BUSINESS BUSINESS ETHICSETHICS

BUSINESS ETHICSBUSINESS ETHICS

"Let me appeal to your sense of doing things my way""Let me appeal to your sense of doing things my way"Cartoon by P.C. Vey

Copyright 2004, Harvard Business Review

BUSINEBUSINESSSS

ETHICS ETHICS

Is this a “Good” Code of Ethics? Is this a “Good” Code of Ethics? Would it help your Employees do the Would it help your Employees do the “Right Thing?” “Right Thing?” What Company published this Code of What Company published this Code of Conduct and got an Award for it?Conduct and got an Award for it?

To be “Successful,” does a To be “Successful,” does a Business have to “Act Business have to “Act Ethically?”Ethically?”

How does a Business “Act How does a Business “Act Ethically?” Ethically?”

Who decides whether a Who decides whether a Business is “Acting Business is “Acting Ethically?”Ethically?”

““Relativity applies Relativity applies to Physics, not to Physics, not

Ethics”Ethics”

This is a 'hot' program for both of us. Approval is imminent. This is a 'hot' program for both of us. Approval is imminent. Let's get the preliminary work underway now…Let's get the preliminary work underway now…

The program is a 'go'. I want you under contract as soon The program is a 'go'. I want you under contract as soon as possible…as possible…

Start work now and we’ll cover your costs when Administration Start work now and we’ll cover your costs when Administration finishes the paperwork…finishes the paperwork…

If you want to be part of the team important great new If you want to be part of the team important great new product, you’ll have to shoulder some of the start-up costs…product, you’ll have to shoulder some of the start-up costs…

A new Product has not yet been formally approved A new Product has not yet been formally approved nor have funds been allocated, but everything nor have funds been allocated, but everything looks fine. Meeting the delivery schedule won’t be looks fine. Meeting the delivery schedule won’t be easy. Wanting to get started, you start negotiating easy. Wanting to get started, you start negotiating with a supplier. What do you tell that supplier? with a supplier. What do you tell that supplier?

BUSINESS BUSINESS ETHICSETHICS

Is this the Right Answer? Is this the Right Answer? Maximize Shareholder Value Maximize Shareholder Value and Everything will be Fine!and Everything will be Fine!

Doesn’t Solving Ethical Doesn’t Solving Ethical Dilemmas use Time that is Dilemmas use Time that is better spent making Sales?better spent making Sales?

If We tell our Shareholders that If We tell our Shareholders that We’ll Maximize their Value, We’ll Maximize their Value, What do We tell our What do We tell our “Stakeholders?”“Stakeholders?”

WHERE DO WHERE DO ETHICS ETHICS

MATTER?MATTER?In a Court Room: Legal In a Court Room: Legal Implications Implications

Financial Markets: Reliability Financial Markets: Reliability of of Information Information

Human Resources Markets: Human Resources Markets: How to How to Attract and Retain the Attract and Retain the Best and Best and BrightestBrightest

After 3 months on the job, After 3 months on the job, you learn an employee you learn an employee falsified her employment falsified her employment application: she doesn’t have a application: she doesn’t have a college degree. As her boss, what college degree. As her boss, what do you do?do you do?

Fire Her Immediately Fire Her Immediately Overlook it, She’s doing a Great JobOverlook it, She’s doing a Great JobBalance the Omission's Severity with the Great Balance the Omission's Severity with the Great Job she’s doing plus her Age and EthnicityJob she’s doing plus her Age and Ethnicity Contact HR and Determine Company PolicyContact HR and Determine Company Policy

UNETHICAL BUSINESS UNETHICAL BUSINESS PRACTICESPRACTICES

1.1. Abusive or Intimidating BehaviorAbusive or Intimidating Behavior2.2. Accurate but Incomplete DisclosuresAccurate but Incomplete Disclosures3.3. Discrimination against Protected ClassDiscrimination against Protected Class4.4. Receiving/Offering Bribes, Kickbacks or Receiving/Offering Bribes, Kickbacks or

IncentivesIncentives5.5. Theft/Fraud: Expense Accounts/Personal Theft/Fraud: Expense Accounts/Personal

Use of Company PropertyUse of Company Property6.6. Sexual HarassmentSexual Harassment7.7. Termination without Fair Notice or CauseTermination without Fair Notice or Cause

ETHICAL ISSUESETHICAL ISSUES

Three Steps for Analyzing Ethical Three Steps for Analyzing Ethical IssuesIssues

Strictly Legal Perspective

Strictly Personal Perspective

Is It Legal? If “No,” Stop and Take Action

Is It Balanced?Compare Risks and Benefits

How Does It Make Me Feel?What is your Conscience telling You?

