Business Ethics is a part of decision making

Business Ethics is a part of decision making at all levels of work and management v Just as important as functional areas of business v Deals with questions of whether practices are acceptable v No universally accepted approach for resolving issues 1

A Crisis in Business Ethics Nearly half of employees observe misconduct in the workplace v After the financial crisis, business decisions and activities have come under scrutiny v The financial sector has not regained stakeholder trust 2

Americans’ Trust in Business Sectors (% of respondents who say they trust the following business categories) 3

Specific Issues v v v v Misuse of company resources Abusive behavior Harassment Accounting fraud Conflicts of interest Defective products Bribery Employee theft 4

A Timeline of Ethical and Socially Responsible Concerns 1960 s 1970 s 1980 s 1990 s 2000 s Environmental issues Employee militancy Bribes and illegal contracting prices Sweatshops and unsafe working conditions in third-world countries Cybercrime Civil rights issues Human rights issues Influence peddling Rising corporate liability for persona damages (for example, cigarette companies) Financial misconduct Source: Adapted from “Business Increasing employeeemployer tension Covering up rather than correcting issues Deceptive advertising Financial mismanagement and fraud Global issues, Chinese product safety Changing work ethic Disadvantaged consumers Financial fraud (for example, savings and loan scandal) Organizational ethical misconduct Sustainability Rising drug use Transparency issues Intellectual property theft Ethics Timeline, ” Ethics Resource Center, http: //www. ethics. org/resources/business-ethics-timeline. asp (accessed May 27, 2009). Copyright © 2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave. N. W. , Suite 400, Washington, DC, 2006, www. ethics. org. 5

Organizational Ethical Culture Ethical culture: The component of corporate culture that captures the values and norms that an organization defines as appropriate v Creates shared values Goal is to: Ø Minimize need for enforced compliance Ø Maximize utilization of principles/ethical reasoning 6

Three Approaches to Management Ethics

Ethics Contributes to Employee Commitment comes from employees who are invested in the organization v Employees willing to make personal sacrifices for the organization Ø The more company dedication to ethics, the greater the employee dedication Ø Concerns include a safe work environment, competitive salaries and benefits packages, and fulfillment of contractual obligations 8

Ethics Contributes to Investor Loyalty Companies perceived by their employees as being honest are more profitable v Ethical climates in organizations provide a platform for Ø Efficiency Ø Productivity Ø Profitability 9

Ethics Contributes to Customer Satisfaction Consumers respond positively to socially concerned businesses Ø Being good can be profitable v Customer satisfaction dictates business success v A strong organizational ethical climate places customers’ interests first v Research shows a strong relationship between ethical behavior and customer satisfaction 10

Ethics Contributes to Profits v Corporate concern for ethical planning is being integrated with strategic planning Ø Maximizes profitability v Corporate citizenship is positively associated with Ø Return on investment and assets Ø Sales growth v Studies have found a positive relationship between corporate citizenship and performance 11

Survey on Ethics and Workplace

Survey on Ethics and Workplace Findings of Deloitte&Touche 2007

Discussion Case: Madoff • Madoff pleads guilty to 11 counts of financial fraud and theft in March 2009 • Is sentenced to 150 years in prison • A Ponzi scheme is a fraud that attracts investors with a promise of high returns • The perpetrator benefits either by disappearing with the money or living a wealthy lifestyle by skimming • Many would say this is a complete failure of government regulations 1 -17