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TVPPA Purchasing Workshop

Business Ethics for the

Purchasing Professional

Kimball Bullington, Ph.D.Professor of Supply Chain Management

Middle Tennessee State University

• What are ethics?

• Why ethics for purchasing?

• Ethical Traps / ISM Guidelines for Ethics

• Takeaways

• Ethics: the study of standards of conduct and moral judgment,… the system or code of morals of a particular philosopher, religion, group, profession, etc.

Webster’s New Universal Unabridged Dictionary, 2nd Edition

• Moral: relating to, dealing with, or capable of making the distinction between, right and wrong in conduct.

Webster’s New Universal Unabridged Dictionary, 2nd Edition

What influences your view of what is right or wrong?

• Judeo / Christian background (Bible)

• Protestant work ethic

• UCC – Reasonableness

• Laws / Court Cases / Precedents

• Tradition

• Educational background

• News / Media scrutiny

Why ethics in purchasing?

• Money

• Buyer / Seller Double Standard

• Professionalism

• Human nature

The answer is easy. Right?

• Just say no?

• Ethics policies?

• Golden rule?

• Understand human nature.

(At least a little bit.)

Ethical Traps

Pressure to Conform

Authority FigurePeer Pressure

Don’t make waves

ISM Principles and Standards of Ethical Supply Management Conduct

3. Avoid any personal business or professional activity that would create a conflict between personal interests and the interests of the employer.

Motivated Blindness

Quid pro quo is not necessary.Favors can result in unfairly favoring

a supplier. Divided Loyalty

ISM Principles and Standards of Ethical Supply Management Conduct

4. Avoid soliciting or accepting money, loans, credits or preferential discounts, and the acceptance of gifts, entertainment, favors or services from present or potential suppliers that might influence, or appear to influence, supply management decisions.

ISM Principles and Standards of Ethical Supply Management Conduct

2. Demonstrate loyalty to the employer by diligently following the lawful instructions of the employer, using reasonable care and granted authority.

Understand agency

Obtain maximum value

Avoid compromising activities

Avoid using employer’s purchasing power for self

Maintain up to date knowledge

Indirectness

Indirect Responsibility:Unethical supplier behavior: environmental,

Employment waste disposalRenewable energy credits / carbon offsets

Faceless VictimsLost in a Group

ISM Principles and Standards of Ethical Supply Management Conduct

10.Conduct supply management activities in accordance with national and international laws, customs and practices, your organization’s policies, and these ethical principles and standards of conduct.

ISM Principles and Standards of Ethical Supply Management Conduct

7. Avoid improper reciprocal agreements.

• Reciprocal agreements can be illegal if they tend to restrict competition or trade or if they are coerced re: sections 1&2 Sherman Act.

ISM Principles and Standards of Ethical Supply Management Conduct

9. Encourage support for socially diverse practices.

“All business concerns, large or small, majority- or minority-owned, should be

afforded an equal opportunity to compete.”

Small Steps

ISM Principles and Standards of Ethical Supply Management Conduct

8. Know and obey the letter and spirit of laws applicable to supply management.

Common LawCommercial Law

Uniform Commercial CodeSarbanes-Oxley ActRestraint of Trade

DOT and DHSHealth & Safety

Environmental LawsIntellectual Property and Trade Secrets

ISM Principles and Standards of Ethical Supply Management Conduct

2. Demonstrate loyalty to the employer by diligently following the lawful instructions of the employer, using reasonable care and granted authority.

Understand agency

Obtain maximum value

Avoid compromising activities

Avoid using employer’s purchasing power for self

Maintain up to date knowledge

ISM Principles and Standards of Ethical Supply Management Conduct

6. Promote positive supplier relationships through courtesy and impartiality.

Golden rule

ISM Principles and Standards of Ethical Supply Management Conduct

11.Develop and maintain professional competence.

Education

Certification

Training

Experience

Minimizing• Comparisons• Renaming• Everybody does it• We didn’t hurt anyone• No one will know• Desensitization

ISM Principles and Standards of Ethical Supply Management Conduct

1. Avoid the intent and appearance of unethical or compromising practice in relationships, actions, and communications.

“The consequences of a perceived impropriety can be the same as

consequences of an actual impropriety.”

ISM Principles and Standards of Ethical Supply Management Conduct

5. Handle confidential or proprietary information with due care and proper consideration of ethical and legal ramifications and governmental regulations.

ISM Principles and Standards of Ethical Supply Management Conduct

12.Enhance the stature of the supply management profession.

Laws & Regulations for Supply Management

• Agency law• Contract &

commercial laws• Antitrust laws• Trade regulations• Industry-specific laws• Gov’t procurement

regs.

• Environmental laws• Employment laws• Worker health & safety• Transportation &

logistics law• Financial laws & regs.• Patent, copyright, trade

secret, trademark

U.S. Laws & Regulations for Supply Management

• Uniform Comm. Code• Uniform Computer Info.

Transactions Act• Uniform Elec.

Transactions Act (@ E-sign)

• Sherman, Clayton, & Robinson-Patman Acts

• Foreign Corrupt Practices Act

• Federal Trade Commission

• Federal Acquisition Regulations

• Defense Acquisition Regulations

• EPA

• EEOC

• OSHA

• Sabanes-Oxley Act

Other Traps• Poverty and Neglect• Low Self-Esteem• Authoritarianism• Need for Closure

Other Traps• Addiction • Competition• Empathy• Contempt for Victim• Doing is Believing

Takeaways

1. Know your profession, relevant laws, and your business.

2. Know & observe ethical guidelines. Often people behave unethically unconsciously.

3. Just because nothing bad happens doesn’t mean it isn’t unethical.

Takeaways

4. Be aware that relationships can blind us.

5. Grow professionally.

6. Be aware of perceptions of ethical behavior.

7. Beware of ethical traps that result from psychological / social dynamics.

8. Ethics matters.