Download week-7-8-ethics-in-functional-areas

Ethics in Functional Areas of an Organisation
1. Marketing Ethics
2. Finance Ethics
3. Accounting Ethics
4. Human Resource Management
5. Management information system
6. Production and Operations
7. Environmental Ethics
Marketing Ethics
What is Marketing Ethics ?
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Principles and standards that define acceptable marketing conduct
as determined by various stakeholders.
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Marketing ethics is the area of applied ethics which deals with the
moral principles behind the operation and regulation of marketing.
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Companies need to develop corporate marketing policies that will
serve as a broad guidelines that everyone in the organization must
follow.
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Good ethics is a cornerstone of sustainable marketing.
Marketing Ethics
What is Marketing Ethics ?
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Marketing ethics, regardless of the product offered or the market targeted,
sets the guidelines for which good marketing is practiced.
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When companies create high ethical standards upon which to approach
marketing they are participating in ethical marketing.
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To market ethically and effectively one should be reminded that all marketing
decisions and efforts are necessary to meet and suit the needs of all
stakeholders, competitor, community, customers, suppliers and the
environment.
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Ethical behavior should be enforced throughout company culture and through
company practices.
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Marketing Ethics
1.
Salespeople
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2.
a.
b.
c.
d.
Distortions- misleading information
Use of personal charisma to sell
Use of connections or threats
Get salesperson to get in debt so they sell more
Marketing Research
• a. Distort findings to fit own views
• b. Pretend to be a study when it is really a sales pitch
• c. Report surveys not held or ask leading questions
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Marketing Ethics
3. Deceptive Advertising and Puffing
a. Lies
b. Puffing- an exaggeration of the benefits through the selling process
c. Puffing can be illegal if:
• there is a probability of deception for most consumers
• a reasonable consumer would believe the deception
• the material would have you believe what is printed
d. Deception can be beneficial, decreases cognitive dissonance
e. Subliminal advertising and packaging
• message presented below the perception threshold, message in cloud
or picture ad, message in shape of package, double meaning words
“take it all off,” “fly me,” “my men wear English leather or nothing at
all”
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Marketing Ethics
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Product Offerings
a. Dangerous products
b. Cause social or physical harm
• 5. Pricing
a.
b.
c.
d.
e.
f.
Quote an original or normal price that is sometimes dishonest
Two for one price--consumer distorts as two for one
Odd pricing $1.98
Price breaks--trade up, sell additional features
Bait and switch- never intend to sell the low-priced product
Package to price (eg., Hershey reduced size of candy bar instead of
increasing price)
g. High price for a short period then quote old price to show appeal for
the low price
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Marketing Ethics
6. Consumers
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a. Safe goods: information about product quality, safety,
content, usage purposes
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b. Right to choose
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c. Right to be heard
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d. Right to compensation
Finance Ethics
What is Finance Ethics?
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Ethics in Finance skillfully explains the need for ethics in the personal conduct
of finance professionals and the operation of financial markets and
institutions.
Finance Ethics include;
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Financial statements
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Hostile Takeovers
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Financial Markets
– Insider Trading
Finance Ethics
Fraud in Financial Statements
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Fictitious Revenues
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Concealed Liabilities and Expenses
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Fraudulent Asset Valuations
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Improper or Fraudulent Disclosures or Omissions
 Creative accounting – form of fraudulent financial
reporting so as to provide misleading information.
Finance Ethics
Ethical Issues in Financial Markets
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Deception: act of misrepresenting relevant information
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Churning: excessive or inappropriate trading for clients account by a
broker who has control over the account with intent to generate
commissions rather than to benefit client
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Unsuitability
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Unfairness in Markets
Finance Ethics
Insider Trading
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Buying and selling of a company shares on the basis of “inside”
information. This information is normally available to company
executives, consultants, auditors and their friends and relatives.
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Refers to trading on price sensitive information by company
employees or individuals closely connected with the firm
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This information has not been disclosed to other market participants
(public)
Finance Ethics
Ethics & Insider Trading
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It violates equality of opportunity
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Does not give a level playing field between insiders and
outsiders
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Might harm exchange as a whole because investors might not
be willing to trade on exchange that does not give
shareholders their rights.
