Unit 2.

1: Professional Code of Ethics - Exam Notes

2.1.1 What is a Professional Code of Ethics?

● Definition: A professional code of ethics is a structured set of principles that guides

professionals in making decisions aligned with the organization’s values. It helps
distinguish right from wrong in complex work situations.
● These principles outline the mission and values of an organization, how the
professionals within the organization are supposed to approach problems and the
standards to which the employees are held.
● Purpose: Sets a standard for expected behavior and provides a foundation for
decision-making that promotes a respectful, fair, and harmonious work environment.

2.1.2 Why is a Code of Ethics Important?

● Internal and External Value: Internally, it serves as a guideline for employees’ behavior.
Externally, it communicates the company’s commitments and values to stakeholders.
● Consistency and Accountability: Ensures universal compliance, provides pre-emptive
guidance to prevent ethical breaches, and serves as a basis for corrective action if
needed.
● A code of ethics can be valuable not just internally as a professional guide but also
externally as a statement of a company’s values and commitments.

2.1.3 Components of the Code of Professional Ethics

1. Respect for Others: Treat people as you want to be treated.

Treat everyone with dignity, politeness, and fairness. Respect personal space, opinions,
and privacy. Harassment or victimization (demeaning, offensive, or threatening behavior)
is strictly prohibited.

2. Integrity and Honesty: Tell the truth and avoid any wrongdoing to the best of your
ability.

Act truthfully and transparently in all interactions. Employees should prioritize

organizational goals, avoid deceit, and refrain from actions that could harm the company.
Dishonesty, theft, or deceitful conduct can lead to disciplinary action, including
termination.

3. Conflict of Interest: Align your action with organizational objectives

Avoid any actions where personal interests conflict with organizational objectives.
Examples include using one’s position for personal gain or exploiting company
 resources. Even actions appearing beneficial to the company can have long-term risks if
done unethically (e.g., misusing competitor information).

4. Justice: Make sure you’re objective are fair and don’t disadvantage others.

Promote fairness, equality, and objectivity in all decisions, especially in hiring,

promotions, and disciplinary actions. Employees should report unethical behavior
(whistleblowing) without fear of retaliation.

5. Lawfulness: Know and follow the law – always.

Adhere to all legal requirements related to the organization, including industry-specific

laws (e.g., medical, finance). Contracts and policies should be legally vetted, and
confidentiality and data protection laws strictly followed.

6. Competence and Accountability: Work hard and be responsible for your work

Perform tasks responsibly and to the best of one’s ability. This includes acknowledging
mistakes, addressing them, and continuously striving for improvement to support the
organization’s mission.

7. Teamwork: Collaborate and ask for help.

Work collaboratively, sharing knowledge and supporting colleagues’ efforts. Being open
to learning and teaching fosters a positive work culture.

2.1.4 Recognizing Unethical Business Activities

● Common unethical activities include:

○ Theft: Unauthorized use of company resources.
○ Deception: Lying or misrepresenting facts.
○ False Impressions: Misleading customers about products/services.
○ Conflict of Interest: Prioritizing personal interests over company interests.
○ Hiding Information: Failing to disclose harmful product information.
○ Abuse of Power: Harassment or unfair treatment of employees.
○ Unfair Advantage: Taking advantage of uneducated consumers.
○ Improper Behavior: Inappropriate personal conduct impacting company
reputation.

Unit 2.2: Workplace Rights and Responsibilities

2.2.1 What is a Right and What is a Responsibility?

 ● Right: A right is something you are entitled to receive, e.g. to be treated in a fair, ethical
and legal way.
● Responsibility: responsibility is a duty or something you should do, e.g. to treat others
with respect.

2.2.2 Classification of Rights and Responsibilities

● Legal: As set out by national, e.g. the right to be treated equally regardless of age,
gender, marital status, etc.
● Social: The treatment of workers by employers, e.g. payment of a fair wage, prevention
of bullying in the workplace, etc.
● Environmental: A safe and healthy workplace. In addition, the employer must ensure
that they do not damage the local environment
● Ethical: Doing what is right, e.g. fair treatment of employees and suppliers, engaging in
fair trade.

