BUSINESS ETHICS

Ethics is the code of moral principles and values that govern the behaviors of a person or group with
respect to what is right or wrong. (Ethics is doing what is right without the compulsion of law).

Ethics sets standards as to what is good or bad in conduct and decision making.

An ethical dilemma arises – is a situation that arises when all alternative choices or behaviours have been
deemed undesirable because of potentially negative consequences, making it difficult to distinguish right
from wrong.

Most Ethical dilemma involves conflict between the needs of the part and the whole, the individual verses
the organization or the organization verses the society as a whole.

Eg.

a. A public servant who has US$100,000.00 to spend to prevent a communicable disease of a

population of 3 million people verses using that US$100,000.00 to save his or her own child from
a brain tumor.
b. Buying raw material from a developing country at a higher than as opposed buying the same raw
material from a rich country at a much lower price because you know that the funds will be used
to reduce starvation in the poorer country.

Four Criteria for Ethical Decision Making

1. The Utilitarian Approach (Principle)- This principle was espoused by the nineteen-century
philosophers Jermey Bentham and John Stuart Mills and it is the ethical concept that moral
behaviours produce the “greater good for the greater number of persons”.

2. The Individualism Approach – the ethical concept that acts are moral when they promote the
individual’s best long-term interest, which ultimately leads to the greater good. Individuals
calculate the best long-term advantage to themselves as a measure a decision’s goodness. The
action that is intended to produce a greater ratio of good to bad for an individual compared with
other alternative is the right one to perform.

This approach seeks to explain that if everyone is pursuing self-direction the greater good is
ultimately served because people learns to accommodate each other in their own long term
interest. Individualism believes in honesty and integrity.

3. Moral Rights Approach- the ethical concept that moral decisions are those that best maintains the
rights of those people affected by them. Six Moral rights should be considered when taking
decisions. These are

a. The right of free consent – Individuals are to be treated only as they knowingly and freely
consent to be treated.
b. The right to privacy – Individuals can choose to do as they please away from work and have
control of information about their private life.
 c. The right of freedom of conscience – Individuals may refrain from carrying out any order
that violates their moral and religious norms.
d. The right of free speech – Individuals may criticize truthfully the ethics or legality of the
actions of others.
e. The right to due process – Individuals have a right to an impartial hearing and fair
treatment.
f. The rights to life and safety – Individuals have a right to live without endangerment or
violation of their health and safety.

4. Justice Approach – This is the ethical concept that moral decision must be based on standard of
equality, fairness and impartiality. There are three main types of Justice that managers are
concern with. These are:

a. Distributive Justice – The difference that different treatment of people should not be based
on arbitrary characteristics, in the case of substance differences, people should be treated in
proportion to the difference among them. Equality with pay for the performance of the same
job regardless of your sex, colour, ethnicity ect. The difference in salary should be on
qualifications and experience.

b. Procedural Justice –This concept outlines that rules should be clearly stated and consistently
and impartially enforced. (What goes for the goose goes for the gander).

c. Compensatory Justice- The concept that individuals should be compensated for the costs of
their injuries by the party responsible and also that individual should not be held responsible
for matters over which they have no control.

Factors Affecting Ethical Choices

Managers bring different personal and behavioural traits to the job. Personal needs, family influence and
religious background that shape their value systems. Specific personality characteristics, such as ego
strengths, self-confidence and a strong sense of independence may enable managers to make ethical
decisions.

One important personal trait is the stage of the manager’s moral development. There are three stages

➢ Pre-conventional Levels – (Level 1) Individuals are concerned with external rewards and
punishment and obey authority to avoid detrimental consequences. In organization this level may be
associated with managers who use an autocratic or coercive leadership style, with employees oriented
towards dependable accomplishment of specific tasks.

➢ Conventional Level- (Level 2) at this level people tends to conform to the expectations of good
behavior as defined by colleagues, family, friend and society. Meeting social and interpersonal
obligations is important. Work group collaboration is the preferred manner for accomplishment of
organizational goals, and managers use a leadership style that encourages interpersonal relationship
and cooperation.

➢ Post-Conventional Stage – (Level 3) Individuals are guided by an internal set of values and standard
and will even disobey rules and laws that violate these principles. Internal values become more
 important than the expectations of significant others. Managers at this level are able to act in an
independent, ethical manner regardless of the expectations (consequences) from others inside and
outside the organization.

THE ETHICAL
ORGANIZATION
ETHICAL ORGANIZATIONAL STRUCTURES AND
ETHICAL INDIVIDUALS ETHICAL LEADERSHIP
SYSTEMS
Integrity Role Modeling Corporate Culture
Honesty Uphold Ethical values in Organization Code of Ethics
Communicate About Ethics and
Inspire Trust Ethics Committee
Values
Treat People Right Reward Ethical Behaviour Chief Ethics Officer
Swift Discipline of Unethical
Play Fair Ethics Training
Behaviour
High Level of Moral
Whistle Blowing Mechanisms
development

Unit 3. Ethical Decision-Making in Business

CHAPTER 2 (Trevino Chapters 2 & 3)

WHY BE ETHICAL? (WHY BOTHER? WHO CARES?)

The Motivation To Be Ethical – Classical economics assume that practically all human
behaviour including altruism, is motivated solely by self-interest. In other words human beings
are purely rational economic actor who makes choices solely on cost benefit analysis.

