CHAPTER 6: BUSINESS ETHICS SCOPE AND IMPACT OF BUSINESS ETHICS

BUSINESS ETHICS • Economic Impact- A business has an economic

impact on society through the wages it pays to its
After studying the chapter, you should be able to: employees, the materials that it buys from their
1. Explain what business ethics is. suppliers and the prices it charges its customers.
2. Discuss the purposes of business ethics. • Social Impact- The social impact of corporate
3. Describe the scope and impact of business ethics governance contributes to the ethical climate of
on society. Corruption may unfairly raise the price of
a. the economy goods for consumers, or the quality of the product or
b. society service compromised.
c. environment
d. business managers Chapter 6 – Urban Bank
4. Explain the ethical challenges in today’s world.
 Environmental Impact- Businesses that implement
BUSINESS ETHICS good environmental policies to use energy more
efficiently, reduce waste and in general lighten
 Refers to standards of moral conduct, behavior their environmental footprint can reduce their
and judgment in business. internal costs and promote a positive image of
 Manners ethics is an area of corporate their company.
responsibility where businesses are legally bound
and socially obligated to conduct business in an Chapter 6 - Honda Facility Earns Environmental Award
ethical manner. for Innovative Wastewater Process
 Based on the personal values and standards of
• Impact on Business Managers
each person engaged in business.
A manager should:
PURPOSES OF BUSINESS ETHICS
 Acknowledge that his role is to serve the business
• Main Purpose
enterprise and the community.
 To help business and would-be business to
 Avoid all abuses of executive power for personal
determine what business practices are right
gain, advantage or prestige.
and what are wrong.
 Reveal the fact to his superior whenever his
• Special Purpose
personal business or financial interests’ conflicts
 To make businessmen realize that they cannot
with those of the company.
employ double standards
 Be actively concerned with the difficulties and
 To show businessmen that common practices
problems of subordinates treat them fairly and by
are really wrong.
example, lead them effectively, assuring all the
 To serve as a standard or ideal upon which
right of reasonable access and appeal to
business conduct should be based
superiors.
Double standards - A double standard is a principle or  Recognize that his subordinates have a right to
policy that is applied in a different manner to similar information on matters affecting them and make
things, without proper justification. Essentially, this provision for its prompt communication unless
means that a double standard occurs when two or such communication is likely to undermine the
more things, such as individuals or groups, are treated security and efficiency of the business.
differently, when they should be treated the same  Fully evaluate the likely effects on employees and
way. the community of the business plans for the
future before taking a final decision and
SCOPE AND IMPACT OF BUSINESS ETHICS  Cooperate with his colleagues and not attempt to
Business ethics covers all conduct, behavior and secure personal advantage at their expense.
judgment in business. This includes the slightest In particular, a manager should:
deviation from what is right to illegal and dishonest
acts that are punishable by law. It involves making the  Recognize that his subordinates have a right to
right choices while engaging in such business activities information;
as manufacturing and selling a product or selling and  Fully evaluate the likely effects on employees and
rendering a service. the community of the business plans for the
future before taking a final decision and;
 Cooperate with his colleagues and not attempt to
secure personal advantage at their expense.
 CHAPTER 7: COMMON UNETHICAL PRACTICES ❑ WEIGHT UNDERSTATEMENT OR SHORT
OF BUSINESS WEIGHING
ESTABLISHMENTS ❑ MEASUREMENT UNDERSTATEMENT OR SHORT
TYPES: MEASUREMENT
1. TO FAMILIARIZE YOURSELF OF THE COMMON ❑ QUALITY UNDERSTATEMENT OR SHORT
UNETHICAL PRACTICES OF BUSINESS NUMBERING.
