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5
Ethics
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1. To examine the role of ethical behavior in
business finance.
2. To illustrate the role of unethical behavior
in the downfall of business.
3. To describe the need for ethical practices
in business finance.
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Ethics
Ethics:
a set of beliefs about right and wrong.
Ethics guide people in dealings with stakeholders and
others, to determine appropriate actions.
 Managers often must choose between the conflicting
interest of stakeholders.

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Stakeholders
Stakeholders:
people or groups that have an
interest in the organization.
Stakeholders include employees, customers,
shareholders, suppliers, and others.
 Stakeholders often want different outcomes and
managers must work to satisfy as many as possible.

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Ethics
 Are
guidelines for human behavior
 Are the moral code by which individuals live
and conduct business
 Help individuals decide how to act in situations
where moral issues are concerned
 Set standards for moral behavior
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Ethics
Vary
from person to person
Do not solely rely on the basis of an act
being legal or illegal
Can be viewed as a moral philosophy
Are generally termed gray areas
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Business Ethics
 Study
the behavior and morals in a business situation
 Are determined mainly by the business owner’s
principles and values
 Should be practiced by all individuals in a business
 Reflect the beliefs of an organization
 Are tied directly to a businesses reputation
 Can be expressed in a code of ethics
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Code of Ethics
Code of Ethics: set of rules for guiding the actions of
employees or members of an organization
 Is
a set of ethical behavior guidelines which govern the
day-to-day activities of a profession or organization
 Describe the appropriate conduct for a business
 Can be used to defend a company against criminal
action if an employee violates the law
 Can be written or unwritten
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Unwritten Codes of Ethics
 Are
the customs of a business
 Are ways of completing tasks which are generally
accepted practices
 Are passed through the business verbally from
employee to employee

example: an employee knows the Internet at work is
not to be used for personal matters
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Written Codes of Ethics
 Are
considered formal codes of ethics
 Allow a company to have a “hard copy” of the
procedures it condones
 Are mainly found within large businesses
 example: an employee must sign a
confidentiality agreement prior to employment in
order to prevent them from leaking company
information
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Developing a Code of Ethics
Can
be completed by:
 brainstorming ethical dilemmas
 discussing potential solutions
 writing a set of general guidelines
 improving the code in place
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Why Behave Ethically?
Managers
should behave ethically to avoid
harming others.

Managers are responsible for protecting and nurturing
resources in their charge.
Unethical
managers run the risk for loss of
reputation.
This is a valuable asset to any manager!
 Reputation is critical to long term management
success.
 All stakeholders are judged by reputation.

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Guidelines for Writing a Code of Ethics
1)Determine the purpose of the code
2)Tailor the code to the needs and values of the organization
3) Consider involving employees from all levels of the company
in writing the code
4) Determine the rules or principles that all members of the
organization will be expected to adhere to
5) Include information about how the code will be enforced
6) Determine how the code will be implemented and where it
will be published or posted
7) Determine how and when the code will be reviewed and
revised
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Results of Illegal Unethical
Practices
 Include
the following:
 jail sentences
 length

is directly related to the severity of the crime
hefty fines
 amount
is linked to the cost of the crime
community service
 removal from leadership positions
 irreparable damage to those affected by the
practices

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Guidelines
When
considering the ethics of business
situations, you can follow these guidelines:



Is the action legal?
Does the action violate professional or company
standards?
Who is affected by the action and how?
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Results of Unethical Practices
Include
the following:
 damage
to reputation
 loss of trustworthiness
 decrease in employee morale
 negatively viewed by customers
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Managing Diverse Workforces
The
workforce has become much more
diverse during the last 30 years.
Diversity refers to differences among people such as age,
gender, race, religion.
 Diversity is an ethical and social responsibility issue.

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Types of Diversity
Figure 5.5
Capabilities
Disabilities
Age
Socioeconomic
background
Gender
Sexual
orientation
Race
Religion
Ethnicity
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Manage Diversity
Distributive
Justice: dictates members be
treated fairly concerning pay raises,
promotions, office space and similar issues.
These rewards should be assigned based on merit and
performance.
 A legal requirement that is becoming more prevalent in
American business.

Procedural
Justice: Managers should use fair
practices to determine how to distribute
outcomes to members.

This involves how managers appraise worker
performance or decide who to layoff.
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Diversity Makes Business Sense
Diverse
employees provide new, different
points of view.

Customers are also diverse.
Still,
some employees may be treated unfairly.
Biases: systematic tendencies to use information in ways
that result in inaccurate perceptions.
 Stereotypes: inaccurate beliefs about a given group.

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How to Manage Diversity
Increase
diversity awareness: managers need
to become aware of their own bias.
Understand cultural differences and their
impact on working styles.
Practice effective communication with diverse
groups.
Be sure top management is committed to
diversity.
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