Ethics
PERSONAL AND CORPORATE
Ethics
 A set of moral principles or values that govern
behavior.
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What is right and wrong?
What are your personal ethics?
Ethics
 All individuals develop their own set of ethical rules
 Which helps them decide how to behave in different situations
 Like individuals, businesses develop ethics to help
them determine what actions are appropriate and
fair among employees.
The Golden Rule
 One should treat others as one would like others to
treat oneself (positive form)
 One should not treat others in ways that one would
not like to be treated (negative/prohibitive form, also
called the Silver Rule)
Hippocratic Oath
 The Hippocratic Oath is an oath historically taken
by doctors swearing to practice medicine ethically
Code of Ethics
 A document that outlines the principles of conduct to
be used in making decisions within the organization.
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Given to all employees
Most all companies in the U.S. have a code of ethics.
Code of Ethics
 Common Content
1.
Honesty
2.
Adherence to the Law
3.
Product Safety and Quality
4.
Health and Safety in the workplace
5.
Conflicts of Interest
6.
Employment practices
7.
Selling and Marketing Practices
8.
Financial Reporting
9.
Pricing, Billing, and Contracting
10. Using Confidential Information
11.
Acquiring and using information about competitiors
12. Security
13. Payments to obtain business
14. Protection of the Environment
Code of Ethics
 Establishing a code of ethics does not prevent
unethical behavior
 The Code MUST BE ENFORCED!!!!!
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Companies must discipline employees that violate the Code of
Ethics
Ethics PRO’s and CON’s
 PRO’s
 Helps employees gain the trust of the people with whom they
work
 Helps businesses gain the trust of customers, suppliers, etc…
with which they deal with
 CON’s
 Cause a company to lose money due to lawsuits or lost
business
 Can result in a personal demotion or termination from the
organization
Classroom Code of Ethics
 What are the Code of Ethics to be followed in the
classroom?

Students should create a 14 item Code of Ethics that will apply
to all students who take this Course. The 14 items should
follow the common contents of the previous slides. The best
Code of Ethics will be printed and placed on the wall.
Enron Corporation
 In 2001, the Enron Corporation, one of the world’s
largest traders in gas, electricity, and related
commodities, collapsed in scandal and declared
bankruptcy. Enron was accused of crimes including
deceiving investors, inflating profits, and hiding
debts.
 Arthur Anderson, the companies accounting firm
was later convicted of obstructing justice by
shredding documents related to its work on Enron’s
accounting.
Enron Corporation
 WorldCom, then the world’s second largest long-
distance provider, suffered the largest bankruptcy in
American history after it revealed that it had
improperly booked over $7 million in earnings.
 As a result of these high-profile scandals and to
shore up faith in the American Economy, President
Bush signed the Sarbanes-Oxley Act of 2002.
Sarbanes-Oxley Act of 2002
 Act containing important rules affecting the
reporting and corporate governance of public
companies and their directors and officers.
 Major provisions:
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Require CEO and CFO to certify periodical reports filed with
the SEC
Prohibits most loans to directors and executive officers.
Forces company insiders to report changes in ownership
within two days after a transaction has been executed.
Ethics
 Some ethical violations are clear cut in the workplace
 Stealing money or supplies
 Lying about hours worked (stealing hours)
 Falsifying records
Employee Theft
 Employers trust their employees not to steal from
them.

Ethical employees do not violate that trust
 Unethical employees steal in many different ways
 Embezzle money
 Steal supplies or inventory
 Accept bribes
 Submit false expense reports
Lying About Hours Worked
 Ethical employees are honest about hours worked.
 Working from home or sales from the road require ethical
reporting since managers cannot check to see them working.
 Ethical employees show up to work unless they are ill
or forced to miss for a legitimate reason.
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They do not pretend to be sick or just lay out of work for no
reason.
This results in no accountability in the workplace
Falsifying Records
 One of the most ethical collapses an employee can
commit!!!
 This may cause massive damage to a companies
reputation
 Years of excellent performance can be wiped out due
to unethical actions.
Laws Relating To Ethics in Business
 Laws relating to:
 Competitive behavior
 Consumer protection
 Product safety
 Environmental protection
Competitive Behavior
 The federal gov. makes sure companies don’t engage
in anticompetitive behavior
 All companies must abide by these laws
 Laws enforced by the:
 FTC (Federal Trade Commission)
 Antitrust Division of the Department of Justice
Competitive Behavior
 3 laws:
 The Sherman Act
 The Clayton Act
 The Wheeler-Lea Act
Competitive Behavior
The Sherman Antitrust Act of 1890
 Made it illegal for companies to monopolize trade
 Company mergers may be prohibited if the result of
the merger gives too large of a share of the market
 Purpose of law is to ensure companies can compete
fairly
Competitive Behavior
The Clayton Act of 1914
 Made it illegal to charge different prices to different
wholesale customers.
 Also banned the practice of requiring a customer to
buy a second product.
Competitive Behavior
The Wheeler-Lea Act of 1938
 Banned all unfair or deceptive acts or practices like
false advertising
 Required businesses to notify customers of any
possible negative consequences of using their
product
Consumer Protection
 Laws protect consumers in the United States against
unethical and unsafe business practices
 These laws cover:
 Food and Drug
 Consumer Products
 Loans
Food and Drug
 The Federal Food, Drug, and Cosmetic Act of 1938
bans the sale of impure, improperly labeled, falsely
guaranteed, and unhealthy foods, drugs, and
cosmetics.
 This law is enforced by the FDA (Food and Drug
Administration)