Finance Ethics
Hostile Takeovers
• Are those that elicit opposition from the boards or
employees of a target company
• Reasons for opposition are as follows:
 Disagreements over price
 Protecting their own interests
Finance Ethics
Anti-takeover defense measures
• Poison Pills
• Green mail
• Golden Parachute
• People Pill
• Management Buyout
Finance Ethics
Poison Pills
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An anti-takeover device used by company’s management to make
takeover prohibitively expensive for the bidders
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Company under target changes AOA so that group of Shareholders
have special rights to buy and sell preferred stock at highly
favorable prices (At times below market price)
Ethics & Poison Pills
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Poison pills are prohibited in Britain by takeover code because they
prevent open competition between bidders for shares
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Use of poison pills are ethical if they are designed to protect the
management from unwanted takeover bids.
Finance Ethics
Greenmail
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It occurs where a potential takeover agent purchases stock in a company
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After the purchases have totaled five percent the agent must announce his
intention to takeover the company, if that is the intent
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Stock prices go up in anticipation of takeover battle
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Management of target company sends greenmails to prevent a shareholder
from taking over the company
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Takeover agent ends up selling the shares back to company at an increased or
higher negotiated price
Ethics & Greenmail
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Target company may be forced to incur debts to raise funds to finance the buy
back of shares at premium price
Finance Ethics
Golden Parachute
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A company gives lucrative benefits to its top executives such as stock
options, bonuses etc
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Presence of parachute allows management to evaluate takeover bid
more objectively
People Pill
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Management threatens that in event of a takeover the entire
management team will resign
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If managers act in their own interest rather than company’s long
term value then they are acting unethically
Finance Ethics
Management Buyout
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It occurs when management decide to bid for the company
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They convert the company into a private company and at a later
date, bring it back to market to make substantial profits.
Ethics & Management Buyout
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Shareholder believe that management may resort to unethical practices to
bring down share prices and buy out at cheaper rate
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Unethical activities can involve leaking confidential information by managers
for their benefit during buy out
Accounting Ethics
Accounting Ethics?
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Accounting ethics in the field of accounting refers to the guidelines (consisting of
judgments and moral values) that a professional needs to follow while practicing
accounting.
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Accountants are expected to adhere to the set ethical standards which are designed to
ensure that they behave in a way which is ethical and consistent.
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The people who receive the services of an accounting professional not only rely on his skill
and ability, but also on his professional integrity.
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People using the service of accounting professionals rely on their professional competency
to take decisions and in the process also relies on the ethics followed by them.
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Ethical and professional accounting forms a clear financial image of a business, and allows
managers to make informed decisions, keeps investors abreast of developments in the
business, and keeps the business profitable
Accounting Ethics
Unethical Issues in Accounting
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There are multiple reasons for which one might consider acting unethically when preparing
financial information as follows:
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For self-interest—greed.
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An accountant may embezzle funds from his or her employer for financial gain.
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The Chief Financial Officer of a publicly traded corporation may prepare financial
statements to appear as though the company is performing much better than it actually is,
because he or she wants their stock portfolio to increase.
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An accountant may feel pressured from his or her client to report false information or may
be a Chief financial officer is experiencing demand for improvements from the board of
directors, the company’s president, owners, or stockholders; or he or she may be in fear of
losing his job.
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An accountant working in a company where there is conflict of interest. If the accountant
is owed money or has a significant stake in a firm, he or she may not be the ideal individual
to prepare certain companies’ financial statements.
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The failure for an accountant to conduct an in-depth analysis when preparing and revising
financial information. There are many individuals who prefer to take short-cuts in life; and
frankly, this simply is not acceptable when expected to perform in a professional manor.
Accounting Ethics
Unethical Accounting Practices
1.
Misappropriation of Cash Receipts and payments.
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Misappropriation of cash is easier in big organizations when owners or top
managers have no time to keep close watch on persons handling cash.
Receipts.
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Non -recording of cash sales and embezzling the money so received
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Misappropriation of cash from unusual sources such as donations and gifts
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Under recording or recording only part of the cash sales and pocketing the balance
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Misappropriation of cash received on miscellaneous eg. recovery of bad debt
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Misappropriation of money received on discounting bills
Accounting Ethics
1.
Misappropriation of Cash Receipts and Payments.
