BUSINESS ETHICS

Business Ethics
Ethics is the study of right and wrong
behavior; whether an action is fair, right
or just.
In business, ethical decisions are the
application of moral and ethical principles
to the marketplace and workplace.
Whats Good for Business is Good for
the Country

This former attitude of business is no longer

adequate to insure ethical conduct
De Vee E. Dykstra, J.D., 2004

Business Stakeholders

Shareholders
Employees
Community
Customers

The interests/needs of these stakeholders

need to be balanced in ethical decision
making to ensure a firms long-term
survival.
De Vee E. Dykstra, J.D., 2004

Ethical Conflicts to be Balanced

Shareholders - want profits
Employees - want safe and secure
jobs
Community - wants economic benefit
or the business and the environment
protected
Customers - want quality product for
good/fair price

De Vee E. Dykstra, J.D., 2004

Why is Business Ethics

Important?

Directors and Officers owe a complex set of

ethical duties to various stakeholders
When these duties conflict, ethical dilemmas are
created

Importance of Values in Business Success

Profits - Ethics Resource Center Study
Costs of Unethical Behavior

Ethics as a Strategy
Good Reputation
Personal Reasons
Seen as a leader and regulation may be
De Vee E. Dykstra, J.D., 2004
prevented

EXECUTIVES COMMENT ON REPUTATION

A reputation,

shake.

good or bad, is tough to

Richard Teerlink, CEO, Harley-Davison

If we were making that decision now in light of the

press scrutiny we have been receiving, we probably
would not have taken that risk.
Robert C. Winters, Chairman, Prudential Insurance

A bad reputation is like a hangover. It takes a while

to get rid of, and it makes everything else hurt.
James Preston,

CEO, Avon
De Vee E. Dykstra, J.D., 2004

Setting the Right Ethical Tone

Importance

of Ethical Leadership and Creating

Ethical Codes of Conduct
Clear Communications to Employees
E.g., Costco and Johnson and Johnsons webbased ethical training

Corporate

Compliance Programs
Conflicts and Trade-Offs
Stakeholder interests differ

De Vee E. Dykstra, J.D., 2004

How does a firm promote the

importance of ethical behavior?

Adopt a code of ethics

Initial and ongoing employee training
Employee hotline for anonymous reporting of
ethical violations
Distribute ethical bulletins
Management (from the top down) provides a role
model
Continued review of company policies to determine
their effect on ethical behavior
De Vee E. Dykstra, J.D., 2004

Beware!!!

Watch for Dangers of Unethical

Environment
Intense competition and issues of survival
Managers making poor judgments
Employees with no personal values

De Vee E. Dykstra, J.D., 2004

What is ethical leadership?

Ethical leadership involves both acting and
leading ethically over time all the time.

Why practice ethical leadership?

Ethical leadership models ethical behavior to the
organization and the community.
Ethical leadership builds trust.
Ethical leadership brings credibility and respect,
both for you and for the organization.
Ethical leadership can lead to collaboration.
Ethical leadership creates a good climate within the
organization.
If you have opposition, or are strongly supporting a
position, ethical leadership allows you to occupy
the moral high ground.
Ethical leadership is simply the right way to go.
Ethical leadership affords self-respect.

When and by whom should

ethical leadership be practiced?
Ethical leadership should be practiced all the
time by anyone in a formal or informal
leadership position.

How do you practice ethical

leadership?
General guidelines:
Ethical leadership requires a clear and
coherent ethical framework on which the
leader can draw in making decisions and
taking action.
Your ethical framework should agree with
the ethical framework, vision, and mission
of the organization or initiative.
Ethics should be a topic of discussion.
Ethics should be out in the open.
Ethical thought must be connected to
action.
Ethical leadership is a shared process.

Specific components of ethical

leadership:
Put the good of the organization and the general
good before your own interests and ego.
Encourage the discussion of ethics in general and
of the ethical choices involved in specific situations
and decisions as an ongoing feature of the
organizational culture.
Institutionalize ways for people to question your
authority.
Dont take yourself too seriously.
Consider the consequences to others of your
decisions, and look for ways to minimize harm.
Treat everyone with fairness, honesty, and respect
all the time.
Treat other organizations in the same way you treat
other people with fairness, honesty, and respect.

Specific components of ethical

leadership (cont.):
Collaborate inside and outside the organization.
Communicate.
Work to become increasingly culturally and
interpersonally competent.
Take cultural sensitivity and cultural competence
seriously.
Work to be inclusive.
Take your leadership responsibility seriously, and
be accountable for fulfilling it.
Constantly strive to increase your competence.
Dont outstay your usefulness.
Never stop reexamining your ethics and your
leadership.

Habits of Strong Ethical

Leaders

ETHICS

Ethical Dilemma

Ethical Dilemma
A situation that, although offering potential
benefits, is unethical.
One of the most common ethical
dilemmas occurs when a companys
culture conflicts with an employees
personal ethics.

