Chelsea Schneider
LET2712: Business Ethics and the Law
25/05/2011
Question 1- “The promotion of ethical business conduct is essential to the proper and efficient functioning of a market economy such as Australia.”
I. Introduction
A code of moral behaviour is the difference between right and wrong. Ethics is a philosophy of business.
In business, corporate executives face situations where they have to make decisions daily. While some solutions may seem like they would provide a positive gain, they may not be ethical and would end up hurting the company.
It is extremely important to exhibit ethical behaviour for a proper and efficient functioning economy.
II. What you understand the expression “ethical business conduct” to mean.
There are six components of ethical business conduct including ethics, values, morals, integrity, character, and laws. Ethics refers to a set of rules that describes what is acceptable conduct in society and helps to serve as a guide to moral daily living. Values are defined as the acts, customs, and institutions that groups of people regard in a favorable way. Morals are a set of rules on which society is based. Morals pertain to the well being and deciding what is right from wrong. Integrity is being honest and sincere and adhering to a moral code. It means being trustworthy. Character is what drives a person. People can build, change, or destroy their own character. Laws are a series of rules and regulations designed to express the needs of people. They provide society with a sense of right and wrong and guide behaviour. Ethical business conduct examines ethical principles and moral or ethical problems that arise in a business environment. When a company has a code of ethical behaviour, it shows that they have high ethical standards, act with dignity and a moral compass, and want to have an effective business. Ethical behaviour not only deals with the way individuals within the company act towards each other, but the way the company treats customers, and the way they perform their business functions. Ethical behaviour promotes success and is the fundamental building blocks to a corporation. When deciding whether or not something is ethical, there are many factors to consider; are you being truthful, fair, selfish, etc. In order to maximize profit in a business, it is important to act with ethical behaviour.
III. The arguments for and against seeking to promote ethical business conduct.
It is very easy to define the arguments for promoting ethical business conduct. It is doing what is right.
Anything a person questions doing is unethical. Wrongful business practices break the law. A code of ethics within a company defines the way a company will act. It creates a structured organization and it is something all employees work by. It is like the constitution of the company. A code of ethical conduct promotes a high morale, teamwork, helps people grow and find meaning in their work, creates a good culture for the company, creates a good public image, etc. It also creates strong relationships within a company. High moral compass within a company builds sales, retains employees and consumers, and reduces litigation and regulation costs. Business ethics can help improve society. Many businesses have unfortunately taken part in unethical behaviour forcing government to enforce new laws and regulations. These help to identify and regulate the way businesses perform. Operating ethically and following guidelines will lead to a successful business in the long run.
Arguments against ethical behaviour could say that what may seem right to one person does not seem right to another. A manager’s moral convictions in trying to run the day-to-day operations of a company may vary from the professional code of conduct. In addition, enforcing an ethical conduct is costly and time consuming. Getting everyone on the same page and to interpret situations in the same way is difficult. There is sometimes a disconnect between the company’s code of ethics and their actual practices making the code set forth seem like a marketing tool.
An example of a company that did not act ethically was Enron. Enron’s goal was the same as most companies; maximizing profit. They were not satisfied unless they were making the most money possible and unless their stock price was rising. The top executives all exhibited the characteristics of unethical people; greedy, selfish, and arrogant. Former CFO Andrew Fastow reported future profits as current profits when these profits had not even been earned yet. The CEO’s of the company knew what was occurring and did nothing to stop it. In
December 2001, the company, which was known as one of the most successful companies, faced bankruptcy due to irregular accounting and investors lose everything. Arthur Anderson, an extremely well-known accounting firm, audited Enron and was aware of what was going on within the company and made alterations to earnings. Enron was found guilty of obstructing justice. Had they implemented a code of ethical conduct from the beginning, each

person within the company would have known how to operate and there would have been uniform procedures in place.
III. The different mechanisms, strategies, or techniques for defining and promoting ethical business conduct, and give examples where appropriate of the different mechanisms, strategies or techniques you have identified for defining and promoting ethical business conduct.
