
his/her interest or organization’s interest or others’ interest. It
occurs when your judgment or objectivity is compromised
i.
Conflict of interest can occur when a vendor entertains you, or you entertain
him/her to influence him/her
ii.
When people who report to you that you have a close friendship with one of
your core workers
iii.
When you are asked to judge the credit rating of your close relative
iv.
When you perform consulting services for your employers competitor
2. Honest and Fairness
•
This is where one follows the applicable laws and regulations not knowingly
harming stakeholders.
•
Is advertising prescription drugs on television/ magazine fair
3. Communication
•
It refers to the transmission of information and the sharing of meaning
•
e.g. deceptive advertising ,product safety information. The customer has to know
the product composition
4. Organizational Relationship
•
Looks at the organization, members towards stakeholders e.g. confidential issuesmeeting obligations
•
Pressurizing others to behave unethically
2.4 Ethical Issues in Functional Areas
2.4.1 Unethical issues in Human Resources
The ethics in human resources covers employees. Employees’ relationship e.g. rights
of duties owed between employer and employees
•
Ghost employees
•
Sexual harassment
•
Issues affecting the privacy of employees e.g. drug testing, worker surveillance
•
Fairness of employment contract and the balance of power between employment
and employee
•
Issues of occupational, safety and health
2.4.2 Unethical Issues in Finance and Accounting
•
Manipulating of figures such that you reduce the amount of money due to taxes
•
Forgering of receipts
•
Delayed payment of creditors
•
Under invoicing
•
Insider trading
•
Securities fraud
•
Executive compensation at the expense of other members of the organization
2.4.3 Unethical Issues in Sales and Marketing
•
Deceptive advertising
•
Tender flaunting
•
Overpricing of goods and services
•
Non disclosure of ingredients in products e.g freezit
2.4.4 Unethical issues in Production
•
Deals with the duties of a company to ensure that products in production process
do not care how. Some of the acute dilemmas in this area arise out of the fact that
there is usually a degree of danger on any product in production process
•
Defective products
•
Pollution in the environment
•
Under weighing
•
Some organization not providing safety equipment
•
Sending genetic modified foods
2.5 Barriers to Exposing Unethical
Behavior
1.
Chain of command
- poor reporting channel and process
2.
Group membership
- develop group think-members fear of being ostracized for
blowing the whistle
3.
Ambiguous priorities
- unclear and contradicting policies
4.
Fear of victimization
5.
Conniving
6.
Might be taken as a trouble maker
What do I benefit from it so rather keep quiet.
Organizational Factors
• Work culture discourages conveying negative
information or dissent
• Loyalty to employees, manager, organization,
and profession is not aligned with ethics
• No established reporting system beyond chain
of command
• Lack of anonymity for reporting misconduct
Observer Factors
•
•
•
•
•
•
•
Habituated not to share sensitive information
Low morality intensity
Lack of evidence
Lack of empowerment
Lack of seniority
Low hierarchical position
Lack of personal relationship with the person or
person’s supervisor
• Lack of moral courage
Anticipated Negative Outcomes
• Being related or viewed negatively (e.g., troublemaker,
complainer, tattletable)
• Damaging a relationship (e.g., loss of trust, respect,
acceptance)
• Retaliation or punishment (e.g., loss of job or promotion)
• Negatively impacting others (e.g., don’t want to upset or
embarrass someone, or get someone in trouble)
• Being blamed for the problem
• No corrective action will be taken
2.6 Examples of Ethical Values
2.6 6 pillars of character by the Josephson Institute of Ethics
(1868)
1.
Trustworthiness
- you are looking at values like honesty, integrity, promise
keeping and loyalty
2.
Respect
- you are looking at privacy, dignity, courtesy, tolerance
and acceptance
3.
Responsibility
-accountability and pursuit of excellency
4.
Caring
- compassion, consideration, giving, sharing, kindness
and loving.
5.
Justice and fairness
- impartiality, consistency and equity
6.
Civic Virtue and citizenship – law abiding, community service and protection of
the environment.
CASE STUDIES
 Cement for Sale
 The Magical $100,000
 The Question of Corporate
Responsibility
 Working Environment
 Mortgages for Black Families
UNIT 3
APPLYING MORAL PHILOSOPHIES TO
ETHICAL DECISION MAKING
Moral philosophy – the rules or principles that people use to decide what is wrong or what is
right . Theories include: (see notes for intro)
3.1 Teleology/Consequentialism
This focuses on the consequences or results caused by a decision
a) Egoist View
• Defines right or wrong in terms of consequences to oneself . it seeks
maximized self interest. An egoist weighs an ethical dilemma in terms of
how different courses of action will affect his physical or mental well
being. Advocates of a free market economy, urge that when an individual
pursues his/her own self interest he/she benefits society at large. This
point of view is notably exposed by Freedman who suggests that the only
moral obligation of a business is to make a profit and obey the law.
b) Utilitarian View (Deontology View)
•
Concerned with consequences in terms of seeking the greatest good for the
greatest number of people
•
An ethical decision should, maximize benefits to the society and minimize the
harm. The cost encompasses cost benefit analysis. The cost or benefits are
measured in economic, social or emotional terms
•
e.g. a manager concludes laying off 20% of the work force in the plant is justified
as it will increase plant’s profitability whilst improving job security for the
remaining 80%
CASE:
•
You are the plant manager in one of ABC Company. Five plants you have worked
for the company for 15 years working your way up from the factory floor after
the company sent you to college your boss tells you in complete confidence that
the company will have to lay off 200 workers luckily your job will not be affected.