Rights and Responsibilities of Employees and Employers

● Employee Rights:
○ Fair pay, safe working conditions, adequate breaks, freedom from harassment,
and the right to join unions.
● Employee Responsibilities:
○ Follow job duties, respect workplace rules, maintain punctuality, and uphold
confidentiality.
● Employer Rights:
○ Set business goals, hire suitable staff, and expect loyalty.
● Employer Responsibilities:
○ Provide a safe work environment, comply with employment laws, and ensure fair
treatment.

How Organizations Influence Ethical Conduct

Organizations play a critical role in influencing ethical conduct by shaping the environment in
which employees make decisions and conduct themselves. This influence can be exerted
through leadership, training, formal codes, and mechanisms like whistleblowing. Here are key
ways organizations can cultivate ethical behavior:

1. Leading by Example

● Leadership Impact: Employees often model their behavior on that of their managers
and leaders. When leaders demonstrate ethical conduct, it sets a standard for
acceptable behavior within the organization.
 ● Example: Ben Cohen, former president of Ben & Jerry’s, implemented a policy limiting
salaries, ensuring no one earned more than seven times the salary of the lowest-paid
worker. This approach promoted fairness and unity within the company by making all
employees feel valued and equal.

2. Offering Ethics Training Programs

● Purpose: Ethics training helps employees recognize ethical dilemmas and equips them
with tools to handle challenging situations.
● Program Elements: Effective training begins with methods for addressing ethical
dilemmas. Employees are often presented with hypothetical situations to practice
decision-making, aiming to identify the "best" ethical solution.
● Global Trend: According to the Ethics Resource Center, many modern organizations
worldwide now incorporate ethics training as a standard practice, which raises
awareness and provides guidelines for ethically ambiguous situations.

3. Establishing a Formal Code of Ethics

● Definition: A formal code of ethics provides clear guidelines on expected responsibilities

and behaviors toward colleagues, clients, and other stakeholders.
● Implementation:
○ Companies often display these codes prominently on office walls, include them in
employee handbooks, or post them on corporate websites.
○ The code’s impact is strongest when senior management actively follows and
reinforces it, creating a culture of compliance and accountability.
● Variety in Codes: Codes may vary from detailed guidelines to broader statements of
company values, policies, and priorities.

4. Whistleblowing

● Definition: Whistleblowing involves reporting illegal, unethical, or improper actions within

an organization, often to protect public interest or organizational integrity.
● Motivations:
○ Many whistleblowers report issues out of ethical concerns, social pressures, or
personal values.
○ Studies show whistleblowers are more likely to act if they know others are aware
of the wrongdoing, reducing the fear of isolation.
● Mixed Outcomes:
 ○ While whistleblowers are sometimes seen as “heroes” for exposing wrongdoing,
they can also be viewed as traitors, especially if motivations are perceived as
personal or vindictive.
○ Example: In cases of corporate fraud, employees may blow the whistle to prevent
further harm to stakeholders, even at the risk of being ostracized by colleagues.

Challenges in Whistleblowing

● Secrecy and Loyalty: Many professionals feel a duty to maintain confidentiality in their
roles, which can conflict with the desire to expose unethical practices.
● Moral Dilemma: Whistleblowing often pits an employee’s loyalty to the employer against
their duty to public interest, making it a complex moral choice.

Legal Protections for Whistleblowers

● Whistleblower Protection Laws: These laws ensure freedom of speech for employees,
allowing them to report unethical or illegal practices without retaliation.
● Rights: Whistleblowers have the right to report evidence of:
○ Law violations
○ Gross mismanagement or misuse of funds
○ Abuse of authority
○ Specific threats to public health or safety

Unit 2.3: Corporate Social Responsibility (CSR)

2.3.1 What is CSR?

● Definition: Acting in an ethical manner is the concern of businesses for the welfare of
society as a whole. It consists of obligations beyond those required by law or union
contract.

