business ethics: when the rubber hits the...

Business Ethics: When the

Rubber Hits the Road

Presented by:

Mona E. Barragan

Objectives

• Define business ethics and whether business ethics

may be taught

• Define consumerism

• Study business ethics as it relates to small business

• Highlight the results of 386 questionnaire

responses to general business ethics questions

• Practice what you have learned by participating in

a group exercise

Business Ethics Definitions

• Business ethics is most narrowly defined in

terms of what is right/wrong or good/bad

• The definition that is more appropriate to

business today is “The processes through

which individuals apply their personal

values, beliefs, and attitudes to new,

dynamic situations in the workforce in order

to make, implement, and evaluate optimal

decisions.”

Can business ethics be taught?

Some say ‘no’ because...

• Values are fully formed by the time we

reach adulthood

• Business ethics is unscientific

• Business instructors may not possess ethics

expertise; ethics instructors may not possess

business expertise

• University business curricula and business

training programs are already full

Most say ‘yes’

• Most textbook authors are including ethics in their

university texts

• Most authors researched believe that business

ethics may be taught…their only point of

contention is how it should be taught

• Many professional organizations require members

to obtain ethics training

• Over 90% of questionnaire respondents believe

that parents, teachers and employers should teach

business ethics

Some Social Obligations of Small Firms

Response to

Employee Needs

Compliance with

Government

Regulations

Consumerism

Protection of

Environment

Contributions to

Community OrganizationsResponse to

Community Needs

Support of

Education

Small Business Management, 11th edition

Longenecker, Moore, and Petty

© 2000

South-Western College Publishing

Business Ethics/

Social Responsibility

• Should be recognized by all businesses--

especially small businesses

• Level may be limited because small

businesses must make a profit to survive

• Does what is best for the majority of

stakeholders--not just what is in the owner’s

best interest

Small business and ethics

• In small business, the personal integrity of

the founder or owner is the most important

key to ethical performance

• Code of ethics may become necessary as a

business grows and the owner’s personal

influence decreases

Small business and ethics

(continued)

• Studies suggest that entrepreneurs are more

likely than other business managers and

professionals to be unethical with respect to

issues that directly affect profits

• Small businesses are under greater pressure

to act unethically, because they may not

absorb the cost of making ethical decisions

as easily as large firms

Consumerism Issues

Key Emphasis: Let the seller beware!

Customer Expectations:

Products/services that reflect

•Safety

•Reliability

•Durability

•Quality

•Accuracy in advertising

Small Firm Responses:

•Clearly stated warranties

•Efforts to satisfy customers

•Honest advertising

•Smoke-free areas

•Standing behind repair work



© 2000


How Entrepreneurs Rationalize

Cheating on Taxes

“Everybody does it.”

“It’s the way I get paid for unnecessary

government red tape.”

“I have to compete with people who cheat.”

“Big operators have their loopholes; this just

evens things up.”

“Taxes are too high; the government doesn’t

deserve that much money.”Small Business Management, 11th edition


© 2000


Difficult Ethical Issues Facing Small Firms

Relationship with outside

parties in the marketplace

Superior subordinate

relationships

Employee responsibilities

and actions that in some way

conflict with the best interests

of the employer

Relationships with suppliers

“Putting old parts in a new device and

selling it as new”

“Lying to customers about test results”

“Reporting to an unethical person”

“Being asked by my superiors to do

something that I know is not good for

the company or its employees”

“Receiving kickbacks by awarding

overpriced contracts”

“Theft of corporate assets”

“Getting people to do a full day’s work”

“Vendors want a second chance to bid if

their bid is out of line.”

“The ordering of supplies when cash flows

are low and bankruptcy may be coming”Small Business Management, 11th edition


© 2000


Compliance with governmental

requirements and reporting to

government agencies

Human resource decisions

Environmental and social

responsibilities

“Having to deal with so-called antidiscrimination

laws which in fact force me to discriminate”

“Employing people who may not be legal

[citizens] to work”

“Whether to lay off workers who [are] surplus to

our needs and would have a problem finding

work or to deeply cut executive pay and perks”

“Sexual harassment”

“Whether to pay to have chemicals disposed of

or just throw them in a dumpster”

“Environmental safety versus cost to prevent

accidents”

Difficult Ethical Issues Facing Small Firms



© 2000


Results of 386 Questionnaires

• 186 respondents were graduating university

seniors, post-graduate students, or graduate

students

• 200 respondents were business practitioners

• Summary of respondents’ perceptions

follow in Tables 1 through 8

Tables 1 - 6

Tables 1 - 6 compare student

and practitioner responses to questions

on business ethics

Table 1

I believe I am living in a time of general ethical decline in:

(% of respondents that Agree)

Students Practitioners

Society 80% 79%

Business 62% 64%

* * * * * * * * * * * * * *

Have you ever made a decision in the workplace

that some may construe as unethical?