ESTABLISHMENTS SUCH AS
• MISREPRESENTATION AND Product Misrepresentation and “Caveat Emptor”
• OVER-PERSUASION Business Practices involving Misrepresentation
2. DESCRIBE HOW DIRECT MISREPRESENTATION and Lying
IS COMMITTED BY BUSINESS A. Direct Misrepresentation:
FIRMS SUCH AS Is characterized by actively misrepresenting
a. DECEPTIVE PACKAGING something about the product or service.
b. MISBRANDING OR MISLABELING 1. Deceptive Packaging - The practice of placing
c. FALSE AND MISLEADING ADVERTISING the product in containers of exaggerated sizes
d. ADULTERATION and misleading shapes to give a false impression
e. WEIGHT UNDERSTATEMENT of its actual contents.
f. MEASUREMENT UNDERSTATEMENT 2. Misbranding or Mislabeling - Is the practice of
g. QUANTITY UNDERSTATEMENT making false statements on the label of a product
3. DESCRIBE HOW INDIRECT or making its container similar to a well-known
MISREPRESENTATION IS DONE BY BUSINESS product for the purpose of deceiving the
FIRMS SUCH AS customer as to the quality and/or quantity of a
a. CAVEAT EMPTOR product being sold
b. DELIBERATE WITHHOLDING OF INFORMATION 3. False or Misleading Advertising - Advertising
c. PASSIVE DECEPTION does not always tell the “whole truth and nothing
4. DESCRIBE HOW OVER-PERSUASION BECOMES but the truth” if it greatly exaggerates the virtues
UNETHICAL of a product and tells only half of the truth or else
5. DESCRIBE SOME UNETHICAL CORPORATE sings praises to its non-existent virtues.
PRACTICES OF THE 4. Adulteration - Is the unethical practice of
a. BOARD OF DIRECTORS debasing a pure or genuine commodity by
b. EXECUTIVE OFFICERS AND LOWER LEVEL imitating or counterfeiting it, by adding
MANAGER something to increase its bulk or volume, or by
c. EMPLOYEES substituting an inferior product for a superior one
for the purpose of profit or gain.
TYPES : 5. Weight Understatement or Short Weighing -
➢MISREPRESENTATION – TO GIVE A FALSE OR the mechanism of the weighing scale is tampered
MISLEADING REPRESENTATION OF USUALLY with or something is unobtrusively attached to it
WITH AN INTENT TO DECEIVE OR TO BE UNFAIR so that the scale registers more than the actual
➢MISREPRESENTATION - MAY BE CLASSIFIED weight.
INTO TWO TYPES: 6. Measurement understatement or short
DIRECT MISREPRESENTATION measurement. In short measurement, the
AND INDIRECT MISREPRESENTATION measuring stick or standard is shorter than the
➢DIRECT MISREPRESENTATION IS real length or smaller in volume than the
CHARACTERIZED BY ACTIVELY MISREPRESENTING standard.
ABOUT THE PRODUCT OR CUSTOMERS. 7. Quality understatement or short numbering. In
this unethical practice, the seller gives the
THIS INCLUDES: customer less than the number asked for or paid
❑ DECEPTIVE PACKAGING. for.
❑ MISBRANDING OR MISLABELING
❑FALSE OR MISLEADING ADVERTISING
❑ ADULTERATION
B. Indirect Misrepresentation: It is characterized BOARD OF DIRECTORS
by omitting adverse information about the • PLAIN GRAFT
product or service. It is a passive deception and ✓SOME OF THE BOARD OF DIRECTORS HELP
not as obvious compared to direct THEMSELVES TO THE EARNINGS THAT
misrepresentation. OTHERWISE WOULD GO TO OTHER
Caveat Emptor means, “let the buyer beware” STOCKHOLDERS. THIS IS DONE BY VOTING FOR
and is a practice very common among salesmen. THEMSELVES DURING THE STOCKHOLDER’S
It is the responsibility of the consumer to MEETING AND THE EXECUTIVE OFFICERS HUGE
determine for himself the defects or negative PER DIEMS, LARGE SALARIES, BIG BONUSES THAT
features of the product. DO NOT COMMENSURATE TO THE VALUE OF
-Deliberately withholding information in any THEIR SERVICES.
business transaction. • INTERLOCKING DIRECTORSHIP
-Business ignorance: Inability of the businessman ✓HOLDS DIRECTORIAL POSITIONS IN TWO OR
to provide the customer with the complete MORE CORPORATIONS THAT DO BUSINESS WITH
information. Example stock investments. EACH OTHER
✓INVOLVE CONFLICT OF INTEREST AND CAN
COMMON UNETHICAL PRACTICES OF BUSINESS RESULT TO DISLOYAL SELLING.
