15/03/2024

BUSINESS ETHICS

PHAN VŨ NGỌC LAN – MDE

International Business
Administration Department
[email protected]

Chapter 3

Organizational
ethics

© 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not
be copied, scanned, duplicated, forwarded, distributed,©
Copyright or 2013
posted The
on a website, in whole orCompanies,
McGraw-Hill part. Inc. All rights reserved.

1
 15/03/2024

1. Define organizational ethics.

Learning Outcomes
2. Explain the respective ethical challenges/dilemmas
facing the functional departments of an
organization.
3. Discuss the position that a human resource (HR)
dep. should be at the center of any corporate code
of ethics.
4. Explain the potential ethical challenges presented
by generally accepted accounting principles
(GAAP).
5. Determine potential conflicts of interest within any
organizational function.
© 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not
be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 2-3

Defining Organizational Ethics

Organizational ethics as an area of
study separate from the general
subject of ethics:
• Other parties (the stakeholders)
have a vested interest in the
ethical performance of an
organization.
• In a work environment, your
personal value system may clash
with the ethical standards of the
organization’s operating culture.

© 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not
be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 2-4

2
 15/03/2024

Defining organizational culture

• The values, beliefs, and
norms that all the
employees of that
organization share.
• represents the sum of all the
policies and procedures—
both written and informal—
from each of the functional
departments in the
organization in addition to
the policies and procedures
established for the whole
organization.
2-5

Value chain
The key functional inputs that an
organization provides in the transformation
Value chain of raw materials into a delivered product or
service.
1. Represent a
significant
commitment of
resources
(personnel,
technology
and dollars).
2. Employees in
each area can
face ethical
challenges and
dilemmas.
2-6

3
 15/03/2024

Value chain – key functions

Research & Development:
• Develops & creates new product designs based on
market research & strategy
• => future growth of organization

Manufacturing:
• Builds the product.

Marketing (and advertising)

• Ensures the product reaches the hands of a
satisfied customer

Sales

Customer service
2-7

Value chain – Line Functions

Human Resource
Management: recruitment, training, and development of
personnel

Finance: Certification of accuracy of a company’s

financial statements.
Information
system/ maintain the technology backbone of the
Technology: organization

Management:
supervisory role
2-8

4
 15/03/2024

Value chain –
key functions & line functions
• Each of these functional line areas can
represent a significant commitment of
resources (personnel, technology and dollars).
• From an ethical perspective, employees in each
area can face ethical challenges and dilemmas.

2-9

Progress questions
• 1. Explain the term organizational culture.
2. Define the term value chain.
3. List the five key functional areas within an
organization.
4. List the four primary line functions.

2-10

10

5
 15/03/2024

Ethical challenges/dilemmas
facing the functional departments

11

ETHICS IN RESEARCH &

DEVELOPMENT (R&D)
Ethical dilemma: Decisions
Responsibilities:
• For future growth of the about product quality
organization: develop new
products (better, faster, The best
cheaper) based on market materials The second
research => to retain best ?
customers & maintain
leading position.
• Commitment to consumers A full
of providing the most battery of Computer
qualified, safest, most tests simulations?
reliable, & without
defective products.
Copyright © 2013 The McGraw-Hill Companies, Inc. All rights reserved.

13

6
 15/03/2024

ETHICS IN MANUFACTURING
Ethical dilemma: want to
build to precise design specs
Responsibilities: but what if supply problem?
• Build the product
to the precise
design specs from Built right
R&D. Built fast?
• Build the product
fast because your
biggest competitor
also is racing to put Wait & hold
a new Alternative &
up delivery less reliable
product on the
market. supplier?
Copyright © 2013 The McGraw-Hill Companies, Inc. All rights reserved.

14

ETHICS IN MARKETING
Ethical dilemma: Encourage people
Responsibilities: to buy unnecessary or hurtful things
• Ensure the
product Pressures of
reaches the expanding Issue of reducing
hands of a consumption side effects of that
satisfied consumption
customer.
• Sell more of
ETHICAL THEORIES
the Accurately
product/servi describe the Influence
ce using product/service customers/prospects
marketing to buy
toolkit.
Copyright © 2013 The McGraw-Hill Companies, Inc. All rights reserved.

