business ethics in a global economy

© 2013 Cengage Learning. All Rights Reserved. 1

Dr. Jingjing WengCollege of Management

Yuan Ze University

Business Ethics in a Global Economy

Recommended text book

Ethical Decision Making for Business: A Managerial Approach (9th edition)

Fraedrich, Ferrell and Ferrel (2013). International Edition. 華泰文化


Business Ethics

Ethics is a part of decision making at all levels of work and management Just as important as functional areas of

business Deals with questions of whether practices are

acceptable No universally accepted approach for resolving

issues


Why Study Business Ethics?

• Business decisions under great scrutiny• Global financial crisis created diminished

stakeholder trust• Deals with questions about whether practices

are acceptable• No universally-accepted approach for resolving

issues


Why Study Business Ethics?

• Reports of unethical behavior are on the rise• Society’s evaluation of right or wrong affects its

ability to achieve its business goals• Studying business ethics is a response to

government policies and stakeholder demands for ethics initiatives

• Individual ethics alone is not sufficient• Studying business ethics helps identify ethical

issues to key stakeholders


Business Ethics Defined

Comprises principles, values, and standards that guide behavior in the world of business Ethical decisions occur when accepted rules no longer

serve and decision makers must weigh values and reach a judgment Values and judgments are critical in ethical decisions

Principles: Specific boundaries for behavior that are universal and absolute• Freedom of speech, civil liberties

Values: Used to develop socially enforced norms• Integrity, accountability, trust

© 2013 Cengage Learning. All Rights Reserved . 6

A Crisis in Business Ethics

Nearly half of employees observe misconduct in the workplace After the financial crisis, business decisions and activities have

come under scrutiny The financial sector has not regained stakeholder trust

• Consumer trust of businesses is declining• No sector is exempt from ethical misconduct• Stakeholders determine what is ethical/unethical

• Investors• Employees• Customers• Interest groups• Legal system• Community



Specific Issues

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

© 2013 Cengage Learning. All Rights Reserved 9

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

categories)


The Reasons for Studying Business Ethics

Having good individual values/morals is not enough to stop ethical misconduct

Ethics training helps provide collective agreement in diverse organizations

Business ethics decisions can be complicated Studying business ethics helps identify ethical

issues to key stakeholders


Source: Adapted from “Business

A Timeline of Ethical and Socially Responsible Concerns

1960s 1970s 1980s 1990s 2000s

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

Increasing employee-employer 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.

Before 1960: Ethics in Business

Theological discussions of ethics emerged Catholic social ethics included a concern for

morality in business, workers’ rights, and living wages

Protestants developed ethics courses in their seminaries and theology schools The Protestant work ethic encouraged hard work


The 1960s: The Rise of Social Issues in Business

Social consciousness emerged Increased anti-business sentiment JFK’s Consumer Bill of Rights— a new era of

consumerism Right to safety, to be informed, to choose, and to

be heard Consumer protection groups fought for

legislation changes Ralph Nader


The 1970s: Business Ethics as an Emerging Field

Business professors began to write about social responsibility An organization’s obligation to maximize positive

impact and minimize negative impact on stakeholders

• Philosophers involved• Businesses concerned with public image• Conferences held and centers developed• Issues:

Bribery Deceptive advertising Price collusion Product safetyEnvironment


The 1980s: Consolidation

Increased membership in business ethics organizations Ethics centers provided publications, courses,

conferences, and seminars Firms established ethics committees Defense Industry Initiative on Business Ethics

and Conduct (DII) The foundation for the Federal Sentencing

Guidelines for Organizations Corporate support for ethics

© 2013 Cengage Learning. All Rights Reserved . 15

The 1990s: Institutionalization of Business Ethics

Continued support for self-regulation, deregulation, and free trade Health-related issues more regulated The Federal Sentencing Guidelines for

Organizations (FSGO) in 1991 Set tone for compliance Preventative actions against misconduct A company could avoid/minimize potential

penalties


The Federal Sentencing Guidelines for Organizations

Standards and procedures for preventing misconduct High level of oversight Care in delegation of authority Effective communication Employee training Systems to monitor, audit, and report

misconduct Consistent enforcement and continuous

improvement© 2013 Cengage Learning. All Rights Reserved. 17

The 21st Century: A New Focus

Continued issues with corporate non-compliance Public/political demand for improved ethical standards Sarbanes-Oxley Act (2002)

Most extensive ethics reform Increased accounting regulations

FSGO reforms (2004, 2008, 2010) Requires governing authorities to be informed of business ethics

programs Dodd-Frank Wall Street Reform and Consumer Protection

Act (2009) Aimed at making the financial industry more

transparent/responsible

A firm’s greatest danger is not discovering misconduct early


Organizational Ethical Culture

Ethical culture: The component of corporate culture that captures the values and norms that an organization defines as appropriate Creates shared valuesGoal is to:

Minimize need for enforced compliance Maximize utilization of principles/ethical reasoning


Global Ethical Culture

Nations working together to establish standards of ethical behavior

NAFTA MERCOSUR WTO

Companies can demonstrate their commitment to social responsibility through adopting international standards Global Sullivan Principles Coalition for Environmentally Responsible Economies

(CERES) United Nations Global Compact



Source: Adapted from “Business

The Role of Organizational Ethics in Performance

Ethics Contributes to Employee Commitment

Commitment comes from employees who are invested in the organization Employees willing to make personal sacrifices

for the organization The more company dedication to ethics, the

greater the employee dedication Concerns include a safe work environment,

competitive salaries and benefits packages, and fulfillment of contractual obligations


Ethics Contributes to Investor Loyalty

Companies perceived by their employees as being honest are more profitable Ethical climates in organizations provide a

platform for Efficiency Productivity Profitability


Ethics Contributes to Customer Satisfaction

Consumers respond positively to socially concerned businesses

Being good can be profitable Customer satisfaction dictates business success A strong organizational ethical climate places

customers’ interests first Research shows a strong relationship between

ethical behavior and customer satisfaction


Ethics Contributes to Profits

Corporate concern for ethical planning is being integrated with strategic planning Maximizes profitability

Corporate citizenship is positively associated with Return on investment and assets Sales growth

Studies have found a positive relationship between corporate citizenship and performance


Guest Lecture (Mar. 20)

Ethics in global finance: Emerging trends in times of crisis Time: 3/20 (Wed) 12:00-14:00 Place: R70304

Speaker: Eddy S. Fang, PhD (Cambridge)Lecturer in Economics, Business School, Xi’an Jiaotong - Liverpool University

Preparation before the lecture: reading case 9 (pp214) of the textbook


Class Discussion today

Harvard University’s Justice with Michael Sandel http://www.justiceharvard.org/about/course/

The moral side of murder?http://www.youtube.com/watch?v=Y4HqXP47lPQ&feature=related

Weekly news sharing from next week!! (International news or news related to business ethics)© 2013 Cengage Learning. All Rights Reserved. 27

http://www.justiceharvard.org/about/course/

http://www.justiceharvard.org/about/course/

http://www.youtube.com/watch?v=Y4HqXP47lPQ&feature=related




business ethics in a global economy

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