Moral behavior needs to be embedded in a supportive social infrastructure that promotes consistent behavior. It is important for management to lead by example. Employees will follow what they see and will act in a manner they believe the employer will like. Therefore, if an employer acts like all he wants is to earn profits, the employees will act in that manner which can lead to unethical behaviour, but if the employer acts in the best interest of the company and clients and abides by the rules set forth by the corporation, the employees will follow suit. An incentive structure can also help people adhere to a code of ethics. Those who act ethically can be rewarded and those who do not can be reprimanded. It is important to exemplify moral behaviour from the start. In the hiring process, it is important to determine the moral development of potential employees. Companies can also require employees to attend seminars regarding business conduct, which often include discussion of the company’s policies, specific case studies, and legal requirements. Companies can have employees sign agreements stating they will abide by the company’s rules of conduct. Communications on a personal level within a corporation is also important in keeping the code of conduct alive. Management must continuously enforce their ethical code.
IV. Examples of legislation used to define and promote ethical business conduct.
Corporate social responsibility is a form of corporate self-regulation integrated into a business model that helps to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, and stakeholders. It functions as a mechanism to monitor and ensure active compliance with the law and ethical standards.
A specific example would be the Institute of Internal Auditors. The mission is to provide dynamic leadership for the global profession of internal auditing and to ensure that they abide by the mandatory guidelines, standards, and code of ethics.
V. Your views on the importance or otherwise of promoting ethical business conduct.
Establishing a code of ethical business conduct helps to pioneer a company towards a successful future. It should be the first rules established within a company in order to create a long-term strategy and in order for the company to operate in a proper manner. Ethical behaviour builds morale, positive character, integrity, etc. and will ultimately lead to positive profits within a company. If a company does not solely focus on maximizing profits, but looks at the bigger picture and how they can act ethically to make their employees and customers happy while also increasing revenues by enforcing their code, they will prosper in the long run. Ethical business conduct is the foundation and the building blocks of a successful and profitable company.

Question 2- “The promotion of ethical business conduct at an international level is both essential and challenging.”
I. Introduction
Over the past few decades, the increase in technology has made it very easy for businesses to become worldwide entities. Economic globalization refers to increasing economic interdependence of national economies across the world through a rapid increase in the movement of goods, service, technology, and capital. Economic integration in countries has led to the emergence of a global marketplace. Through foreign direct investment, the reduction of trade barriers, and modernization within countries, corporations have easily integrated their businesses into other areas of the world. Corporations outsource as an alternative to cutting costs. Foreign countries own
American icon businesses. With all of the interactions occurring between different countries, it is important to have an established ethical code on an international level to ensure that both parties are operating under the same objectives. Since cultural differences exist in various countries it is essential to determine which ethical norms are needed to guide business conduct in other nations and cultures.
II. Examples of the types of “ethical business conduct” you think need to be promoted at an international level.
Ethical business conduct is similar on a domestic as well as an international level. The six elements including values, ethics, morals, character, integrity, and laws are relevant in making business decisions anywhere in the world. While some laws of ethics may be universal, other laws and elements are on a cultural level. In order for two foreign countries to enter a business agreement, both parties must examine the other’s code of ethics and then establish a standard of ethics within their arrangement to work together. They must act in compliance with the regulations of both party’s countries. It is important when entering a business deal to act honest and fairly and not at the expense of the other company. Companies must not participate in bribery, deceit, distribution of false information, patent or copyright infringements, anti-competitive behaviour, discrimination, poor working conditions, low wages, etc. A famous example of a company engaging in poor working conditions on an international level is
Nike. Nike did not own production facilities and subcontracted to independent companies that owned factories.
Most of their workers were young women aged 19-25. The charges against Nike were that their wages were too low, workers were too young, factories engaged in abusive labor practices, the company earned unfair profits, there were poor working conditions. By using factories in Vietnam, they were able to have people work longer hours and lower wages. The argument against Nike was that by using sweatshops, they were able to increase their profit margins. At first they asserted that their relations with the subcontractors were contractual and they were not responsible for what happened in the factories. Eventually they took responsibility for their errors and set a strict age requirement and eliminated managers who were charged with abusive practices. When hiring employees in less developed nations, the firms should ensure they have proper living conditions and similar facilities to what would be in their country (that of a developed nation). Ethical guidelines must be set forth so that one country isn’t taken advantage of and so that they can both abide by the same laws, etc.
