ETHC 301 – C1 – Wednesday, September 29 2010

Read “ an ethical dilemma in chapter one “

Read “ Monsanto attempts to balance stakeholder's interests case study.

Business Ethics: The study of human conduct.

Business Ethics comprises the principles, values, and standards that guide behavior in the world of
business.

Business Ethics: An inquiry into the nature and grounds of morality where the term morality means
more judgment, standards, and rules of conduct.

Principles: values are specific boundaries for behavior that are universal and absolute.

Values: are used to develop norms that socially enforced like integrity, trust and credibility.

Insider Trading: is getting inside information and using it to ones' own interest. (Unethical)

Code of Ethics:

Nepotism = ‫واﺳطﺔ‬

Studying Business Ethics is an awareness programs. It let us recognize what is right from wrong. You
may identify ethical issues when they arise and use the approaches available for resolving them. You
will also learn more about the ethical decision making process and about the ethical decision making
process and about ways to promote ethical behavior within your organization. You will be able to cope
with conflicts between your own personal values and those of the organization in which you work.

The Benefits of Business Ethics

1- Employee commitment.
2- Investor loyalty.
3- Customer satisfaction

These three within an ethical culture will eventually lead to:

4- Ethics contribute to profit.
ETHC 301 – C2 – Monday, October 04 2010

The development of business ethics: business ethics have evolved along with other business
principles over the years.

The industrial revolution started by misusing people and taking people in the wrong way. Treating
people like machines. There is also a reaction to an action, if you have certain force. There will be a
reaction to that force.

Code of ethics were created to set principles that are made out of good conduct, in which following
them would result in a positive ethical behavior.

Three School of Thoughts: (Evolved From One Thought to Another)

 Classical Management School
 Behavior Management School
 Human Relation Management School
 Environmental Stability & Sustainability Management School

Ch.2 Stakeholder Relationships, Social Responsibility, and corporate governance

Main Elements:

Stakeholders: Are the external & Internal Audience for the organization. They could be from
employees to perspective customers, or analysts. Primary Stakeholders: Customers, Employees,
Shareholders, and Community. Secondary Stakeholders: Mass Media, Competitors, Special Interest
Group.

Social Responsibility: The responsibilities that falls under each person in regards to the society as
whole. Maximize Positive Impacts, Minimize Negative Impacts.

Corporate Governance: It is the governing body of the organization, they are the body that set rules
and principles within the organization in which it must be followed.

Stockholders: Are the shareholders of the organization, or the internal audience such as people who
owns stocks in the company, or employees, and managers.

Relationship between Stakeholders and Ethics? Ethics are highly linked to the reaction for the
stakeholders of the company. An unethical behavior may and will create a negative impact on the
stakeholders towards the organization. While a positive behavior, will create a positive impact on the
stakeholders as whole towards the organization.
ETHC 301 – C3 – Wednesday, October 06 2010

Read Ethical Dilemma in Chapter 2 and answer its questions:

Jack 17 years with the company boss

Carla 2 years with the company where her boss is jack

Jack personal feelings took over him to do unethical behaviors

his son needs money for school so he had to go unethical
Stole the company software (he thinks it is not stealing)
worked alone with clients off site without the company acknowledgment

He started working unethically after turning him down.

Carla doesn't know what to do? Should she tell the managers about it? Will they believe her words
over jack the old employee?? would she be willing to sacrifice her job
…......................

answer Monsanto case on page 66 next class.

Altruism = ‫إﯾﺛﺎر‬

Read About:

‫اﺑراھﯾم أﺑواﻟﻌﯾش‬
‫ﻣﺣﻣد ﯾوﻧس‬

You can use your cleverness in creating either an Ethical or Unethical Businesses.
You can use your capability in Ethical or Unethical means.
You are driven Ethically, or driven Unethically.

The shortcuts are not always efficient, and most likely they will be unethical. However, taking
shortcuts could be necessary sometimes. So, if you must take shortcuts, then ensure to make it as less
harmful as possible to yourself and also to others.

Read The Ethical Dilemma Beginning in Chapter 3.

Talk about Integrity: Define it, How it relates to Ethics.