15

7
 15/03/2024

ETHICS IN MARKETING
Code of ethics adopted by Is encouraging people
the American Marketing to buy things they don’t
Association (AMA): need truly an ethical
• Doing no harm, fostering process?
trust, and improving => Using ethical
“customer confidence in the
integrity of the marketing theories to support
exchange system,” your argument
• Clear ethical values of
honesty, responsibility,
fairness, respect, openness,
and citizenship.

16

Philip Kotler: Is Marketing Ethics an

Oxymoron?
• Oxymoron
• The combination of two
contradictory terms, such as
“deafening silence” or
“jumbo shrimp.”
• Can marketing really be
ethical?
• Willing to market substitute
products that are much
healthier and safer.
• NOT work to sell more of
what hurts people.
2-17 2-17

17

8
 15/03/2024

ETHICS IN MARKETING –
Progress questions
• 5. Identify the three functional components of
the marketing process.
• 6. Explain why marketers feel that their
involvement in the production and delivery of
goods and services is an ethical one.
• 7. Explain the opposing argument that
marketing is an unethical process.
• 8. Which argument do you support? Provide an
example to explain your answer.
2-18

18

ETHICS IN HUMAN RESOURCES

(HR)
• What ethical issues
might arise for a
human resources
professional when
privy to an
employee’s personal
and professional
history?

19

9
 15/03/2024

ETHICS IN HUMAN RESOURCES

(HR) – Responsibilities
HR
Responsibilities

Directly involved thru out Ensure ethical

life cycle of employer- transgressions do
employee’s contract NOT happen.

At the center of code

Corporate conscience of ethics
2-20

20

ETHICS IN HUMAN RESOURCES

(HR) – Responsibilities
• Directly involved in the relationship between the company
and the employee throughout the life cycle of their contract
=> HR personnel might consider their direct involvement in this
contract as acting as the conscience of the organization in many
ways.
• Legally responsible to ensure ethical transgressions do not
happen.
 Should be at the center of any corporate code of ethics
—NOT as the sole creator of the code, since it is a document that
should represent the entire organization, but certainly as the
voice of reason in ensuring that all the critical areas are
addressed.
2-21

21

10
 15/03/2024

ETHICS IN HR – Responsibilities –
Life cycle of their contract
job
severance description
recruitment
benefits &
of right
exit
candidate
interview.

a career Conscience of
developmen orientation
t program organization

disciplinary
behavior & payroll and
remedial benefits
training performance
reviews
2-22

22

ETHICS IN HUMAN RESOURCES

(HR) – Responsibilities
At the center of any corporate code
of ethics (not as the sole creator):
• 1. Ensure that ethics is a top organizational
priority.
• 2. Ensure that the leadership selection and
development processes include an ethics
component.
• 3. Ensure that the right programs and
policies are in place.
• 4. Stay abreast of ethics issues (and in
particular the changing legislation and
sentencing guidelines for unethical conduct).
2-23

23

11
 15/03/2024

ETHICS IN HR – Ethical
transgressions

Hire illegal immigrants

& catch the schedule Hire legal workers &
missing deadline

Violate company policy

& keep your job Comply with company
policy & lose your job

2-24

24

ETHICS IN HR – Ethical
transgressions
• You are behind schedule on a building project,
and your boss decides to hire illegal immigrants
to help get the project back on track.
• They are paid in cash “under the table,” and your boss
justifies the decision as being “a ‘one-off ’—besides, the
INS [Immigration and Naturalization Service] has bigger
fish to fry than a few undocumented workers on a
building site!
• If we get caught, we’ll pay the fine—it will be less than
the penalty we would owe our client for missing our
deadline on the project.”

2-25

25

12
 15/03/2024

ETHICS IN HR – Ethical transgressions

• Your company has hired a new regional vice
president. As the HR specialist for her region,
you are asked to process her payroll and benefits paperwork.
• Your boss instructs you to
waive the standard one-year waiting period
for benefits entitlement and enroll the new VP
in the retirement and employee bonus plan
immediately.
• When you raise the concern that
this request violates current company policy,
your boss informs you that this new VP is
a close friend of the company president and
advises you that, in the interests of your job
security, you should “just do it and don’t ask
questions!” 2-26

26

ETHICS IN HR – Ethical transgressions

• On your first day as the new HR specialist, you
mention to your boss that the company appears to be
out of employee handbooks and both the minimum
wage and Occupational Safety and Health
Administration (OSHA) posters that are legally
required to be posted in the employee break room.
• Your boss laughs and says, “We’ve been meaning to
get around to that for years—trust me, there will
always be some other crisis to take priority over all
that administrative stuff .”