But a rumor is circulating in the plant and one of your workers an old friend who
now works for you asks a questions ‘ Is the plant closing?, am I going to lose my
job?, I have a kid in college, I need to know’ what will you say to him
•
Criticism
•
It is difficult to obtain the information required to evaluate all the consequences
for all individuals who may be affected directly/ indirectly by the decision
•
The rights of a minority group can easily be sacrificed for the benefit of the
majority
3.2 Rights View of Ethics
•
View of ethics in which decisions are concerned with respecting and protecting
basic rights of individuals e.g. rights to privacy, freedom of conscience, free
speech (may have freedom of speech and no freedom after speech)
•
It focuses on the rights of the individual and on the intension s associated with
behavior and not on the consequences.
•
They base the decisions about what is a right on broad abstract, universal
principle, e.g. honesty, promise keeping, rights, justice, and respect for persons
and property. Some actions would be considered wrong even if the
consequences are good
•
A deontologist focuses on what is right based on moral principles where the
utilization focuses on doing what maximizes societal welfare equal to the golden
rule for deontologist is “do unto others as you would like them to do unto you”
•
E.g. an auditor takes a deontological approach would insist on telling the truth about a company’s
financial difficulties even if doing so might cause harm than good and putting the company out of
business. While a utilization manager would weigh the societal harms and benefits by deciding what to do.
•
Criticism
•
Can present obstacles to high productivity and efficiency by creating a working climate that is more
concerned with legally protecting individuals rights than getting the job done
•
Which duty, obligation, right or principle takes precedence in case of a clash of interest e.g. in case of
abortion whose rights rather the mother’s right or the unborn child.
•
Another difficulty for arguing for rule or principle that if followed in a particular manner will have
devastating consequences
3.3 Theory of Justice View of Ethics
•
Concerned with perceived fairness of action. A just or ethical action is one that
treats all fairly and consistently in accordance with the ethical or legal standards
•
It calls upon managers (decision makers) to impose and enforce rule fairly and
impartially.
•
It protects interest of stakeholders who may be under represented or lack power
but can encourage a sense of entitlement that might make employees reduce risk
taking, innovation and productivity.
a.
Distributive justice
- based on outcomes received by individuals and their
perception of these outcomes. If you perceive that you are underpaid you may
cut back on your amount of work output, show up late or look for another job.
3.3 Theory of Justice View of Ethics
cont.
•
Procedural justice
- based on the processes (policies, procedures and rules)
employed to reach decisions. Individuals evaluate the fairness of these processes
in addition to the outcome received
•
Interactional justice
- relate to the personal treatment that one receives in
the administration of a decision making process. Interactional fairness has to do
with the respect and consideration shown in the administration of decisions. It
evaluates accuracy of information and truthfulness and respect in the decision
making process
3.4 Integration Social Contracts Theory
(Virtue Ethics)
•
Focuses more on the integrity of the moral actor than it does on the moral act itself.
•
It also proposes that decisions should be made on the basis of combining empirical (what is) and normative (what should
be) factors. View suggests that managers need to look at existing ethical norms in industry and organizations in order to
determine what constitutes right and wrong decisions of actions.
•
It considers the actors’ character, motivation and intension, principles, rules or consequences are considered in the
context of the actress’ character and integrity
•
In virtue ethics character is defined by one’s community
•
Virtue ethics may be useful in determining the ethics of an individual who works in a professional community that has
well developed norms and standards e.g. accounting, lawyers, architects etc
3.4 Integration Social Contracts Theory
(Virtue Ethics) cont.
Advantage
•
It allows the decision maker to relay a relevant community standard without going
the complex process without trying to find out what is right in every situation
using deontological or teleological approaches
Criticism
•
What if the community has not done that kind of thinking
•
It may be limited in business because there is limited agreement about what
standard are. There is no universal code of conduct for all business to follow
3.5 Relativist Approach
•
It states that there are no universal principles of ethics and that right or wrong
must be determined by each individual or group
•
Believes that standards of right or wrong change overtime and are different across
cultures and does not accept that some ethical standards are superior to others
thus, what is right for someone may not be right for another or when in Rome
does the Roman do
Summary
•
•
•
•
•
•
•
•
The Six Ethical Theories
EGOISM: How does the action relate to me? If the action furthers my interests, then it is right. If it conflicts
with my interests, then it is wrong.
SOCIAL GROUP RELATIVISM: how does the action relate to my social group (peers, friends etc)? If the
action conforms to the social group’s norm, then it is right. If it is contrary to the social group’s norms then
it is wrong
CULTURAL RELATIVISM: How does the action relate to the national culture, particularly in laws? If the
action conforms to the laws, then it is right. If it is contrary to the laws then it is wrong.
