North South University

School of Business and Economics (SBE)

Strategic Management
Business Ethics
 Most experts, managers, the SEC, and
academic researchers agree that the most
important factor in good corporate
governance is an ethical climate, which top
management sets.
 Today’s lecture outline
❑ Ethics
❑Define and Discuss
❑ Sources of ethics
❑ Business ethics
❑Benefits of business ethics
❑Ethical issues in business
❑ Code of ethics in business
❑ Common unethical acts
❑ Real-life examples
❑ Company’s responsibility
❑ Models of business ethics
❑ Making decisions on ethical issues
 What is Ethics?
❑Can be defined as a “system of right and
wrong”.
❑Ethics… accepted principles of
right/wrong governing conduct.
❑Assists individuals in deciding whether an
act is:
❑Moral or immoral.
❑Socially desirable or undesirable.
 What is Ethics?

Ethics is the set of moral principles by which

people conduct themselves personally,
socially, or professionally.
 What is Ethical Behavior?

❑Ethical behavior means:

❑Knowing the difference between right and wrong.
❑Consciously choosing to do right.
Sources of Ethics
❑Genetic Inheritance: the qualities of goodness are a
product of genetic traits strengthened over time by
the evolutionary process.
❑Religious Beliefs: religious morality is a primary
focus in shaping our societal ethics.
❑Philosophical Systems: the quality of pleasure to be
derived from an act was the essential measure of its
goodness.
❑Cultural Experience: individual values are shaped in
large measure by the norms of society.
Sources of Ethics…
❑The legal system: laws represent a rough
approximation of
society’s ethical standards.
❑National and ethnic beliefs.
❑Family practices.
❑Educational experiences.
❑Senior management influence.
❑Friends/peers.
 Sources of Ethics…
❑Media.
❑Corporate mission, vision, and values statements.
❑Union contracts.
❑Competitive behavior.
❑Activists or advocacy groups.
❑Business or industry organizations.
❑Professional associations.
What is Business Ethics?
❑Business ethics means applying principles of
right and wrong to situations in the
workplace.
❑Business ethics is about:
❑Decision-Making
❑By People in Business
❑According to Moral Principles or Values
 What is Business Ethics?
❑Principles and standards which guide behavior in
the world of business.
❑“Right” or “wrong”, “acceptable” or “unacceptable”
behavior within the organization.
❑Determined by key stakeholders.
 Business Ethics
Many accepted principles codified in laws:
❑Tort: product liability.
❑Contract: contracts/breaches of contracts.
❑Intellectual property: protection of intellectual
property.
❑Antitrust law: competitive behavior.
❑Securities law: issuing/selling securities.
 Benefits of Ethics in Business
❑Fostering a more satisfying and
productive working environment.
❑Building and sustaining an organization’s
reputation.
❑Maintaining the trust of staff to ensure
continued self-regulation.
❑Providing ethical guidance for employees
before making difficult decisions.
Benefits of Ethics in Business…
❑Increased employee loyalty, higher
commitment and morale, and lower staff
turnover.
❑The attraction of ‘high-quality’ staff.
❑Reputation benefits (customers and
suppliers).
❑More open and innovative culture.
❑Encourages personal sacrifices.
 Ethical dilemmas

❑No agreement over accepted principles.

❑None of the available alternatives seem
acceptable.
❑Behaving ethically = beyond staying within the
law.
 Some myths about business ethics
❑It’s easy to be ethical.
❑Unethical behavior is part of the business.
❑There are no rewards for being ethical.
❑Ethical behavior will prevent me from being successful.
❑Business is like a sport – push the rules and try not to get
caught.
❑Is about character education and teaching moral
philosophy.
 Ethical Issues in Business

❑Product safety standards.