Ethical Dilemmas in Business

Two Types
Private Interest Conflicts with Corporate
Business Interest Conflicts with Public

De Vee E. Dykstra, J.D., 2004

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Language of Ethical Dilemmas

Everybody else does it.

If we dont do it, someone else will.

Thats the way it has always been done.
Well wait until the lawyers tell us its
wrong.
It doesnt really hurt anyone.
The system is unfair.
I was just following orders.

De Vee E. Dykstra, J.D., 2004

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ETHICAL DILEMMA
CATEGORIES
Taking things that dont
belong to you
Saying things you know
arent true
Giving or allowing false
impressions
Buying influence or
engaging in conflict of
interest
Hiding or divulging
information
Taking unfair advantage

Committing personal
decadence
Perpetrating
interpersonal abuse
Permitting
organizational abuse
Condoning unethical
actions
Violating rules

De Vee E. Dykstra, J.D., 2004

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ORGANIZATIONAL ETHICS

MANAGEMENT TIPS

Checklist for dealing with ethical dilemmas

Step 1. Recognize the ethical dilemma.

Step 2. Get the facts.
Step 3. Identify your options.
Step 4. Test each option: Is it legal? Is it right? Is
it beneficial?
Step 5. Decide which option to follow.
Step 6. Ask the Spotlight Questions: To double
check your decision.
How would I feel if my family found out about my
decision?
How would I feel if the local newspaper printed my
decision?

Step 7. Take action.

ETHICS

Ethics and Work

The Wall Street Journal reports:
36% of workers calling in sick are lying.
35% keep quiet about co-worker
misconduct.
12% of job resumes contain falsehoods.
Managers are more likely than other
workers to report wrongdoing.
Managers with 03 years experience feel
most pressure to violate personal ethics.

ETHICS

Rationalizing Unethical
Behavior

Four reasons:
1. What Im doing is not really illegal.
2. My behavior is in everyones best
interests.
3. Nobody will ever find out what Ive
done.
4. The organization will protect me.

ETHICS AND ETHICAL BEHAVORIAL

Organizational Ethics
MODULE GUIDE 4.2

Personal and contextual factors influence

ethical conduct
Training in ethical decision making may
improve ethical conduct
Protection of whistleblowers may
encourage ethical conduct
Managers acting as positive role models
may motivate others toward ethical conduct
Formal codes of ethics set standards for
ethical conduct

ORGANIZATIONAL ETHICS

Ethics Training

Ethics Training
Seeks to help people understand the
ethical aspects of decision making and to
incorporate high ethical standards into
their daily behavior.

Code of Ethics
A formal statement of values and ethical
standards

Using Formal Guidelines to

Make Ethical Decisions
A guideline is an outline for conduct
Violating a guideline doesnt have
legal implications of breaking a law
A formal guideline is an explicit
statement
Examples include a statement of a
corporate policy, an associations code
of ethics

Using Formal Guidelines

When you have an ethical situation ask yourself:
Is the act consistent with corporate policy?
Either explicitly or implicitly, corporations often tell their
employees how to act.
The policy may be a rule stating that no gifts are to be
accepted from vendors, or it may just be a motto, such as:
The customer is always right.

Does the act violate corporate or professional codes of

conduct or ethics?
Often companies and professional organizations adopt such
codes.
Some are quite specific and can be helpful in directing the
activities of the members.
Even if you do not belong to a professional society or your
organization does not have a computer ethics code, it may
be worthwhile to adopt a code as your personal guide.

Using Formal Guidelines

Cont.

Does the act violate the GoldenRule?

That is, are you treating others the way you
would wish them to treat you?

Does the act serve the majority rather than

a minority?
Does it serve yourself only?
Generally, an outcome that benefits the majority,
or serves the common good, is more desirable
than one that benefits a few or even one.

Using Informal Guidelines to

Make Ethical Decisions
Informal guidelines help us to quickly
evaluate a situation in an attempt to resolve
an ethical dilemma
Informal guidelines help us to arrive at a
general direction for an ethical action
Lets look at seven informal guidelines
For each guideline, imagine that you are in
an ethical situation and must make a
decision about your course of action

You are considering one action or sometimes

must choose among multiple possible actions

Informal Guideline 1: The Mom

Test
Would you tell your mom what you
did?
Suppose you wrote a program to
make up sentences from a collection
of vulgar words

Would you tell your mother about it? (or

some other individual who you look up
to?)
Or would you hide it from her(them)?

Informal Guideline 2: The TV

Test
How would you feel if you saw your
situation described on TV or in the CNN
IBN Morning News?
Would the story make you look good or
bad?
How would the viewers or readers react?
EX) You and a friend both own computer
consulting companies and decide to share
your software so that only one copy needs
to be purchased

Informal Guideline 3: The Smell

Test
Does the situation smell?
Do you just feel in your bones that
there is a problem but you cant quite
pin it down?
If so,

There probably is a problem because the

situation has failed the smell test

Informal Guideline 4: The Other

Persons Shoes Test
What if the roles were reversed
Would you be happy if the act were
done to you?