Ethics dictates that people acts for altruistic or moral purposes hat seems to have little or no cost
benefit analyses. For example

➢ Mail back wallets to stranger, cash and all

➢ Help stranger in distress
➢ Donate bone marrow for stranger, or a kidney for a family member.
It is evident therefore that people pursue self-interest and economic concerns as well having
moral and ethical concerns.

The Media Focus on Ethical and Corporate Reputation – The media in recent times have
turned the spotlight on unethical behaviour on every type of organization, such as the
government, schools, religion, Sports and the Church. Some of the charges that are levied on
these institution are :
➢ Insider trading
➢ Businesses that overcharge the Government
➢ Government employees who steal or misuse funds
➢ Academics who falsify their research results
➢ Students who cheat
➢ Ministers who steal from the congregations
➢ Athletes who takes bribe and drugs
➢ Companies that exploit poor workers in developing countries.

Manager Care about Ethics - Managers cares about ethics because it affects the following:

➢ Staffing
➢ Managing the production process (quality Control)
➢ Sourcing of raw materials Disposal of Waste
➢ Budgeting and allocation of resources
➢ Registration, Certification, and Statutory Obligations

Executive Leaders Care about Ethics – Executive leaders cares about ethics for the following
reasons:
➢ To protect the corporate image of the organization
➢ To protect the brand
➢ To avoid litigation from government and other organizations
➢ To develop trust and confidence in the organization

Employees Care about Ethics – (Employees Attraction and Commitment) Employees care
about ethics for the following reason:
➢ Employees feels a sense of pride knowing that they are working for an ethical
organization
➢ Research has shown that employees prefer to work for an organization that has ethical
corporate behaviour, honesty in communication and respectful to employees than those
that pays very well.
➢ Employees prefer a company with excellent socio-cultural behaviour.

Individuals Care about Ethics – Individuals care about ethics to protect the following:
➢ Their Reputation
➢ Integrity
➢ Relationships with their peers
Does Society Cares? Business & Social Responsibility - The reasons why business must be
socially as well as financially responsible are as follows:
➢ From an economic perspective, business must use its power in a responsible manner or
risk losing it. Businesses are responsible to several stakeholders. (customers, suppliers,
government, employees and the environment)
➢ The second duty-based perspective argues that business have an ethical responsibility to
stakeholders that goes beyond economic harm. Responsible executive have a duty to care
about justice and stakeholders rights. This perspective supports corporate policies and
practices beyond regulatory requirements such as:
a. The development of quality products
b. Contribute to societal welfare
c. Human resources practices that treat employees fairly
d. Manufacturing processes that protects the environment
e. Contribution to help organization’s community

It should be noted that the biggest corporate social responsibility challenges come when ethical
responsibility and economic responsibility conflicts.

Economic Responsibility – Economic responsibilities refer to business’s primary function as a

producer of goods and services that consumer needs and wants, while making an acceptable
profit. This responsibility is considered primary because without financial viability the other
responsibility become moot issues.

Legal Responsibilities – In addition to economic responsibilities, business is expected to carry

out its work in accordance with law and government regulations

Ethical Responsibilities - Ethical responsibilities encompass the more general responsibility to

do what is right without the compulsion of law.

Philanthropic Responsibilities – This entails the organization’s active involvement in activities

that promote human welfare or goodwill. This normally includes the donation of time and money
to the needy.

Government Regulation of Business – Regulation of businesses is one way that the society
shows that it cares about responsible conduct of business.

Is Socially Responsible Business Good Business – (Discuss)

Chapter 3

1) Human Resources Issues - These include:

 ➢ Discrimination – This occurs when something other than qualifications and productivity
affects how an employee is treated. Discrimination can be on the following: race,
ethnicity, religion or sexual stereotyping.

➢ Sexual or other types of harassment – In the United States Federal Laws have defined
two types of sexual harassment. These are :
a. Quid Pro Quo - Means that sexual favours are required or appeared to be required or
advancement in the organization.
b. Hostile Work Environment – means that a worker has been made to feel uncomfortable
because of unwelcome actions or comments relating to sexuality.

➢ Performance evaluation

➢ Hiring a Firing

➢ How people get along

2) Conflict of Interest – Conflict of interest occurs when your judgement of objectivity is

compromised, while the appearance of Conflict of interest is when a third party could think your
judgement has been compromised. The appearance of conflict of interest is just as damaging as
conflict of interest. Conflict of interest erodes trust by making it look as if special favour is being
granted. Conflict of interest includes:
➢ Overt Bribes or Kickbacks
➢ Subtle Bribes
➢ Influence
➢ Privileged Information

3) Customer Confidence Issues. These include

➢ Confidentiality – Privacy is a basic customer right. Privacy is the obligation to keep

customer’s information in confidence often to go beyond protecting sales projections or
financial information.

➢ Product Safety – Product safety is a customer’s right. Eg wrong labelling of a product.

➢ Truth in Advertising

➢ Special Fiduciary Responsibilities – certain profession such as banking, accounting, law,

religion and medicine have a special obligation to customers. The law and the judicial
system have recognized these special obligations and they are spelled out in the code of
ethics for those professionals.