ESTABLISHMENTS • INSIDER TRADING
• INDIRECT MISREPRESENTATION - OMITTING ✓BROKER OR ANOTHER PERSON WITH ACCESS
ADVERSE OR UNFAVORABLE INFORMATION TO CONFIDENTIAL INFORMATION USES THAT
ABOUT THE PRODUCT OR SERVICE. INFORMATION TO TRADE IN SHARES AND
• CAVEAT EMPTOR - MEANS “LET THE BUYER SECURITIES OF A CORPORATION
BEWARE” • NEGLIGENCE OF DUTY
• THE SELLER IS NOT OBLIGATED TO REVEAL ANY
✓FAILURE TO ATTEND BOARD MEETINGS
DEFECT IN THE PRODUCT OR SERVICE HE IS
SELLING. IT IS THE RESPONSIBILITY OF THE
CORPORATE ETHICS
CUSTOMER TO DETERMINE FOR HIMSELF THE
CODE OF ETHICS
DEFECTS OF THE PRODUCT.
IS A GUIDING SET OF PRINCIPLES INTENDED TO
• DELIBERATE WITHHOLDING OF INFORMATION -
INSTRUCT PROFESSIONALS TO ACT IN A MANNER
NOT DISCLOSING CERTAIN INFORMATION ABOUT
THAT ALIGNS WITH THE ORGANIZATION'S
THE TRANSACTION
VALUES AND IS BENEFICIAL TO ALL
• PASSIVE DECEPTION - CONTRIBUTES TO THE
STAKEHOLDERS INVOLVED
IMPRESSION THAT BUSINESSMEN ARE LIARS AND
ARE OUT TO MAKE A FAST BUCK.
SOME UNETHICAL PRACTICES OF EXECUTIVE
• OVER-PERSUASION - APPEALING TO THE
OFFICERS AND LOWER LEVEL MANAGERS
EMOTIONS OF A PROSPECTIVE CUSTOMER AND
1. CLAIMING A VACATION TRIP TO BE A BUSINESS
URGING HIM TO BUY AN ITEM OF MERCHANDISE
TRIP.
HE NEEDS.
2. HAVING EMPLOYEES DO WORK UNRELATED TO
1. URGING A CUSTOMER TO SATISFY A LOW
THE BUSINESS.
PRIORITY NEED FOR MERCHANDISE.
3. LOOSE OR INEFFECTIVE CONTROLS.
2. PLAYING UPON INTENSE EMOTIONAL
4. UNFAIR LABOR PRACTICES.
AGITATION TO CONVINCE A PERSON TO BUY.
➢TO INTERFERE WITH, RESTRAIN OR COERCE
3. CONVINCING A PERSON TO BUY WHAT HE
EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO
DOES NOT NEED JUST BECAUSE HE HAS THE
SELF-ORGANIZATION;
CAPACITY OR MONEY TO DO SO.
➢TO REQUIRE AS A CONDITION OF
CORPORATE ETHICS EMPLOYMENT THAT A PERSON OR AN EMPLOYEE
UNETHICAL PRACTICES OF CORPORATE SHALL NOT JOIN A LABOR ORGANIZATION OR
MANAGEMENT SHALL WITHDRAW FROM ONE TO WHICH HE
SAMPLE BOARD OF DIRECTORS ETHICS CODE BELONGS;
➢TO CONTRACT OUT SERVICES OR FUNCTIONS
BEING PERFORMED BY UNION MEMBERS WHEN
SUCH WILL INTERFERE WITH, RESTRAIN OR AND PROMOTE THE INTERESTS OF HIS EMPLOYER
COERCE EMPLOYEES IN THE EXERCISE OF THEIR VIOLATES THIS OBLIGATION BY
RIGHTS TO SELF-ORGANIZATION; GETTING HIMSELF INTO A SITUATION WHERE HIS
➢TO INITIATE, DOMINATE, ASSIST OR DECISION OR ACTUATION IS INFLUENCED BY
OTHERWISE WITH THE FORMULATION OR WHAT HE CAN GAIN PERSONALLY FROM IT
ADMINISTRATION OF ANY LABOR RATHER THAN WHAT HIS EMPLOYER
ORGANIZATION, INCLUDING THE GIVING OF CAN GAIN FROM IT.