ETHC 301 – C4– Wednesday, October 13 2010

Ch: 3 - Emerging Business Ethic Issues

 Recognizing an Ethical Issue

 Ethical Issues and dilemmas in business
 The challenge of determining an ethical issue in business

 Not recognizing an ethical issue is very dangerous for business organizations if business is
treated as a game in which ordinary rules of fairness don't apply.
 When you think of just making profit and increase sales then.
 “Business is business” Mentality.
 Check table 3-1 and tick the most observable issues in the table.

Honesty: truthfulness or trustworthiness to tell the truth and nothing but the truth. Business is not a
game, Business is not a warfare.

Fairness: being just equitable, and impartial

Equity
Reciprocity: Give as much as you take, don't take without giving back.

Integrity: Being whole, credible, honest and reliable.

Its uncompromising adherence to ethical values. Integrity is very important value for business people
in the 21st century organization. (High chance to come in exam). Integrity is about being ethical all the
time.

Other issues: Abusive or intimidating behavior is Very bad for employees. It begins by physical threat
to false accusation, insults, harshness, roundness, profanity (curse), sweating.

 Have your intentions at the center.

 Watch bullying, it could be illegal now.

Read Article “ Changing others through changing one self “

On Dr. Melhem Website the article file is called “ACT” - You can download it from the download
section.

Lying

Distorting the truth, some is related to joking. Lying by commission - like gimmicks in advertising and
lying by omission.
ETHC 301 – C5 – Saturday, October 16 2010

Ethical Issues related to the Arabic Culture:

- Nepotism have a higher impact.

- It takes longer to process information than what it usually takes outside the the Arabs World Because
of (Unnecessary Delays)

 Arriving on Time (Arriving Late)

 Leaving Workplace Early
 Tribal Discrimination
 Bribes and ‫ﺑﺧﺷﯾش‬
 Integrity Issues
 There is no anti- ‫ﻻ ﯾوﺟد ﻣﻛﺎﻓﺣﺔ ﻓﻌﺎﻟﺔ ﻟﻠﻐش اﻟﺗﺟﺎري‬
 No effective work for anti-piracy... Pirated Software found everywhere easily.

Most Ethical Issues in the Arabic cultures are mostly directed towards human resources.
ETHC 301 – C6 – Monday, October 18 2010

Types of Fraud:

 Accounting Fraud: To evade taxes for example

 Marketing Fraud: Producers Misleading consumers in relation to the 4p's
 Consumer Fraud: When consumers commit fraud such as lying or shoplifting or changing price
tags.

Other Ethical Issues:

 Insider trading
 Intellectual property rights
 Privacy issues
 The Challenge of determining and ethical issue in business

(Look up the book; Chapter 5 and case study: Arthur Anderson)

ETHC 301 – C7 – Wednesday, October 20 2010

Chapter 5: Ethical Decision Making and Ethical Leadership

Important: Fame Work for Ethical Decision Making in Business. Check figure 5-1.

Habits of strong Ethical Leaders:

 Ethical leaders have strong personal character.
 Read more on book......................................................

Ethical issue intensity. What is it? And what is moral intensity?

The answer to the first question lies in the following:

To what extent you view certain ethical issue as critical, problematic with negative consequences or
not. It's the important you (or the team or the organization) attach to a certain ethical issue.

Are you concerned and anxious or cheating. Two people have different levels of concern. Put a weight
from 1 to 10 on the level of your concern to the issue of cheating.

The instructor believes that “The Family” has the highest influence on intensity.

Others to follow are:

 The Workplace
 Religion
 Legal System
 Community
 Profession

Read on the internet about Locus of Control

ETHC 301 – C8 – Saturday, October 23 2010

1. Describing the legal and ethical issues surrounding Anderson's Auditing of companies
accused of accounting improprieties.
2. What evidence is there that Anderson's corporate culture contributed to its downfall?
3. How can the provisions of the Sarbanes-Oxly Act help minimize the likelihood of auditors to
identify accounting irregularities?

Arthur Anderson Case: Ideas and Lessons:

- Once exemplified the rock solid character and integrity that was synonymous with the
accounting profession.

- Accounting, auditing and consulting and independency.

- Investors lost about $300 Billion.

- Hundreds of thousands of people los their jobs.

- Closed in 2002, after 90 years of business.

- Auditing is the process of checking and examining the organization financial statements.

- What happens when growth becomes the highest priority?

A: Grow moderately, or grow without sacrificing the organization integrity or quality.