Yes No

Practitioners 33% 67%

Table 2

I believe that ethical business practices lead to:



increased profits 68% 75%

increased returns on investment 65% 74%

a positive work environment 91% 96%

a positive public perception of 89% 94%

the organization

Table 3

I corporate decision-makers should be accountable to:



the government 58% 57%

stockholders 88% 98%

employees 92% 97%

the communities in which 87% 91%

they operate

Table 4

I believe I will face/have faced the following issues in my

work experience:



growing presence of women & minorities 95% 72%

ecological responsibility 83% 40%

illegal activity 74% 36%

global complexities 88% 55%

restructuring & reorganization 91% 85%

mergers and acquisitions 87% 64%

technological surveillance of employees 81% 53%

Table 5

I believe business managers should consider ethical/social

implications before they make business decisions:



95% 96%

Table 6

I believe the following should be LEADERS in teaching ethics/

social responsibility in BUSINESS decision-making to future

managers:



parents 88% 91%

teachers/professors 90% 97%

clergy 70% 74%

employers 88% 94%

Tables 7 - 8

Tables 7 - 8 present practitioners’

experiences with business ethics

Table 7

I have personally made/witnessed others make decisions

in the workplace that involve(s) business ethics/

social responsibility:


Personally Others

at least weekly 49% 54%

between weekly and monthly 26% 27%

between monthly and yearly 17% 12%

less than once a year 4% 4%

never 5% 3%

Table 8What do you believe are the motivating reasons for

unethical behaviors by managers/non-management

employees:


Managers Employees

career advancement 74% 69%

financial benefit 80% 71%

no formal ethics training 33% 45%

upbringing lacks ethics emphasis 57% 64%

lack of accountability 64% 66%

company policies do not address ethics 28% 33%

corporate culture 56% 46%

following directives 31% 37%

Class Scenarios

Scenario #1

Jeff is a salesman working at a small business that manufactures

small tools. He is paid strictly on a commission basis.

The higher the price he negotiates with his customers,

the higher his commission, and thus, his paycheck.

Many of Jeff’s customers are small businesses like the one he

works for. While he needs to provide for a family, his small

businesses customers cannot afford high prices for tools.

How can Jeff balance the needs of his family and his customers?

What are the ethical implications of the decisions Jeff makes?

Scenario #2

Sarah started a small Internet company two years ago. She

sees that she is beginning to lose a lot of business to

companies that pop up, produce advertisements that promise

the world, do not deliver, and are gone in a year.

Sarah has decided she has several options: (1) compete with

them head to head by making the same promises, (2) exposing

the fly-by-night businesses for what they are, (3) wait it out,

hoping her business will survive and even thrive in the long run.

What course of action should Sarah take? How will her actions

affect all of her stakeholders?

Scenario #3Samantha runs an antique store in Madisonville, Texas.

She has an assistant manager, two sales clerks, one buyer,

and a bookkeeper that work for her full time. The assistant

manager resigns. One sales clerk with 15 years of experience,

the buyer who has 6 years, and the bookkeeper who has

1 year all want the promotion.

The sales clerk’s performance has been marginal, but she

is a steady, dependable employee. The buyer has excellent

connections to the auction market, which is why he was hired;

however, Samantha and the buyer don’t always get along.

The bookkeeper is a go-getter who always gives 200%.

Who should Samantha promote, and why? Are there trade-offs

between what is fair to the employees and what is best for

the business?

Scenario #4

Paul works for a small communications company. His earnings

and benefits are enough to provide nicely for his family of 4.

He has just lost his largest customer, $2 million, because of

an unethical decision made by Paul’s boss.

Paul has discovered several things he could do: (1) go to his

boss and address the unethical decision with him, (2) go to

the customer and try to cut a personal deal with him, (3) leave

the company.

What should Paul do? Who will his decisions affect?

Scenario #5

Elena is the bookkeeper for a small oil & gas firm. She posts

all entries, including all routine monthly entries that are required

to close the books. The business is attempting to get a large loan

from a bank, and so Elena works day and night to get the books

closed quickly.