III. The arguments for and against seeking to promote ethical business conduct at an international level.
Globalization and international agreements between countries and foreign companies are a vital part of our economy now. It is important when working with a dissimilar culture that you foster as loyal and positive a relationship as possible to ensure a successful venture and possible future business. Because of the disparities in cultures, it is already doubtful and threatening to enter into a foreign partnership, so the establishment of a code of ethics is extremely important. Without ethics, a company will fail and so will a partnership. A code of ethics not only promotes a fair workplace but a constitution by which both parties can act and interpret a similar point of view.
Arguments against promoting ethical business conduct at an international level deals with corruption in foreign cultures. Bribery and deceit are common parts of some governments and country’s cultures. It is hard as it is to enter a foreign agreement. Being granted permission to work with that country and obtain licenses would be difficult and bribery may be necessary, but it is important that the corporation does not engage and only works with countries that are willing to act ethically as well.
IV. The different mechanisms, strategies or techniques for defining and promoting ethical business conduct at an international level.
When dealing with a dissimilar culture, there are many barriers, one being language. It is important to learn about the culture you are dealing with. It is important to learn their cultural norms. Also, many times one mannerism or saying in one country may mean something entirely different in another country. It is important to be trained and well versed about their culture. This can be done through training programs and learning how to communicate. Training programs could also help to educate corporations on international human rights and ethics.

The most beneficial way to promote ethical business conduct on an international level would be to adopt a universal set of laws and regulations which would be adhered to by all countries participating in a business operation on a global level.
V. Your views on the importance or otherwise of promoting ethical business conduct at an international level.
It is my belief that no two countries or corporations should act on an international level without ethical business conduct. Without ethical business conduct, there would be disorder, arguments, and business agreements would be limited and most likely fail. There should be an internationally recognized standard for all corporations to comply with. A universal standard would mean within an international business arrangement, corporations and countries would not have to waste time arranging an agreement, but there would be a mutual understanding based on a universal law and standard. Promotion of ethical conduct at an international level is essential for the global marketplace to succeed and it would act as a means to measure and demonstrate compliance with the standard.
VI. Case Study
Unocal is a California based company and a major petroleum explorer and marketer. Developing a pipeline to transport natural gas from the Andaman Sea across Burma into Thailand was an attractive deal for Unocal because Burma was rich in natural gas. It was a strategic location and labor was cheap. Burma however, is known to have one of the world’s most repressive military dictatorships. By investing in this effort, they knowingly thrust themselves deep into Burmese politics even though they claimed that they engaged in business without having an interest or effect on the political context. Refugees and villagers in Burma were forced at gunpoint to work on the pipeline. Unocal was a willing participant in a joint venture that included the notorious military regime in Burma, and delegated pipeline security to the military government. By bringing capital into the country, they helped support the corrupt government, which violated human rights. The corporation and executives could be legally help responsible under the Alien Tort Claims Act. The settlement compensated villagers by developing programs to improve living conditions, health care and education, and to protect the rights of people from the pipeline region.
This case illustrates the challenge multinational corporations face when dealing with governments whose human rights policies differ from those in their home country. It also illustrates how diverse politics can affect a global business enterprise.
Question 3- “The detection, investigation, and elimination of corporate wrongdoing is everyone’s responsibility.”

I. Introduction
Corporate crime refers to crimes committed either by a corporation or by individuals that may be identified with the corporation or other business entity. Many people are under the impression that only top managers can identify and deal with unethical behaviours, however, oftentimes it is the top executives of the company participating in the illegal conduct. Every employee is an important entity within a corporation and if they see something that seems like it violates the ethical code of conduct, they should report it.
II. Examples of the types of “corporate wrongdoing” that may occur.
Corporate and ethical legal abuses can include misleading financial statements, insider trading, securities fraud, creative accounting, inflating earnings, bribery/ kickbacks, facilitation payments, anti-competitive behaviour, patent or copyright infringements, scams, deceit and criminal manipulations of finance markets. Within human resources, abuses can include compensation in accord with comparable worth, collective bargaining, discrimination, sexual harassment, poor workplace conditions, etc. Within marketing, unethical decisions include price fixing and advertising a product with falsified information. An example of false advertising is bait and switch selling, which attracts customers to a store by luring them into with a cheap price of a product and once they get there, the product advertised is no longer available, so the store recommends an alternative that is more expensive.
