Conducting Business Ethically

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Conducting Business Ethically

Chapter 2

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

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EthicsEthics (االخالق): are the beliefs

about what is right and wrong or (المعتقدات)good and bad in actions that affect others.

An individual’s values and morals + The social context in which his or her behavior occurs, determine whether behavior is regarded as:

Ethical or Unethical ( غير أو أخالقي.(أخالقي

Examples :

(how we behave in a football ground or in a mosque).

2Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall

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ETHICAL BEHAVIOR Ethical behavior is behavior that:

Conforms to individual beliefs ( الفرديه (المعتقدات(you personally believe the action to be correct behavior)

and

Social norms ( االجتماعية accepted by)(المعاييرsociety as “normal” behavior)

About what is right and good

Unethical behavior is behavior that: individual beliefs and social norms (individuals and society) define as wrong and bad

Reference: Ebert & Griffin (2007). "Business Essentials" Pearson,

Prentice Hall

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Individual Ethics

Individual Ethics: since they are based on our beliefs and social concepts: They vary (change) from person to person (different beliefs and

different level of practicing that beliefs). They vary from situation to situation, ( example: too hungry might

steal to eat “unethical”). They vary from culture to culture.(example: multiple marriages

are unaccepted in the west). Therefore people developed personal codes of ethics

reflected from there wide range of attitudes and beliefs. (different people in the broad society, with different codes of

ethics, living together without breaking the general social standards of ethics.

4Reference: Ebert & Griffin (2007). "Business Essentials" Pearson,

Prentice Hall

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MANAGERIALETHICS

Managerial ethics are standards (rules) of behavior that guide managers in their work

While ethics can affect a manager’s work in many ways, we will look at three main areas:

1. Behaviour towards employees2. Behaviour towards the organization3. Behaviour towards other economic agents( االقتصادية(الوكيل


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1. ETHICAL BEHAVIORTOWARD EMPLOYEES

This area covers the ethics of the employer’s behavior towards the employee –

hiring and firing ( والفصل should be based only (التعيينon ability to work. Hiring your friend instead of another qualified .person is unethical (تأهل)

Wages and working condition, usually regulated by law. Yet it is unethical to pay a worker less because you know he really needs the job.

Privacy and respect ( الخصوصية protection of the ,(واحترامemployees personal information.


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2. ETHICAL BEHAVIORTOWARD THE ORGANIZATION

This area covers the ethics of the employee’s behavior toward his or her employer – conflict of interest, confidentiality, and honesty

Conflict of interest ( المصالح when an activity :(تضاربmay benefit the individual to the loss of his employer.(like accepting gifts from company’s suppliers).

Confidentiality (السرية), (like selling company’s secrets to competitors).

Honesty (الصدق), (Like: stealing, using expenses account, using company phone for personal long distance calls).


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3. ETHICAL BEHAVIOR TOWARD OTHER ECONOMIC AGENTS

This area covers the ethics of both the employer and employee’s behavior towards those companies and individuals who are their “primary agents of interest”: customers, competitors, stockholders, suppliers, and labor unions…….

Employers and their employees must be fair, honest, and ethical in:

Advertising (االعالن) Financial disclosure ( المالية (الذمه Ordering and purchasing supplies and products Bargaining and negotiating with labor unions ( والتفاوض المساومه

العماليه النقابات (مع


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ASSESSINGETHICAL BEHAVIOR

To make an ethical judgment ( األخالقي :we ,(الحكم

1. Gather factual information ( الحقائق (جمع2. Analyze (نحلل)the facts to decide the correct

moral values3. Make a judgment (حكم) based on what is right

or wrong

We must trust that others will do what is most correct – as others trust us to do the same


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COMPANY PRACTICES AND BUSINESS ETHICS

Companies try to encourage (تشجيع) ethical behavior and discourage unethical behavior

Many companies have codes of conduct Ethical behavior within a company must

begin at top management and filter down to lower level employees


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ADOPTING WRITTEN CODES

Many companies, particularly large national and international companies, have written codes of ethics which all employees are required to follow

These policies state how the company will conduct (تصرف) business, how employees will be treated (تعامل), and how employees must behave (تصرف)

An organization’s core principles and values usually remain the same - they do not change over time


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INSTITUTING ETHICS PROGRAMS

Ethics are taught:

At homeIn social situationsAt school and in universityIn the workplace

It is the responsibility of the employer to educate employees in the way business ethics are to be practiced in their organization


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Social Responsibility

• Social responsibilities ( االجتماعية the :(المسؤولياتattempt of a business to balance its commitments ( التزاماته to groups and individuals in its (التوازنenvironment. These groups are called the :

The organizational stakeholders: they are those groups, individuals and

organizations that are directly affected by the practices of the business. they have a “stake” (حصة) in its performance.


