AN OVERVIEW OF ETHICS
WHAT IS ETHICS?
Ethics is a set of rules for how to behave that is created by a group of people. Ethical behavior
follows the rules that are generally accepted by that group and may change over time. Ethics
helps group members understand their responsibilities and work together for the common
good.
Morals are personal principles that guide an individual's decisions about right and wrong. They
are the core beliefs that people live by, such as treating others with respect. As people grow up,
they develop habits and values that help them make decisions.
Different people have different ideas about what is right and wrong based on their age, culture,
religion, education, and life experiences. Some behaviors, like murder and theft, are universally
considered wrong, but other behaviors may be acceptable in one culture but not in another.
People can have strong disagreements on moral issues, like abortion, same-sex marriage, and
gun control.
In some situations, a person's ethics may conflict with their personal morals. For example, a
defense attorney may have to defend a guilty client, and a doctor may have personal beliefs
about euthanasia that conflict with medical ethics.
The importance of integrity
Integrity means sticking to your personal values and treating others with respect. But it's hard
to be consistent when faced with tough moral choices. For example, if your boss asks you to
work overtime without pay, you might feel conflicted because you value being paid fairly. In
situations like this, it can be tough to act with integrity. Also, it's important to apply the same
moral standards to all situations, even if it means making difficult choices between two "right"
options. For example, protecting wildlife in Alaska and finding new sources of oil are both
important, but how do you balance the two?
The Difference Between Morals, Ethics, and Laws
Law is a set of rules that tell us what we can and cannot do. They are enforced by institutions
like the police and courts. Breaking a law can result in punishment like fines or imprisonment. In
the United States, laws are made by different government bodies, but sometimes these laws
conflict with each other. Laws are always changing, which can make their meaning unclear in
the future.
Legal acts are things that follow the law, while moral acts are things that an individual believes
are right. Sometimes legal acts are considered immoral by many people, like abortion. Other
times, illegal acts are considered moral by many people, like using marijuana for medical
purposes. Laws deal with issues of equality, fairness, and justice, but do not provide a complete
guide to ethical behavior. Many professionals have a code of ethics that guides their behavior
and helps them determine what is legal and what is ethical, but individuals are also guided by
their own moral beliefs.
ETHICS IN THE BUSINESS WORLD
Unethical behavior in business can have serious negative consequences for both organizations
and individuals. Several trends have increased the likelihood of unethical behavior. First,
greater globalization has made it more difficult to apply principles and codes of ethics
consistently. Second, some organizations are tempted to resort to unethical behavior to
maintain profits, especially in challenging economic climates. Employees, shareholders, and
regulatory agencies are increasingly sensitive to violations of accounting standards, failures to
disclose substantial changes in business conditions, nonconformance with required health and
safety practices, and production of unsafe or substandard products. Enron accounting scandal is
a classic example of the many risks associated with unethical decision making. It is not unusual
for powerful, highly successful individuals to fail to act in morally appropriate ways. Even lowerlevel employees and ordinary individuals can find themselves in the middle of ethical dilemmas.
CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility (CSR) means companies should act ethically and take
responsibility for the impact of their actions on shareholders, consumers, employees,
community, environment, and suppliers. It includes things like donating to charity, being
sustainable, and treating workers fairly. Supply chain sustainability is part of CSR and involves
developing and maintaining a supply chain that meets present needs without hurting future
generations. Many companies prioritize supply chain sustainability to meet regulations and
lower costs. Companies must decide if CSR is a priority and what their specific goals are.
Pursuing CSR goals can lead to increased profits, but if it leads to a decrease in profits,
companies may need to modify or drop the goal. CSR programs require senior executives to be
responsible for each area, with initiatives defined and tracked for progress. Intel, for example,
has a diversity and inclusion initiative to achieve full representation of women and minorities
by 2020.
WHY FOSTERING CORPORATE SOCIAL RESPONSIBILITY AND GOO
D BUSINESS ETHICS IS IMPORTANT?
There are five reasons why organizations should pursue CSR goals and encourage ethical decisionmaking among employees:
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To gain community goodwill
To operate consistently
To foster good business practices
To protect the organization and its employees from legal action
To avoid negative publicity.
Gaining the Goodwill of the Community
Organizations have responsibilities to society in addition to earning profits and serving
customers. To attract and maintain loyal customers, many companies engage in socially
responsible activities, such as making contributions to charitable organizations and reducing
their impact on the environment. These activities can generate goodwill, making it easier for
companies to conduct their business and compete for top job candidates. On the other hand,
businesses that are not socially responsible risk alienating their customers, with many shoppers
willing to switch to brands that support a socially responsible cause.