4) Use of Corporate Resources - The use of corporate resources involves the fulfilling of your
end of the employer- employee contracts. It means being truthful with your employees and
management and being responsible in the use of corporate resources including its finances and
reputation. These include

➢ Use of Corporate Reputation – Once you identify yourself as an employee of your

company, people can infer that you are speaking on behalf of your company. Hence the
need to be careful to link yourself to your organization.

➢ Corporate Financial Resources – Corporate financial resources should only be used only
for the company’s business and nothing else, unless otherwise instructed.

➢ Providing Honest Information – It is imperative for organizations to be honest about the

information they are providing their stake holders and the society.

5) When All Else fails – Blowing the Whistle

➢ When to Blow the Whistle

➢ How to Blow the Whistle
a. Approach your immediate manager first
b. Discuss the matter with your family as whistle blowing might not only affect you but
your family as well.
c. Inform your ethics officer
d. If there is no ethics officer then advise someone outside your chain of command such as
the Internal Auditor.
e. Once you have advised your HRM your ethic officer and internal auditor, If, not resolved
you should consider approaching your CEO.
f. If it is raised with your top manager and the issue is still not resolved then you should go
outside.
g. If the situation is that disturbing and no action is taken then you might have to quit the
job.

UNIT 4. (Trevino Chapter 9)

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate Social Responsibility is the duty of a corporation to create wealth in

ways that avoid harm to, protect, or enhance societal assets. The term is a modern
one.

It did not enter common use until the 1960s, when it appeared in academic
literature. It often goes by other names, including its abbreviation CSR, corporate
citizenship, stakeholder management, sustainability, and, in Japan, kyosei , a word
that translates as “living and working together for the common good.”

The fundamental idea is that corporations have duties that go beyond lawful
execution of their economic function. Here is the reasoning. The overall
performance of a firm must benefit society. Because of market imperfections, the
firm will not fulfil all its duties, and may breach some, if it responds only to market
forces.

Laws and regulations correct some shortcomings, more in developed countries,

fewer in less developed. Beyond the law, firms must voluntarily take additional
actions to meet their full obligations to society.

GENERAL PRINCIPLES OF CORPORATE SOCIAL RESPONSIBILITY

Corporations are economic institutions run for profit. Their greatest responsibility
is to create economic benefits. They should be judged primarily on economic
criteria and cannot be expected to meet purely social objectives without financial
incentives.

• All firms must follow multiple bodies of law , including (1) corporation laws and
chartering provisions, (2) the civil and criminal laws of nations, (3) legislated
regulations that protect stakeholders, and (4) international laws, including treaties
and trade agreements.

• Managers must act ethically . They must respect the law and, in addition,
conform their behaviour to ethical principles; model ethical values such as
integrity, honesty, and justice; and set up codes, policies, and procedures to elevate
behaviour within the firm.

• Corporations have a duty to correct adverse social impacts they cause . They
should try to internalize negative external costs , or adverse costs of production
borne by society.

Social responsibility varies with company characteristics such as size, industry,

products, strategies, marketing methods, locations, internal cultures, and external
demands. Thus, a global pharmaceutical company such as Merck has a far different
impact on society than a local insurance company, so its responsibilities are
different and greater.

• Managers should try to meet legitimate needs of multiple stakeholders .

Although corporations have a fiduciary duty to shareholders, it is not legally
required, desirable, or possible, to manage solely in their interest. Consumers,
employees, governments, communities, and other groups also have important
claims on the firm.

• Corporate behaviour must comply with an underlying social contract. To

understand this contract and how it changes, managers can study the direction of
national policies and global norms as evidenced in legislation, regulations, treaties,
conventions, trade agreements, and public opinion.

• Corporations should be transparent and accountable. They should publicly

report on their social performance in addition to their financial performance. This
social reporting should cover major social impacts and, like financial reporting, be
verifiable; that is, audited and checked by independent parties.

Corporate Social Responsibilities (Who’s Responsibility)

➢ The Board of Directors

➢ The Chief Executive Officer
➢ Senior Managers
➢ Middle Managers
➢ Auditing Firm of The Company
➢ The Employees

Who Are The Stakeholders:

1. The Customers
2. The employees
3. The Suppliers
4. The Shareholders
5. The Government
 6. The Environment

Carroll’s A., Perspective on CSR

➢ Corporate Social Responsibility should go beyond just satisfying the Needs of

the Shareholder, but it should include all the stakeholders.

➢ Carroll went on to outline that the responsibility goes beyond just the economic
responsibility of the company. These are the responsibilities that Carroll posited
as the responsibilities of a business.

a. Economic responsibilities – This is to ensure that the company is profitable

and is able to meet the expenses of the business, while taking care of the
other responsibilities of the stakeholders.

b. Legal and Political Responsibilities – The company has a responsibility of

complying with the laws of the land and playing by the rules of the game

c. Ethical Responsibility – These duties should overcome the limitations of its

legal duties and responsibilities. They entail doing what is right, just and
fair, respecting people while avoiding harm or social injury to people.

d. Altruistic Responsibility or Philanthropic Responsibility – Giving back

time and money in the form of voluntary service.

Arguments for CSR

• Business organization exist not only to make profits; they also have a
responsibility to fix human and social problems, some brought on by their
own actions/decisions.

• By acting in a socially responsible manner, they ward off government

intervention and action.

• Reciprocal Stakeholder Responsibility is to ensure that they give support

to companies that are supporting them.
 • Giving back to the Society will ensure the long-term viability of the
business.