- Growth became Arthur Anderson's culture, growth was aggressively promoted… BAD!

- The company lost 100s of millions of dollars just to settle claims brought by clients and
investors.

- News that Enron had overstated earnings became public, sending shockwaves through the
financial markets.

Arthur Andersons corrupted others and got corrupted by:

1. Baptist Foundation of Arizona

2. Sunbeam
3. Waste Management
4. Enron
5. WorldCom & Telecoms
Enron was forced to restate five years worth of financial statements that Anderson had signed off
Shredding Enron Statements.

Anderson's CEO had viewed the $1 million a week in audit fees from Enron paid to Anderson along
with the consulting fees it paid to Anderson's Spin off firm, Accenture, as a significant opportunity to
expand revenues at Andersons.

Culture what matters most!

- Growth and making short Money was the only language spoken at this big company with many
things to hide and cover up.

- Trust then, was destroyed.

- Billions of Dollars were lost.

- Many people lost their jobs.

- Again distrust prevailed.

Lookup:

Culture – Corporate Governance: How would they relate to ethical standards?

ETHC 301 – C9 – Monday, October 25 2010

Moral Intensity: Refers to a person's perception of social pressure and the harm the decision will have
on others.

- Common concern regarding ethical issue in the organization is important. So managers need to
create a common concern to avoid ethical conflict.

Individual Factors: (related to intensity issues & decisions made)

- Gender
- Education
- Nationality
- Age
- Locus of Control: To which extent you control the destination of your life. It is when you
believe that your destiny is controlled by yourself or external forces such as fate or luck.

Internal Locus of Control: When a person believes that his behavior / actions are guided by his
own personal decisions and efforts.

External Locus of Control: When a person believes that his behavior / actions are guided by
external forces such as fate, luck, etc…

Organizational Factors: (related to intensity issues & decisions made)

- A corporate culture
- Ethical culture
- Significant others
- Obedience to authority

Q) Define Locus of Control? Explain the differences between internal and external locus of control?
Provide Example. (Important)
ETHC 301 – C10 – Wednesday, October 27 2010

Major One Review:

Chapters: 1, 2, 3.

Multiple Choices - True/False - Three Essay; Choose Two

- Cases not included

- Focus on the book main context (Principles)
ETHC 301 – C11 – Monday, November 01 2010

Hypocrisy: ‫ﻧﻔﺎق‬

Moral Intensity: refers to a person's perception of social pressure and the harm the decision will have
on others.

Common concern regarding ethical issue in the organization is important. So managers need to create
a common concern to avoid ethical conflict.

Individual Ethical Factors: Age, Gender, Etc…

Organizational Ethical Factors:

- A corporate Culture
- Ethical Culture
- Significant Others
- Obedience to Authority

Opportunity: Relation to Ethical Behavior?

- Intrinsic Rewards
- Extrinsic Rewards

The Role of Leadership in a Corporate Culture:

- Leadership – Define Leadership?

- Are you a leader or a manager?
- Can you as a leader create programs to maintain ethical culture?
- Planning, Organizing, Directing, and implementing an ethical program.

H.W. Q) what are the differences between a Manager and a Leader?

ETHC 301 – C12 – Wednesday, November 03 2010

Leadership:

- Transformational vs. Transactional Leadership.

- Do you know other forms of leadership?
- Level Five leaders,
- Visionary Leaders.
- Authentic Leaders.

Successful Leaders:
- Professional
- Humility

3M Leader was shy and full of humility???

Habits of strong ethical leaders:

1. Have strong personal character.

2. A passion to do right
3. Proactive
4. Consider stakeholder's interest
5. Role Models
6. Transparent and actively involved in org D-M
7. Competent managers who take a holist view of the firm's culture.
ETHC 301 – C13 – Saturday, November 06 2010

Read Case: Case No. 3 – Enron – P. 76

Book: In Search of Management

Q) What is the impact of using legitimate / coercive / referent … and expert / referent power?
ETHC 301 – C14 – Monday, November 08 2010

Q) What is the impact of using legitimate / coercive / reward … and expert / referent power?

A) Compliance and Commitment…….

Positional Sources of Power: Legitimate / Coercive / Reward (Compliance): I will do what you asked
me to do.

Personal Sources of Power: Expert / Referent (Commitment): I will do what you asked me to do and
extra.