UTILITARIANISM: How does the action relate to everyone who is affected by it? If the action is beneficial
to the greatest number of people affected by it, then it is right. If it is detrimental to the greatest number,
then it is wrong.
DEONTOLOGY: Does the action treat every stakeholder with respect and dignity in all situations? Is the
action something that everyone should do? If yes, then it is right. If no, then it is wrong.
VIRTUE ETHICS: How would a virtuous person act in this situation? If the act strengthens moral character,
then it is right. If it is contrary to moral character building then it is wrong.
UNIT 4
BUSINESS ETHICS AND SOCIAL
RESPONSIBILITY
Social Responsibility
4.1 Definitions
•
It refers to an organization obligation to maximize its positive impact on
stakeholders and minimize its negative impact.
•
It is an organization’s obligation beyond that which is required by law and
economics to the society
4.2 Classical Views
•
It proposed that the only social responsibility of an organization is to maximize
profits. It argues that managers are the owners of the business therefore they
should not be socially responsible for the costs of social responsibility. Is it the
consumers in raised prices, is it the employees in lower wages or it the
shareholders in return.
•
In most cases it is the owners of the business who lose out therefore managers
would not be socially responsible
4.2 Socio-Economic Views
It argues that business has an obligation towards the society that creates and supports it. If business is socially
responsible it maximizes profits in the long run as a result of a good image and acceptance by the society.
Business should therefore play an activist role by supporting charitable organizations creating employment and
protecting the environment.
4.4 Four Dimensions of Corporate
Social Responsibility
a. Economic dimension
b. Legal dimension
c.
Ethical dimension
d. Philanthropic dimension
a) Economic Dimension
•
Refers to the business’ primary function as a producer which the consumer needs
and wants whilst making an acceptable profit
•
It also looks at how resources for the production services are distributed in the
system
•
The responsibility is said to be primary because without financial viability the
other responsibilities will not be there. Some issues of concern here are economic
development, technological progress, profit generation, employment, wages and
benefits, pollution and maintaining competition.
b) Legal Dimension
It refers to obeying laws and regulations established by government to set minimum
standards of acceptable behavior. Laws are passed because society does not always
trust business to act in societies’ best interest : - Civil law
Criminal law
b) Legal Dimension cont.
Civil law -
defines the rights and duties of individual and organization. The laws are enforced by individuals generally
in counts
Criminal law -
prohibits specific action and imposes penalty. Criminal laws are enforced by the state.
•
Most laws affecting business, fall into one of the following categories
•
Laws regulating competition e.g. prevention of restraint of trade ……….
•
Laws protecting consumers e.g. safety of the product. The right to have information.
•
Laws protecting employees – non discrimination rights of association. Work place safety.
•
Laws protecting investors – disclose of financial statement, financial fraud etc.
•
Laws protecting the environment – protecting air, water pollution
c) Ethical Dimension
•
Encompasses the more general responsibility to do what is right and avoid harm
•
These are behaviors and activities that are expected or prohibited by organization
members, the community and society. These are not codified into law. These include
serving stakeholder interest and addressing social concerns.
•
The ethical dimension interacts with the law
category pushing expansion of legal responsibilities and placing expectations on business
persons to function at a level above the law.
d) Philanthropic Dimension
d) Philanthropic Dimension
• Philanthropic means intervening in the lives of others for their benefit not
merely for own. The dimension involves active involvement in activities
that promote human welfare and goodwill in other words it refers to
business contribution to society by making the local community a better
place to leave and addressing sound concerns and problems. Since this is
voluntary failure to be philanthropic is considered to be ethical
4.5 Arguments against Corporate
Social Responsibility
•
If the arguments for a socially responsible approach were widely accepted, nobody
would even use the label "CSR" because everyone would be doing it. Those of us
who spend our time marshalling the case for would do well to spend a little time
hearing the case against, and considering what should be the response.
•
Of course, one of the challenges in considering cases "for" and "against" CSR is the
wide variety of definitions of CSR that people use. We assume here we are talking
about responsibility in how the company carries out its core function.
• RESPONSES
CASE STUDY
TOYOTA
UNIT 5
A FRAMEWORK FOR UNDERSTANDING
ETHICAL DECISION MAKING IN
BUSINESS
5.1 Eight steps to sound Ethical
Decision Making in Business
1. Gather the fact
• It is important to gather the fact about the occurrence of the dilemma ask
questions like ‘How did the situation occur? Are there historical facts I
should know? , are there facts concerning the current situation I should
know?’
• Fact gathering may be difficult because the facts might be simply
unavailable but it is important to try and attempt to assemble the facts
available before proceedings.
2. Define the ethical issues
•
Do not just jump into conclusions without first identifying the issues or point of
conflict in the dilemma. In our lay off cases one issue has to do with the workers
right to know about the plant closing in advance. Another issue has to do with the
company right to keep information private. At a more personal level there are
issues related to honesty, loyalty and promise keeping. The point of conflict will go
back right to the conflict between teleology and deontology approaches e.g. if I
tell the truth which is consistent with the principle of deontology bad things will
happen. Do not be inclined to the first ethical issue that comes to mind, but
challenge yourself to think as many ethical issues as you can. Talking to others
about the problem can help be it friends, spouses etc. ask them if there are any
issues you might have missed.