• Proacting is better than Reacting – Planning, anticipating and initiating is

more practical and less costly than simply reacting to social problems.

• The public strongly supports it and embrace companies that are engage in
CSR

Arguments against CSR

• Friedman’s. M., Perspective on CSR.

Milton Friedman one of the biggest opponents of Corporate Social

Responsibilities articulated the following:
a. Friedman held that management has one and only one responsibility and
that is to maximize the wealth of the shareholders.

b. Freidman contented that Social Issues are not the concerns of

businesspeople but the government through legalisation.

c. Business are not equipped to handle social activities. Managers he argued

are oriented towards finance and operations and do not have the
necessary expertise to deal with social problems.

d. CSR dilutes business primary purposes and business are not able to focus
on what they do best.
e. Businesses has enough power already and why we should place in their
hands additional power such as social power.

f. Companies that pursues CSR are likely to make itself less competitive
globally.

Some of the Companies that Practice Good Corporate Social Responsibilities

(CSR)
1. Grace Kennedy Limited

a. GraceKennedy Limited is committed to maintaining the highest

standards of corporate social responsibility in our business activities

and dealings.

b. We are guided by the highest of ethical standards in our business

decisions and relationships with others and jealously guard our

reputation for “honesty, integrity and trust”.

c. We are committed to providing quality products and services for our

customers, clients, consumers and partners who we will treat fairly

and with respect. We believe in fair play. Our word is our bond.

d. We respect the rights and dignity of every employee and treat them

fairly and without discrimination. We are tolerant of each other’s

differences. We believe in teamwork, the sharing of knowledge

throughout our organization, and we recognize the contribution of

every team member. We will offer our employees clear and fair terms

of employment and provide resources to enable their continued

development. We will provide our employees with opportunities to

offer feedback and participate in discussions on issues in the

workplace that affect their health, well-being or productivity.

e. We promote the “Grace We Care” philosophy by providing a healthy

and safe working environment conducive to the well being of our

staff, and fostering an atmosphere of cooperation and harmony in the

workplace.

f. We commit to being a good corporate citizen, mindful of our

responsibility to give back to the community in which we live and

operate our businesses. Successive leaders of our Company have

built on this tradition and we encourage our employees to serve their

community and country through individual effort and through our

Grace & Staff Community Development Foundation, and other

organizations. Through the GraceKennedy Foundation we make

contributions in the areas of education, health, community outreach

and the environment.

g. We recognize that we have a responsibility to the communities and

countries in which we operate and will ensure that, in all our activities,

we contribute to the safety and protection of the environment.

2. National Commercial Bank Jamaica Limited

3. Digicel Limited
4. Flow
5. Sagicor Jamaica Limited
UNIT# 5

Ethical Issues Facing Organizations (Trevino Chapters 4, 8 & 10)

CHAPTER 4

DECIDING WHAT”S RIGHT A PRISCRIPTIVE APPROACH

Prescriptive Approach to Ethical Decision Making in Business - The following approaches

are advised:

➢ Focus on Consequences (Consequentialist Theories) This theory argues that when a

decision is being made and you are attempting to decide what is right or wrong you
should focus on the result or the consequences of the decision or action. (Utilitarian
Principle)

➢ Focus on Duties, Obligations and Principles (Dentological Theories) – This theory

base their decision about what is right based on moral principles which include the
following:

a. Honesty
b. Keeping a Promise
c. Fairness
d. Right to Safety and Privacy
e. Justice and respect for all person and property.
This principle argues that some moral principles are binding regardless of the consequences.
Therefore some actions would be considered wrong even if the consequences of the actions were
good.

➢ Focus on Integrity (Virtue Ethics) – The virtue ethics approach focuses more on the
integrity of the moral actor than on the moral act itself. This approach considers primarily
the actor’s:
a. Character
b. Motivations
c. Intentions.

Eight Steps to Sound Ethical Decision Making in Business –

1. Gather the Facts

a. Ask yourself how did the situation occur?
 b. Are there historical facts that I should know
c. Are there facts concerning the present situation that I should know.

2. Define the ethical Issues (There could be multiple issues to be address)

3. Identify The Affected Parties (be able to see the situation through others’ eyes). Which
one of the stakeholders is affected?

4. Identify The Consequences (After identifying the affected parties, think about the
potential consequences for each parties. (Who could be harm if a decision is taken in a
particular way). Pay attention to the following:

a. Long-term vs. Short-Term consequences

b. Symbolic Consequences

5. Identify the Obligations – Identify the obligation involved and the reasons for each
(Think in terms of values, principles, character, or outcomes)

6. Consider Your Character and Integrity – Think about what you should do in an ethical
dilemma, it can also be useful to consider what your relevant community would consider
to be the kind of decision that an individual or integrity would make in the situation.
Then, you have to determine how community members would evaluate the decision or
action you are considering.

7. Think Creatively about Potential Actions – Before making any decision, be sure that
you haven’t unnecessarily forced yourself into a corner. Are you assuming that you have
only two choices?

