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BUSINESS MANAGEMENT
CHAPTER 4
In this section:
Ethics are a set of moral principles or values that govern behavior.
This section discusses:
• The Importance of Ethics
• Codes of Ethics
• Behaving Ethically
• Laws Relating to Ethics and Business
• Ethical Standards and Culture
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BUSINESS MANAGEMENT
CHAPTER 4
What You’ll Learn:
• Why business ethics are important.
• What ethical codes should include.
• How businesses solve ethical dilemmas.
• What laws relate to ethics in business.
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BUSINESS MANAGEMENT
CHAPTER 4
Why It’s Important
To succeed as a manager, you will need to understand the ethical
issues that influence businesses.
Ethics – a set of moral principles or values that govern behavior
•Making decisions based on what they believe is right and wrong
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Code of Ethics
Some businesses use a code of ethics which a document that outlines
the principles of conduct to be used in making decisions within the
organization. Some of the areas they cover are:
• Adherence to the law.
• Health and safety in the workplace.
• Conflicts of interest.
• Selling and marketing practices.
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Code of Ethics continued
• Financial reporting
• Pricing, billing, and contracting
• Acquiring and using information about competitors
• Protection of the environment
Merely establishing a code of ethics does not prevent unethical behavior
• If not enforced, they can do more harm than good
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Behaving Honestly Means:
• not engaging in employee theft – includes:
•embezzling money, stealing supplies or inventory from their
employers
•Not accepting bribes or submitting false expense accounts
• not lying about hours worked
•Showing up for work
•If working from home, accurately report how long they worked
• not falsifying records – this can cause a lot of damage to a
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company’s
reputation
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• Sarbanes-Oxley Act of 2002 – contains important rules
affecting the reporting and corporate governance of
public companies and their directors and officers
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Solving Ethical Dilemmas
•
•
•
Have you defined the problem accurately?
How would you define the problem if you stood on the other side
of the fence?
Whom could your decision or action injure? Can you discuss the
problem with the affected parties before you make your decision?
Cont.
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Solving Ethical Dilemmas cont.
• Are you confident that your position will be as valid over a long
period of time as it seems now?
• Could you disclose without qualm your decision or action to your
boss, your CEO, the board of directors, your family, and society as
a whole?
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Identifying Acceptable Business Interactions
• Normal interactions include taking clients to lunch or inviting
them to play golf.
• Questionable interactions include sending a client a very
expensive gift.
• Illegal interactions include taking or paying bribes.
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BUSINESS MANAGEMENT
CHAPTER 4
Laws relating to ethics in business address:
• Competitive behavior
• Consumer protection
• Environmental protection
Fig 2-1
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Competitive Behavior
• The Sherman Act (1890) – makes it illegal for companies to
monopolize trade – mergers could be prohibited if it will
create too large of a company that will control the market
• The Clayton Act (1914) – makes it illegal to charge different
prices to different wholesale customers – also bans requiring
a customer to purchase a 2nd good
• The Wheeler-Lea Act (1938) – bans unfair or deceptive acts
or practices, including false advertising
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Consumer Protection
• The Federal Food, Drug, and Cosmetic Act (1938) – bans the
sale of impure, improperly label, falsely guaranteed and
unhealthful foods, drugs and cosmetics
• The Consumer Product Safety Commission (1972) –
establishes safety standards on consumer products
• Truth in Lending Act (1968) – creditors are required to let
consumers know how much they are paying in finance
charges and interest
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Environmental Protection
• The National Environmental Policy (1969) – created the EPA
whose mission is to protect human health and safeguard the
air, water and land
• The Clean Air Act (1970) – regulates air emissions – sets
maximum air pollution standards, deals with problems of
acid rain, ozone depletion and toxic substances in the air
• The Clean Water Act (1976) – gives the EPA the authority to
set standards on the type and quantity of pollutants that
industries can put into bodies of water.
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 Gift giving – customs differ around the world
• In some cultures, gifts are expected – failure to present
them is considered an insult
 Intellectual property – refers to ownership of
ideas, such as inventions, books, movies, and
computer programs
• Only the owners of the intellectual property will profit
from their work
• Guaranteed through patents, trademarks, and
copyright laws
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 Laws regarding intellectual property differ in other
countries
• Ex: China and India – laws are not enforced – as a result,
Chinese companies copy and sell foreign computer
programs
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• Social Responsibility – the obligation that individuals or
businesses have to help solve social problems
 Evolved through 3 distinct schools of thought
• Profit maximization, trusteeship mgmt, and social involvement
 Profit Maximization – dealing with social problems was not
considered a legitimate business activity – earning money was the
only concern
 Trusteeship Mgmt. – recognized that owners of businesses had
obligations to do more than just earn profits
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• Social involvement – 1960’s – many believed that
corporations should use their influence and financial
resources to address social problems that affect stakeholders
 Stakeholders – include a company's employees, customers,
suppliers and the community
• Example – commitment to the increased diversity
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Measuring Social Responsibility
• Social Audit – a review of a business's social responsiveness
 Philanthropy – efforts to improve human welfare – contributing
time and money to charitable, cultural and civic organizations
• Paid time off to donate blood, participate in charitable activities, etc
 Environmental Awareness – limiting the damage their operations
cause to the environment – creating processes that are as
environmentally friendly as possible
 Sensitivity to Diversity and Quality of Work Life – adopting
policies that contribute to the quality of live for their workers
• Example – flex-time, on-site daycare
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