3. Identify the affected parties
•
Teleology and deontology approaches both involve the parties affected by the
decision. The teleology approach will identify those affected by the harms and
benefits. The deontology approach may want to know whose rights are involved
and who has a duty to act in this situation. It helps to start with identifying the
individuals affected and broaden your thinking to incorporate larger groups.
4. Identify the consequences
•
Think about the potential consequences for each of the parties look at the
consequences which have a relatively high probability of occurrence and those
that would have negative consequences if they did occur. In the lay of case the
supervisor might lose his job and the family will suffer if he told his friend the
truth. But it would give the friend and other workers more time to look for another
job and perhaps serving many families from negative financial consequences.
•
Symbolic consequences – every decision or action sends a message .what you are
saying to your friend if you do not tell the truth and finds out you knew
•
Long term versus short term consequences – consider the long term
consequences to the company versus the short term consequences going
•
Consequences of secrecy – if a decision is made in private to avoid some negative
reaction – think about the potential problems of the decision is made public
5. Identify the obligation involved – and the reason for each. E.g. consider
your obligation to your friend and state the reasons why you have this obligation
think in terms of values, character or outcomes the obligation you identify may
vary depending on the people involved and the roles they play
6. Consider your character and integrity – consider what your relevant
community would consider to be the kind of decision that an individual of integrity
would make in that situation. A method that could help you is the disclosure rule
which asks whether you would be comfortable if your activities were disclosed in
broad day light in a public forum.
7. Think relatively about potential actions
make sure you have not forced yourself into a corner
8. Listen to your conscience
- before making a decision
5.2 Guidelines when making a quick
decision
1.
Listen to your conscience –
2.
Ask for time to think over it
3.
Find out quickly if your organization has a policy that applies to your decision
4.
Ask your manager or your peers for advice
5.
Check whether you will not be embarrassed if your decision is to be made public.
It is better to delay the decision than making a wrong decision
5.3 Factors affecting Ethical Decisions
Individuals do not always behave consistently with either their judgments or intensions
1. Individual difference factors
- these are personal factors about an individual that
may influence their sensitivity to ethical issues and their judgment about such issues
and their related behavior. Different people make different evaluations when
confronted in the same ethical issue
Cognitive Moral Development Framework (Lawrence Kohlberg (1960)
According to this theory individuals levels of development passes through 3 stages as they
mature
a)
The Pre-conventional level
b)
The Conventional level
c)
The Post Conventional or Principled level
1. Individual difference factors cont.
a) Pre-conventional level
•
One decision about what is right or wrong is explained through rewards and
punishment and the exchange of favors
•
•
This has 2 stages
i.
The individual is guided by obedience to avoid punishment
ii.
Either is concerned about self reward and satisfaction
Level one is usually associated with small children
1. Individual difference factors cont.
b) The conventional level
•
One individual assesses ethical issues on the basis of fairness to others and desire to conform to societal
rules and expectations
•
There are two stages here; calls then
•
Stages 3: what is usually right is that which is thought to please others or that which is approved by those
close to you
•
Stage 4: it is concerned by fulfilling agreed upon duties and following rules or laws that are designed to
promote the common good. Kohleberg states that most adults operate at the conventional level of
reasoning.
c) The Post Conventional or Principled level
•
The individual is likely to apply principles which are likely to be utilizing justice to ethical issues in an
,attempt to solve them a principled person looks inside himself/ herself and is less likely to be affected by
situational expectation
2. Situational or organizational factors
•
These include
•
The work
•
The supervisor
•
Policies and procedure
•
The code of conduct
•
The organizational culture
•
Each of these factors individually or collectively can cause individuals to reach
different conclusions about ethical issues than they would have on their own
3. Issue Related Factors
•
Research by Thomas Jones in the 90s and subsequent empirical studies suggest
that ethical issues in business movement have a certain level of moral intensity
before they will trigger ethical decision making processes thus individual and
situational factors are unlikely to influence decision, making issues considered by
the individual to be minor. The research suggests that issues with more serious
consequences are more likely to reach the threshold of intensity. Issues that are
deemed by a societal consensus to be ethical or unethical are more likely to trigger
ethical decision making processes
Other Factors that affect decisions on Ethical
problems
1.
Law defines minimum ethical standards in a given area of practice
2.
Government regulations
3.
Industry and company ethical codes
4.
Social pressure e.g.
- consumer boycotts
-political lobbying
-publicity in the press and television
5.
Tension between personal standards and organizational standards.
UNIT 6
ORGANIZATIONAL CULTURE
6.1 Definition
•
It is a set of values, beliefs, goals and norms that members of organization share.
•
A company history and unwritten rules are a part of its culture
•
Organization culture is manifested in ways including norms physical settings, modes of dress, special
language rituals and stories.