❑Advertising content.
❑Unauthorized payments.
❑Employee privacy.
❑Information manipulation.
 Ethical issues in Business

❑Anticompetitive behavior.
❑ Opportunistic exploitation.
❑ Substandard working conditions.
❑ Environmental degradation.
❑ Corruption.
 Code of Ethics in Business
❑A systematic set of rules and
procedures is used to guide the
behavior of an individual, a business,
or a culture.
❑The code of ethics is in writing and
available to everyone who is
expected to abide by them.
 Code of Ethics in Business…

❑ Responsibilities of Business:
❑ not to harm knowingly
❑ to adhere to all applicable laws and regulations
❑ the accurate representation of their education,
training, and experience
 Code of Ethics in Business…
❑ Honesty and Fairness:
❑ Being honest in serving consumers, clients,
employees, suppliers, distributors, and the
public.
❑ Rights and Duties of Parties:
❑ Products and services offered are safe and fit for
their intended use.
❑ Communications about offered products and
services are not deceptive (misleading/false).
❑ All parties intend to discharge their obligations,
financial or otherwise, in good faith.
 Principle of Employee Conduct!

❑10% follow their own beliefs.

❑40% try to follow company policies and rules.
❑40% go along with the workgroup.
❑10% take advantage if the risk is low.
 Golden Rules of Ethics @ Workplace
❑Body Language.
❑Avoid Creating Disturbance.
❑Trust and Respect for Others’ Work.
❑Don’t Interfere In Others’ Work.
❑Respect the Privacy of Your Co-workers.
❑Avoid Ethnic and Gender Bias.
❑Improve Your Self Presentation.
❑Avoid Lobbying.
❑No/Least Personal Work During Work Hours.
 Common Unethical Acts
(Reported by Employees)
❑Lying to supervisors.
❑Falsifying records.
❑Alcohol and drug abuse.
❑Conflict of interest.
❑Stealing.
❑Receiving a gift/entertainment in violation of company
policy.
❑Improper accounting procedures.
❑Sexual harassment.
❑Discrimination.
❑Violation of environmental laws.
 Why misconduct is not reported

❑Fear of not being considered a team player.

❑Did not think that corrective action would be
taken.
❑Fear of retribution – from management.
❑“No one else cares – why should I?”
❑Did not trust the organization to keep the
report confidential.
Global Experience
High Profile Ethical Scandals in Business

❑ Wall Street Meltdown: The

ethics of Sub-prime
mortgages;
❑ New York Times: Plagiarism;
 Enron Scandal
❑The Enron scandal, revealed in October 2001, eventually led
to the bankruptcy of the Enron Corporation, an American
energy company.
❑The largest bankruptcy in American history.
❑Complex business models and unethical practices required
that the company use accounting limitations to misrepresent
earnings and modify the balance sheet to indicate favorable
performance.
❑Shareholders lost nearly $11 billion.
❑Many executives at Enron were indicted for a variety of
charges and were later sentenced to prison.
 BP Oil Crisis in 2010
❑ A BP oil well is leaking millions of gallons of crude oil into the
Gulf of Mexico.
❑ More than 8,000 birds, sea turtles, and marine mammals
were found injured or dead in the six months after the spill.
❑ It was estimated that $14-23 Billion dollars were spent
cleaning up this mess.
❑ 74 Million to 145 Million gallons of oil were spilled into the
Gulf of Mexico taking nearly 7,000 boats and nearly 45,000
people to clean.
❑ Almost two full years after the oil spill there are eye-less
shrimp and fish with cancerous tumors being found in the Gulf
after it was deemed safe to fish.
❑
Bangladesh Experience
 Business Ethics: The Case of Bangladesh
The picture of a Bangladeshi worker in the RMG
sector
“The authorities say many girls do not return after the
break. So they allow us to go out without sandals."
ACHHIA
A garment worker has to walk barefoot because her
employer will not let her go out of the factory with her
shoes.
"It is hard to walk barefoot on the hot and rough footpath.
It often hurts," she also says.
A management reply
"And I have found the workers are accustomed to walking
barefoot."
NURUL HUDA
Director (Production) of Tex Tech Company Ltd
Where Achhia works
 What is the company’s responsibility?
❑Code of Conduct.
❑The attitude of the Board and senior
management:
❑“The tone from the top”.
❑Provide a ready avenue for discussion of
ethical issues.
❑Designated “privacy officer(s)”.
❑Training and open forums.
What is the company’s responsibility?
Unethical business practices can affect
your business indirectly.