This definition makes two important points.

● First, CSR is both voluntary and law abiding.

● Second, the obligations of corporate social responsibility are broad. They extend
beyond investors in the company to include workers, suppliers, consumers,
communities, and society at large.
Peter Drucker, the late globally respected management expert, said that we should look first at
what an organization does to society and second at what it can do for society. This idea
suggests that social responsibility has two basic dimensions: legality and responsibility.
2.3.2 Key Components of CSR

1. Responsibility to Stakeholders: Meet obligations to all stakeholders, including

employees, customers, the public, and investors.

2. Responsibility to Employees: An organization’s first responsibility is to provide a job to

employees. Keeping people employed and letting them have time to enjoy the fruits of
their labour is the finest thing business can do for society.

Beyond this fundamental responsibility, employers must provide a clean, safe working
environment that is free from all forms of discrimination. Companies should also strive to
provide job security whenever possible.
3. Responsibility to Customers: To be successful in today’s business environment, a
company must satisfy its customers. A firm must deliver what it promises, as well as be
honest and forthright in everyday interactions with customers.

4. Responsibility to Society:

A business must also be responsible to society.

A business provides a community with jobs, goods, and services.

It also pays taxes that support schools, hospitals, and better roads.

Some companies have taken an additional step to demonstrate their commitment to

stakeholders and society as a whole by becoming Certified Benefit Corporations, or B
Corps for short.

5. Environmental Protection: Adopt sustainable practices to reduce environmental

impact. Companies can follow ISO 14001 standards and commit to renewable energy
sources, waste reduction, and conservation efforts.

To slow the erosion of the world’s natural resources, many companies have become
more environmentally responsible. For example, Toyota now uses renewable energy
sources such as solar, wind, geothermal, and water power for electricity to run its
facilities. When its new $1 billion North American headquarters opened in Plano, Texas,
in May 2017, Toyota said the 2.1 million square-foot campus would eventually be
powered by 100% clean energy, helping the auto giant move closer to its goal of
eliminating carbon emissions in all of its operations

6. Corporate Philanthropy:

Companies also display their social responsibility through corporate

philanthropy.Corporate philanthropy includes cash contributions, donations of equipment
and products, and support for the volunteer efforts of company employees.

Engage in charitable activities, such as donations and support for disaster relief.
Examples include contributions from companies like Bayer and American Express to
assist in emergencies.

7. Responsibility to Investors: Achieve profitability while considering ethical

responsibilities. Investors are increasingly choosing socially responsible investments,
avoiding companies associated with unethical practices.
2.3.3 Trends in CSR

● Strategic Philanthropy: Aligns CSR initiatives with business objectives.

● Employee-Employer Social Contract: Recognizes mutual responsibilities between
both parties to enhance organizational loyalty.
● Global Ethics: Multinational corporations must uphold ethical standards worldwide,
respecting local practices while promoting human rights and safety.
● Sustainability: Focus on reducing the ecological footprint, with companies increasingly
dedicated to sustainable practices.

Unit 2.4: Conflict of Interest - Exam Notes

2.4.1 What is a Conflict of Interest?

● Definition: A conflict of interest arises when an individual’s personal interests (financial,

relational, reputational) interfere with their professional responsibilities, potentially
compromising their impartiality.
● When It Occurs: Conflicts occur if a person prioritizes personal gain over their duties to
their employer or organization, raising concerns about their ability to act unbiasedly.
● Legal Implications: Conflicts of interest can have legal ramifications, often necessitating
the removal of the conflicted individual from decision-making processes.

Examples:

● Board Members: Corporate board members have a fiduciary duty to the company. For
instance, if a board member of an insurance company with a vested interest in a trucking
business votes to reduce premiums for fleet vehicles, their actions may benefit their
personal interests at the company’s expense, creating a conflict.
● Legal Representation: Lawyers or judges with a vested interest in a case outcome
(e.g., personal relationships or financial ties) are expected to withdraw from involvement
to avoid bias.