P.289: Framework of Organizational Culture Typologies (Understand It)

ETHC 301 – C15 – Wednesday, December 01 2010

Defining Corporate Culture:

Three Main Elements:

1- Culture is shared among organization members.
2- Culture is formed over a long period of time.
3- Culture is relatively stable.

If ethics is a major component of corporate culture, employees will be rewarded for observing ethical
behavior. HR will hire people based on ethical standards and measures, marketing and sales will do
accordingly, finance will do so and so on and so forth.

Managing culture is very important. When managed effectively, culture will be the source of success.
Culture will be the secret behind that success.

Managing culture means what?

Planning and directing the organization to have the right culture, healthy culture and effective culture.
An ethical culture that does not compromise its ethical values under whatever circumstances.

Managing Culture includes creating an ethical culture by determination, planning, organizing, and
leading that culture.

Rewarding people and disciplining people according to their compliance to he right ethical standards
applied by the organization.

Compliance vs. Value based ethical cultures

Use of legal departments to determine ethics, auditing departments, monitoring systems. The
problem with this is that its short-term approach rather than a long term one.

Value based ethics culture is based on clear mission statement that defines the firm as well as how
customers and employees should be treated. The focus here is on valued not rules. The first is
consistent with single loop learning whereas the second is consistent with double loop learning
(explaining why not just what).

Differential Association:
Differential Association refers to the idea that people learn ethical or unethical behavior while
interacting with others who are part of their role-sets or belong to other intimate personal groups.
Also, superiors have a strong influence on the ethics of their subordinates.
Whistle – Blowing

Exposing an employer's wrongdoing to outsiders.

Two forms of whistle blowing:

1- Internal: means inside the organization.
2- External: to outside the organization.

Protect whistle blower against retaliation.

ETHC 301 – C16 – Saturday, December 04 2010

Motivating Ethical Behavior:

What is Motivation?
What is job performance?
Do you know about Maslow's hierarchy?

Some people may overbill time worked on projects to satisfy their family basic needs.

Once people continue up the ladder, they might become tempted by obeying company rules and
policies and concerned with internal recognition and achievement over their family needs.
ETHC 301 – C17 – Monday, December 06 2010

Motivating Ethical Behavior

- What is meant by Frustration-Regression theory in Maslow's hierarchy of needs?

- Individual's personal ethics and needs will significantly affect his or her ethical decisions.
- What is higher order needs and lower order needs in Maslow's hierarchy?

Lookup: Cons and Pros of Centralization vs. Decentralization

Centralization affects ethical issues:

- Behaving according to the "letter of the law" rather than spirit. Strict rules and regulations.
- Little upward communication makes top managers unaware of unethical issues down the
hierarchy. Including sweatshop, labor and forced labor. Enslaved in sweatshops and migrant
labor working on farms and building homes.
- Blame shifting or scapegoating.
- System thinking problem.

What is decentralized organization?

Empowered lower level managers and employees might misuse authority and get engaged in
unethical problems and sometimes disasters like the Bhopal disaster in India…

Select 3 to 5 key words which you may empower your employees without misusing empowerment:
1- Trust
2- Character
3- Knowledge and Skill
4- Rewards
5- Information Sharing

Which one more ethical, centralization or decentralization?

There are cases where centralization creates the grounds for unethical behavior and there are cases
where decentralization is. Rules are necessary for central organization and culture is necessary for
decentralization.

Group Dimensions of corporate structure and culture:

Type of groups:
1- Formal Groups
2- Informal Groups
Formal Groups:
1- Committees: What is groupthink?
Ethical committees are good for recent ethical crisis in the business. They need to be independent
and avoid politics. Also, the committee needs to have guidelines and policies and rules to avoid
personal conflict. Texas Instrument is a good example.
2- Work Groups
3- Taskforce
Etc…

Informal Groups:
- Friends
- Fan Groups
ETHC 301 – C18 – Saturday, December 11 2010

Which one more ethical centralization or decentralization?

Answer: There are cases where centralization creates the grounds for unethical behavior and there
are cases where decentralization is. Rules are necessary for central organization and culture is
necessary for decentralization. Why?

Ch. 8 – Developing an Effective Ethics Program

- The responsibility of the corporation as a moral agent.