2-27

27

13
 15/03/2024

ETHICS IN HR –
Progress questions
• 9. Explain why HR personnel might consider
themselves to be the conscience of the
organization.
• 10. Select one of the ethical transgressions listed in
the HR sections, and document how you would
respond to that situation as the employee.
• 11. Why is HR’s involvement in the selection of the
leaders of the company so important to ethical
business conduct?
• 12. Why have ethics policies and ethics training
suddenly become so important? 2-28

28

ETHICS IN FINANCE –
3 Primary areas of finance function
1. Financial 2. Accounting 3. Auditing
transactions: function: function:

The certification
Keeps track of
of an
all the
The process organization’s
company’s
by which the financial
financial
flow of money statements, or
transactions,
through an “books,” as being
and balancing
organization is accurate by an
the accounts
handled. impartial third-
at the end of
party
the period.
professional.
2-29

29

14
 15/03/2024

ETHICS IN FINANCE –
Responsibilities
• Not falsifying documents, stealing money from the
organization, or undertaking any other form of
fraudulent activity related to the management of
the organization’s finances.
• Not accept illegal practices: falsifying accounts,
underreporting income, overvaluing assets, and
taking questionable deductions…

2-30

30

ETHICS IN FINANCE –
Internal auditors’ roles
• Internal auditors are grounded in professionalism,
integrity, and efficiency.
• Make objective assessments of operations
and share ideas for best practices;
• Provide counsel for improving controls, processes and
procedures, performance, and risk management;
• Suggest ways for reducing costs, enhancing revenues, and
improving profits;
• And deliver competent consulting, assurance, and
facilitation services.
(According to the Institute of Internal Auditors)
2-31

31

15
 15/03/2024

ETHICS IN FINANCE –
GAAP
How accountants Ethical challenges presented by
governed by GAAP GAAP
• The generally • open to interpretation and
accepted accounting abuse.
principles that govern • Very clear taxation rates but
the accounting unclear process to arrive at the
profession—not a set profit figure
of laws and  Considerable pressure on
established legal accountants
precedents but a set
of standard operating  Last resort: The Code of Conduct
procedures within the issued by the American Institute
profession. of Certified Public Accountants
(AICPA).
Copyright © 2013 The McGraw-Hill Companies, Inc. All rights reserved.

32

ETHICS IN FINANCE – Creative

bookkeeping techniques
Legal practice:

• to defer receipts from one quarter to the next to

manage your tax liability

Illegal practices:

• Falsifying accounts, underreporting income,

overvaluing assets, and taking questionable
deductions.
• Providing numbers that are satisfactory to the
client.
2-33

33

16
 15/03/2024

ETHICS IN FINANCE –
Ethical dilemmas
Stand up to Enron’s
requests for creative
Not to stand up to
bookkeeping policies
Enron

Arthur Andersen & Enron

May lose business to

Satisfy client by
competitors
accepting requests for
illegal practices

2-34

34

ETHICS IN FINANCE –
Progress questions
• 13. List the three primary areas of the finance
function in an organization.
• 14. Explain how the accounting profession is
governed by GAAP.
• 15. Why would audited accounts be regarded as
being “clean”?
• 16. What key decision brought about the
demise of Arthur Andersen?

2-35

35

17
 15/03/2024

CONFLICTS OF INTEREST
An auditing
firm’s obligation
to a paying
client: Govern
men’s
Satisfying client respon
by accepting se
illegal practices Arthur
Ander
An auditing sen &
firm’s obligation Enron Sarbanes-
to stakeholders: Oxley Act
Third-party of 2002
assessment of
that client’s
financial stability

37

DEFINING CONFLICTS OF INTEREST

CONFLIT OF INTEREST EXAMPLES
A situation in which one Obligation to
relationship or obligation shareholders:
places you in direct
Increased profits
conflict/dispute with an
=> close factory &
existing relationship or move production
obligation. overseas
=> Meeting stakeholders’
needs can create conflicts Obligation to
of interest employees & the
community:
???