Creating an Organization That Operates Consistently
Organizations have values to create a consistent approach for dealing with stakeholders. This
consistency ensures that everyone knows what to expect from the organization. Multinational
companies must present a consistent image to stakeholders regardless of where they operate.
Common values include honesty, ethical conduct, respect, excellence, diversity, and fact-based
decision making.
Fostering Good Business Practices
Good ethics often means good business and improved profits. Companies that produce safe
and effective products avoid costly recalls and lawsuits, while those that provide excellent
service retain their customers and those with strong employee relations enjoy better morale
and lower turnover rates. Ethical companies tend to be more profitable in the long term.
Conversely, bad ethics can lead to negative business results, as it can create negative attitudes
among employees, erode their commitment and involvement, foster poor performance, and
build indifference to the organization's needs.
Protecting the Organization and Its Employees from Legal Action
In simple terms, a company can be held responsible for the actions of its employees even if
they go against company policy. This principle is called "let the master answer." When Wells
Fargo employees created fake credit card accounts, the bank was fined and ordered to pay
restitution to affected customers. Selling more products to existing customers is cheaper than
finding new customers, and some argue that companies should not be held liable if they have
effective ethics and compliance programs. However, others argue that company officers should
still be punished if these programs fail to prevent criminal behavior.
Avoiding Unfavorable Publicity
A company's reputation affects the value of its stock, how consumers view its products, and the
level of government oversight and business support it receives. Therefore, many companies
create ethics programs to avoid negative publicity. If a company operates ethically, customers,
business partners, shareholders, and regulators will generally view it more positively.
Facebook greatly exaggerated the average viewing time of video ads on its platform, which is
an important metric for advertisers. They were not counting views of three seconds or less,
leading to an overestimation of viewing time by 60 to 80 percent. This caused anger among ad
buyers and marketers, who may reduce their advertising spending on Facebook in the future,
potentially impacting billions of dollars in revenue.
HOW ORGANIZATIONS CAN IMPROVE THEIR ETHICS
Employees who behave ethically are rewarded, and companies that achieve success through
questionable means are not rewarded. According to the 2013 National Business Ethics Survey,
there has been a decrease in employee misconduct and an increase in reporting of misconduct,
but some employees still face negative consequences for reporting misconduct. As the risk of
unethical behavior grows, improving business ethics becomes more important. The following
sections describe some of the steps companies can take to improve business ethics.
Appoint a Corporate Ethics Officer
A corporate ethics officer is in charge of leading and guiding an organization's ethical behavior.
This person makes sure that the company's actions are aligned with its values and holds
employees accountable to ethical standards. The officer should be a respected manager who
reports directly to the CEO. Usually, the appointment of an ethics officer follows a major
scandal. The officer is responsible for establishing an environment that promotes ethical
decision-making and ensuring that ethical procedures are consistently followed throughout the
organization. Simply appointing an ethics officer is not enough, and ongoing effort is required
to establish and maintain an organizational ethics program.
Require the Board of Directors to Set and Model High Ethical Standards
The board of directors manages an organization and is responsible for overseeing the business
activities for the benefit of all stakeholders. The board delegates day-to-day management to
the management team but supervises them. The board sets an example of high-level ethical
behavior and ensures compliance with laws and regulations. The board creates an environment
in which employees can seek advice about appropriate business conduct, raise issues, and
report misconduct. The board may need to intervene to stop unethical behavior. For example,
the Wounded Warrior Project's board fired the CEO and COO after allegations of ineffective and
wasteful spending, and the board later hired a new CEO who redirected spending to better
serve veterans.
Establish a Corporate Code of Ethics
A code of ethics is a statement that explains an organization’s ethical values and principles. It
helps employees understand what is expected of them and how to deal with ethical issues. The
code applies to everyone in the organization, and it should be easily accessible and endorsed by
the leadership. It must also be consistently applied to decision-making and be an important
part of the company's culture. Companies with strong ethical performance are recognized as
such, and Intel is one of the most ethical companies in the IT industry.
Conduct Social Audits
More organizations are conducting social audits to review if they are meeting their ethical and
social responsibility goals, and communicate new goals to stakeholders. Dell requires its key
suppliers to undergo quarterly reviews of their social and environmental progress, including
audits, policy compliance, and implementation plans.