•
Ethics is an integral part of an organization culture.
•
An organization’s future to monitor or manage its culture may result in unethical behavior a one size fits all
approach in an organization simply does not work.
•
When designing an ethical organization it is important to analyze all aspects of an organization’s culture
and aligning them so that they support ethical behavior
6.2 Centralized organizations
•
Decision Making is concentrated on upper levels of management it works well in
high risk industries with less skilled lower levels employees there is little upward
communication. There is less understanding of interrelatedness of functions
6.3 Decentralized organization
•
Decision making is delegated as far down the chain of command as possible.
•
Employees are empowered to make decisions therefore decentralized
organization tend to have less programmes on ethics and policies.
•
Control is relatively formal and the organization is adaptable and sensible to
external changes
6.4 Organizational Norms
These are rules and standards of behavior that are accepted as appropriate in a group .they
exert a powerful influence on individual behavior in organization and they serve to support
ethical or unethical conduct. E.g. if an individual entering a sales job is told that customers
should be dealt with honesty because long term customer relations are important this
supports ethical behavior. If one is told that making a sale is all that counts then this is
promoting unethical behavior. Either kind of norm whether ethical or unethical can become
the way to do things around here.
6.5 Socialization versus Internalization
Socialization
•
This is the way employees are taught the organization culture. Employees learn the prevailing norms usually
through formal training and/or mentoring or through informal transmission of norms by peers and superiors when
effectively socialized. Employees behave in ways that are consistent with cultural norms because they feel that
they are expected to do so. Their behavior may have nothing to do with these personal beliefs.
•
Socialization can promote both ethical and unethical behaviors
Internalization
•
Individuals behave according to the norms because they have adapted to the norms because they have adopted
the external standards as their own.
•
These behaviors although consistent with the culture fits well with their own belief about what is right
6.6 Formal Cultural Systems versus Informal Cultural Systems
Organization culture is created and maintained through a complex interplay of formal
and informal systems
6.6.1 Formal Cultural Systems
The following factors contribute to culture creation and maintenance
a)
Leadership
b)
Organization structure
c)
Reward systems and
d)
Decision making processes
a) Leadership
•
6.6.1 Formal Cultural Systems cont.
Leaders create culture in an organization. The founder of a new organization plays an important role in creating culture in the organization
because he/she has a vision for the organization. She/he may personify the culture values providing a role model for others to observe and
follow and guiding decision at all organization levels.
•
Leaders maintain or change the culture of an organization by articulating a vision by controlling certain things, by making critical policy
decisions and by recruiting and hiring people who fit the vision of the organization.
•
Leadership is crucial to the organization’s ethical culture as integrity or lack of it flows from top to bottom of the organization.
•
To achieve ethical results top management to be strongly and committed to ethical conduct. They should give constant leadership in
reviewing the values of the organization.
•
Honesty and competence are the most important qualities of good leadership
•
Vin ‘’’’’’’’’' former CEO of PPQ industries in 1992 said that CEO stands for “Chief Ethical Officer” a statement that recognizes how important
it is for the organization leader to set the firms’ ethical standards. When unethical conduct occurs in an organization top managers are
frequently held accountable even if they were not personally involved.
6.6.1 Formal Cultural Systems cont.
b) Organization Structure
•
It often creates problems of authority and responsibility most organization have a bureaucratic
structure- meaning they have a hierarchy of authority, specialization,
•
However some of these characteristics can present problems for the organization culture.
•
Bureaucracy comes with legitimate authority organizational chat tells you who reports to who and
who has authority over whom in the organization
•
i.
Legitimate authority possesses ethical problems in the following way:
People tend to obey authority figures no matter what they are ordered to do. Thus tendency
towards unquestioning obedience can be a real threat to the organization attempt to built
individual responsibility into its ethical culture.
ii.
Managers try by all means to avoid blame by delegating responsibility to those below them they
can often avoid blame by ethical blame or blunders.
•
NB Note that the ethical culture must incorporate a structure that emphasize and supports
responsibility and accountability at all levels each person must be encouraged to take responsibility
for him/her action must be held accountable for negative consequences when they occur.
c) Reward System
Reward and punishing behavior
•
You have to consider the behavior that are recorded and punished and how these
systems align with the rest of ethical culture.
•
People are usually rewarded for reading a particular goal for selling a certain
amount of product with little attention of how the goal is achieved.
•
Management there for should ensure that performance goals are realistic and can
be achieved without resenting to unethical behavior e.g. in some organizations
sales people are rewarded for high sales when the other sales people know that
the results were achieved through unethical means, this is a good example of top
management hypocrisy.
c) Reward System cont.
Rewards Systems and Whistle Blowers
•
The organization’s treatment of whistle blowers is a very relevant reward system
concern of source of misalignment.
•
Whistle blowers often suffer retaliation especially when they report managerial and
organizational misconduct.
•
They are punished rather than doing what is right
•
If an organization claims that its attempting to develop ethical culture, retaliation for
against a whistle blower is powerful e.g. of misalignment.
•
Organizations must find ways to make whistle blowing safe if not rewarded.