FINANCIAL OR OTHER SUPPORT TO IT; EXAMPLES:
➢TO DISCRIMINATE WITH REGARDS TO WAGES, • HOLDS A SIGNIFICANT INTEREST OR SHARES OF
HOURS OF WORK, AND OTHER TERMS OR STOCK OF A COMPETITOR, SUPPLIER, CUSTOMER
CONDITIONS OF EMPLOYMENT IN ORDER TO OR DEALER FAVORS THIS PARTY TO THE
ENCOURAGE OR DISCOURAGE MEMBERSHIP IN PREJUDICE OF HIS EMPLOYER.
ANY LABOR ORGANIZATION. • ACCEPTS CASH, A GIFT OR A LAVISH
ENTERTAINMENT OR A LOAN FROM A SUPPLIER,
SOME UNETHICAL PRACTICES OF EXECUTIVE CUSTOMER, COMPETITOR, OR CONTRACTOR.
OFFICERS AND LOWER LEVEL MANAGERS • USES OR DISCLOSES CONFIDENTIAL COMPANY
➢TO DISMISS, DISCHARGE, OR OTHERWISE INFORMATION FOR HIS OR SOMEONE ELSE’S
PREJUDICE OR DISCRIMINATE, AGAINST AN PERSONAL GAIN.
EMPLOYEE FOR HAVING GIVEN OR BEING ABOUT • ENGAGES IN THE SAME TYPE OF BUSINESS AS
TO GIVE TESTIMONY UNDER THE LABOR CODE; HIS EMPLOYER.
➢TO VIOLATE THE DUTY TO BARGAIN • USES FOR HIS OWN BENEFIT A BUSINESS
COLLECTIVELY AS PRESCRIBED BY THE LABOR OPPORTUNITY IN WHICH HIS EMPLOYER HAS OR
CODE. MIGHT BE EXPECTED TO HAVE AN INTEREST.
➢TO PAY NEGOTIATION OR ATTORNEY’S FEES TO
2. DISHONESTY - BUSINESS ETHICS IS NOT JUST
THE UNION OR ITS OFFICERS OR AGENTS AS PART
LIMITED TO BUSINESS TRANSACTIONS WITH
OF THE SETTLEMENT OF ANY ISSUE IN
OUTSIDE PARTIES. IT ALSO COVERS EMPLOYEE
COLLECTIVE BARGAINING OR ANY OTHER
EMPLOYER RELATIONSHIP, ESPECIALLY WITH
DISPUTE;
RESPECT TO AN EMPLOYEE’S HONESTY AS HE
➢TO VIOLATE OR REFUSE TO COMPLY WITH
CARRIES OUT HIS ASSIGNED DUTIES IN THE
VOLUNTARY ARBITRATION AWARDS OR
OFFICE.
DECISIONS RELATING TO THE
EXAMPLES:
IMPLEMENTATION OR INTERPRETATION OF A
• TAKING OFFICE SUPPLIES HOME FOR PERSONAL
COLLECTIVE BARGAINING AGREEMENT;
USE.
➢TO VIOLATE A COLLECTIVE BARGAINING • PADDING AN EXPENSE ACCOUNT THROUGH
AGREEMENT. THE USE OF FAKE RECEIPTS WHEN CLAIMING
REIMBURSEMENTS.
5. MAKING FALSE CLAIMS ABOUT LOSSES TO FREE • TAKING CREDIT FOR ANOTHER EMPLOYEE’S
THEMSELVES FROM PAYING THE COMPENSATION IDEA
AND BENEFITS PROVIDED BY LAW.
6. MAKING EMPLOYEES SIGN DOCUMENTS CREATING AN ETHICAL WORKPLACE
SHOWING THEY ARE RECEIVING FULLY WHAT ENVIRONMENT THE FOLLOWING ELEMENTS ARE
THEY ARE ENTITLED TO UNDER THE LAW WHEN CRITICAL COMPONENTS IN CREATING AN
IN FACT THEY ARE ONLY RECEIVING A FRACTION ETHICAL WORKPLACE ENVIRONMENT:
OF WHAT THEY ARE SUPPOSED TO GET. • FAIRNESS: EMPLOYEES AT EVERY LEVEL SHOULD
7. SEXUAL HARASSMENT. BE HELD TO
THE SAME STANDARDS OF CONDUCT.