- The need for organizational ethics programs.
- An effective ethics program.
- An ethics program can help avoid legal problems.
- Codes of Conduct.
- Ethics Officers.
- Ethics training and communication.
- Systems to monitor and enforce ethical standards.
ETHC 301 – C19 – Saturday, December 18 2010

Which one more ethical centralization or decentralization?

Answer: There are cases where centralization creates the grounds for unethical behavior and there
are cases where decentralization is. Rules are necessary for central organization and culture is
necessary for decentralization. Why?

Ch. 8 – Developing an Effective Ethics Program

- The responsibility of the corporation as a moral agent.

- The need for organizational ethics programs.
- An effective ethics program.
- An ethics program can help avoid legal problems.
- Codes of Conduct.
- Ethics Officers.
- Ethics training and communication.
- Systems to monitor and enforce ethical standards.

Discuss the rest of chapter 8 – Teamwork Discussion

Ethics Training and Communication:

One of the important steps in designing an ethics program is the design of an effective ethics
training program. There are many key-factors that must be taken into consideration in order to
have an effective ethical training program, and they are:

1- The training program must identify the risk areas that the employees are currently facing or
will face in the future.
2- The training must also provide how to deal with these risk areas… by providing real example
cases and developing options.
3- The training program must emphasize that wrongdoings will not be accepted in the
organization, by informing them that they will be individually responsible for their actions.
4- Allow the employees to voice their concerns. If necessary, make it anonymous… and make sure
to provide feedbacks for them.
ETHC 301 – C20 – Saturday, December 25 2010

Factors that Determine Ethical Behaviors:

- The personal Social Culture (Verify)

- Organizational Culture
- Unrealistic Expected Performance
- Decision Making Process
- Leadership

Firms influence their employees…

↓ Chapter: 9 ↓

2- Benefits of Ethics Auditing:

- For the Organization.
- For Stakeholders.
- Identify potential risks and liabilities.
- Improve its compliance with the law.
- Improve relationship with stakeholders.
- Enron could have been saved!
- Trust Creation and Building…
ETHC 301 – C21 – Monday, December 27 2010

Major 2 Notes:
How to read the case study?

Independence vs. Combining Auditing and Consulting,

Doing so will create a conflict of interest… combining auditing and consulting was a major factor for
Arthur Anderson's Corruption. When auditing and consulting get combined, independency is lost.

What happens when growth becomes the highest priority?

Growth becomes their culture, growth becomes promoted and the people who provided growth were
promoted… Having growth as the only aim without considering other factors will eventually trigger
unethical behaviors… This is true as growth could be achieved by any means necessary… Grow should
be a future aim or a future goal… but it should never be as the only and highest priority for a company
(Important Question) A company needs a strong ethical infrastructure that shapes a strong ethical
culture which will eventually lead to achieving the growth in the correct manner.

Arthur Anderson Corrupted and Got Corrupted by:

1- Baptist Foundation of Arizona
2- Sunbeam
3- Waste Management
4- Enron
5- Telecoms and WorldCom

Culture is what matters most!

If Growth was the Culture of the firm, trust will be destroyed (as people knew their true aim is growth,
this may let people think that they may not provide the needed tasks in the correct manner) …and
when trust goes down… Money will be lost… This would lead to people losing their jobs… Eventually
Distrust will prevail in the economy.

Type of Questions:
- Multiple Q's
- True & False
- Essay
ETHC 301 – C22 – Saturday, January 01 2011

Chapter 9: implementing and Auditing Ethics Programs

The Auditing Process – 7 Steps

1. Secure commitment of top managers and board of directors – this is very clear and self
evident.
2. Establish a committee to oversee the ethics audit – who do you suggest?
3. Define the scope of the audit process: (for example, environmental issues, employee rights,
discrimination, fraud, legal compliance)
4. Review Organizational mission, values, goals, and policies, and define ethical priorities. Why?
5. Collect and analyze relevant information: this is to identify the tools or methods for measuring
the firm's progress in improving employees' ethical decisions and conduct.
6. Verify results by an independent party.
7. Report findings via the ethics audit report to the board o directors, and external stakeholders.

The strategic importance of ethics auditing:

- Auditing ethical performance can generate many benefits. The ethics audit provides an
assessment of a company's overall ethical performance as compared to its core values, ethics
policy, internal……………………………………. (Book)
……….
….......
In summary, ethics audit is a tool to ensure the health of the system and its overall effectiveness and
development.