Ethical and Unethical Behavior and How it Effects Business

Anthony Agnese Professor Attia MKT378 12/03/2013

Table of Content

I. II.

Introduction Ethics & Business Ethics a. Defining Ethics b. Role of Ethics in Business

Pg. 1

Pg. 1 Pg. 2

III.

Ethics at a Leadership Level a. Ethical and Unethical Management b. Promoting Ethics Pg. 4 Pg. 5 Pg. 6 Pg.8 Pg.10 Pg.12

IV. V. VI.

Training Employees Ethics Unethical Behavior and its Effects on Sales Conclusion References

I.

Introduction Ethics. Believe it or not business ethics is a major part of how a business is

managed, operated, and it productivity. It is important to understand how business is conduct because this can change how people perceive ethical and unethical behavior. A business ethics is relayed through out the business mainly two ways: the leadership of the business and the training that employees get. A big controversy with ethics is if businesses and employees are using ethical or unethical behavior. Using both ethical and unethical behavior can have a significant positive or negative impact on sales. Along with unethical behavior there are going to be consequence for the organization or employee that is at fault.

II.

Ethics & Business Ethics a. Defining Ethics Ethics is defined as A systematic attempt to make sense of our individual and

social moral experience, in such a way as to determine the rules that ought to govern human conduct, the values worth pursuing, and the character traits deserving development in life (Svensson & Wood, 2003). Ethics basically is how a person or society conducts themselves in certain situations and whether they do the right or wrong thing. Applying this to a business (business ethics) means basically how an organization handles their daily business and when certain situations a rise do they do whats best for all, themselves, or the heads of the company.

b. Role of Ethics in Business Ethics has a big role in business. There are several different factors that effect business ethics. According to an article, The authors define business ethics as a function of time and culture. The function consists of two generic external determinants generally applicable across companies in different industries. Therefore, there is a genuine justification to examine and develop generic conceptual frameworks surrounding them in the marketplace and in the society (Svensson & Wood, 2003). Since time and culture are two functions that are able to use in many different industries it is very important to utilize them. The function of time has to do with how over a point of time how things change, while the function of culture has to with the constant change in views and options. Two principal parameters influence the dynamics of ethics in the marketplace and in society. These are namely time and culture. As time moves on, culture evolves and as a consequence ethical standards change. In conjunction, these two parameters create a generic conceptual framework and also contribute to describe the dynamics of ethics, in the extension business ethics (Svensson & Wood, 2003). This extremely important when it comes to ethics because the market and society are consistently changing and when this happens it can also change the views of peoples ethical and unethical behavior. This also shows how the market, society, time, and culture are all connected with ethics and they can impacts peoples views on ethical situations. This can also influence sales because with all these variables. In another article it states, The business ethics model consists of three principal components (i.e. expectations, perceptions and evaluations) that are interconnected by five sub-components (i.e. society expects; organizational values, norms and beliefs; outcomes; society evaluates; and reconnection) (Svensson & Wood, 2008).

This model can be used to help breakdown ethical situations using each component. The following figure is the Business Ethics Model:

To breakdown this model, start with the three principle components: Expectations, Perceptions, and Evaluations. Expectations are basically how people view the organization and their expected performance. Perceptions are how the organizations interact with different parts of society whether its positive or negative. Evaluations are the final value society gets from the organizations performance. The next part to the model is the sub-categories: Society Expects, Organizational Values, Norms and Beliefs, Outcomes, Society Evaluates, and Reconnection. The first category is Society Expects, which is basically what the whole society is expecting from the organizations actions. Next are Organizational Values and Beliefs, which is how the organization is impacted by the social environment and culture. Outcomes are how the social expectations are expressed and how the organization interprets and responds to the expectations. Society

Evaluates is how society perceives an organizations profit, whether they are being ethical or unethical. The final part of the model is Reconnection, in this component it basically restarts the whole process over with a different level of expectations, which gets changed from Society Evaluations. This model can definitely help organizations change a help them be more ethical because this model takes into account things from the business, society, and the market. Ethical decision-making models posit that management has the ability to influence the ethical behavior of subordinates by delineating and emphasizing appropriate behavior (Schwepker & Good, 2010). This model can be done especially if it can be implemented from the top of the management (leadership) to be taught down to all employees.

III.