2.4.2 Understanding Conflict of Interest in Business

● Definition in Business: A conflict of interest in business arises when an individual’s

personal interests clash with the professional duties owed to their employer or
organization.
● Duty of Loyalty: Directors and executives have a legal duty of loyalty to prioritize the
company’s interests. Actions that serve personal gain but detract from the company’s
welfare constitute a breach of this duty.

Example:
● Judicial Recusal: Judges with connections to parties involved in a case, such as
friendships or financial interests, must recuse themselves to maintain impartiality.

2.4.3 Common Types of Conflicts of Interest

1. Self-Dealing
○ Definition: Occurs when a professional engages in transactions that benefit
themselves at the expense of their employer or clients.
○ Example: A company executive partners with a third-party vendor that personally
benefits them, potentially harming the company’s financial interests or credibility.
2. Gifting
○ Definition: Involves receiving gifts or favors that may influence decision-making.
Accepting gifts from clients or vendors can lead to biased decisions favoring the
gift-giver.
○ Prevention: Many companies ban employees from accepting gifts from clients to
avoid favoritism or biased actions.
3. Insider Trading
○ Definition: This conflict arises when an employee gains confidential, non-public
information through their professional role and uses it for personal financial gain.
○ Example: An employee in a finance role might use confidential details about a
company’s merger to buy or sell stocks before the information becomes public.
This is highly regulated in the financial industry due to the potential for market
manipulation.
4. Nepotism
○ Definition: Favoritism toward relatives or close friends in hiring or promotions
can create a conflict of interest, especially if those individuals receive preferential
treatment.
○ Example: A manager hires a relative, promoting them over more qualified
candidates. This can lead to organizational distrust and morale issues, as well as
legal complications regarding fair treatment in the workplace.

Unit 2.5: Managing Boundaries and Multiple Relationships - Study Notes

2.5.1 What are Personal Boundaries?

● Definition: Personal boundaries are physical, emotional, and mental limits that protect
professionals from getting overly involved in their clients' lives.
● Purpose:
○ Helps professionals maintain psychological safety.
○ Supports objective decision-making in therapeutic or professional processes.
● Risks of Blurred Boundaries: Without clear boundaries, professionals may feel
compelled to "rescue" clients, which can cloud objectivity and professional judgment.
Instead, the goal is to support clients in achieving their own goals.

2.5.2 What are Professional Boundaries?

● Definition: Professional boundaries are legal, ethical, and organizational frameworks

that protect both clients and employees from harm.
● Examples of Boundary Challenges:
○ Gifts from clients: Accepting gifts can compromise objectivity.
○ Social invitations: Engaging socially can blur professional lines.
○ Personal disclosures: Clients may share irrelevant information, challenging
professional focus.
● Importance of Clarity:
○ Professionals must clearly communicate role expectations and what constitutes
appropriate conduct.
○ Maintaining professional boundaries helps in delivering services effectively while
preserving the integrity of the relationship.

2.5.3 Considerations for Maintaining Professional and Personal Boundaries

1. Set Clear Expectations: Establish mutual understanding of expected behavior, respect,

and commitment to the process at the outset.
2. Define Your Role: Clearly outline the limits of your role to prevent overstepping
boundaries.
3. Assertiveness: Address inappropriate behavior directly to maintain professional
standards.
4. Single Relationship: Avoid dual relationships (e.g., being both friend and professional),
as these can complicate professional objectivity and workplace dynamics.
5. Personal Information: Limit sharing of personal details with clients to avoid unintended
biases.
6. Relevant Information: Avoid asking clients for unnecessary information that does not
serve the professional purpose.
7. Maintain Objectivity: Approach situations and decisions without personal bias.
8. Recognize and Manage Triggers: Be aware of personal reactions and manage them to
maintain professionalism.
9. Privacy and Confidentiality: Uphold client privacy by safeguarding their information.
10. Critical Reflection: Regularly reflect on your actions and decisions to ensure they align
with ethical standards.