Payment
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Recording of false cash purchases and pocketing the amount
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Recoding cash purchases at a higher figure than actual amount and
pocketing the difference
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Recording payment of cash which are not made at all
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Recording payment of some account at a figure higher than the actual
payment and pocketing the difference
Accounting Ethics
2.Misappropriation Of Goods
Misappropriation of goods means wrongful conversion or fraudulent appropriation by those who
handle the goods.
This usually involves goods which are small in size but high in value such as watches, jewelry,
spare parts etc.
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Goods can be Misappropriated by actual theft.
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By supplying more than what is stated in the invoice and privately receiving the difference.
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Recording purchased of higher quantity than what is actually supplied
Controlling Misappropriation Of Goods.
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Proper methods of keeping accounts of purchases and sales.
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Periodic stock -taking, stock -checking, strict internal checking and control
Cross checking.
Accounting Ethics
3.Fraudlent Manipulation Of Account
Manipulation of account is fraud, normally done by officers on the advice of top
management
Objectives Of Manipulation Of Accounts
1.
To show more profit than what is actually is so that
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Top management may be retained by showing more profit.
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Obtain further Credit from the banks
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Top management get more commission
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Have their share prices increased which will attract more subscribers to their shares
2. To show less Profit than what is actually is so that
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Top management can purchase their company’s share in the market at a lower price
Accounting Ethics
3.Fraudlent Manipulation Of Account
Manipulation of account is fraud, normally done by officers on the advice of top management
Objectives Of Manipulation Of Accounts
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Reduce or avoid the payment of income tax
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Give wrong impressive about the success of the business to their competitors
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Withhold the declaration of dividends
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Declare law rate of dividend
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Reject demand by workers unions
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Give wrong impression about the company to competitors.
Ways of Fraudulent Manipulation of account includes:
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Deliberate false entries
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Erasing entries
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Alteration
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Not- recording some entries that are factual.
Accounting Ethics
Ways Of Manipulating Account
 Not providing for depreciation on fixed assets
 Overvaluation and undervaluation of assets and liabilities
 Not recording items of expenses to show higher profit

Recording revenue expenditure as capital expenditure.
 Recording fictitious sales & return outwards to show less profit &
purchases 7 return inwards
 Recording fictitious purchases return inwards to show profit
Accounting Ethics
Role Of Auditing
Auditing is the examination of books of account and checking the
financial statement for the purpose of finding out the true and fair
position and results of operation of a concern.
Auditing work is to be done by independent professional who are
honest and sincere to the profession.
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The primary objective of the audit is to express an opinion on the
financial statements.
Accounting Ethics
Auditor As A Guide To Ethics
 He can suggest to management the proper methods of maintaining
accounts relating to purchases and sales of goods, Stock- taking
etc.
 He can suggest ways for very strict internal Check and control
system
 He can suggest to management to maintain perpetual inventory
 Ho can suggest that management should undertake surprise
checking of cash balance
 Suggest to management regarding external scrutiny arrangement
Human Resource Management Ethics
•
Human Resource Management is a business function that is concerned with
managing relations between groups of people in their capacity as employees,
employers and managers.
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Inevitably, this process may raise questions about what the respective
responsibilities and rights of each party are in this relationship, and about
what constitutes fair treatment. These questions are ethical in nature
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Human aspect and human relations are applicable anywhere and in any
department, hence individual behavior, group behavior, personality, attitudes,
perception are some of the factors which have to be taken into account to
evaluate fair-unfair, good-bad, or ethical – unethical behavior.
Human Resource Management Ethics
Recruitment
• Recruitment based on financial favors
• Gender based recruitments
• Giving less minimum wages as fixed by the state.
• Recruitment of under- or over qualified persons
• Recruitment without assessing their capabilities
Human Resource Management Ethics
a. Employers:
I.
Creating split in unions.
II.
Not caring for just demands of trade unions
III.
Giving different treatment to different people in the same
level.
IV.
Bias attitude in selection, transfer, promotions etc
Human Resource Management Ethics
b. Employees
I.
False claim of ages, qualification and experience.
II.
Producing fake certificates to obtain jobs.
III. Taking decisions very slowly or very fast to suit
convenience of their own.
Human Resource Management Ethics
c. Government Agencies
I.
Announcing the vacancies and not taking actions further
II.
The government methods of selection is best suited to low
paid jobs and not senior level post
III.
Functioning of government employment offices is not
transparent, not reliable and purpose not well served.