Are You doing the “Right Thing?”

No, since no one has complainedNo, since no one has complainedYes. Explain to the supervisor that, while he may have Yes. Explain to the supervisor that, while he may have no no sexual intention, use of “Babe” may cause resentmentsexual intention, use of “Babe” may cause resentmentYes. Order the supervisor to call an all-hands meeting and Yes. Order the supervisor to call an all-hands meeting and

apologize for the unintended slightsapologize for the unintended slightsNo, because there is nothing wrong with calling a female No, because there is nothing wrong with calling a female

employee “Babe" or other endearmentemployee “Babe" or other endearment

When one of your male supervisors When one of your male supervisors talks to any female employee, he talks to any female employee, he always calls her, "Babe.” You have always calls her, "Babe.” You have overheard him use this term several overheard him use this term several times. As his manager, should you do times. As his manager, should you do anything?anything?

BUSINESS ETHICS: BUSINESS ETHICS: APPROACHES APPROACHES

COMPLIANCE-BASEDCOMPLIANCE-BASEDPrevent, Detect and Punish Legal Prevent, Detect and Punish Legal ViolationsViolations

INTEGRITY OR VALUES-BASEDINTEGRITY OR VALUES-BASEDDefine Organizational Values and Define Organizational Values and Encourage Employee Commitment Encourage Employee Commitment to Ethical Aspirationsto Ethical Aspirations

CONFLICTS OF INTERESTCONFLICTS OF INTEREST

DEFINITION: DEFINITION: Employee’s Personal or Employee’s Personal or Financial Interests Interfere with Employee’s Financial Interests Interfere with Employee’s

Obligations to EmployerObligations to EmployerTHREE TYPES: THREE TYPES:

Financial: Self-dealing or Insider TradingProfessional: Outside Commitments infringe on Employer ResourcesPersonal: Family/Employee Conflicts, Nepotism, Fraternization

CONFLICTS OF INTERESTCONFLICTS OF INTERESTBEST RESPONSE?BEST RESPONSE? Preventative Preventative Measures: Employees free to have Measures: Employees free to have unrelated job activities, but… unrelated job activities, but…

EMPLOYER CAN EXPECT LAWFUL AND EMPLOYER CAN EXPECT LAWFUL AND CONFLICT-FREE BEHAVIORCONFLICT-FREE BEHAVIOR

Strategically Identify and Manage Potential Strategically Identify and Manage Potential Conflicts with Written Policies, Standards, Conflicts with Written Policies, Standards, Expectations, Training, Monitoring and Expectations, Training, Monitoring and Constant CommunicationConstant Communication

Say the employee is the best one you’ve ever Say the employee is the best one you’ve ever had and you’re heartbroken they’re leaving had and you’re heartbroken they’re leaving Be Candid - Tell Everything - Leave out NothingBe Candid - Tell Everything - Leave out NothingTell the manager the employee might be a Tell the manager the employee might be a better “fit” in their department instead of yoursbetter “fit” in their department instead of yoursDuck it: Suggest the Request be handled by HRDuck it: Suggest the Request be handled by HR

Your “Least Effective” Your “Least Effective” Employee has Applied to Employee has Applied to Transfer to another Transfer to another Department. And the Department. And the Manager is Calling you for a Manager is Calling you for a Reference…Reference…

STRUCTURES AND SYSTEMSSTRUCTURES AND SYSTEMS

Have a Code of Ethics (Standards), but Have a Code of Ethics (Standards), but More ImportantMore Important, have a , have a Code of Code of ConductConduct (Actions) (Actions)Communications NetworkCommunications Network: Formal and : Formal and Informal (Use the ‘Informal (Use the ‘GrapevineGrapevine’) Processes ’) Processes for Reinforcing and Refreshingfor Reinforcing and RefreshingFormal Reporting SystemFormal Reporting System: Ethics : Ethics Ombudsperson - Unbiased and Neutral Ombudsperson - Unbiased and Neutral but with Authoritybut with Authority

THE BOTTOM LINETHE BOTTOM LINE

Decision-making includes Personal, Decision-making includes Personal, Organizational and Societal Values (“Layers”)Organizational and Societal Values (“Layers”)Ethical Values Ethical Values alwaysalways open to Discussion open to Discussion and Criticism but … and Criticism but …