FDA has the power to force manufacturers to stop selling
products it considers unsafe
Consumer Products
 The CPSC was established in 1972
 The Consumer Product Safety Commission
 It established minimum product safety standards on
consumer products
 The CPSC has the authority to force manufacturers
to recall any product found to be defective
Loans
 Laws that protect consumers from unfair lending
practices are:
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The Truth-In-Lending Act of 1968
The Equal Credit Opportunity Act of 1975
Loans
 Truth-In-Lending Act of 1968
 Requires the lender to disclose in writing the APR (Annual
Percentage Rate), and all finance and interest charges over the
course of the loan.
 The Equal Credit Opportunity Act of 1975
 Creates equal chances for all consumers to receive a line of
credit.
 Makes it illegal to make credit approval decisions based on any
discriminatory practice.
Environmental Protection
 Environmental Protection has been an important
social and economic issue in the U.S. since the 1960’s
 This issue led to these laws designed to protect the
environment.
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The National Environmental Policy Act of 1969
The Clean Air Act of 1970
The Toxic Substance Control Act of 1976
The Clean Water Act of 1977
The National Environmental Policy Act of 1969
 Was the key piece to the environmental protection
movement of the 1960’s
 Created the EPA
 Environmental Protection Agency

Mission is to protect humans health and safeguard the air, water,
and land.
 The EPA enforces all of the following laws
The Clean Air Act of 1970
 The federal law that sets maximum air pollution
standards in for each of the 50 states.
 In 1990, the act was amended to deal with new
problems:
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Acid Rain
Ground-Level Ozone
Stratospheric Ozone Depletion
Toxic substances in the air
The Toxic Substances Control Act of 1976
 Act gave the EPA the authority to track all industrial
chemicals produced in, or imported into the U.S.
 EPA screens all industrial chemicals and can require
periodical reporting or testing of those that may be
dangerous to humans or the environment.
The Clean Water Act of 1977
 Act gives the EPA authority to prevent industries
from discharging pollutants into bodies of water
without a permit
 Law makes it illegal to dump chemicals or pollutants
into bodies of water unless a permit is granted
Environmental Protection
 Which laws govern the environment?
 What was the key piece of legislation in the
environmental protection movement?
 Which decade did the Environmental protection
movement begin?
Ethical Standards
 Standards of Business Ethics are different around
the world
 Business Managers must be aware of these different
ethical standards when working in foreign countries
Ethical Standards
 Gift Giving
 Some cultures expect a gift. Failure to give is considered an
insult.
 In Japan, gifts are important part of doing business, usually
exchanged at the first meeting
 In the U.S. Government officials are not allowed to
accept gifts from businesses.
Intellectual Property
 Ownership of ideas, such as inventions, books,
movies, and computer programs
 In the U.S. creators of intellectual property have the
exclusive right to market and sell their work.
Intellectual Property
 These rights are protected by:
 Patents
 Trademarks
 Copyright laws
 These laws guarantee only the creator profits from
the idea
 In 1999, the Justice Department, FBI, and Customs
Services began cracking down on piracy and
counterfeiting
Intellectual Property
 China and India do not enforce these rights
 Chinese copy and sell foreign computer programs and pirate
newly released movies
 Publishers in India reprint foreign textbooks
 In the U.S. these people would be guilty of
PLAGARISM and will be sued in a court of law
Intellectual Property
 A manager must know the culture of the countries
they do business in.
 Intellectual property laws must be respected and
followed in the U.S.