Business and Society Stakeholders

Ethics Public Policy 15th Edition

Lawrence Solutions Manual
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 Chapter 6
Organizational Ethics

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 Ch. 6: Key Learning Objectives

 Classifying an organization’s culture and ethical climate.

 Recognizing ethics challenges across the multiple
functions of business.
 Creating effective ethics polices, ethics reporting
mechanisms, ethics training programs, and similar
safeguards.
 Assessing the strengths and weaknesses of a
comprehensive ethics program.
 Understanding how to conduct business ethically in the
global marketplace.

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 Corporate Culture and Ethical Climates

 Corporate culture: A blend of

ideas, customs, traditional
practices, company values, and
shared meanings.
 To help define normal behavior for
everyone who works in a company.
 Nearly twice as many employees
observe misconduct by
coworkers in weak ethical
cultures companies.

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 Corporate Culture and Ethical Climates

 Ethical climate: The unspoken understanding

among employees of what is and is not
acceptable behavior.
 Based on the expected standards and norms.
 Multiple climates (or subclimates) can exist
within one organization.

✔ ✗

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 The Components of Ethical Climates
Figure 6.1

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Business Ethics Across Organizational Functions
Business operations can be highly specialized,
leading to ethical challenges related to those
functional areas.
 Professional ethical standards may conflict with the ethical
standards within the organization.
 Example of functional areas:

Information
Accounting Financial Marketing
Technology
Ethics Ethics Ethics
Ethics

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 Accounting Ethics

 Critically important component of every business firm.

 Financial records must be audited by a certified
professional accounting firm.
 Requirements of the accounting function:
 Responsibilities
 Public interest
 Integrity
 Objectivity and independence
 Due care
 Conflict of interest
 Conflict with self-interest (of the accounting firm)
and the interests of others (shareholders and
the public).

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 Financial Ethics

 Responsibilities to manage the

firm’s assets and raising capital.
Example of ethical issues:
 Wells Fargo and JP Morgan Chase were
accused of accepting kickbacks
 LIBOR financial scandal
 Self-regulation as the best path for
ethical compliance.

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 Marketing Ethics

 Marketing: advertising, distributing, and selling

products.
 Issue in marketing ethics emphasizes honesty and
fairness in advertising, especially toward children.
Example: Good Start Gentle formula by Gerber Products
Company
 American Marketing Association (AMA) code of
ethics:
 Do no harm
 Foster trust
 Embrace ethical values

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 Information Technology Ethics

 Ethical challenges in this field involve:

 Invasions of privacy
 The collection and storage of, and access to, personal and
business information
 Copyright protection regarding software, music, and
intellectual property

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 Building Ethics Safeguard
Into the Company

 To improve the quality of a company’s

ethical performance you have to
change the culture so that ethics is part
of everyday decision-making.
 To do so means institutionalizing ethics
or building ethics safeguards in to
everyday routines.

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 Organizations’ Ethics Safeguards
Percentage of Firms Reporting They Have Ethical Safeguard Figure 6.2

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 Two Ethics Approaches

 Compliance-based approach:
 Seeks to avoid legal sanctions
 Emphasizes the threat of detection and
punishment
 Integrity-based approach:
 Combines concern for law with employee
responsibility
 Promotes acting with integrity and
conduct business with honesty and
fairness
 Both approaches have been found
to lessen unethical conduct, but in
somewhat different ways.

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 Ethics Programs and Policies

 Top Management Commitment and

Involvement:
 Critical to fostering employee ethical behavior

 Ethics Policies or Codes:

 As a guidance to managers and employees to
solve ethical dilemma
 In U.S. policies tend to be instrumental,
providing rules and procedures.
 In Japan policies tend to be combination of
legal compliance and company values.
 Ethics programs must be widely distributed and
associated with ethics training.

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 Ethics Programs and Policies
 Ethics and Compliance Officers:
 Many created as early as the 1980s
 Membership in professional association, Ethics and Compliance
Officers Association, doubled between 2000 and 2004
 Recently more are reporting to the firm’s CEO

 Ethics Reporting Mechanisms:

 Often called the “helpline” or “hotline”
 Purposes:
 To provide interpretations of proper ethical behavior
 To create avenue for reporting unethical conduct
 To provide information-sharing tool
 Executives tend to use the helpline more often than middle managers

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 Ethics Programs and Policies

 Ethics Training Programs:

 Generally the most expensive and
time-consuming element of an
ethics program
 Found mostly in larger business
organizations
 Online or Web-based training more
common, but may not be as
effective as face-to-face

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 Corporate Ethics Awards

 Awarded to companies for efforts in

creating and improving their ethical
performance and serve as role models.
 Demonstrate that firms can be
financially successful and ethically
focused.
 Ethisphere Magazine: honors firms
based on Ethical Quotient (EQ).
 The Foundation for Financial Service
Professionals sponsors the American
Business Ethics Awards (ABEA).

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 Ethics in a Global Economy
 Doing business in global context brings
up host of complex ethical challenges.
 Bribery: a questionable or unjust
payment often to a government
official to ensure or facilitate a
business transaction.
 International watchdog agency,
Transparency International, publishes
a survey of countries’ levels of
corruption.
 Bribe-taking more likely in countries with low
per capita income, low salaries for
government officials, and less income
variation.
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Efforts to Curtail Bribery on the Global Level

 The Institute of Business Ethics (IBE)

 Say No Toolkit in 2014
 Advises organizations on how to combat bribery
and corruption
 Numerous efforts to prohibit bribery:
 U.S. Foreign Corrupt Practices Act (FCPA)
 The United Kingdom’s Bribery Act prohibits
bribery
 Anti-Bribery Law in Brazil and India
 Organization’s culture and ethical work
climate play a central role in encouraging
employees to act ethically.

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