After presenting the month-end reports to the business owner,

the owner says, “we are at ____ in net income; we need to be

at _____.” He subsequently gives her entries to make into the

accounting records for which she has no backup. Elena calculates

that including those entries, the net income will be where the owner

wanted it to be.

What should Elena do? What are her choices and who will her

decisions affect?

Scenario #6Joyce works for a small real estate brokerage firm. They buy

and sell property that has been abandoned or repossessed for non-

payment of taxes. Although an initial environmental assessment

of a property came up clean when a property was first purchased,

Joyce has recently learned that a part of the property was

used as a dumping ground for paints and other chemicals in

the past.

Joyce and her employer feel since the property passed an initial

environmental inspection, it will pass again, and the company

does not wish to disclose the environmental hazards.

What are Joyce’s options when placing the property for sale?

What are the implications of the decisions she makes? Who will

her decisions affect?

Scenario #7

Jake, the owner of Mustang Supplies, believes that

employees are stealing from him by placing small tools

and equipment into their lunch boxes. A friend has suggested

that Jake place hidden surveillance cameras in the break room

and in the employee locker area.

What should Jake do? Are there privacy issues involved in

the decisions he makes? What are the implications of

the decisions he makes?

Scenario #8

Max works for a small used car dealership. The owner has

always allowed him to create his own advertisements.

Recently, the owner has started pressuring Max about the

“fine print” in his advertisements. That is, the owner wishes

to price one vehicle at a super sale price, with the small print

in the advertisement stating: “one at this price.” He wants

to bring in more potential customers.

What are your options? What are the ethical implications

of these advertisements? What should Max do?

What may we learn from

practitioners?

Scenario #1--a balancing act

I'm in Sales. By definition I sell a product, service, etc.,

and try to increase the overall margin of a job. This means that I

am trying to "bleed" money out of my customers. I have a budget.

If I obtain the budgeted goal, I am rewarded by increased

commissions. Question: What's at stake? I am constantly torn

between putting the "screws" to a cust that trusts me

and a company signs my pay check! This far, I believe I have

been able to balance them both.

Scenario #2--my decisions affect

millions of people

Know yourself & your ethical boundaries. Be honest with yourself

about what you can & cannot do. Be sure you understand the

repercussions of your decisions-the consequences to your

community, your family, your company/employees, friends and the

consequences to yourself. One decision affects millions of people,

more times than you think. That's a lot of responsibility.

Always be prepared to take responsibility for your actions,

but never expect to get credit for them.

Scenario #3--be fair

Treat everyone fairly. I have seen so much back-stabbing either

for getting ahead or getting out of trouble. You might have

personality conflicts with people--but you still need to try to

be neutral. Hope this helps with your study & try to make this

world a better place by teaching ethics!

Scenario #4--time to leave

I lost a 2 plus million dollar account because of the lack

of ethics the president of the company had. I left the company

shortly after.

Scenario #5--stand your ground

"Awareness" is the key! Understand that eventually a situation

will arise where ethics is an issue. If it comes from a client

or management, don't be afraid to stand your ground. You can

always get a new job, but it's very difficult to change your

reputation.

Scenario #6--stepping over the

line

Students need to be informed how ethical decisions apply to

everyone and that the decisions they make will affect everyone.

Once upper management learns that you are willing to ethically

lean toward the company's side or decision, they will return again

and again for your help. If you make an unethical decision for

the company's benefit you will be expected to cover it up and

forget about it, until they need you to do it again. My ethical

situations deal mainly with the environment.

Scenario #7--all-knowing Big

Brother

Continue teaching ethics, but aside from that place an emphasis

on "Big Brother." The technological surveillance of employees

is out of control. Welcome to Dell.

Scenario #8--bait advertising--

reputation is all you have to lose

Let them be fully aware that unethical behaviors will happen,

and that they will be faced with it and will have to make a

decision (be prepared). Unethical behavior always catches up

to people. It may never catch up with them financially, however

“reputation" in the business world will make or break you.

Being in sales, I encounter unethical behaviors frequently.

Large corporations are just as guilty as small businesses

(it is not isolated to any segment of the market).

An Ethical Culture

An ethical culture is one in which the

company makes a good faith effort to meet

its obligations to all its stakeholders not

just to its employees, but also to its

customers, shareholders, the community

and the environment. The list of

stakeholders gets longer every day, and

their interests often conflict, but they

cannot be ignored.

Shaun O’Malley, chairman

emeritus of Price Waterhouse



© 2000


“Cultivate literature and useful knowledge,

for the purpose of qualifying the rising generation

for patrons of good government, virtue, and happiness.”

George Washington

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