8. Check Your Gut Feeling.

Practical Preventive Medicine –

➢ Doing your Home Work – This involves

a. Read your company code of ethics
b. Ask questions of your managers and executives when you are not certain what to
do.
c. Develop relationship with people who are outside of your chain of command. (get
to know people in HR, Legal Department Audit Department.
➢ When You are asked to make a Snap Decision – Consider the following when a
quick decision must be made:

a. Do not underestimate the importance of a hunch to alert you that you are facing an ethical
dilemma. (Gut feeling)
b. Ask for time to think it over
c. Find out quickly if the organization has a policy that applies to the decision.
 d. Ask your manager or your peers for advise.
e. Use The New York Times test (If you are embarrassed to have your decision disclosed to
the media or to your family, don’t do it.

DECIDING WHAT IS RIGHT: A PSYCHOLOGICAL APPROACH

Moral Awareness and Moral Judgement – If a decision maker is engaged in moral judgement
process (those discussed in chapter 4) he or she must first recognize the ethical nature of the
situation at hand. MORAL AWARENESS - MORAL JUDGEMENT.

With moral awareness, a situation or issue is interpreted as a moral or ethical issue.

Individual Differences, Moral Judgement and Ethical Behaviour – When people are hired
they come with different personality’s ie individual predisposition to think and behave in certain
ways. Research as shown that individual traits influence the way people think and behave to
ethical dilemmas. These traits are:

➢ Cognitive Moral Development - Lawrence Kohlberg moral reasoning theory is a

cognitive development theory that focuses primarily on how people decide what course
of action is morally right. The cognitive moral development theory proposes that moral
reasoning develops sequentially through three broad levels. These are:
1 Level 1- Pre-conventional
2
a. Stage 1- Obedience and Punishment Orientation that is Sticking to the rules and avoid
physical punishment. Obedience for his own sake.

b. Stage 2 – Instrumental Purpose and exchange that is Following rules when it is in

one’s immediate interest. Right is an equal exchange, a fair deal.

2. Level 11- Conventional .

c. Interpersonal Accord, Conformity, Mutual Expectations - Sterotypical “good”

behaviour. Living up to what is expected by peers and people close to you.

d. Social Accord and System Maintenance – Fulfilling duties and obligations of social
systems. Upholding laws except in extreme cases where they conflicts with fixed social
duties. Contributing to the society or group.

3. Level 111 – Postconventional or Principled

e. Social Contracts and Individual Rights – Being aware that people hold a variety of values;
that rules are relative to the group. Upholding rules because they are social contracts. Upholding
non-relative values and rights regardless of the majority opinion.
 f. Universal Ethical Principles – Following self-chosen ethical principles of justice and
rights. When laws violate principles, act in accord with principles.

➢ Are women and Men Different – Carol Gillian argues that men focus almost
exclusively on justice while female focus on care.

➢ Looking Up and Looking Around – It is established that most adults are at the
conventional level of cognitive moral development ie they are highly susceptible to
external influences. Their decision about what is morally right is linked to what other
think or say about them. There they look at what their superiors and their peers are doing
or saying and use these as cues to guide their action.

➢ Autonomous Thinking and Action – Higher stage thinking is more independent of these
external influences. The postconventional principled thinker (representing a minority of
people) has developed his or her own justice and rights-based principles that guides
ethical decision making.

Locus Of Control – Locus of control is another individual characteristic that has been found to
influence ethical conduct. Locus of control refers to an individual’s perception of how much
control he or she exerts over the events in life. There are two types of locus of control, these are:
1. High Internal Locus of Control – This is where the individual believes that outcomes are
primarily the result of his or her own efforts.
2. High External Locus of Control believes that life events are determined primarily by fate,
luck or powerful others.

Locus of control is not something that someone is born with, instead it is shaped by one’s
environment and can change.

Cognitive Barriers to Good Ethical Judgement These barriers include

➢ Script Processing (The Pinto Fire case) Script processing are cognitive frameworks that
guide human through an action. Although they might not be written down, Scripts
contain information about the appropriate sequence of events in routine situation.
➢ Cost/Benefit Analysis
➢ Thinking about Fact Gathering
➢ Think about Consequences
➢ Reduce number of Consequences
➢ Consequences as Risk
➢ Consequences over Time – Escalation of commitment
➢ Thinking about Integrity
➢ Thinking about Your Gut feeling
➢ Emotions in Ethical Decision Making.
UNIT # 6 (Trevino Chapters 6 & 7)

MANAGING ETHICS & LEGAL COMPLIANCE

Structuring Ethics Management

Seven Requirements for Due Diligence and effective compliance ethics

programme are:

➢ Establishing compliance standard reasonably capable of preventing criminal

conduct.
➢ Assigning specific high level individuals with responsibility to oversee those
compliance standards.
➢ Experiencing due care to ensure that discretionary authority is not
delegated to individuals with a propensity to engage in illegality.
➢ Taking necessary steps to communicate compliance standards and
procedures to all employees, with special emphasis on training and the
dissemination of manuals
➢ Taking reasonable steps to achieve compliance with written standard
through monitoring, audit and other system designed to detect criminal
conduct, including a reporting system free of any retribution to employee
who report criminal conduct.
➢ Consistently enforcing the organization’s written standard through
appropriate disciplinary mechanism, including as appropriate, discipline as
appropriate, discipline of individuals for failure to detect an offence.
➢ After an offence is detected taking all reasonable steps to respond and to
prevent future similar conduct.
Make Ethics Comprehensive and Holistic – Organization must create ethics
programme that drive integrity and ethical behavior in their business operations.
Organization must focus on making ethics and values central to how they do
business.