2.5.4 Socializing at Work with Clients

● Guidelines for Social Interactions:

○ Appropriate Conversations: Avoid jokes or topics that would be inappropriate in
a professional setting.
○ Non-Work Topics: Focus on casual subjects like hobbies or interests instead of
work matters.
○ Be a Listener: Let others speak to foster a positive impression; avoid dominating
the conversation.
○ Meet New People: Use events to connect with new colleagues or clients and
build positive impressions.
○ Stay Controlled: Relax without compromising professionalism. Remember, you
represent your company even in informal settings.
○ Address Inappropriate Behavior Discreetly: If a coworker behaves
inappropriately, speak to them privately to avoid public embarrassment or
confrontation.

Unit 2.6: Organizational Loyalty - Study Notes

2.6.1 What is Organizational Loyalty?

● Definition: Organizational loyalty is the commitment employees have towards their

employers, contributing their best efforts to the organization’s success.
● Evolving Concept: Loyalty expectations have shifted; unlike in the past, many
employees today may seek better opportunities within a shorter timeframe, making
long-term loyalty less common.
● Employee Obligations: Employees owe employers a good day’s work and their best
effort, but the concept of loyalty has become more flexible in the modern workforce.

2.6.2 Duty of Loyalty

● Definition: Duty of loyalty means employees must act in good faith, advancing the
employer’s interests rather than their own.
● Common Law: In most cases, common law governs the employment relationship,
outlining the duty of loyalty as refraining from actions contrary to the employer’s
interests.
● Restrictions: Employees must avoid conflicts of interest (e.g., holding a competing
second job) without the employer’s consent, and they should not engage in actions
benefiting themselves at the expense of the company.

2.6.3 Antecedents of Loyalty

1. Implicit Social Contract: Older generations often committed long-term to one employer.
In contrast, millennials are less likely to stay with a single employer for more than three
years, reflecting changing job market dynamics.
2. Perception of Best Option: Loyal employees believe their current organization provides
the best career opportunity and do not actively seek other employment.
3. Organizational Care: A decline in perceived organizational care leads to reduced
loyalty; employees may feel less attached if they sense the company won’t look after
them in return.
4. Two-Way Loyalty: Loyalty is reciprocal. Employers generally do not legally bind
themselves to long-term obligations with employees (e.g., "at-will" employment), which
may cause employees to feel less loyalty.
5. Emoluments and Career Decisions: Financial considerations heavily influence loyalty.
Observing top executives leaving for better offers may prompt employees to look out for
their interests and change jobs for higher pay.
6. Meaning in Work: Beyond financial incentives, employees value purpose and
recognition. Being acknowledged for hard work can reinforce loyalty, though financial
stability remains essential for job satisfaction.
7. Independent Status: Freelancers and contractors typically do not form the same loyalty
bonds as traditional employees since they are hired for specific projects and maintain
professional independence.

2.6.4 Loyalty and Confidentiality

● Confidentiality Expectations: Employers expect employees to keep sensitive

information, such as proprietary data, patents, trade secrets, and customer information,
confidential.
● Common Law and Contracts: Confidentiality duties may be specified in employment
contracts or upheld under common law. Nondisclosure agreements (NDAs) are common
tools to reinforce this responsibility.
● Trade Secrets: Unlike patents and copyrights, trade secrets lack legal status but are
often protected through internal policies and NDAs.
● Protecting Intellectual Property:
 ○ Companies may use confidentiality clauses to prevent employees from sharing or
misusing intellectual property.
○ Clauses may include non-compete agreements or solicitation restrictions to
prevent employees from taking clients or employees after leaving the company.
● Expectations for Current and Former Employees:
○ Current Employees: Should not engage in competitive behavior or conflicts of
interest.
○ Former Employees: Expected not to solicit former clients or employees or
misuse sensitive information acquired during employment.