ETHICS AND VALUES IN BUSINESS

EuropeanManagement Assistants

National Training Day16 June 2012

José Ignacio González

Ethics and Values in Business

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To start off with a simple question.....

All companies have ethical values and codes of conduct. But

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LEMAN BROTHERSGESCARTERA

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Do they apply them correctly

when they do business?

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The concept of business ethics

Business ethics are the set of moral principles or guidelines governing or influencing conduct in organisations doing business.

As the standards which organisations use when interacting with individuals and in business relationships, the ethics of a particular organisation can be diverse.

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What is business ethics?

Many organisations have already gained a bad reputation just by starting up in business. For some people, business organisations are only interested in making money. Making money is not wrong in itself. What really matters is how individuals and organisations conduct themselves when doing business.

Good business ethics should be part of every business. There are many factors to be taken into account. When an organisation does business with another individual or organisation whose conduct is not ethical, is the first organisation also considered to be acting unethically because of its business relationship with such individual or organisation? Some people would say yes. The first business has a responsibility and it is now a link in a chain of unethical businesses.

Many global businesses, including most of the major brands used by the public today, do not seem to appreciate the need for good business ethics. Many major brands have been fined millions for breaching business laws on ethics.

Money will always be the deciding factor.

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What is business ethics?

If an organisation does not adhere to business ethics and breaks the law, it is usually fined. Many organisations have broken anti-trust, ethical and environmental laws and have been fined millions. The problem is that the money that these organisations make is often much higher than the fines which are imposed on them. Huge profits make organisations blind to business ethics.

An organisation may be a multi-million seller, but does it use good business ethics and do people care? There are popular soft drinks and fast food restaurants that have been fined time and time again for unethical behaviour. Business ethics should eliminate exploitation at all levels, whether it is employing young children to make sneakers or paying low salaries to coffee-serving staff. Business ethics can be applied to everything from the cutting-down of trees to sell paper to the importing of coffee from certain countries.

In the end, it may be up to the public to make sure that an organisation conducts its business ethically. If the organisation’s profits are high, it may not wish to pay much attention to ethical conducts. There are many organisations which pride themselves in their correct business ethics, but in today’s competitive world, they are few and far between.

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What is business ethics?

Let’s get down to basics.....................

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Ethics

• To talk about ethics, we have to talk about philosophy as ethics, also known as moral philosophy, is a branch of philosophy that deals with moral principles.

• The most widely-accepted understanding of the word “ethos” comes from Aristotle who defined it in the following terms: temperament, character, habits, manner.

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The nature of ethics

• Ethics is a philosophical discipline.

• Ethics deals with the study of morals.

• Ethics is the rules or standards by which we should live.

• Ethics is reflexive in that it studies actions not as they are,

but how they should be.

• Ethics is practical in the sense that it is concerned with

human actions.

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How is ethics defined?

• Ethics is defined as:

“A set of principles which guide us in our

conception of life, people, judgements, actions

and morals”

• When we talk about ethics in business, ultimately we are talking about responsibility.

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Responsibility and its different meanings

• Liability to pay the cost of something, e.g. Drivers of motor vehicles are responsible for damages caused by their vehicles.

• Commitment, obligation, duty to do something and assume the consequences for our actions. e.g. My responsibility as president will be to lead our country to prosperity.

• Cause of something, e.g. Cigarette smoking is responsible for a high percentage of deaths from lung cancer.

• Being able to be blamed for something, e.g. He is mentally ill and he cannot be held responsible for his actions.

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Legal responsibility

• Legal responsibility arises when a person fails to carry out a duty of conduct which, unlike moral principles, is established by a body other than the person in question (mainly the State through laws) and is coercive.

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Corporate ethics

Does it exist?Is it always correct?

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Corporate ethics

• Ethics are the fundamental pillar of corporate governance and its defining factor.

• Ethics are what determine the general public’s perception of companies.

• For this reason, companies should have a code of ethics, which they should provide to shareholders, staff, clients, suppliers and the authorities of their sector.

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Ethics and companies. Ethics and directors

• In general, all ethics aim to establish ideal standards of conduct.

• Deontological ethics are concerned with the duties which are imposed on people according to the various areas or fields of their lives.

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Ethics and competition

• Fair competition with fines for unfair competition.

• Fair competition using legal weapons, i.e. quality and a low price due to efficiency.