If you were in the other persons shoes?

If you wouldnt want the roles reversed

then there is probably something
wrong

Informal Guideline 5: The Market

Test
Would you use your behavior as a
marketing tool?
Ie) Does your action have enough
merit to give you a marketing edge?
EX)

Informal Guideline 6: The

Principle of Harm Minimization
This principle prescribes choosing the
course of action that minimizes the
amount of harm
You may recall in old Star Trek
Episodes a frequent saying of Mr.
Spock,

The good of the many outweighs the

good of the few

Harm Minimiation Continued

The principle of harm minimization can help

you spot ethical problems as well as solve
them
Sometimes it is useful to examine ethical
dilemmas from the stakeholders
perspective

A stakeholder is any person or organization with

a stake in the decision
Harm refers to any act, physical or psychological,
that denies a stakeholder their reasonable rights
An unethical activity is one that results in
unnecessary harm or an activity that has the
potential for harm

Ethical Dilemma Resolution

Models
Blanchard and Peale
Is it legal?
Is it balanced?
How does it make me feel?
Front Page of the Newspaper Test
How would the story be reported?
Objective and informed reporters point of
view

De Vee E. Dykstra, J.D., 2004

37

Ethical Dilemma Resolution

Models
Laura

Nash

Put yourself in the others shoes.

Can I discuss my decision with family,
friends?
What am I trying to accomplish?
Long-term comfort level

Wall

Street Journal Model

Comply with the law

Contribution to stakeholders
Consequences-short and long term
De Vee E. Dykstra, J.D., 2004

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Ethical Displacement

Ethical displacement
It means that ethical dilemmas are
displaced upwards to a higher level in
order to solve or dissolve the dilemma.
Ethical displacement consists of
resolving a dilemmaor sometimes of
solving an ethical problemby
seeking a solution on a level other
than the one on which the dilemma or
problem appears.

Context of ethical
displacement

Many dilemmas faced by individuals in a

firm cannot be resolved simply by the
individual's acting ethically
They are not amenable to intuitive
solutions on the individual level
Existing structures of a firm would have
caused the dilemma

Thus, the only way to resolve it may be to

rise above the level of individual ethical
analysis.

Features of ethical
displacement

It is both a
Descriptive techniques, and
Diagnostic technique

Any solutions resulting from it will not

be easy as it may involve changing
corporate structure and policies
It will require attitude change

How to go about ethical

displacement?

Ethical hotlines
Ombudsman a confidential intermediary for
workers

Yet these approaches rarely lead to structural

changes within a company because
Ethical hot lines were not instituted to handle
complaints that threaten the existing structure
of the corporation, but
To answer or allay day-to-day concerns of
employees, usually on fairly straightforward
and obvious issues of right and wrong.

The questions to be asked by the

company
Who attempts to resolve dilemmas
involving ethical displacement?
Where are the ethical gray areas in the
company?
Who internally challenges corporate
procedures or structures from an ethical
point of view?
How might such questioning or attempts
at resolution be institutionalized?
Does the company need a devil's (or an
angel's) advocate to do just that?

To be effective, the company

needs

Someone highly placed in a corporation

who should have the explicit task of
anticipating complaints from workers,
consumers, suppliers, and the general
public, and of arguing from an ethical
point of view for changes in corporate
structures and policies.

To be effective such a person should be

rewarded for raising and pressing ethical
concerns about corporate policies and
structures and should be penalized for
failing to do so.

Constraints facing ethical

displacement
The solutions to them are seldom
intuitive.
Solutions that go beyond a
corporation's immediate domain of
action are often so costly, timeconsuming, or unusual that people
have an inherent reluctance to raise
them.
If it involves changes in the existing
structure, they are seen as threatening
and hostile.

ENVIRONMENTAL
ETHICS

Environmental/ecological ethics is
the part of environmental philosophy
which considers extending the
traditional boundaries of ethics from
solely including humans to including
the non-human world.

Blackstones ethic of
environment right
Propounded by William Blackstone
the issue of environmental
management not from a scientific or
political viewpoint but from a
philosophical and ethical perspective
that humanity must take responsibility
for the environment regardless of the
economic and political impacts.

Utilitarian ethic of pollution control:

environment problem should be seen
as market defects, arguing that
pollution should be avoided because it
harms societys welfare.

Environmental Issues in
Business Ethics
Urban blight: excessive development,
inappropriate development, use of green
belt land etc
Waste: land fill? Recycling? Burning?
Energy use renewable energy or non
renewable energy?
Global warming fact or fiction?
Pollution noise, air, land, sea, water

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