Ethics at a Leadership Level a. Ethical and Unethical Management Ethical and unethical behavior is a factor that effects a whole organization, which

definitely comes from the top of organization all the way to the bottom. If management is not being ethical then how is it possible for the whole organization to take after their example and be ethical themselves. On the other hand, ethical leadership is the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and promotion of such conduct among followers through twoway communication, reinforcement, and decision-making processes (Alahmad, 2010). This article proves that a leaders personal actions and relationship affect everything that they do from the decisions they make to whom they influence below them. It is crucial for management to be ethical because it can potentially affect every one. According to anther article, Leadership ethics used to be about honesty, integrity, fairness, following

rules and laws, and being true to your values. Now, in the global marketplace, with fierce competition for business and resources, the scope of problems that can occur in leadership ethics has expanded exponentially (Thornton, 2009). This shows how ethical leaders are to act by definition. Now with all this high competition ethical leaders have started to change to gain an advantage over their competition by becoming more unethical which can have both a positive and negative affect. Positives are they might get the client and make more sales and the negatives are they might get caught, loss the client, and could possibly get fined. Unethical pro-organizational behavior (UPB) refers to actions that are intended to promote the effective functioning of the organization or its members, and violate core societal values, mores, laws, or standards of proper conduct (Miao, Newman, Yu, & Xu, 2013). This type of behavior from management could definitely hurt an organization because it blatantly promotes unethical behavior which will potential destroy the organization.

b. Promoting Ethics To change this type of behavior managers need to step forward to make a change. An article by Gael McDonald found that Many managers eager to promote business ethics appear to be most receptive to material that can be easily reviewed and from which specific suggestions and recommendations can be drawn for implementation into their organisations. Managers are particularly receptive to strategies for promoting ethics which can be initiated by themselves without requiring the additional expense of ethics consultants or the more formalised creation of ethical officers (1999). This shows when managers are given the opportunity; they will take the appropriate path to promote ethics not when it is forced, thus making them a positive leader. If there are no managers

that take the initiative, an organization might want to use an ethics officer. The impact of an EO is a product of both practical and symbolic dimensions. The practical dimension consists of the EO's specific activities, which directly influence the organization's decisions and behavior. The symbolic dimension is reflected by the EO's existence; the presence of an autonomous, impartial and decisive EO is an indication that management is committed to ethical conduct and fosters a perception that such behavior is normative. This, in turn, induces organization members to match their behavior to the perceived norms (Izraeli & BarNir, 1998). This position can important to an organization because it will effect the organization directly to change it decisions and behavior if it is being unethical. Since the ethics officer is impartial it would not have a problem telling the organization to change. Another way to promote ethics would be the influence of stakeholders. A fundamental working assumption about the nature of organizational stakeholders guides our discussion of ethics and social responsibility. This assumption has to do with our perception of who is a legitimate stakeholder, and it underlies the rationale for the institutionalization of an organizational function whose primary purpose is to protect the interests of the stakeholders (Izraeli & BarNir, 1998). This idea would also help the promotion of ethics because if an organization does something negative that effects stakeholders in business it could effect how much more money they will put into the business and how it will also impact the sales of the organization due to the unethical behavior.

IV.

Training Employees Ethics Once management has ways to solve their ethical and unethical behavior, the next

part is to train the employees on ethics. The ethical climate of an organization has been

defined as the shared perceptions of what is ethically correct behavior and how ethical issues should be handled in the organization. Several studies have proposed that a relationship exists between the ethical climate of an organization and the ethical behavior of employees (Peterson, 2004). It has been said that the interaction and perceptions of ethical behavior of the organization is just handled by the business as whole, but it can be shown that it involves the ethical behavior of the employees individually. This is because each employee has their own personal ethical beliefs and action on themselves, which most of the time is for the betterment of the organization. Companies use a code to communicate their core values. Ethics training guarantees that employees read and are familiar with the content of the code. When a code is supported by ethics training and an ethics office, it can have a positive effect on related employee perceptions (Liao & Teng, 2010). This will be the first thing, which a corporation should apply to have a positive ethical outlook. Having a code of core values and ethics will deter from unethical behavior. Also with this entire positive image, it will create employee satisfaction and it will help sales. Organizations adopt corporate-responsibility practices to maximize the positive outcomes and to minimize the negative ones on stakeholders. Corporate-responsibility practices focus on (1) employee -directed codes of conduct, which are fair systems of employee selection, promotion, and compensation, (2) support for employees training and development, and (3) assistance to employee in the balancing of work and family life (Liao & Teng, 2010). Basically with an overall positive ethically trained employee being satisfied, will lead to a harder worker who will sell more and bring more money in from the stakeholders. The opposite of this would be not trained employees that have no core values and no training. This will have an adverse

effect of lower sales, fewer stakeholders, and possible unethical fines. This unethical behavior would have a negative effect on sales.

V.