CORPORATE ETHICS • COMMUNICATION: MOST COMPANIES ARE
SOME UNETHICAL PRACTICES BY EMPLOYEES PRETTY GOOD AT
1. CONFLICTS OF INTEREST - ARISES WHEN AN SHARING INFORMATION FROM THE TOP DOWN.
EMPLOYEE WHO IS DUTY BOUND TO PROTECT BUT THE COMPANIES WITH THE BEST
WORKPLACE ENVIRONMENT ALSO ALLOW
COMMUNICATION TO FLOW FROM THE BOTTOM 7. SEXUAL ORIENTATION - IT REFERS TO SEXUAL
UP. PREJUDICE, A NEGATIVE ATTITUDE TOWARDS
• RESPECT: EMPLOYEES DESERVE SOMEONE THAT IS BASED ON THEIR SEXUAL
CONSIDERATION AS ORIENTATION. AN EXAMPLE OF THIS BIAS IS
INDIVIDUALS RATHER THAN SIMPLY AS COGS IN HOMOPHOBIA, WHICH REFERS TO
THE COMPANY MACHINE. RECOGNIZING DISCRIMINATION TOWARDS SOMEONE WHO IS
INDIVIDUAL TALENTS, SKILLS, ANDGOALS HELPS HOMOSEXUAL
DEVELOP EMPLOYEES INTO EVEN
MORE VALUABLE MEMBERS OF THE
ORGANIZATION, WHICH,
IN TURN, HELPS A COMPANY THRIVE.
• TRUST: MANY MANAGERS CLING TO THE
NOTION THAT
PEOPLE DON’T LIKE TO WORK AND WILL GOOF
OFF AT ANY OPPORTUNITY.

OTHER CORPORATE ETHICAL ISSUES

1. DISCRIMINATION - THE UNJUST OR
PREJUDICIAL TREATMENT OF DIFFERENT
CATEGORIES OF PEOPLE, ESPECIALLY ON THE
GROUNDS OF ETHNICITY, AGE, SEX, OR
DISABILITY.
2. AGEISM - AGEISM IS DEFINED AS
DISCRIMINATION AGAINST OLDER PEOPLE
BECAUSE OF NEGATIVE AND INACCURATE
STEREOTYPES—AND IT'S SO INGRAINED IN OUR
CULTURE THAT WE OFTEN DON'T EVEN NOTICE.
3. DISABILITY - A DISABILITY IS ANY CONDITION
OF THE BODY OR MIND (IMPAIRMENT) THAT
MAKES IT MORE DIFFICULT FOR THE PERSON
WITH THE CONDITION TO DO CERTAIN ACTIVITIES
(ACTIVITY LIMITATION) AND INTERACT WITH THE
WORLD AROUND THEM (PARTICIPATION
RESTRICTIONS).
4. GENDER - REFERS TO THE CHARACTERISTICS OF
WOMEN, MEN, GIRLS AND BOYS THAT ARE
SOCIALLY CONSTRUCTED. THIS INCLUDES
NORMS, BEHAVIORS AND ROLES ASSOCIATED
WITH BEING A WOMAN, MAN, GIRL OR BOY, AS
WELL AS RELATIONSHIPS WITH EACH OTHER.
5. RACIAL AND ETHNIC – ANY DISCRIMINATION
AGAINST ANY INDIVIDUAL ON THE BASIS OF
THEIR RACE, ANCESTRY, ETHNICITY, AND/OR SKIN
COLOR.
6. RELIGION - IT IS TREATING INDIVIDUALS
DIFFERENTLY BECAUSE OF THEIR RELIGIOUS
BELIEFS AND PRACTICES, AND/OR THEIR
REQUEST FOR ACCOMMODATIONS OF THEIR
RELIGIOUS BELIEFS AND PRACTICES. IT ALSO
INCLUDES TREATING INDIVIDUALS DIFFERENTLY
BECAUSE OF THEIR LACK OF RELIGIOUS BELIEFS
OR PRACTICES.