• Advertising based on truths, not on lies or half-truths, and without denigrating competitors.

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Virtues of the businessman

• Businessmen should be hardworking, imaginative, upright.

• Their duties should be based on the truth, firstly the duty to be truthful and transparent in their dealings and to ensure the quality of the products and services which they offer.

• Secondly, the duty to be prudent and refrain from using information which they obtain to the detriment of their competitors.

• Thirdly, the duty to be bold and assume risks which ultimately are what justify their gains.

• Their actions to obtain their gains should be moderate and restrained and should not be taken at all cost.

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Suppliers, clients and workers:Climate for values

• The climate should be one where values are governed by regulations which safeguard the equilibrium and which do not impose more stringent rules for certain parties than others.

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Creating value in companies

• The basis of “value” in companies lies in the way directors run their businesses.

• Being a “competitive director” is not enough. Directors should become leaders who know, above all, that they are people and that they are surrounded by people.

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Three values created by companies

1• f

inancial

2• p

sychological

3• e

thical

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Professional ethics

• Professional ethics regulate the activities of a profession. Professional ethics is a discipline of applied ethics as it refers to a specific part of reality.

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Relationship of business ethics and corporate actions

• In one of Domenec Melé’s studies, he refers to the effect which ethical actions and morals may have in business relationships.

• According to him, these actions may be of the following types:

Work motivation.

Practical wisdom (prudence).

Corporate culture.

Reputation or good image.

Gaining trust.

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Work motivation

• Obviously, work motivation largely depends on the worker’s level of satisfaction and the employment climate as well as the human values and qualities of his work colleagues and superiors.

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Practical wisdom

• When faced with situations and events that arise, decision-making requires prudence as well as maturity, initiative and a sense of responsibility.

• In addition to these qualities, people who provide services need to have managerial skills.

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Corporate culture

• Corporate culture is knowledge, experience and practices or ways of doing business which are typical in an organisation and are based on the values and convictions of its members.

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Strong culture versus weak culture

• Strong cultures in organisations where key values are highly regarded and widely shared by their members have a bigger impact on workers than weak cultures.

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• The greater the number of members of an organisation who accept its core values and the greater their commitment to such values the stronger its culture is.

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How is culture transmitted?

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How do workers learn about corporate culture?• Culture is transmitted to workers in a number of ways, the

most frequent of which are:

Stories

Rituals

Material symbols

Language

Let me give you a visual example.

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Stories

• Stories of the organisation are usually about key events or people such as the organisation’s founders, rule-breaking, rags-to-riches stories, staff reductions and relocations, reactions to past mistakes, and solutions to problems.

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Rituals

• Rituals are repetitive sequences of activities which express and reinforce an organisation’s key values and its most important challenges. They help an organisation decide who is essential for the organisation and who is not.

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Material symbols

• Examples of material symbols are the physical layout of an organisation’s business premises, the clothes worn by workers, the company vehicles provided to executives, whether the organisation has its owns aeroplanes. etc.

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Language

• Many organisations and their divisions and departments use language as a means of identifying their members. Merely by using specific language, members show that they accept the organisation’s culture which helps to preserve it.

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Reputation or good ethical image to attract clients• A good reputation of loyalty and decency is one of the main

assets of organisations which all workers should promote with the utmost care.

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Gaining trust

• A certain amount of trust is always required for large economic operations.

• Carrying out operations requires:

A certain length of time for negotiations.

The favourable testimonial of a known third person.

More than just superficial relations.

Ethical actions and professional competition at all times.

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The PwC Experience

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PwC’s code of conduct

PwC is one of the biggest international service providers. As professional advisers we help our clients solve complex business problems and enhance their ability to create value, manage risk and improve performance. As a result we play a significant role in the operating of capital markets globally. We take pride in the fact that our services add value to our clients by helping them to improve transparency, trust and consistency in their business processes. In order to succeed, we must grow and develop, both as individuals and as a business. PwC’s core values of excellence, teamwork and leadership help us to achieve this growth.

While, at PwC, we conduct our business within the framework of applicable professional standards, laws, regulations and internal policies, we also acknowledge that these standards, laws, regulations and policies do not govern all types of conduct.

As a result, PwC has established a code of conduct for all its firms and people. This code is based on our values and enables us to takes them one step further by demonstrating our values in our actions. The PwC code of conduct may be expanded by PwC firms in line with the specific requirements of their territories.

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THANK YOU!

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