The amount you make in profits from one

unhappy customer can translate into a lot
more lost because of missed repeat business.
What is the company’s responsibility?

❑Treating employees unethically can also

backfire.
❑Mistreating employees leads to a high
turnover rate. This increases the cost of hiring
and training new employees.
 What is the company’s responsibility?
❑Establish an ethical workplace.
❑Create a written code of ethics to set
guidelines to help the business owner and
employees make ethical decisions.
❑Establish company policies and procedures to
let business owners and employees know how
to act in certain situations.
❑Treat all employees fairly.
Three Models of Business Ethics

Immoral A style devoid of ethical principles

Management and active opposition to what is ethical.

Moral Conforms to high standards

Management of ethical behavior.

Intentional: does not consider

Amoral ethical factors.
Management Unintentional: casual or careless
about ethical factors.
 Characteristics of immoral managers
❑Intentionally do wrong.
❑Self-centered and self-absorbed.
❑Care only about self or organization’s
profits.
❑Actively oppose what is right, fair, or just.
❑Exhibit no concern for stakeholders.
❑Are the “bad guys”.
❑An ethics course probably would not
help them.
 Characteristics of moral managers
❑Conform to a high level of ethical or right behavior.
❑Conform to a high level of personal and professional
standards.
❑Ethical leadership is commonplace.
❑The goal is to succeed within the confines of sound
ethical precepts (guidelines).
❑High integrity is displayed.
❑Embrace the letter and spirit of the law.
❑Possess an acute moral sense and moral maturity.
❑Are the “good guys”.
 Characteristics of amoral managers
Intentionally amoral managers:
❑Don’t think ethics and business should “mix”.
❑Business and ethics exist in separate spheres.
❑A vanishing breed.

Unintentionally amoral managers:

❑Don’t consider the ethical dimension of decision-making.
❑Don’t “think ethically”.
❑Have no “ethics buds”.
❑Well-intentioned, but morally casual or unconscious.
❑Ethical gears are in neutral.
 Graphic Organizer
Graphic
Important Organizer
Ethical Questions
Does it violate the law or policies? YES UNETHICAL
NO

What if everyone did this, but it’s bad? YES UNETHICAL

NO

Would this sacrifice long-term benefits for MAY BE

short-term gain? YES
UNETHICAL
NO

ETHICAL DECISION
So what does this mean to you and me?
❑We have a personal obligation to ourselves
and our employers to act ethically in our
business dealings.
❑Personal and corporate reputational risk.
❑We are also bound by the Ethical Rules of
professional bodies (BERC, BTRC, Press Council,
BGMEA, FBCCI, SEC).
❑Disciplinary consequences for bringing the
bodies into disrepute.
❑Includes fines, suspension, or expulsion.
So what does this mean to you and me?
To make sure ethical issues are considered in
business decisions, managers should:
❑Hire/promote people with a sense of personal ethics.
❑Place a high value on ethical behavior and ingrain it in the
organizational culture.
❑Ensure leaders articulate and act ethically.
❑Require that ethics be part of the decision-making
process.
❑Use ethics officers.
❑Enforce strong corporate governance processes.
❑Act with moral courage - encourage others to do so.
 Finally!
❑Ethics can be a learned behavior….to a
point.
❑Will be assimilated over some time,
primarily during more vulnerable years:
❑Youth – family/schooling.
❑Young adult – university/workplace.
❑Will be dispersed during more secure
years:
❑Mature adult – workplace/social group.