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THE STAKEHOLDER MODEL OF RESPONSIBILITY

Many companies concentrate on five main groups of “stakeholders”:

1. Customers (العمالء)2. Employees (الموظفين )3. Investors (المستثمرون)4. Suppliers (الموردين )5. Local Communities( المجتمعات( المحلية


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CUSTOMERS AND EMPLOYEES

1. Customers: Customers must be treated fairly and honestly. Companies must charge fair prices, honor product warranties (guarantees), sell quality products, and meet delivery commitments to customers

2. Employees: Employees must be are treated fairly, made to feel part of a team, and treated with respect and dignity


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INVESTORSAND SUPPLIERS

3. Investors: Investors must be sure that the company follows proper accounting practices, gives accurate information about financial performance, and is being managed in a way which protects their investments

4. Suppliers: Suppliers must be paid acceptable prices for their products and given realistic product delivery schedules


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LOCAL COMMUNITIES

5. Local Communities: Companies must try to be “socially responsible” by giving back to the community in which they do business

Many major companies in Bahrain give financial support to sports teams, charities, and health centers

Companies must also try not to cause damage to the environment of the country (reducing the amount of smoke from the Bapco Refinery, making sure that heavy trucks are well maintained to help reduce air pollution)


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RESPONSIBILITY TOWARD THE ENVIRONMENT

Companies (and individuals) have social responsibility towards the environment in the following areas:

Greenhouse Emissions ( الدفيءه غازات انبعاثات (من Global Warming ( العالمى (االحترار Noise Pollution Air Pollution Water Pollution Land Pollution Toxic Waste Disposal ( السامه النفايات من (التخلص Recycling (أعادة)


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RESPONSIBILITY TOWARD CUSTOMERS

Consumer Rights: Consumerism is the protection of the rights of consumers (customers) in their dealings with companies. Consumers should have:

The right to safe products (no manufacturing defects) Be informed about the product (which fabric was used) Be heard by the company if they have a question or complaint

(companies must supply a telephone number or address) Be able to choose what they buy (based on price and quality) The right to be educated about purchases (dosages and side

effects of prescription drugs) The right to courteous service (bad service can be reported to

a manager)


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UNFAIR PRICING(COLLUSION)

Collusion is an illegal ( الشرعية agreement(غيرbetween two or more companies to commit a wrongful act such as “price fixing” of products

Imagine that only three drug manufacturing companies made the same drug. If they all agreed to charge the same high price for the drug, patients who needed the drug would have no choice but to pay the high price as all manufacturers charged the same price

There would be no competition in pricing. This would result in unfair pricing of the product


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ETHICS IN ADVERTISINGAND PRODUCT INFORMATION

Product advertising:

Should be truthful – in the use of such words as “diet”, “light”, and “low fat”. Companies are required by law to list the ingredients contained in a product on the product package

Should not cause cultural or moral offense to customers – cigarette advertising featuring young people may encourage young people to start smoking, advertising for alcoholic drinks would be offensive in a Muslim country


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RESPONSIBILITY TOWARD EMPLOYEES

Legal and Social Commitments: Business should not practice discrimination (التمييز) against people because of their:

Gender, age, or ethnicity (race or ethic origin)

People should be hired, paid, and promoted on the basis of job-related factors only – not on the basis of race or gender.

A workplace should also be physically and socially safe for employees


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RESPONSIBILITY TOWARD EMPLOYEES - ETHICAL

COMMITMENTS

Companies should not conduct their business in a way that is:

Illegal, unethical, or socially irresponsible

The “whistle-blower” : is the employee who detects and tries to stop a company’s unethical, illegal, or socially irresponsible actions by publicizing them.

These honest employees are sometimes treated badly by there employers and some coworkers


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RESPONSIBILITY TOWARD INVESTORS

• The shareholders are the true owners of the company.

• Irresponsible behavior toward shareholders means abuse of a firm’s financial resources.

Improper financial management:In some organizations, officers in that organization do financial mismanagement, like having very high salaries, expensive holidays, or other expensive services like transports.


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Improper financial managementOther improper financial management can be in one of the following:

1. Check kiting: Unethical and illegal practice of writing checks against money that has not yet been credited at the bank on check are drawn.

2. Insider Trading: Illegal practice of using special knowledge about a firm for profit or gain. Like knowing the share prices will go up for organization, and use this information to make profit for you.

3. Misrepresentation (تحريف) of finance: companies must use generally accepted accounting principles, the management must give true information about there profit and lose. Unethical managers hide give the investors false profit expectations, and some even hide there loses.


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IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS

There are differences of opinion regarding the social responsibilities of business organizations

Some people think that a company’s only responsibility is to make a profit

Other people think that as the company is operating in the community, it should be viewed as a “citizen” and help to improve the lives of fellow citizens in the community

• (4th Page 77: 5th Pages 58 - 59)


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Managing social responsibility programs [1]

There is four steps required to encourage companies for social responsibilities.

1. Social responsibility must start at the top and be considered as a factor in strategic planning. (top management support).

2. A committee of top managers must develop a plan detailing the level of management support. (like setting a percentage of the profits for social programs).

3. One executive must be put in charge of the firm’s agenda. (this individual will follow the programs, make sure it is done, and consistent with the company policy).


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Managing social responsibility programs [2]

4. The company must conduct (make) occasional social audit. We need to follow up with the programs, if the company pay to train unemployed people, then firm must check back if those people did graduate and find a job, otherwise we change this program.Social audit ( االجتماعية :( المراجعهsystematic analysis of a firm’s success in using funds earmarked (allocated) for meeting its social responsibility goals.


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Social responsibilities and the small business.[1]

• Whether the business small or large, managers will face ethical, legal, social and environmental responsibilities.

• Small business managers must be committed to these responsibilities.

• Most of the decision small business managers will face related to there individual ethics. (like would I refuse to sale or call the police if a customer used stolen credit card)


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Social responsibilities and the small business.[2]

• But what about social responsibilities, can the small business afford support social programs, like free students training, or sponsorship of a sport team.

• Ethics and social responsibilities are decisions faced by all managers in all organization, regardless of size and rank.


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Conducting Business Ethically

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