Human Resource Management Ethics
Discrimination
Discrimination covers unequal treatment between individuals and
groups and between men and women either based on race, gender
color religion, nationality and place or origin.
Discrimination Practices
I.
II.
III.
IV.
V.
VI.
Unequal pay for equal work .
Different wages and salaries for men and women.
Treat handicapped in lower esteem.
Preferences for a particular religion
Delay in promotions.
Faulty screening to avoid particular applicants
Reverse Discrimination
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Reverse discrimination is an unfair treatment of a majority groups resulting from
preferential policies, as in college admissions or employment, intended to remedy
earlier discriminatory policies
Human Resource Management Ethics
Restructuring and layoffs
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Human resource planning undergoes structuring of departments and
these are periodically restructured to the under-listed reasons;
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New recruits
Lay off retirement and retrenchment
Promotions and transfer
Change of location, processes and products
Layoffs
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Layoff also called redundancy is the temporary suspension or
permanent termination of termination of employment of an
employee or (more commonly) a group of employees for business
reasons, such as when certain positions are no longer necessary or
when a business slow-down occurs.
Human Resource Management Ethics
Unethical practices in restructuring and layoffs
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To remove some employees who do not toe the line of management.
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To create situations where in some unwanted employees leave the
organization themselves.
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Create panic in workers and staff to have an upper hand to deal with
union members.
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Keep away trouble creators and poor performers. This also serve as
warning to others who do not perform well.
Human Resource Management Ethics
Sexual harassment
Sexual harassment is intimation, bullying or coercion of a sexual nature, or
the unwelcome or inappropriate promise of rewards in exchange for sexual
favors
Forms of Sexual harassment
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Turning work discussions to sexual topics.
Sexual innuendos or stories.
Asking about sexual fantasies, preferences, or history.
Personal questions about social or sexual life.
Sexual comments about a person's clothing, anatomy, or looks.
Kissing sounds, howling, and smacking lips.
Telling lies or spreading rumors about a person's personal sex life.
Neck massage.
Touching an employee's clothing, hair, or body.
Giving personal gifts.
Hanging around a person.
Hugging, kissing, patting, or stroking.
Touching or rubbing oneself sexually around another person.
Standing close or brushing up against a person.
Looking a person up and down (elevator eyes).
Staring at someone.
Sexually suggestive signals.
Facial expressions, winking, throwing kisses, or licking lips.
Making sexual gestures with hands or through body movements.
Human Resource Management Ethics
Prevention of Sexual Harassment
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Leadership
De-sexualize the workplace
– (Focus on professionalism, not sexuality)
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Address/stop sexist behaviors
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Ensure people know the policy
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Training
– Policy
– Grievance procedure
Human Resource Management Ethics
Whistle Blowing
An attempt of an employee or former of an organization to disclose what he/she believes to
be wrong in or by the organization.
Whistle can be internal, external and interpersonal
Condition For Justifying Whistle Blowing
●A product or policy that will commit serious and considerable harm to the public.
●When the employee identifies a serious threat of harm to the consumer, employee, other
stakeholder and things against his or her concern
● When immediate supervisors does not act
● Employees must have documented evidence that is convincing to a reasonable
level
● Valid reasons to believe that reveals the wrongdoing to the public
Human Resource Management Ethics
Whistle Blowing
Wrong Type Of Whistle Blowing
● In case of disclosing business secrecy, inventions, future plans which are exclusive to the company
● Whenever an employee remarks are irrelevant to the organization work and product
● In case of wrong accusations which cannot be proved
● Complaining against transfer, demotions, when such action is taken ion the basis of routine performance
appraisal
Precautions Before Whistle Blowing
● Whistle blowing has consequences of moral, legal, personal, economic, family and career demand.
● Be clear about your 9intentions and likely consequences
● Allegations should be stated appropriately with document
● Take internal route
● Whistle blowing can be done openly or anonymously
● Consult a lawyer about possible legal battle and possible defense mechanisms
Human Resource Management Ethics
Alternatives to Whistle Blowing
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Create an effective internal grievances system to both present and former
employees.
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Appreciate employees and even adopt reward system for solving problems
through grievances redressed system.
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Keep special officers in each unit to study
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Punish with heavy fines or retrenchment of employees who indulge in unlawful
and corrupt