Managing Ethics: The corporate Ethics Officer – Most large firms realizes that
ethics initiatives need to be coordinated from a single office to ensure that all the
programme’s pieces fit together. Many firms designate their Legal Counsel as
their Ethics Officer. Others create posts such as Vice President or director of
Ethics, Compliance and Business Practices.

The Ethics officer can be from within the company or if the skill sets are not within
then you may want to look outside.

The Ethics Infrastructure – Ethics offices can either be centralized or

decentralized or a combination of both.

The decision to centralize of decentralize is dependent on the firms structure,

While decentralization will better meet the needs of units that are in different
business, it may be difficult to manage effectively because they must
communicate with each other constantly to ensure consistency and commitment
to the organization’s key values.

Centralization on the other hand might be much easier to manage in order to

keep the different business units committed to the organization’s key values,
however, it might not meet the specific needs of these units.

The Corporate Ethics Committee – The Corporate Ethics committee usually

consist of senior managers with its primary focus to provide ethical oversight and
policy guidance to the CEO on management decisions.

COMMUNICATING ETHICS
 Within the ethics infrastructure, good communication –downwards, upwards and
two way is essential if an organization is to have strong alignment to ethics
culture.

Basic Communications Principles

Align The Formal and Informal Communication Systems

Formal Communication include all formal written and electronic communication

– newspaper, magazine, memos, recruiting literature, policy manuals, annual
reports, websites and advertising as well as formalized oral communication such
as meetings and speeches.

Informal communication (Grapevine) – This is a continual stream of information

among employess about ” what really is going on”, in the organization. Grapevine
exists in all organization and contain news, rumors, impression and perception.

Analyze The Audience

The first thing to do when designing a communication program is to analyze the

need of you your audience. There are three kinds of people that the organization
must consider when developing a communication strategy. These are:

➢ Good Soldier – These people understand and follow the rules and policies
of the organization, and they have good ethical compasses. They have the
judgment or experience required to discern the difference between right
and wrong.
➢ Loose Cannons – These people may have good ethical compasses but they
don’t their corporation policies. They might not even be familiar with
general ethical standard in business. Loose cannons may be inexperienced
or they are coming in from other unrelated industry with different norms.
 ➢ Grenades – These employees are neither ignorant nor benign. These
employees may or may not know the rules, but they don’t care either way.
They have their own agenda and they lack any company or professional
loyalty. They are called grenades because their activities can blow up
suddenly and severely damage the organization.

Evaluating The Current State of Ethics Communications –

The following questions must be asked.

➢ What kinds of ethical dilemmas are employees likely to encounter?

➢ What don’t employees know? –
➢ How policies are currently communicated?
➢ What communication channels exist?

Multiple Communication Channels for Formal Ethics Communication

➢ Websites
➢ Recruiting Brochures
➢ Campus Recruiters
➢ Orientation Meetings and materials
➢ Newsletter and magazines
➢ Booklets

MISSION OR VALUES STATEMENTS

The Mission Statement, Value statement or Credo is a succinct description of

“how we do business” ie. The corporate principles and values that guide how
business is to be conducted in an organization.

A Mission Statement is a short description of the organization’s reason for

existence.

Value statement is – the next step in the process of explaining the organization to
the world, ie. “here is how we do it”. Eg of Sagicor’s value Statement “SCRIPT”
SERVICE

COMMUNICATION

RESPECT

INTREGRITY

PERFORMANCE

TEAMWORK

Organizational Policy

Policy- the “rules of the organization” is critical to any company, and most
organizations create a policy manual or an Internet site to house all relevant
company rules. When you are designing policy communication first analyze your
audience. Here are some of the guidelines to follow:

➢ Communicate relevant rules to people who needs them

➢ Prioritize Policy
➢ Make it understandable
➢ Make Policy come alive

Codes of Conduct – A code of conduct is not a substitute for any ethics

programme, a code of conduct is a start of an ethics effort. The code of conduct is
really designed to be the main road map, the ground rule for ethical conduct
within the organization.

VALUES OR COMPLIANCE APPROCHES

Value Approach

Formal corporate ethics initiatives can be categorized as emphasizing either a

Value or a Compliance approach to managing ethics.
The value approach is proactive and aspirational. It emphasizes expected behavior
and an effort to achieve high standard represented by the spirit of the law and
organizational values. It relies on such techniques such as leader communication
and role modeling to affirm the organization’s commitment to its stated ethical
values and goals.

Compliance Approach

With a compliance emphasis , the focus is more on required behavior – obeying

the letter of the law rather than aspiring to lofty ethical principles. Disciplinary
procedures for violators are also important to compliance efforts.

An effective programme should have both Value and compliance approach.

UNIT 7 (Trevino Chapter 5)

ETHICS AS ORGANIZATIONAL CULTURE

Culture as defined by Trevino L, et al. 2011 as a body of learnt beliefs, traditions

and guide for behaviors shared among members of a group. Organization’s
culture expressed shared assumptions, values and beliefs, and is manifested in
many ways including formal rules and policies, norms of daily behaviours, physical
settings, mode of dress, special language, myths, rituals, heroes and stories.

Strong Verses Weak Culture.

➢ Strong Culture – In Strong Culture standards and guidelines are widely

shared within organization, providing common directions for day-day-
behaviours.

