Chapter 3
ETHICS AND SOCIAL RESPONSIBILITY
WHAT IS ETHICAL AND UNETHICAL WORKPLACE BEHAVIOR?
Ethics is the set of moral principles or values that defines right and wrong for a person or group. Ethical
behavior conforms to a society’s accepted principles of right and wrong.
A significant percentage of managers have committed or been asked to commit unethical acts, yet felt that
most people in their companies were ethical. Many managers surveyed felt that business ethics could be
improved by better communication and strong commitment from managers.
The authority and power in the management position itself can tempt unethical behavior. There are several
areas in which managers must be careful to act ethically: managers that control company resources must
not cross the line from legitimate company use of resources to personal use; handling information is a key
part of management work so managers must be truthful and keep confidential information confidential;
managers should not use their power to influence others to perform unethical acts; managers should avoid
policies which inadvertently reward employees for unethical acts; and managers should set realistic goals,
so that employees are not pressured to perform unethical acts.
Companies can be prosecuted and punished for an employee’s unethical acts, even if management didn’t
know about the unethical behavior. Any organization characterized as a business is subject to the U.S.
Sentencing Commission Guidelines including nonprofits, labor unions, pension funds, trusts, joint stock
companies, partnerships, unincorporated organizations and associations, and incorporated organizations.
The guidelines cover federal laws, such as invasion of privacy, price fixing, fraud, customs violations,
antitrust violations, civil rights violations, theft, money laundering, conflict of interest, embezzlement,
dealing in stolen goods, copyright infringement, and extortion. The purpose is to encourage companies to
take proactive steps to discourage or prevent white-collar crime before it happens, not just to punish
companies after the law is broken. The guidelines also give companies an incentive to cooperate with and
disclose illegal activities to federal authorities.
Companies that take proactive steps get smaller fines. The importance of this can be shown in the steps to
determining punishment:
1. Computing base fine by determining what level of offense has occurred (based on
kind of crime, victim’s loss, and how much planning went into the crime).
2. Computing culpability score to assign blame to company, from .05 (for a company
with a compliance program that has voluntarily reported the offense) to 4.0
(management has secretly planned, approved, and participated in illegal or unethical
activity).
3. Total fine is computed by multiplying the base fine by the culpability score.
The components of an effective compliance program are as follows:
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Chapter 3: Ethics and Social Responsibility
1. Establish standards and procedures to meet the company’s business needs.
2. Put upper level management in charge of the program.
3. Don’t delegate decision-making authority to employees who are likely to act illegally
or unethically.
4. Use auditing, monitoring, and other methods to encourage employees to report
violations.
5. Use company publications and training to inform employees about the company’s
compliance standards and procedures.
6. Enforce compliance standards by fairly and consistently disciplining violators.
7. After violations occur, find appropriate ways to improve the compliance program.
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