Require Employees to Take Ethics Training
The ancient Greek philosophers thought that education could improve a person's sense of right
and wrong, and psychologists today agree. Organizations need to communicate their code of
ethics to employees and provide ongoing training to help them understand how to apply ethical
principles in real-life situations. Training can help increase the number of employees who
report misconduct and reduce the company's liability in legal cases. Many companies, including
IBM, provide ethics training to employees around the world using various formats such as
online courses, workshops, and integrity summits.
Include Ethical Criteria in Employee Appraisals
Managers can help employees meet expectations by monitoring their behavior and giving
feedback, including ethical conduct in performance appraisals. This means that employees are
evaluated not only on their contribution to the business, completion of tasks, and customer
relations, but also on how they treat others fairly and respectfully, operate in diverse
environments, take personal responsibility, develop themselves and others, and act openly and
honestly with suppliers, customers, and coworkers. In a survey, around two-thirds of
organizations said they include ethical conduct in employee evaluations.
Create an Ethical Work Environment
Employees want to do their jobs well and ethically, but pressure in highly competitive
workplaces can lead to unethical choices. Managers can influence employee behavior by setting
expectations and providing guidance on ethical conduct. Some ways that managers can
encourage unethical behavior include setting unrealistic goals, failing to provide a corporate
code of ethics, setting a poor example, failing to hold people accountable, and overwhelming
employees with too much information. Managers can establish an ethical workplace by using a
checklist to ensure that they have set clear expectations and provided resources for employees
to report unethical behavior without fear of retaliation. At Intel, employees can report
violations anonymously through an internal website, and senior management has made it clear
that employees will not face retaliation for reporting suspected violations.
INCLUDING ETHICAL CONSIDERATIONS IN DECISION MAKING
We make tough choices at work and in our personal lives, and we usually have a process that
we follow without realizing it. Figure 1-7 shows the steps that many of us follow. This process
will be explored in more detail, with emphasis on how ethics should be incorporated into it.
Develop Problem Statement
A problem statement describes a problem that needs to be solved. It should answer questions
like what the problem is, who it affects, how often it happens, and how serious it is. Developing
a clear problem statement is the most important step in decision-making. If the problem is
stated incorrectly, solving the real problem becomes harder. To create a good problem
statement, gather and analyze facts from a variety of sources. Avoid making assumptions and
check key facts for validity. Here is an example of a good problem statement: Our product
supply organization is continually running out of stock of finished products, creating an out-ofstock situation on over 15 percent of our customer orders, resulting in over $300,000 in lost
sales per month. Two examples of poor problem statements are: "We need to implement a
new inventory control system" and "We need to install cameras and monitoring equipment to
put an end to theft of finished product in the warehouse."
Identify Alternatives
When trying to come up with solutions to a problem, it's helpful to involve others in the
brainstorming process. This can help generate a wider range of ideas and lead to a better
solution. However, in some situations, it may not be appropriate to involve others. When
brainstorming, it's important to avoid being critical of ideas and to simply write them down
without judgment. This encourages an open flow of ideas and can lead to a better solution.
Choose Alternative
When evaluating different options to solve a problem, it's important to consider various criteria
such as effectiveness, risk, cost, and time to implement. It's also important to weigh the
applicable laws, guidelines, and ethical principles, including those of your organization and your
personal morals. Consider the impact of each option on yourself, your organization, other
stakeholders, and the environment. Choose an option that is legally and ethically sound,
consistent with your organization's policies and code of ethics, takes into account the impact on
others, and effectively solves the problem.
Implement the Decision
To implement the selected alternative, it's important to communicate the change and its
benefits to stakeholders. Resistance to change is common, so a transition plan should be
created to show people how to move from the old way to the new way with ease. The plan may
include training, incentives, and modifications to the reward system to encourage new
behaviors consistent with the change.
Evaluate the Results
Check if the solution worked as planned and see if there were any unintended outcomes. If
needed, refine the problem statement and start the process again. If the solution didn't work
well due to poor implementation, redo some of the steps.
ETHICS IN INFORMATION TECHNOLOGY
As technology advances, there is an increasing risk of unethical use of information technology.
This includes issues such as government surveillance, employee monitoring, copyright
violations, identity theft, and privacy invasion. This book emphasizes the importance of ethics in
IT and the need for both IT professionals and general business managers to make ethical
decisions when implementing technology and formulating policies. The book aims to educate
and motivate people to recognize ethical issues and provide tools for making ethical decisions.