Part Two

Ethical Issues and

the
Institutionalization
of Business Ethics
Chapter 3
Emerging
Business Ethics
Issues
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Learning Objectives
• Define ethical issues in the context of organizational ethics
• Examine ethical issues as they relate to the basic values of
honesty, fairness, and integrity
• Delineate misuse of company resources, abusive and
intimidating behavior, lying, conflicts of interest, bribery,
corporate intelligence, discrimination, sexual harassment,
fraud, financial misconduct, insider trading, intellectual
property rights, and privacy as business ethics issues
• Examine the challenge of determining an ethical issue in
business

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Ethical Awareness
• People make ethical decisions when they find an
ethical component in a particular issue or
situation.
• Failure to acknowledge or be aware of ethical
issues is hazardous to an organization.
• Ethical issues involve a group, a problem, or an
opportunity that requires introspection and
investigation before a decision can be made.

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Foundational Values for

Identifying Ethical Issues (1 of 3)
• Integrity: Element of virtue, an unimpaired
condition. Integrity relates to product quality,
open communication, transparency, and
relationships.
• Honesty: Truthfulness or trustworthiness. To tell
the truth to the best of your knowledge without
hiding anything.
• Confucius defined an honest person as junzi, or
one who has the virtue ren.

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Foundational Values for

Identifying Ethical Issues (2 of 3)
• Honesty
• Ren: One who has humanity.
• Yi: What one should do according to the
relationships with others.
• Li: Good manners or respect.
• Zhi: Whether a person knows what to say and
what to do as it relates to honesty.

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Foundational Values for

Identifying Ethical Issues (3 of 3)
• Honesty
• The Confucian version of Kant’s Golden Rule is to
treat your inferiors as you would want your superiors
to treat you.
• Virtues such as familial honor and reputation for
honesty are paramount.
• Lying: (1) Untruthful statements that result in damage
or harm; (2) “white lies,” which do not cause damage
but instead function as excuses or a means of
benefitting others; and (3) statements obviously meant
to engage or entertain without malice.

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Foundational Values Continued

• Fairness: Just, equitable, and impartial.
• Three fundamental elements that motivate
people to be fair:
1. Equality: The distribution of benefits and
resources.
2. Reciprocity: An interchange of giving and
receiving in social relationships.
3. Optimization: Trade-off between equity (equality)
and efficiency (maximum productivity).

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Ethical Issues in Business (1 of 19)

• Misuse of Company Time and Resources
• Abusive or Intimidating Behavior: Actions
such as physical threats, false accusations, and
yelling. Meaning differs from person to person.
• Bullying: Creates hostile environment. Workplace
bullying is strongly associated with sleep
disturbances, as well as depression, fatigue,
increased sick days, and stomach problems.

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Ethical Issues in Business (2 of 19)

• Lying
1. Joking without malice.
2. Commission lying: Creating a perception or belief
by words that intentionally deceive the receiver of
the message.
3. Omission lying: Intentionally not informing others
of any differences, problems, safety warnings, or
negative issues relating to the product or
company that significantly affect awareness,
intention, or behavior.

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Ethical Issues in Business (3 of 19)

• Conflicts of Interest: Individual chooses either
to advance his or her own interests, those of the
organization, or those of some other group.
• Bribery: Offering something (often money) in
order to gain an illicit advantage from someone in
authority.
• Active bribery: The person who promises or
gives the bribe commits the offense.

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Ethical Issues in Business (4 of 19)

• Bribery
• Passive bribery: Offense committed by an official
who receives the bribe.
• Not an offense if the advantage was permitted or
required by the written law or regulation of the
foreign public official’s country, including case law.

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Ethical Issues in Business (5 of 19)

• Bribery
• Small facilitation payments: Payments made to
obtain or retain business or other improper
advantages—do not constitute bribery payments
for U.S. companies in some situations.
• Often made to induce public officials to perform
their functions.
• Illegal in the United Kingdom.

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Ethical Issues in Business (6 of 19)

• Corporate Intelligence: Collection and analysis
of information on markets, technologies,
customers, and competitors, as well as on
socioeconomic and external political trends.
• Three types:
• Passive monitoring system for early warning.
• Tactical field support.
• Support dedicated to top-management strategy.

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Ethical Issues in Business (7 of 19)

• Discrimination: On the basis of race, color,
religion, sex, marital status, sexual orientation,
public assistance status, disability, age, national
origin, or veteran status is illegal in the United
States.
• Discrimination on the basis of political opinions or
affiliation with a union is defined as harassment.

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Ethical Issues in Business (8 of 19)

• Discrimination
• Equal Employment Opportunity Commission
• Age Discrimination in Employment Act: Illegal to
discriminate against people 40 years of age or older,
as well as those that require employees to retire
before the age of 70.
• Affirmative Action Programs: Involve efforts to
recruit, hire, train, and promote qualified individuals
from groups that have traditionally been discriminated
against on the basis of race, gender, or other
characteristics.

