BMGT 27 – Good Governance and Social Responsibility  Reciprocity: Occurs when an action that has an

effect upon another is returned.

Lecture: Chapter 3 Emerging Business Ethics Issues  Optimization: The tradeoff between equity
(equality) and efficiency (max. productivity)
Part One: An Overview of Business Ethics
Integrity
Book Used: BUSINESS ETHICS – Ethical Decision
Making and Cases  Integrity: Uncompromising adherence to ethical values.
 One of the most important terms relating to virtue.
Author: Ferrell, Fraedrich, Ferrell
Ethical Issues and Dilemmas in Business
Ethical Issues
 Ethical issue is a problem, situation, or opportunity that
- arise because of conflicts among individual’s personal moral requires an individual, group, or organization to choose
philosophies and values, the values and culture of the among several actions that must be evaluated as right or
organizations in which they work, and those of the society in wrong, ethical or unethical.
which they live.  An ethical dilemma is a problem, situation, or opportunity
that requires an individual or group to choose among
Recognizing an Ethical Issue several wrong or unethical actions.

- An ethical issue is simply a situation, a problem, or even an Abusive or Intimidating Behavior

opportunity that requires thought, discussion, or investigation
to make a decision. One of the most common ethical problems.
 Can be physical threats, false accusations, profanity, insults,
Honesty harshness, ignoring someone, or unreasonableness.
 Intent is important in determining abuse.
 Honesty: Truthfulness or trustworthiness.  Bullying is a growing problem.
 Telling the truth to the best of your knowledge.  Is associated with a hostile workplace.
 Dishonesty: A lack of integrity, incomplete disclosure,  81% of workplace bullies are supervisors.
or an unwillingness to tell the truth.
Lying
Issues related to honesty arise when people perceive
business as something where normal rules do not apply.  Commission lying is creating a false perception with words
that deceive the receiver.
Fairness
 Omission lying is intentionally not informing channel
members of problems relating to a product that affects
 Fairness: The quality of being just, equitable, and
awareness, intention, or behavior.
impartial.

 3 Fundamental Elements that motivate people to be

fair:
 Equality: How wealth or income is distributed.
Conflicts of Interest Discrimination

Exist when an individual must choose whether to advance “Anti-Discrimination Act of 2011” shall penalize acts of
his/her personal interests, those of the organization, or some discrimination in the following fields: employment, education,
other group. delivery of goods, facilities and services, accommodation,
 Individuals must separate personal interests from business transportation, media, and in search and investigatory
dealings. activities.

Bribery  Affirmative Action Programs

 Efforts to recruit, hire, train, and promote qualified
The practice of offering something in order to gain an illicit individuals from groups that have traditionally been
advantage. discriminated against.
 Different Types of Bribery:
 Active Bribery: The person who promises or gives the Sexual Harassment
bribe commits the offense.
 Passive Bribery: An offense committed by the official A repeated, unwanted behavior of a sexual nature perpetrated
who receives the bribe. upon an individual by another.
 Facilitation Payments: Legal as long as they are small.  Hostile work environment
 The conduct was unwelcome
Corporate Intelligence  The conduct was severe, pervasive, and regarded by
claimant as hostile/offensive.
The collection and analysis of information on…  The conduct was such that a reasonable person would
 Markets find it hostile or offensive.
 Technologies
 Customers and competitors To avoid sexual misconduct, a firm needs:
 Socioeconomic and external political trends
 Hacking 1. Statement of policy
 System hacking assumes that the hacker already has 2. Definition of sexual harassment
access to a low-level privilege user account. 3. Non-retaliation policy
 Remote hacking involves attempting to remotely 4. Specific procedures for prevention
penetrate a system across the internet. 5. Establish, enforce, and encourage victims to report.
 Physical hacking requires that the CI agent enter a 6. Establish a reporting procedure
facility personally. 7. Timely reporting requirements to the proper authorities.
 Social engineering is the tricking of individuals into
revealing their passwords or valuable corporate information. Dual Relationship
 Shoulder surfing in which someone looks over an
employee’s shoulder while he/she types in a password. A personal, loving, and/or sexual relationship with someone
 Password guessing with whom you share professional responsibilities.
 Dumpster diving
 Whacking is wireless hacking  A key ethical issue in sexual harassment
 Phone eavesdropping  Unethical dual relationship: The relationship causes a
conflict of interest or impairment of professional judgment.
Fraud  Government calls for reform
 Stricter controls on hedge funds and other instruments
Any purposeful communication that deceives, manipulates, or  Greater transparency
conceals facts in order to create a false impression.
 Accounting fraud Insider Trading
 Misrepresentation of company’s financial reports
 Dramatic changes in accounting field.  Two Types of Insider Trading
 Increased competition and pressures to perform can  Legal insider trading: Involves legally buying and
create opportunities for misconduct. selling stock in an insider’s own company, but not all the
 Accountants should abide by a strict code of ethics. time.
 Illegal insider trading: The buying or selling of stocks
Marketing Fraud by insiders who possess material that is not public.

The process of dishonestly creating, distributing, promoting,  Insider Trading can be illegal or legal depending on when
and pricing products. the insider makes the trade. It is illegal when the material
 Puffery: Exaggerated advertising claims, blustering, and information is still nonpublic; trading while having special
boasting knowledge is unfair to other investors who don’t have
 Can be difficult to distinguish from fraud. access to such knowledge.
 Implied falsity: An advertising message that misleads,
confuses, or deceives the public. Just Wage
 Literally false: Claims can be divided into tests prove
(establishment claims) and bald assertions (non-  Remuneration which is enough to support the wage-earner
establishment claims). in reasonable and frugal comfort.
 Issues:
Consumer Fraud  Mutual agreement
 Geographic differences
 When consumers attempt to deceive businesses for personal  Wage indexation
gain  Justifiable pay for certain job positions, skills, and tasks.
 Price tag switching, item switching, or lying to obtain  Law of demand and supply
discounts.
 Collusion involves an employee who helps a consumer Whistleblowing
commit fraud.
 Duplicity involves a consumer duping a store.  The disclosure by an employee of confidential information
which relates to some danger, fraud, or other illegal or
Financial Misconduct unethical conduct connected with the workplace.

 The failure to understand and manage ethical risks was a

key problem in the recent financial crisis.
 Many firms rewarded risk-taking
 Difficult-to-understand financial instruments and murky
accounting played roles