1. Ethical Issues in
Business
Chapter 03
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2. Lesson’s Objectives
Define Ethical Issues
Classification of ethical issues
Identify the ethical issues with examples
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3. Three “C’s” of Business Ethics
The need for compliance of rules, including :
◦ Laws,
◦ Principles of morality, the customs of community,
and
◦ Policy of the company and fairness.
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4. Three “C’s” of Business Ethics
The contribution business can make to
society through:
◦
◦
◦
◦
The core values,
Quality of one’s products and services
By providing jobs to employees
Usefulness of activities to surrounding
community, and QWL (Quality of Work Life)
influenced by ethical and moral values.
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5. Three “C’s” of Business Ethics
The consequences of business activity:
Towards environment inside the plant and outside the
organizational community, e.g., Bhopal Gas Leading
Tragedy.
Social responsibility towards shareholders, bankers,
suppliers, customers and employees of organization.
Good public image. Sound business practices so that
public image is not tarnished.
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6. Influences on Ethical Behavior
 Personal values
 Attitude/Behaviors of supervisor
 Attitudes/Behaviors of senior management
 Internal drive to succeed
 Performance pressures
 No threat of punishment
 Friends/Coworkers
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7. Ethical Issue
•A problems, situations, or opportunities
requiring an individual to choose among
actions that may be evaluated as right or
wrong, ethical or unethical
Ethical issues arise because of:
Conflict among personal/organizational
values
◦ Conflicts with societal values
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8. Is it Ethical Issue?
Is it ethical to reduce costs by exploiting low
quality resources
Is it ethical to sell products that are legal, but
known to harm those who use them
Is it ethical to manufacture products that are
used to kill?
Those are ‘big questions’ that elicit strong views,
but there are many smaller, tactical issues at an
individual level
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9. Then…..
 Ethical behavior goes beyond the legal
requirement placed on a business, as it concerns
discretionary decisions and behavior;
 In other words, what a business chooses to do,
rather than what it is forced to do.
 Business ethics are relevant both to the conduct
of an individual within an organization and to the
conduct of the organization as a whole.
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10. Theory & Practice
 In theory, business ethics are shared
set of attitudes, morals and rules of
behavior that underpin the decision
making process
 However, in practice not everybody
agrees on what is ethical and what is
not.
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11. Classification of Ethical Issues
I.
II.
III.
IV.
Conflicts of interest
Honesty & fairness
Communications issues
Organizational relations
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12. I.
Conflict of Interest
 A conflict of interest (COI) occurs when an
individual or organization is involved in multiple
interests, one of which could possibly corrupt the
motivation for an act in another.
 A conflict of interest is a set of circumstances
that creates a risk that professional judgment or
actions regarding a primary interest will be
unduly influenced by a secondary interest.
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13. • Exists when an individual
Conflict of Interest must choose whether
to advance his or her own personal interests,
those of the organization, or some other group
• Must be able to separate personal interests
from business dealings
• Bribery is a significant concern
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14. Conflict of Interest
 Grease Payments – Money given for the purpose of
getting minor officials to do what they are supposed
to be doing. (Money given to minor officials – clerks,
to expediting a project)
 Bribes – Relatively large amounts of money given far
the purpose of influencing officials to make decisions
or take actions that they otherwise might not take.
(to high – ranking officials to get these persons to
purchase goods
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15. II. Honesty and Fairness
Honesty relates to truthfulness, integrity &
trustworthiness with business activities
Fairness relates to being just, equitable & impartial
with organizational activities
Business should not be played as a “ game” and
managers tend to Breaking or bending laws means
violates trust
And finally Lack of rules & poor enforcement of firm
may leads to unethical behavior
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16. III. Communications
 Issues involved relate to advertising, product
safety, pollution, & employee work conditions.
 Lying is a major ethical issue with internal &
external communications
 False advertising relates to:
 Exaggerated/inflated claims
 Concealed / hidden facts & ambiguous statements
 Lying
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17. IV. Organizational Relationships
Organizational behavior related to behavior of
organizational members toward customers,
suppliers, subordinates, superiors, peers & others
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18. Ethical Issues Related to Ownership
Owners have an obligation to society as well as
their employees & customers
Minimize pollution
Compensate working fairly
Produce safe products
Must be sensitive to legal & ethical risks of
their industry & region
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19. Employees & Management Concerns
Employee theft, sabotage & competitive
intelligence, child labor,
Rights in hiring, promotion, and firing
Fear of layoffs, Upward mobility
Salary plateau/level, motivations
Discrimination, security of job
Privacy & data access, outsourcing
Health & safety, welfare facility
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20. Consumer & Marketing Issues
Better quality of goods, truth
Reasonable price not discriminatory pricing
How to use positioning, promotion tool
How shows differentiations
Maximize positive publicity & avoid
negative
Bidding, Pricing, Competition
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21. Shareholders
Ensure capital appreciation
Ensure steady & regular dividends
Disclosure all relevant information
Protect minority shareholders interest
Protect interest in times of mergers,
amalgamations and takeovers.
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22. Government
Comply with rules and regulations
Honesty in paying taxes
Competitor
Honesty in attracting customer
Practice win-win approach
Beating with value not cheating
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23. Distributors
Comply with rules and regulations
Honesty in paying taxes
Supplier
Comply with agreements
Use bargaining power
Consider as a supplier to supplier
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24. Identify an Ethical Issue
An activity approved by most members of the
organization & customary in the industry is probably
ethical
If the issue withstands open discussion between
groups within & outside the organization is probably
ethical
Covert discussion, destroyed or disguised documents
indicate potential problems.
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