•
Please note that reward systems are important because they provide guidelines about
expected behavior.
•
They reflect the real message about what is valued in an organization.
c) Reward System cont.
Blowing the whistle
When all fails you can blow the whistle
Developing a Formal Whistle Blowing System
•
Whistle blowing to an external entity such as media and government agencies has been a hazardous activity for
both individual and organization
•
Whistle blowers may face retaliation in a number of workers
i.
Being shunned by core workers
ii.
Being closely supervised
iii.
Just feeling alienated
Objectives of an Internal Whistle Blowing Programme
a)
To encourage employees to obtain ethical and legal violations so that action can be taken immediately to
resolve the programme.
b)
To minimize the organization’s exposure to the damages that can occur when employees circumvent internal
mechanism
c)
To employee know that the organization is serious about adherence to C.O.C.
c) Reward System cont.
Barriers to a Successful Internal Whistle Blowing Programme
1.
A lack of trust in the internal system
2.
Unwillingness of employees to be snitches
3.
Misguided union solidarity
4.
Belief that management is not hold to the same standard
5.
Fear of retaliation
6.
Fear of alienations from peers
c) Reward System cont.
Steps for creating a whistle blowing culture
1.
Policy
A policy about reporting illegal or unethical practices should include
i.
Formal mechanisms for reporting violations e.g. hotlines and mailbox
ii.
Clear communication about the process of solving concerns such as a specific chain of
commands as the identification of a specific person in the organization
iii.
Clear communications about bans on retaliations in addition a clear connection should exist
between an organization’s code of ethics and performance measures
2.
•
Get endorsement from top management
Top management starting with the CEO should demonstrate a strong commitment to encourage
whistle blowing. This message must be communicated by line mangers at all levels who are trained
continuously in creating an open door policy regarding employee complains.
c) Reward System cont.
3. Publicize the organization’s commitment
•
To create a culture of openness and honesty. It is important that employee hears about the policy
regularly
•
Top management should make every effort to talk about the commitment in newsletters, speeches to the
company’s personnel.
•
Publicly rewarding employees who pin point ethical ;issues is one way to send the message that
management is serious about addressing issues before they come serious.
•
Investigate and follow up. Managers should be required to investigate all allegations, promptly and
thoroughly and the results to a high authority. In action is the best way to create Sinicism about the
seriousness of the organization ethics policy
•
Assess the organization’s internal whistle blowing system find out employees’ feelings about the
organization’s culture its commitment to ethics and values you can ask questions like
Do you believe ethical issues are tolerated here?
know how to report an ethical issue?
-
Do you
CASE STUDY
WHISTLE BLOWING IN THE CONTEXT
OF ZIMBABWE’S ECONOMIC CRISIS
c) Reward System cont.
Orientation and training programmes
•
The organization’s values and guarding principles can be communicated in
orientation programmes and more specific guidance in ethical decision making can
be provided in subsequent training programme.
•
The ethics training must be consistent with the ethical culture because a program
that is not aligned may be taken as a joke.
d) Decision making processes
•
Emphasis on ethics can be reinforced by regulations addressing ethical concerns in
meetings and by making then an expected part of managers reports regarding how
products and business ventures. It is also important to create ethics communities
that are charged with reviewing major organizational level decisions from an
ethical perspective.
•
Overreliance on quantitative analysis in decision making e.g. cost benefit analysis
to the exclusion of moral consequences has disastrous consequences. Discussion
about whether the decision is right must accompany discussions about the effect
of a particular decisions on the bottom line.
d) Decision making processes
6.6.1 Informal Cultural Systems of the Organization
•
Organizational culture is also kept alive informally thru informal norms, heroes, rituals and stories, people come to know through the
grapevine the behavior that are really rewarded, how decisions are really made and what the leaders really expect. If the formal and
informal systems are out of alignment people are more likely to believe the message carried by the informal system.
Informal norms
•
New employees may be told the best or the right way of behaving but once they are on the job they ten d to follow what these core
workers are doing. The core workers may rationalize their behavior because of their low pay, power working conditions or the belief
that the supervisor do not care
•
Heroes and role models
•
Heroes personify the organization’s values. They are symbolic figures who set standards of performance by modeling certain behaviors
•
These need not be present in the organization. e.g. Tom Watson former president and son of IBM is still very much alive in the
organization stories about his values and exploits continue to influence more daily organization behavior thus a hero who champions
integrity and stands for what is right may influence the behavior of many in e organization
d) Decision making processes cont.
Informal norms continues
•
In most organizations the role models and mentors are superiors, experienced core workers. These may
emphasize the importance of integrity and resistance to pressure ……… behaves unethically or they may
indoctrinate the individual into accepted unethical practices.
Rituals
•
These tell people symbolically what the organization wants then to do and how it expects then to do it.
Rituals is a way of affirming and communicating culture in a very tangible way
Myths and stories
•
Organizational culture usually the stories are about the events that happened in the organizational
•
The characters are employees perhaps company heroes and the moral of the story express the
organization’s values.
6.7 Creating an Ethical Culture: What Managers Can Do
1.