Unethical Behavior and its Effects on Sales Unethical behavior by a business can have a significant impact on sales. The

interest in improving ethics can be seen across all business functions, because all are vulnerable to charges of unethical practice. However, the promotional component of marketing, particularly the sales function, is especially vulnerable to accusations of unethical practice (Stevenson & Bodkin, 1998). Business in general is affected by ethics but as stated sales is more susceptible to being effected by unethical behavior. The origins of such accusations spring from many sources, not the least of which is the fact that because of personal dealings with salespeople, the general public perceives them to be dishonest and unethical (Stevenson & Bodkin, 1998). The main reason for this is because society does not trust the employees of these businesses, which has a negative effect on the total number of sales in an area that relays on salespeople. This is because society thinks that salespeople will do anything to make a sale. According to Joseph Bellizzi and Ronald Hasty, One form of unacceptable behavior is unethical selling behavior. Behavior such as misleading customers or disparaging competitors are generally considered unethical and inappropriate conduct, but alluring to salespeople because they may enhance sales production (2003). Salespeople misleading their customers and talking down completion is an unethical tactic this is used to increased sales, hence this is why society does not always trust them. If a salesperson or company is proven to be conducting unethical behavior there are consequences. Unethical Behavior

can be costly to organizations in terms of diminished public trust, tarnished organizational reputation, and lost profits (Trevino & Ball, 1992). Each of these cost listed can have a serious effect on the organizations and its sales. Diminished public trust will cause people in society to avoid or stop using the organizations good or service because society will not trust them to be ethical towards them. Tarnished organizational reputation will cause a stop in potential new customers because of a negative reputation the company has. This is because of media and word of mouth, when a company does something unethical it gives society a negative view of the organization. There obviously will be a loss in profits because if there is a stop in new or existing customers there will be no sales due to their unethical behavior.

VI.

Conclusion Ethics plays a major role in the day-to-day business of an organization, whether

it is the organization as a whole or an individual. It has been seen that society and market has a major impact on how ethics is perceived because over time the culture is always changing. An organization should have a type of model or guideline that should help them evaluate their ethical behavior. They should follow this model and change accordingly to better satisfy society. Setting standards through the organization allows everyone to be on the same page with ethical standards. These standards should come from the leaders of the organization (management) to implement and pass on to other employees. The way that this can be passed on is how the employees are trained and how ethics is instilled in them from the leaders. Employees that conduct unethical behavior can hurt the sales of a company because it can have a negative impact on the reputation

and trust a company gains from their customers. This would cause new customers and existing customers from continue buying from an organization, which in turn cause the organization not to make profits.

References

Alahmad, A. (2010). To be ethical or not to be: An international code of ethics for leadership. Journal of Diversity Management,5(1), 31-35. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/19 5579458?accountid=13025 Bellizzi, J. A., & Hasty, R. W. (2003). Supervising unethical sales force behavior: How strong is the tendency to treat top sales performers leniently? Journal of Business Ethics, 43(4), 337-351. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/19 8091110?accountid=13025

Izraeli, D., & BarNir, A. (1998). Promoting ethics through ethics officers: A proposed profile and an application. Journal of Business Ethics, 17(11), 1189-1196. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/19 8021111?accountid=13025 Liao, W., & Teng, M., PhD. (2010). The relationship between ethics training employee satisfaction: A mediator of corporate responsibility practices. The Journal of Human Resource and Adult Learning, 6(1), 9-18. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/86 7266405?accountid=13025

McDonald, G. (1999). Business ethics: Practical proposals for organisations. Journal of Business Ethics, 19(2), 143-158. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/19 8026323?accountid=13025

Miao, Q., Newman, A., Yu, J.,& Xu, L. (2013). The relationship between ethical leadership and unethical pro-organizational behavior: Linear or curvilinear effects? Journal of Business Ethics, 116(3), 641-653. doi:http://dx.doi.org/10.1007/s10551-012-1504-2 Peterson, D. K. (2002). The relationship between unethical behavior and the dimensions of the ethical climate questionnaire.Journal of Business Ethics, 41(4), 313-326. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/19806082 6?accountid=13025

Schwepker, C. H., & Good, D. J. (2010). Transformational Leadership and its Impact on Sales Force Moral Judgment. Journal Of Personal Selling & Sales Management, 30(4), 299-318. Stevenson, T. H., & Bodkin, C. D. (1998). A cross-national comparison of university students' perceptions regarding the ethics and acceptability of sales practices. Journal of Business Ethics, 17(1), 45-55. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/19 8095230?accountid=13025

Svensson, G., & Wood, G. (2003). The dynamics of business ethics: A function of time and culture--cases and models.Management Decision, 41(4), 350. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/21 2065897?accountid=13025 Svensson, G., & Wood, G. (2008). A model of business ethics. Journal of Business Ethics, 77(3), 303. doi:http://dx.doi.org/10.1007/s10551-007-9351-2

Thornton, L. F. (2009). Leadership ethics training: Why is why is it so hard to get it right? T + D, 63(9), 58-61,8. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/22 7040136?accountid=13025 Trevino, L. K., & Ball, G. A. (1992). The social implications of punishing unethical behavior: Observers' cognitive and affective reactions. Journal of Management, 18(4), 751. Retrieved from http://ezproxy.oswego.edu:2048/login?url=http://search.proquest.com/docview/21 5259071?accountid=13025