III. The arguments for and against seeking to identify and deal with corporate wrongdoing.
Arguments against seeking to identify and deal with corporate wrongdoing are that if it is something that will affect the company as a whole, the person could be fired for speaking up. For example, Jeffrey Wigand was the
Vice President of tobacco research and development at Brown& Williamson, an American tobacco company.
Jeffrey Wigand came forward and told people how the industry minimized tobacco’s health and safety issues. He stated that the company intentionally manipulated the tobacco blend to increase the amount of nicotine and increase the impact on the user. He assisted the FDA in its investigation of the tobacco industry and was fired by Brown&
Williamson.
It is often difficult for someone to step up and report unethical behavior in the workplace especially when the person acting unethical is a superior. However, there are many reasons to identify and report corporate wrongdoing. Whatever illegal activity is taking place is at the expense of the company, customers, and society. By turning someone in, you are ensuring the company looks into the details and proper measures are taken to alleviate the situation. In addition, if someone does not report it, they are in fact taking part in the unethical behavior because they are aware it is occurring and are doing nothing to stop it. Whistleblowing should be encouraged and rewarded within an organization. Empowerment encourages whistleblowing and enhances their confidence in their ability to perform and it will inadvertently give them more confidence to come forward with any evidence they may have.
IV. The different mechanisms, strategies or technique for identifying and dealing with corporate wrongdoing.
As an employee, in identifying and dealing with corporate wrongdoing, the employee must consider if the action merits being labeled as unethical behaviour. They must consider whether or not it was legal, if it violated the ethical code of conduct within the company, does it defy the core values, would you feel guilt-free if you did it, etc.
They must also be sure of the facts because reporting false information would damage the person in question and your own career. It is important to keep the information private and profession by reporting the problem directly to the appropriate individual within the organization. It is then the responsibility of the organization to determine the punishment for that offense and to decide if it has to be taken to a higher official.
In order to avoid corporate wrongdoing, it is important for managers to lead by example. Positive reinforcement increases the likelihood that a person will repeat the behaviour that led to it. This can help to increase the likelihood of whistleblowers in a company. Ethics programs can also help to understand ethical aspects of decision-making within a company and can teach people how to deal with an ethical situation if they are faced with one.
V. Your views on the importance or otherwise of identifying and dealing with corporate wrongdoing.
Managers must exemplify ethical behaviour and abide by the code of ethical conduct set forth by the company. This code will ensure a structured set of laws that the company will follow. If managers lead by example, employees will follow. In addition, if managers make clear how important the guidelines are, employees will take it seriously and not only follow suit but also report any unethical behaviours. I think it is extremely important to identify any unethical behaviour because it will help to benefit the company otherwise you are helping lead to the ultimate demise of a company. Unfortunately, in some companies, employees succumb to the idea of

maximized profits and greed and act with unethical conduct. Each individual is equally responsible for identifying and reporting unethical behaviour. In business, in order for a company to succeed, they must act ethically with honesty and integrity.
VI. Case Study
Dennis Kozlowski was the CEO of Tyco International, a global manufacturing company. Kozlowski was accused of giving himself and former CFO Mark Swartz interest-free or very low interest loans that were disguised as bonuses and were never approved by the Tyco board or repaid. They were accused of selling their company stock without telling investors and they stole $600 million from Tyco International through unapproved bonuses, loans, and extravagant company spending. Leaving them out of the accounting books and out of shareholders and board members knowledge concealed their actions. In 1999, the SEC began an investigation after an analyst reported questionable accounting practices. Tyco’s bookkeeping and accounting came into question again in 2002 when there was a payment of $20 million. Kozlowski also began to be investigated for tax evasion because he failed to pay $13 million in artwork he had purchased with company funds. He even had some shipped to New Hampshire then trucked back to New York to avoid sales tax. Kozlowski along with CFO were asked to restore the funds.
They were found guilty of taking bonuses worth more than $120 million without the approval of Tyco’s directors, abusing the employee loan program, and misrepresenting the company’s financial condition to investors to boost the stock price while selling $575 million in stock. The ethical and legal issues range from discrimination, accounting fraud, and grand larceny. They placed their own values ahead of the organization and acted on greed and personal gain. All members of the company involved in the fraud scandal were indicted and are no longer with the company.
In 2003, Tyco developed The Tyco Guide to Ethical Conduct to help set ethical standards and code of conduct for its employees.