Chapter
Six
Managing the Ethics of
Business
Canadian Business and Society:
Canadian Business and Society:
Ethics & Responsibilities
Outline
Ethical Propositions
Statement of Values
Codes of Conduct and Ethics
Ethics Training
Ethics Audits and Consultants
Ethics Officers and Ethics Committees
Ethics Reporting Systems and
Ethical propositions.
Business ethics is identified as an ‘in’ topic, yet it
has been discussed for the last forty years and
definitely since 1972.
Some ethical propositions.
Ethical conflicts and choices are inherent in
business decision making.
Proper ethical behaviour exists on a plane above
Ethical propositions
Individual values are the final standard, although not
necessarily the determining reason for ethical behaviour.
Consensus regarding what constitutes proper ethical
behaviour in a decision-making situation diminishes as the
level of analysis proceeds from abstract to specific.
The moral tone of an organization is set by top management.
The lower the organizational level of a manager, the greater
the perceived pressure to act unethically.
Individual managers perceive themselves as more ethical
Ethical propositions.
There is no single satisfactory standard of ethical action agreeable to
everyone that a manager can use to make specific operational
decisions.
Managers should be familiar with a wide variety of ethical standards.
The discussion of business cases or of situation having ethical
implications can make managers more ethically sensitive.
There are diverse and sometimes conflicting determinants of ethical
action. These stem primarily from the individual, from the
Ethical propositions
Effective codes of ethics should contain meaningful
and clearly stated provisions, along with enforced
sanctions for non-compliance.
Employees must have a non-punitive, fail-safe
mechanism for reporting ethical abuses in the
organization.
Every organization should appoint a top-level
Developing a Ethics Programme
for An Organisation
Code of
Conduct
Values
Statement
Statement of Values
A description of the beliefs, principles, and basic
assumptions about what is desirable or worth
striving for in an organization.
Key components:
Key stakeholder interests to be satisfied and balanced
Emphasis on quality and/or excellence
Efficiency
Work climate
Codes of Conduct and
Ethics
Code of conduct
: explicitly states what
appropriate behaviour is by identifying what is
acceptable and unacceptable
Code of ethics
: a statement of principles or
values that guide behaviour by describing the
general value system within which a
Types of Codes
Corporate or business enterprise
Professional organizations
Industry and sector
Single issue
Codes of Ethics
POLICY ISSUE RISK RATING
H/M/L KEY POINTS TO CONSIDER Statement on ethics
and compliance H Be proactiveEmphasize responsibility for self and others
Legal issues
General compliance with
laws and regulations H Organisations policies as well as applicable laws and regulations should be considered Employee, customer, &
agent privacy H Identify policies for protecting privacy including EU regulations Affirmative Action/ Equal
Opp./ Discrim. M/L No discrimination based on race, colour, gender, religion, age, national origin, disability, sexual orientation, marital status, or citizenship status Applies to decisions re: recruitment, hiring, promotions, termination, compensation, benefits, transfers, layoffs, and returns from layoffs Antitrust/ Fair
competition/ Trade regulations
L Relevant issues include price fixing, territorial allocation, customer allocation, appearance of impropriety, and monopolization
Employment at will H Emphasize mutual responsibility of company and employee
Insider trading M Issues also include tipping, pre-clearance, short sales, puts, and call Sexual and non-sexual
Codes of Ethics
Market conduct issues
Advertising &
Marketing L Sales force must be made aware of review policies for materials and claims made or altered by sales personnel Anti-corruption -
Bribery/kickbacks M/L Cross-reference conflicts of interest
Joint venture policy H/M Establish code applicability to respective joint venture partners International business
conduct M/L Mention OECD, and applicable limitations thereof
Conduct on behalf of/against the firm
Conflicts of interest H Cross-reference bribery/kickbacks
Discuss both real and apparent conflicts Political activities/
lobbying/ contributions
Codes of Ethics
Gifts, favours, and
entertainment M/L Emphasize that giving and receiving gifts should not unduly influence recipients or be perceived as such Explain the far stricter rules that apply to gifts that are to or from government personnel
Financial reporting/
Record keeping H Discuss provisions that apply to both foreign and domestic operations.Prohibit destruction or falsification of documents for which litigation is pending or are otherwise significant
Travel, time, and
expense reporting M Emphasize accountability Firm equipment,
supplies, and funds M/L Not to be used for personal use Intellectual property/
Copyrights H/M Relevant issues include trade secrets and post-employment restrictions as well as non-disclosure of customer information Proprietary information M Includes kinds of financial information, organisational information, and
technical information
Discuss restrictions on speech with non-employees, the press, and employees without a need-to-know
Computer security and password protection Post-employment restrictions
Corporate governance
and structure H Emphasize responsibility to owners/shareholdersPrioritise responsibilities in reference to mission
Employee issues
Employee health,
safety, and welfare M/L Require employees to report accidents and potential dangers and give reporting mechanism Subcontractor