➢ Weak Organizational Culture- In a weak organizational culture, strong

subculture exist and guide behavior from one subculture to another.
How Culture Influences Behaviour: Socialization and Internationalization

Employees are brought into the organization’s culture through a process called
enculturation or socialization. Through socialization employees learn” the
ropes”, .

➢ Socialization can occur through formal training or mentoring, or through

more informal transmission of norms of daily behaviours by peers and
superiors.

➢ Internalization is where individuals have adopted the external culture

standard as their own. Their behaviours even though consistent with the
culture, also accords with their own beliefs.

Ethical Culture a Multi-System Framework

Formal & Informal Systems

Formal Systems include

1. Executive Leadership
2. Policies/Codes
3. Orientation/Training
4. Performance Management
5. Authority Structure

Informal Systems

1. Role Modeling/Heroes
2. Norms
3. Rituals
4. Myths/Stories
5. Languages.

Alignment of Ethical Culture – To create a consistent ethical culture message the

formal and informal system must be aligned, working together to support ethical
behavior. That is both the formal and informal system s must be sending the right
signal.

ETHICAL LEADERSHIP

Executive Leaders Create Culture in both formal and informal ways. Senior
Leaders can create, maintain, or change formal and informal culture systems by
what they say, do or support. This is done through formal communications of
policies and procedures within the organization or informally by role modeling,
and the norms their message and actions support.

Leaders Maintain or Change Organizational Culture

Leaders can influence organizational culture in a number of ways, some of these

ways are:

➢ They can help maintain the present culture

➢ They can change it by articulating a new vision and values
➢ By paying special attention to measuring and controlling certain things
➢ By making critical policy decisions
➢ By hiring personnel who fit their vision of the organization
➢ By holding people accountable for their actions.

Ethical Leaders & Ethical Culture

Ethical leaders in an effort to influence ethical culture must develop a reputation

of being visible on ethical issues and communicate a strong ethical message. As a
moral person the Ethical leader is seen as demonstrating certain individual traits
such as:

a. Integrity
b. Honesty
c. Trustworthiness

UNETHICAL LEADERSHIP

Unethical Leaders can just as strongly influence the development of an unethical

culture. Unethical Leaders have reputation of weak moral person.
Hypocritical Leadership

These are leaders who talk incessantly about integrity and ethical values but then
engage in unethical conduct, encourages, others to do so either explicitly or
implicitly, rewards only bottom line results and fail to discipline misconduct.

Ethically Neutral or “Silent Leaders”

Ethically Neutral Leaders are those leaders who are not ethically or unethically
strong. The do not provide any strong leadership whether ethically or unethically.
This could due to the fact the these leaders are not aware of how important
leadership is to ethical behavior within the organization.

OTHER FORMAL CULTURAL SYSTEMS

Other Formal cultural systems include:

➢ Selection Systems –Hiring and selecting people who fit the culture of the
firm.
➢ Value and Mission Statements – Once employees are onboard the
organization through a formal induction process would guide each
employee through the organization’s value statement, mission statements,
credos and policies.
➢ Policies & Codes – Formal ethical policies often called codes of ethics or
codes of conduct are very detailed and provide guidance about employees’
behavior in multiple specific areas.
➢ Orientation & Training Programmes.

➢ Performance Management Systems –

a. Design Performance management Process and systems that supports
ethical conduct.
b. Treat others with respect at all times
c. Be fair and objective
d. Actively Listen and incorporates input of others
e. Act with Integrity
f. Inspire the Trust of the team
 g. Talk openly and honestly “say it as it is”.

➢ Organizational authority Structure – Strong ethical culture incorporates a

structure that emphasizes and support individual responsibility and
accountability at every level.

➢ Authority, Responsibility and Ethical Culture.

➢ Organizational Structure that supports Reporting of problems (Whistle

Blowing).

INFORMAL CULTURAL SYSTEM

➢ Role Modeling and Heroes

➢ Norms “ The way we do things around here”.
➢ Rituals – These are ways of affirming and communicating culture in a very
tangible way. Rituals tell people symbolically what the organization wants
them to do and how it expects them to do it.
➢ Myths and Stories – The telling of stories to give meaning to ones way of
life.
➢ Language – Language is used to communicate values to employees

Organizational Climates: Fairness, Benevolence, self-Interest, Principles

When employees think about a climate for fairness they expect the following:

➢ Benevolent Climate – one in which Organization cares

➢ Self- interest Culture – a culture in which people protect their own interest
above all and everyone is essentially out for him or herself.
➢ Rule Based Climate – Employees perceives that the organization is one in
which the organization follows both laws and the organizational rules when
making a decision.

A Cultural Approach to Changing Organizational Ethics

 ➢ Audit the Ethical Culture
➢ Take A Cultural Systems view
➢ Take a long-term View when changing organizational culture. It can take up
to six years.
➢ Assumptions About People – be careful to assume that people are
economic beings and that they are not good and open to growth and
change.
➢ Diagnosis – Conduct an Ethical Culture Audit.
➢ Ethical Culture change must be managed.
➢ Conduct An Ethical culture Change Evaluation.

UNIT 8 (Trevino Chapter 11)

ETHICS AND THE GLOBAL BUSINESS ENVIRONMENT

With the advent of Globalization and the world becoming one big market place. Organizations
have to turn their attention to operating ethically within this global space.