Build a Fire Wall between Build a Fire Wall between “Immutable Standards” and “Immutable Standards” and Case-by-Case ExceptionsCase-by-Case Exceptions

Accept ResponsibilityAccept Responsibility for sound Moral for sound Moral Judgments: It’s in Everyone’s Job DescriptionJudgments: It’s in Everyone’s Job Description

Communities and their Businesses

Organizational Responsibility. Discuss possible roles and activities the venture might take or promote that contribute to the community’s “greater good.” Will these roles or activities make a significant, positive contribution? How will the venture sustain its commitment to these contributions?

ETHICS AND THE LAWETHICS AND THE LAWLegal Requirements often represent an Legal Requirements often represent an

Ethical MinimumEthical MinimumPersonal Ethical Standards Generally Personal Ethical Standards Generally

Exceed Legal StandardsExceed Legal Standards

ETHICS

LAW

Laws are Ethical Issues with Societal Implications as

interpreted by a Legislature; Personal Ethics have Broader Context and

Application

BUSINESS ETHICSBUSINESS ETHICS

A Relative wants to work in your Department. It A Relative wants to work in your Department. It could be a promotion and a big pay raise. He’s could be a promotion and a big pay raise. He’s asking for your advice…asking for your advice…

Give him the benefit of your inside knowledgeGive him the benefit of your inside knowledge

Tell him not to applyTell him not to apply

Tell him that if he gets the job, he’ll have to move Tell him that if he gets the job, he’ll have to move out of your house where he’s been for 9 monthsout of your house where he’s been for 9 monthsAsk him how to deal with possible perceptions of Ask him how to deal with possible perceptions of favoritism or nepotismfavoritism or nepotism

PERSPECTIVES ON ETHICSPERSPECTIVES ON ETHICSEthical Issues require Persons or Organizations Ethical Issues require Persons or Organizations

to choose an Action that to choose an Action that maymay get judged as get judged as Right or WrongRight or Wrong

Business Ethical Issues: ClassificationsBusiness Ethical Issues: ClassificationsConflicts of InterestConflicts of InterestFairness and HonestyFairness and HonestyCommunications Communications Organizational RelationshipsOrganizational Relationships

WHY DO ETHICS WHY DO ETHICS MATTER?MATTER?

Does “Doing the Right Thing” Matter? Does “Doing the Right Thing” Matter?

To Whom Does it Matter?To Whom Does it Matter?

What are the Costs to Business of What are the Costs to Business of Unethical Behavior?Unethical Behavior?

ETHICAL ETHICAL CLIMATE/CULTURECLIMATE/CULTURE

More Important than Ethics ProgramMore Important than Ethics Program

Begins with leadership (all levels) that includes Begins with leadership (all levels) that includes Ethical Considerations in every Ethical Considerations in every

Decision: Decision: Are We Doing the Right Thing?Are We Doing the Right Thing?

Focus on What’s best for Focus on What’s best for BOTHBOTH Employees Employees and Affected Community and Affected Community

(stakeholders)(stakeholders)

Actions louder than Words/Codes: Actions louder than Words/Codes: Consistency and Follow-up ActionsConsistency and Follow-up Actions

CRITERIA GUIDING ETHICAL ACTIONSCRITERIA GUIDING ETHICAL ACTIONS

Employees won’t be Punished for Employees won’t be Punished for Questioning AuthorityQuestioning AuthorityEmployees will be held Accountable Employees will be held Accountable (Punished) for Rule Violations (Punished) for Rule Violations Focus on larger organizational/societal Focus on larger organizational/societal

Outcomes; Not Personal/self-Outcomes; Not Personal/self-InterestInterestWould You wish Others to behave in the Would You wish Others to behave in the

same Way if Action affected You?same Way if Action affected You?

FORCES THAT SHAPE BUSINESS FORCES THAT SHAPE BUSINESS ETHICSETHICS

IsIsDecisionDecision

or Behavioror BehaviorEthically andEthically and

SociallySociallyResponsible?Responsible?

Beliefs and ValuesMoral DevelopmentEthical Framework

FounderHistoryDefining MomentsStories of Development

Government RegulationsCustomersSpecial Interest GroupsMarket Forces

StructurePolicies and RulesCode of EthicsReward SystemSelection and Training

External StakeholdersOrganizational Systems

Personal Ethics Organizational Culture