Set high standards and communicate them loudly and repeatedly in private and public
2.
Act swiftly and violently when someone violets the standards- be consistent do not have special rules for
special people
3.
Insist on complete report from those who directly report to you.
4.
Never – never shoot the messenger
5.
Talk to a wide variety of employees on different levels and at different location. Get out there and find out
what is really going on. Do not be satisfied with others interpretation
6.
In a crisis take responsibility be accessible and be honest
7.
Finally put your money where your mouth is – that is find ethics initiatives. To develop ethics programmes
you should get help from communications and training professional. Do not leave your ethics strategy to
the lawyer
6.8 Developing a Code Of Conduct
1.
Identify key behaviors needed to adhere to the ethical values proclaimed in your
code of ethics including ethical values derived from key laws and regulations.
2.
Ethical behaviors needed in your product service are, behaviors to address
current issues in your work place and behavior needed to reach strategic goals.
3.
Include wording that indicates that all employees are expected to conform to the
behavior specified in the code of conduct
4.
Obtain review from key members of the organization.
Announce and distribute the new code of conduct e.g. of topics addressed C.O.C.
include:
•
Preferred style of dressing
•
Avoiding illegal drugs
6.8 Developing a Code Of Conduct
e.g. of topics addressed C.O.C. include: continues
•
Following instructions of supervisors
•
Maintaining confidentiality
•
Not accepting personal gift from stakeholder as a result of company rule
•
Avoiding racial or sexual discrimination
•
Avoiding conflict of interest
•
Complying with laws and regulations
•
Not using the organization’s property for personal use
•
Reporting illegal or questionable activity
CASE STUDY
Effective Code Standards on Raising Concerns and Retaliation
6.9 Policies and Procedures
Policy manuals act as reference manuals employees consult them. The way they use a dictionary – periodically
and on a need to know basis
Designing policy manuals
1.
Update policies and procedures to produce behaviors preferred from the C.O.C.
2.
Give examples of how the organization can manage values through the use policies and procedures e.g.
to provide behavior aligned with social responsibility you can institute policies such as recycling the
waste, donating to local charity or paying employee to participate in community service
3.
Include policies and procedures to address ethical dilemmas
4.
Include policies and procedures to ensure training of employees about ethics programme management.
Designing policy manuals cont.
5. Include policies and procedures to reward ethical behaviors and
impose consequences for unethical behaviors
6. Include a grievance policy for employers to use to resolve
disagreements with supervisors and other members of staff.
7. Consider establishing an ethics hotline. This function might be best
provided by an outside consultant
8. Once a year review all policies and procedures if it is a small
organization you can include all staff during this review.
Guidelines When Designing Policy Manuals
i.
Communicate relevant rules to the people who need them e.g. if there is a
specific policy needed by the accountants in the organization either separate it
from the main manual under a specific heading or leave it out from the main
manual and distribute an accountancy manual to the accountants.
ii.
The policy should be presented in a way that lets employees see at a glance
what the most important rules are.
iii.
Make it understandable
6.10 Training
•
Value statements policy manuals and codes of conducts are not enough. Organizations that are serious
about ethics distribute those regularly distribute these materials widely and provide regular training in
their meaning and application
•
Effective training programmes are ongoing efforts to train everyone from new recruits to high level
managers
•
Training should be designed to suit the group of individuals to be trained e.g. a new employee needs
training from someone who has been in the organization for the past 10 years.
•
When an organization begins ethics training for the first time it is best to begin the training at the top of
the organization and then it can Cascade to the lower levels of the organization level by level
Training basics for supervisors and learners
1.
Orient new employees to the organization’s ethics programme during the new employees orientation period
2.
Review the ethics management programme in management training workshops
3.
Involving employee in review of codes, policies and procedures is strong ethics training.
4.
One of the strongest forms of ethics training is practice in resolving complex dilemma
5.
Include ethical performance as a dimension as an ethical appraisal
6.
Bill Goodman Chief Human resources Officer at Aveda describes the best ethics trainer as “we start our training
even in our job adverts but the best trainer is the behavior of our leaders.”
NB. Ethics training must be
refreshed regularly because people forget ethical issues change with changes in law, technology etc and refreshers
send the signal that the organization constantly thinking about ethics.
6.11 Communicating Ethics
Good communication downward, upward and two way is essential if an organization is to have a strong aligned
ethics culture
Basic Communications Principle
1.
Incorporate credibility – align the formal and informal communication systems in the organization’s formal
communication include all written communication like the communication made in speeches.
•
Informal communication that is grapevine, there is a continual stream of information about what is really
going on. This exists in every organization. Research has shown that 70-90% of the information that passes
through the grapevine is accurate since honesty and truth are the core of any ethics effort if a company is
saying one thing and doing another thing and doing another if it has little or no credibility.
Basic Communications Principle cont.
2. Analyze the audience when designing ethics communication organizations need to
consider 3 kinds of people.
i.
Good soldiers – these people understand and follow the rules and policies of
the organization and they have good ethical compasses. They have the
judgment or experience required to discern right or wrong and they have the
moral grounding to do the right thing.
ii.