One of the Most important thing to do is to focus on the Individual Expatriate Manager.
This is so because there are difficulties inherent in foreign business assignment and the
importance of cultural understanding, sensitivity and openness.

The Difficulties of Foreign Business Assignment – The globalization of business has

contributed to huge increase in interactions between people from different cultural background.
These interactions may occur during brief business trips or lengthy overseas assignment that last
for years.

The need For Structure, Training and Guidance – Studies have shown that businesses often
does not provide adequate support and cross cultural training for their managers who are
assigned to work overseas. Research has found that expatriates needs clear guidance about goals
and expectations associated with their job, as well as realistic preview of their living conditions
in the new location.

When expatriate managers are trained they feel:

➢ Greater feelings of well-being and self-confidence
➢ Improvements in relationship with host nationals
➢ The development of correct perceptions of host culture members
➢ Better adjustments to New culture
➢ Higher Performance.

Foreign Language Proficiency – An essential training that can improve one’s international
business experienceis foreign language training. Language is an essential part of cultural learning
that can contribute to international business relationships.

Learning About Culture

The culture of a nation is influenced by shared values, knowledge, beliefs as well as common
modes of behaviour and ways of thinking among members of a society.

The following influences Social Values:

➢ Power Distance
(a) High Power Distance
(b) Low Power Distance

High Power Distance means that people accept inequality of power among institution,
organization and people, Example of countries with high power distance are: Malaysia,
Philippines, India and Panama.

Low Power distances me that people expect equality in power within institution, organizations
and people. Example of countries with Low Power Distance is:
Denmark, Austria and Israel.

➢ Uncertainty Avoidance
(a) High Uncertainty Avoidance
(b) Low Uncertainty Avoidance

High uncertainty avoidance is where members of a society feels uncomfortable with uncertainty
and ambiguity and thus supports belief that promotes certainty and comfort. Examples of these
countries are: Greece, Portugal and Uruguay.

Low Uncertainty avoidance is where people in a society have high tolerance for the unstructured
the unclear and the unpredictable. Examples of these countries are Singapore and Jamaica.

➢ Individualism and Collectivism

Individualism is a preference for a loosely knit social framework in which individuals are
expected to take care of themselves. Countries with individualism tendencies are United
States of America Australia, Canada and Great Britain.

Collectivism is a preference for a tightly knit social framework in which individuals look
after each other and organizations protects their member’s interest. Countries with
collectivist tendencies are: Japan, China and Guatemala.

➢ Masculinity/Femininity

Masculinity is a cultural preference for achievement, heroism, assertiveness, work certainty and
material success. Countries with high masculinity tendencies are Germany,
Austria and Mexico.

Femininity is a cultural preference for cooperation, group decision-making and quality of life.
Examples of countries with femininity tendencies are: Sweden, Norway, Denmark and France.
 ➢ Long-term Orientation/Short-term Orientation

Long-term orientation refers to countries that have a great concern for the future and place high
value on thrift and perseverance. Countries with long-term orientation tendencies are: China,
Japan and other Asian Countries.

Short-term Orientation refers to countries have a great concern or high value on tradition and
meeting social obligations. They are more concern with the past and the present and these
countries are like West African countries Russia and Haiti.

➢ Ethnocentrism – is the notion that people has a tendency to think that their culture is
more superior than other cultures and tend to downgrade other culture and elevate theirs.

Points For Careful Consideration

Recognizing the Power of Selective Perception – human beings are constantly bombarded with
information. They must, therefore, perceive selectively, or they would be totally overwhelmed.
This selective perception process is influenced by culture. Example in collectivism culture
people more attention to relationship than behaviour.

Assumption of Cultural Homogeneity – We should not assume homogeneity within a culture

ie. individuals within a culture are all the same. This prevents stereotyping

Assumption of Similarity – Another problematic assumption is the assumption of cultural

similarity. Many countries started their internationalization process in countries that they believe
to be more similar to their own, because they believe that success will come easier. However,
research has shown that this is not so because managers tend to prepare less for these
assignments which usually leads to failure.
Ethical Related Training and Guidance – International business assignment requires training
that is more specifically related to ethics. This training should cover such topics as how to
recognize the ethical issues likely to arise in a particular culture and how to handle requests for
payoff and bribes.

Recognizing and Dealing with Ethical Issues - Beyond general training in the culture, training
with respect to business ethics beliefs and practices are essential. The Expatiate Manager must be
able to identify the following:

1. The ethical Issues likely to arise in a particular business setting

2. The expatriate manager needs guidance in making ethical decision in the more
ambiguous business context.
3. How to negotiate across culture

DEVELOPMENT OF CORPORATE GUIDELINES AND POLICIES FOR GLOBAL

BUSINESS ETHICS

Given the wide diversity of legal requirements and the continued existence of cultural
differences and corruption, companies doing business abroad have a responsibility to develop
guidelines and policies to guide their employees’ ethical conduct.

Ethical Relativism ( When You Go To Rome You Do As the Romans Do) or Ethical Imperialism
(Assumes truths that would require exactly the same standard in and behaviours in every
culture.
THE ORGANIZATION IN GLOBAL BUSINESS ENVIRONMENT

The Following must be considered:

➢ Do I intend to Do Business in a Foreign Country?

➢ The Challenges of Legitimacy in doing business in a foreign country.
➢ How to mitigate against these challenges.