Copyright © 2013 The McGraw-Hill Companies, Inc. All rights reserved.

38

18
 15/03/2024

CONFLICTS OF INTEREST –
Examples & Resolutions
EXAMPLES RESOLUTIONS
1. Selling a product
Dell and Hewlett-Packard:
harmful to your
customers • offer plans to recycle your old
(McDonald’s) computer equipment
2. Selling a product McDonald’s:
harmful to the
environment (Dell • changed packaging to move away
and Hewlett- from clamshell boxes for burgers.
Packard) Nestlé:
• producing bottles for bottled water
using less plastic
Copyright © 2013 The McGraw-Hill Companies, Inc. All rights reserved.

39

CONFLICTS OF INTEREST –
key points
1. Potential conficts of interest can
arise in any departments.
2. What is best for your
shareholders may not be best
for your employees, the
community, customers…and vice
versa.
3. Whether prompted by internal
strategic policy decisions or
aggressive campaigns by
customers and special interest
groups, the decisions to address
conflicts of interest had to come
from the top of the organization. 2-40

40

19
 15/03/2024

TYPES OF MISCONDUCT
1. • Abusive or intimidating behavior
toward employees (21 percent).
2. • Lying to employees, customers,
vendors, or the public (19
percent).
3. • Situations that placed employee
interests over organizational
interests (18 percent).
4. • Violations of safety regulations
(16 percent).
5. • Misreporting of actual time
worked (16 percent).
(Ethics Resource Center survey)
2-41 2-41

41

CONCLUSION
1. If bending the rules, stretching the truth, breaking the rules,
and even blatantly lying have become a depressingly regular
occurrence in your workplace. Why? => Profit => “Get out of
jail free” card.
2. As an individual, you wouldn’t normally behave unethically.
(Just this once => that’s how it started for the folks at Enron
and….how it could start for you!)
3. If the organization doesn’t set the ethical standard,
employees will perform to the ethical standards of their
boss (why?)
4. How well companies set ethical standards can be
measured by the extensive legislation that now exists to
legally enforce ethical behavior in business.
2-42 2-42

42

20
 15/03/2024

CASE STUDY Review exercise

Ambush marketing (p62 coursebook)

2-43

43

CASE STUDY - QUESTIONS

1. 1. Is this unethical marketing? Explain why or why not.
2. Critics argue that such campaigns “blur the lines
between consumerism and con artistry.” Is that a fair
assessment? Why or why not?
3. How would you feel if you were involved in such an
ambush?
4. If the majority of consumers are already skeptical
about most advertising they are exposed to, how do you
think the general public would feel about such marketing
campaigns?

2-44

44

21
 15/03/2024

CASE STUDY - QUESTIONS

1. 5. Supporters of these campaigns argue that our
economy is built on consumerism and that if you don’t
find more effective ways to reach consumers, the entire
economy will suffer. Does that make the practice OK?
Should we just accept it as a nuisance and a necessary
evil like solicitation calls during dinner?
6. Would your opinion change if the advertisers were
more obvious in their campaigns—such as admitting
after each skit that the raving fans were really actors?

2-45

45

CASE STUDY 3.1 Boosting your

resumé

2-46

46

22
 15/03/2024

CASE STUDY - QUESTIONS

1. 1. Does the competitive pressure to get hired
justify the decision to boost your résumé?
Why?
2. Do you think the board of directors of
Bausch & Lomb made the right decision in
choosing not to fire Zarrella?
Why or why not?
3. What steps should companies take during
the hiring process to ensure that such bad hires
do not happen?
2-47

47

CASE STUDY - QUESTIONS

1. 4. Can you polish your résumé without resorting to little
white lies? Provide some examples of how you might do
that.
5. Your friend has been unemployed for two years. She
decides to boost her résumé by claiming to have been a
consultant for those two years in order to compete in a
very tough job market. She explains that a colleague of
hers did the same thing to cover a six-month period of
unemployment. Does the longer period of
unemployment make the decision any less unethical?
Why or why not?
6. If you discovered that a colleague at work had lied on
her résumé, what would you do? 2-48

48

23
 15/03/2024

• THANK YOU FOR LISTENING

2-49

49

24