Loose cannons – these are people with good ethical compasses but they do not
know their company policies and they may not be familiar with general ethical
standards in business. They may be inexperienced or transferring from another
unrelated industry with very different norms.
iii.
Grenades – these people may/may not know the rules but they do not care.
They have their own agenda that lack any company or professional loyalty. Their
activities can blow out any time and can severely damage the organization.
•
NB. The challenge in designing an effective communication programme is meeting the needs of all
types of employee good soldier need support because they need to know that their instincts are
right and that their behavior is not an exception. Loose cannons need to be educated they need to
know and understand basic norms of ethical conduct and specific company policy and standards.
•
Grenades need to know that ethical lapses will not be tolerated.
Evaluation methods
1.
Surveys which target knowledge attitudes skills and behaviors of employees over a given period
of time
2.
Use ethical compliance audits – it focuses on the key factors on how decisions are made in the
organization.
3.
Peer review – different organization’s ethics officers can enter into an agreement to provide peer
review of each other’s ethics programme. The focus will be on the processes not cases and they
should review everything from the ethics office mission and strategies training programme
communication programme etc. The ……… should be trusting and supportive than investigative.
UNIT 8
BUSINESS ETHICS AND A GLOBAL
ECONOMY
8.1 Brief Introduction
•
With the increasing globalization of business more managers are finding
themselves in an international environmental fill of ethical challenges. Business
people face cultures, customs and norms that may conflict with their own ethical
standards.
8.2 Ethical Challenges Faced by Managers in a Global
Environment
1.
Cultural differences - INNSCOR in Nigeria a Muslim country versus Zimbabwe a Christian country
2.
Bribe- where in one country it is acceptable versus your own culture
3.
Human right issues - concern for the well being of employees the key concerns are
•
–
Issue of child labor
–
Payment of law wages
–
Abuses in foreign factories
Multinational corporations should view the law as the flow of acceptable behavior and strive to
improve the workers quality of life
4.
Sexual and racial discrimination - other countries prohibit business from discriminating on the
bases of sex, race or disability on their hiring of promotion………………. Globally discrimination is
embedded in many countries
8.2 Ethical Challenges Faced by Managers in a
Global Environment cont.
5.
Price discrimination - it occurs when firm charges different prices to
different groups of customers these differences are legal if they do not
reduce competition or can be justified n the basis of cost.
a.
Gouging – this is when unusually high prices are charged due to a shortage.
b.
Dumping – charging high prices at home and low prices in foreign countries
6. Harmful products – issues surrounding pastados, tobacco products
dumping harmful products, and unsanitary conditions
7. Violations of copyright laws
8. Pollution – there are different laws
8.3 Business ethics and organizational
performance
Issues to be discussed
i.
Committed employees
ii.
Customer satisfaction
iii.
Commitment to quality
iv.
Profitability
1. Business Ethics and Employee Commitment
•
Most people prefer being part of an ethical organization one they are proud to be associated
with
•
Business ethics cerates employee loyalty it encourages personal sacrifices
•
It honors organizational policies and contractual obligation
•
It reduces staff takeover
2. Corporate Ethics and Profitability
•
Can we say business ethics is equal to profits?
•
Look at classical an socio-economic view
•
Research has shown that an ethical company is profitable in the long term. Accord
Core and Proper (1997) 70% of customers will switch to brands or stores based on
ethics and societal issues and according to Walker (1998) 88% of customers are and
more likely to buy from a socially responsible firm
•
The cost of ethics is an investment in customer loyalty therefore we are saying
business ethics equal to profits
•
A survey by Price Waterhouse examined the US business understudying development
of sustenance business practices. The report reviewed that the triple bottom line is
rapidly taking its place along the financial one and will increasingly be regarded as an
important measure of value. 70% of the respondents indicated that they were actually
reviewing their corporate governance or ethics programme.
2. Corporate Ethics and Profitability cont.
The top 3 reasons were:
i.
Enhanced reputation
ii.
Competitive advantage
iii. Cost savings
3. Business Ethics and Commitment to Quality
•
A programme that support ethics is integral to programmes that are designed to
improve and maintain quality in the organization
•
Quality is the totality of features and characteristics of a product or service that
bears its ability to satisfy given needs.
8.4 Values of a quality culture
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We are all in this together, company supplier and customer
No subordinates and supervisors allowed
Open and honest communication is vital
Everyone should have access to all the information they need
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Focus on processes rather than individuals
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There are non successes or failures it is just learning experiences rather than
successes everything no tolerance for failure.
8.4 Values of a quality culture cont.
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According to Sherely Peterson – A lot of merit should be put in placing the ethics office in a
very close relationship to the quality initiative. Ethics can help nature a quality culture where
employees are encouraged to think, speak up and improve key process. It gets back to this
business of what employees really want. This is about the cross-walk between ethics and
quality and productivity and job satisfaction.
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Research has also shown that breach number 1 of ethics was the compromise of quality with
respect to customers. According to Loe (1996) ethical climate has been linked to
improvement to quality which is equal to customer satisfaction.