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Ethical Issues in Business (9 of 19)

• Affirmative Action Programs and Supreme
Court Standards
1. There must be a strong reason for developing an
affirmative action program.
2. Affirmative Action Programs must apply only to
qualified candidates.
3. Affirmative Action Programs must be limited and
temporary and therefore cannot include “rigid and
inflexible quotas.”

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Ethical Issues in Business (10 of 19)

• Sexual Harassment: Any repeated, unwanted
behavior of a sexual nature perpetrated upon
one individual by another.
• May be verbal, visual, written, or physical.
• Can occur between people of different genders or
those of the same gender.
• The law is primarily concerned with the impact of
the behavior and not its intent (Title VII of the Civil
Rights Act of 1964).

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Ethical Issues in Business (11 of 19)

• Sexual Harassment
• Hostile work environment—three criteria must
be met. The conduct was:
1. Unwelcome.
2. Severe, pervasive, and regarded by the claimant
as so hostile or offensive as to alter his or her
conditions of employment.
3. Such that a reasonable person would find it hostile
or offensive.

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Ethical Issues in Business (12 of 19)

• Sexual Harassment
• Hostile work environment
• Employee need not prove the harassment
seriously affected his or her psychological well-
being or that it caused an injury.
• Decisive issue is whether the conduct interfered
with the claimant’s work performance.

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Ethical Issues in Business (13 of 19)

• Sexual Harassment
• Dual relationship: A personal, loving, and/or
sexual relationship with someone with whom you
share professional responsibilities.
• If the sexual advances in any form are considered
mutual, then consent is created.
• Unless the employee or employer gets something
in writing before the romantic action begins,
consent can always be questioned.

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Ways to Avoid Sexual

Misconduct (1 of 2)
1. Establish a statement of policy naming someone in the
company as ultimately responsible for preventing
harassment at the company.
2. Establish a definition of sexual harassment that includes
unwelcome advances, requests for sexual favors, and
any other verbal, visual, or physical conduct of a sexual
nature; that provides examples of each; and reminds
employees the list of examples is not all-inclusive.
3. Establish a non-retaliation policy that protects
complainants and witnesses.

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Ways to Avoid Sexual

Misconduct (2 of 2)
4. Establish specific procedures for prevention of such
practices at early stages. If in writing, they are expected
by law to train employees in accordance with them,
measure their effects, and ensure the policies are
enforced.
5. Establish, enforce, and encourage victims of sexual
harassment to report the behavior to authorized
individuals.
6. Establish a reporting procedure.
7. Make sure the firm has timely reporting requirements to
the proper authorities.

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Ethical Issues in Business (14 of 19)

• Fraud: Any purposeful communication that
deceives, manipulates, or conceals facts in order
to harm others. Can be a crime; convictions may
result in fines, imprisonment, or both.
• Accounting fraud: Usually involves a
corporations’ financial reports.
• Fraud triangle: Pressure, opportunity, and
rationalization.
• Marketing fraud: Dishonestly creating,
distributing, promoting, and pricing products.

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Ethical Issues in Business (15 of 19)

• Fraud
• Puffery: Exaggerated advertising, blustering, and
boasting upon which no reasonable buyer would
rely upon and is not actionable under the Lanham
Act.
• Implied falsity: The message has a tendency to
mislead, confuse, or deceive the public.
• Literally true but imply a false message.

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Ethical Issues in Business (16 of 19)

• Fraud
• Literally false
• Tests prove (establishment claims): Advertisement
cites a study or test that establishes the claim.
• Bald assertions (nonestablishment claims):
Advertisement makes a claim that cannot be
substantiated.
• Labeling Issues
• Kroger agreed to remove “raised in a humane
environment” from its packages of chicken.

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Ethical Issues in Business (17 of 19)

• Consumer Fraud: When consumers attempt to
deceive businesses for their own gain.
• Shoplifting
• Collusion: An employee assists the consumer in
fraud.
• Duplicity: Consumer stages an accident in a store
and then seeks damages against the store for its lack
of attention to safety.
• Guile: A person who is crafty or understands
right/wrong behavior but uses tricks to obtain an unfair
advantage.

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Ethical Issues in Business (18 of 19)

• Insider Trading: An insider is any officer, director, or
owner of 10 percent or more of a class of a
company’s securities.
• Illegal insider trading: The buying or selling of stocks
by insiders who possess information that is not yet
public.
• Legal insider trading: Legally buying and selling
stock in an insider’s own company, but not all the time.
Insiders are required to report their insider
transactions within two business days of the date the
transaction occurred.

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Ethical Issues in Business (19 of 19)

• Intellectual Property Rights: Legal protection of
intellectual property—music, books, and movies.
• Copyright Act of 1976
• Digital Millennium Copyright Act of 1998
• Digital Theft Deterrence and Copyright Damages
Improvement Act of 1999

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