relations M/L Stress impartiality when making procurement decisions Work and family M/L Mention available worklife programs
Management style/workload management
M/L Pursue ethical, communicative management style that encourages long and short term innovation and productivity
Professional
development L Emphasize human resource assets through commitment to training and development Compensation and
benefits L Fair payReasonable executive compensation given marketplace
Union relations N/A Recognize rights of union employees by law and the existing labour agreement
Substance abuse L Prohibit possession, sale, distribution, use, or transportation of illegal drugs on premises
Office closures/ N/A Emphasize employee assistance programme, if available
Codes of Ethics
Public and social relations
Customer relations H Stress importance of customer focus with reference to guiding principles
Media relations M/L Explain who may represent the organisation to the media, and hence, who to refer questions
Cross-reference proprietary information
Protect reputation H Recognize importance to business of a good reputation Product quality and
suitability H Responsibility to report product deficienciesExpect compliance with corporate requirements, customer specifications, and government regulatory standards
Environmental
compliance M/L Relevant issues include disposing of hazardous waste, pollution, environmental laws, efficient use of natural resources, and conservation
Criticisms of Codes
Unenforceable
If enforced, penalties are insignificant
Unnecessary, as most corporations already
operate ethically
Often idealistic
Written in meaningless generalities
Ethics Training
Managers or outside consultants
Online exercises
Practical checklists and tests
Is it legal
Benefit/cost test
Categorical imperative
Light of day test
Do unto others
Ventilation test
Conficts of Interest
Three types of conflict: (1) real; (2) apparent;
(3) potential
Examples:
self-dealing; accepting gifts or benefits; influence
peddling; using employer’s property; using
Ethics Audits and
Consultants
Systematic effort to discover actual or
potential unethical behaviour in an
organization.
Preventive and remedial purpose
Ethics Oficers and Ethics
Committees
Ethics officers:
Independent manager
Reports to the board of directors or CEO
Reviews complaints or information from anyone in the
organization or any stakeholder
Studies situation and recommends action
Responsible for the ethics program
Ethics committees:
Ombudsperson programs
Not many ombudsperson programs in Canadian corporations.
Five essential characteristics for successful ombudsperson
programs
competent staff
widespread respect among and support from senior management
ironclad confidentiality
direct access to the CEO or president when necessary
Executive Speech Making
‘War’ stories
Inform certain stakeholders that the business
enterprise and its management are
Ethics Reporting Systems and
Whistleblowing
Whistleblowing: an act of voluntary disclosure
of inappropriate behaviour or decisions to
persons in positions of authority in an
organization.
Whistleblowing: Issues
Remain silent, quit, or disclose wrongdoing?
Does obligation to employer supersede
obligation to self, profession, or industry?
Will whistleblower be believed?
Is whistleblower hero or snitch?
Whistleblowing and Movies
Boiler Room (2000)
A Civil Action (1998)
Erin Brockovich (2000)
The Insider (1999)
Ethics: Who is Responsible?
Boards of directors?
Management?
Three models of moral management:
Immoral (devoid of ethical principles)
Amoral (without ethics, but not actively immoral)
Moral (conform to high standards of ethical
behaviour)
Ethics Programs:
Approaches
Formal approach
based on organizational norms that are written as a code of
conduct
Monological approach
allows organizational members (e.g., managers,
employees) to determine for themselves what is right or
wrong
Dialogical approach
Emphasizes communication before decisions are made
and implemented
Ethics Programs:
Evaluation and Benefts
Compliance
-based
Rules, laws
Prevent criminal
conduct
Lawyer-driven
Employee discretion
limited
Code of conduct
Integrity
-based
Values/ethics/principles
Enable responsible
conduct
Management-driven
Employee discretion
increased
Ethics Programs and Their
Evaluation
Explicit and implicit
Implicit
organization’s culture
reward system
valued behaviour
promotion policies
management example
general practice
Evaluation of Ethics Programs
Some criteria
Visibility
Ownership
Fit
Evaluation of Ethics Programs
Some criteria
Statements such as codes should be widely distributed and
communicated in a variety of formats.
Evidence of commitment to the ethics programs, as demonstrated
by awareness and usage of the initiatives and by their integration
into the organization culture.
Teaching Ethics in Business
Schools
Some argue that ethics
Arguments for Teaching Ethics
So many immoral or unethical events taking place
that it is essential to teach ethics in an attempt to
increase awareness.
Teaching ethics sends a powerful message to
students, that is, ‘this school feels it is a priority for
students to follow generally accepted rules of
business when they graduate’.
Businesspersons, as well as students, suffer from
Arguments for Teaching
Ethics
From an ethical perspective, the business environment is
changing radically and students must be made aware of this. Old
principles or standards do not work today, and what is acceptable
today may not be in the future.
Course in business ethics focuses on the long-term perspective
and asks ‘what if’ questions – essential for planning, strategy etc.
Provide tools for analysis.
