Ethics in the World of Business

Topic 1

Learning outcomes
At the end of this lecture, students should be able to:
Analyze the three levels of decision making in the world of business individual, organization, business system. Compare and contrast the three viewpoints of business decision economic, legal and moral. Recognize the importance of integrating the economic, legal and moral viewpoints to make sound business decisions.

What is ethics?
The standards of moral behaviour, i.e. behaviour that is accepted by society as right versus wrong ( Nickels,2006).

Personal Ethics
Ethics begins with each of us.
It is related to our upbringing which is influenced by socialization, culture and religion.

Conduct of Business
Ethical issues are not only faced by managers but by all people, includes employees, consumers and members of the public. Corporate activities affect all, and so conduct of business is a matter of concern for everyone with a stake in ethical management. Ethical issues in business are closely tied up to important matters of public policy, to legislative and judicial processes of government.

Business Decision Making

In making decision, business people most of the time are faced with questions about ethics in their relationship with customers, employees and members of society.

If ethically correct course of action is clear, they will act accordingly.

Exception occurs when there is uncertainty about ethical obligations in particular situations or when considerations of ethics conflict with demands of business.

Two Distinguishing Features of Business

One distinguishing feature of business is its ECONOMIC character. In the world of business, we interact with each other not as family members or friends but as buyers and sellers, employers and employees, etc.
It typically takes place in ORGANIZATIONS. An organization, according to organizational theory, is a hierarchical system of functionally defined positions designed to achieve some goal or set of goals. Consequently, the members of an organization, in assuming a particular position (e.g . sales reps, managers, CEOs etc) take on new obligations to pursue the goals of the firm.

Two Distinguishing features in Business ( Cont.)

Because business involves economic relations and transactions, it raises ethical issues for which the ethics of everyday life has not prepared us. Although the familiar ethical values about honesty, fairness, promise-keeping, etc are applicable to business, it is necessary in many cases to rethink how they apply in business. This is not to say that ethics in business is different from ethics in life, but only that business presents us with new situations that require us to think through the ethical issues.

Cont
Business people can rely to some extent on the everyday rules of right conduct. However, business activity also has some features that limit the applicability of our normal ethical views. What we ought to do depends to some extent on situation and roles we occupy. Slightly different rules or codes of ethics are needed to guide us in different departments of lives.

Levels of Decision Making

Three distinctive levels: 1. Individual 2. Organization 3. Business system
Identifying the appropriate level for a decision is important, because an ethical problem may have no solution on the level it is approached.

Three Points of View

Business decision making involves many factors, ethics is only one.
To understand the relevancy of ethics in business conduct; three viewpoints should be understood : The economic thinking about business benefits The legal thinking about administrative decision The moral thinking about what is the best thing to do

Features of Moral Point of View

1. Willingness to seek out and act on reasons 2. Requires us to be impartial must regard the interests of everyone including ourselves as equally worthy of consideration and equal weight in deciding what to do.

An Integrated Approach
Decision making in business involves an integration of all three viewpoints. Business ethics is the attempt to think clearly and deeply about the ethical issues in business and to arrive at conclusions that are supported by the strongest possible arguments.

Ethics + Economics + Law

Both economics and law are critical to business decision making and it would be helpful to observe ethical standards as means to the end of profit making.

3 check questions when faced by an ethical dilemma in business decision making

1) Is it legal? Am I violating any law or company policy? 2) Is it balanced? Am I acting fairly? 3) How will it make me feel about myself? Will I be happy after taking such actions?

Case Study 1: The Job Dilemma

You have a long standing consulting relationship with a large consumer products company. This company represents 50% of your consulting revenues and is clearly your most important client. The CEO has called to ask you to commit a significant amount of time over the next couple of months to assist with a large merger project. The company is merging with a large conglomerate whose primary business is the sale and distribution of tobacco products. The CEO is relying on you to assist in facilitating a smooth integration of the two companies. You promised yourself that, since your father died of lung cancer, you would never work for a tobacco company. Is there a way that you can accept the consulting assignment and will still keep your promise to yourself? How will you handle this if you decide that you cannot work for the tobacco company?

Short case 2 : Time Crunch

Jenny has been working extra hours at her part time job in a clothing store. The store needs her help because the Mega Sale rush is starting to promote sales for the coming Hari Raya festival.
She also needs the money to pay next semesters tuition and to fix her car so that she can drive home for the long semester holidays. The coming holiday season also means the end of the semester, and unfortunately, final exams. Jenny simply doesnt have time to study for all of her exams and also work the extra hours she needs.

Case Study - Time Crunch (cont)

Something has to give, and she decides to fake being sick on the day of her biology exam so that she can take the make up exam the next week and have more time to study.
She knows that it wont be hard to get a note from the busy school health clinic saying that shes too sick to take the exam. Her friend Debbie works there and can borrow a page of their letterhead stationery. Even if I have to lie, its fair that I get extra time to study, Jenny tells herself, because I have to work, and I cant study all the time like students who get mommy and daddy to pay for everything.

Case Study - Time Crunch

(cont)

1. Jenny seems to see her lie as a simple case of manipulating an unfair system. Is there anything wrong with manipulating the system? Is her strategy fair to the other students in her biology class?

2. Jenny seems to justify her behaviour with a vague idea that unfair differences between people that have nothing to do with effort or intelligence such as wealth, should not be reflected in their grades. What do you think about her claim that she deserves more time to study than other students because they dont have to earn money?