Understanding Business Ethics
An Introduction
Business Ethics Process (KPMG)
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Program/ Practices/
Systems
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Designed to motivate,
measure, and monitor an
organization’s ethical
performance
Business Ethics and
Business Reputation
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Strong link between business ethics and
business reputation
TV Rule
Management needs to take an active role in
‘managing’ ethics
Role of Management
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Top Management is
responsible for
establishing,
developing, and
enforcing a code of
ethical conduct
Shows all employees
top management’s
commitment to ethical
behavior
Development of Code of Ethics
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Ensures employees and the company can’t
be challenged on their ethical integrity.
Establishes course of action for unethical
behavior by employees
Need to establish a procedure for reporting
unethical behavior
Educating Employees
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Texas Instruments established a Quick Test
for educating employees about what is right
or wrong:
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Is the action legal?
Does it comply with our values?
If you do it, will you feel bad?
How does it look in the newspaper?
If you know it is wrong, don’t do it.
If you aren’t sure, ask.
Keep asking until you get an answer.
Lockheed Martin established a quick
quiz…When in doubt, ask yourself:
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Are my actions legal?
Am I being fair and honest?
Will my action stand the test of time?
How will I feel about myself afterwards?
How will it look in the newspaper?
Will I sleep soundly tonight?
What would I tell my children to do?
How would I feel if my family, friends, and neighbors
knew what I was doing?
Developing a Code of Ethics
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Need to incorporate individual and corporate values
when facing ethical dilemmas
Nortel states this clearly to all employees in their Ethical
Business Practices document:
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You have a personal responsibility to make sure that all your
words and actions live up to these statements
You have a responsibility to ask questions when you have
doubts about the ethical implications of any given situation or
proposed course of action.
You have a responsibility to report any concerns about business
practices within the corporation that may violate this code of
business conduct.
Cost of Managing Ethics

Estimated $100 billion is spent each year for
companies in North American to deal with ethical
problems (KPMG)
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Federal Sentencing Guidelines (est 1991)
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investigating and resolving ethical dilemmas
establishing mechanisms to ensure the problem doesn’t
happen again
fines from $5K to 72.5K for violation of ethical actions
Total penalties for a single company could approach
$290 million
Federal Sentencing Guidelines - Minimum
Requirements for Effective Ethics Compliance
Program
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1. Establish compliance
standards and procedures
2. Assign top level
management overall
responsibility for compliance
3. Don’t delegate responsibility
to employees who are not
trustworthy
4. Communicate standards
and procedures to all
employees
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5. Monitoring and audit
systems used to detect
unethical activities
6. Enforce ethical standards
through appropriate disciplinary
mechanisms
7. Make adjustment to ethical
process if unethical behavior
has occurred
Comprehensive Ethics Program
May Include:
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1.
2.
3.
4.
5.
6.
7.
Codes of conduct
Mission statement
Training and awareness program
Town meeting
Ethics officers
Compliance hotlines
Ethics offices
Ethics and Information
Technology
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1. Property Rights and
Obligations
2. Policies Pertaining
to Customer
Information
3. Employee E-Mail
Privacy
4. Workplace
Monitoring
The Ten Commandments of Computer Ethics
(Computer Ethics Institute)
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1. Thou shalt not use a computer
to harm other people.
2. Thou shalt not interfere with
other people’s computer work.
3. Thou shalt not snoop around in
other people’s computer files.
4. Thou shalt not use a computer
to steal.
5. Thou shalt not use a computer
to bear false witness.
6. Thou shalt not copy or use
proprietary software for which you
have not paid.
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7. Thou shalt not use other people’s
computer resources without
authorization or proper compensation.
8. Thou shalt not appropriate other
people’s intellectual output.
9. Thou shalt think about the social
consequences of the program you are
writing or the system you are
designing.
10. Thou shalt always use a computer
in ways that insure consideration and
respect for your fellow humans.
Developing Policies to Address IT
Issues
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1. Understanding Privacy Laws
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Federal Privacy Act of 1974
Fair Credit Reporting Act of 1970
Right to Financial Privacy Act of 1978
Privacy Protection Act of 1980
Cable Communications Policy Act of 1984
Electronic Communications Privacy Act of 1986
2. Establishing a Privacy Code
3. Policy Content
Policy Content should include:
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Technology equipment owned by the
company gives the company exclusive rights
to control and monitor
Private databases and emails developed
using the company’s equipment can be
reviewed
Deletion of a file/email does not guarantee
that it has been permanently destroyed
Policy Content should include:
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Guidelines on what is appropriate and
inappropriate material
Guidelines for using emails for solicitation of
employees
Violation of ethics policy will result in
disciplinary action
Description of ethical treatment of
information from external sources including
customers
Policy Content should include:
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Summary of types of disciplinary actions
should be included in the written policy
Employees need to acknowledge content of
policy by signing a written agreement
Using Ethical Policies for a
Competitive Advantage
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Internally:
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help motivation of employees -- they know what
behavior is expected of them
reduce company costs by reducing disciplinary
actions including dismissal and reducing fines for
ethical violations
Using Ethical Policies for a
Competitive Advantage
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Externally:
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use the privacy policy to ensure customers that
their personal information will not be misused
establish opt in/ opt out option -- allow customers
to determine whether they agree to have their
information available to other companies
Lockheed Martin Ethical Policy:
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“While maintaining sensitivity to the diverse
social and cultural settings in which we
conduct our business, Lockheed Martin aims
to set the standard for ethical conduct at all
of our locations throughout the world. We
will achieve this through behavior in
accordance with six virtues: Honesty,
Integrity, Respect, Trust, Responsibility, and
Citizenship.”
You’re on Ethical Thin Ice When You
Hear (Lockheed Martin):
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Well, maybe just this
once…
No one will ever
know…
It doesn’t matter how it
gets done as long as it
gets done.
It sounds too good to
be true.
Everyone does it.
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Shred that document.
We can hide it.
No one will get hurt
What’s in it for me?
This will destroy the
competition.
We didn’t have this
conversation.