Business Ethics: When the Rubber Hits the Road

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Business Ethics When the Rubber Hits the Road

• Presented by
• Mona E. Barragan

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Objectives

• Define business ethics and whether business
  ethics may be taught
• Define consumerism
• Study business ethics as it relates to small
  business
• Highlight the results of 386 questionnaire
  responses to general business ethics questions
• Practice what you have learned by participating
  in a group exercise

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Business Ethics Definitions

• Business ethics is most narrowly defined in terms
  of what is right/wrong or good/bad
• The definition that is more appropriate to
  business today is The processes through which
  individuals apply their personal values, beliefs,
  and attitudes to new, dynamic situations in the
  workforce in order to make, implement, and
  evaluate optimal decisions.

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Can business ethics be taught? Some say no
because...

• Values are fully formed by the time we reach
  adulthood
• Business ethics is unscientific
• Business instructors may not possess ethics
  expertise ethics instructors may not possess
  business expertise
• University business curricula and business
  training programs are already full

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Most say yes

• Most textbook authors are including ethics in
  their university texts
• Most authors researched believe that business
  ethics may be taughttheir only point of
  contention is how it should be taught
• Many professional organizations require members
  to obtain ethics training
• Over 90 of questionnaire respondents believe
  that parents, teachers and employers should teach
  business ethics

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Some Social Obligations of Small Firms
Compliance with Government Regulations
Response to Employee Needs
Consumerism
Protection of Environment
Support of Education
Contributions to Community Organizations
Response to Community Needs

• Small Business Management, 11th edition
• Longenecker, Moore, and Petty
• 2000
• South-Western College Publishing

7
Business Ethics/Social Responsibility

• Should be recognized by all businesses--especially
  small businesses
• Level may be limited because small businesses
  must make a profit to survive
• Does what is best for the majority of
  stakeholders--not just what is in the owners
  best interest

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Small business and ethics

• In small business, the personal integrity of the
  founder or owner is the most important key to
  ethical performance
• Code of ethics may become necessary as a business
  grows and the owners personal influence
  decreases

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Small business and ethics (continued)

• Studies suggest that entrepreneurs are more
  likely than other business managers and
  professionals to be unethical with respect to
  issues that directly affect profits
• Small businesses are under greater pressure to
  act unethically, because they may not absorb the
  cost of making ethical decisions as easily as
  large firms

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Consumerism Issues
Key Emphasis Let the seller beware!

• Customer Expectations
• Products/services that reflect
• Safety
• Reliability
• Durability
• Quality
• Accuracy in advertising

• Small Firm Responses
• Clearly stated warranties
• Efforts to satisfy customers
• Honest advertising
• Smoke-free areas
• Standing behind repair work

• Small Business Management, 11th edition
• Longenecker, Moore, and Petty
• 2000
• South-Western College Publishing

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How Entrepreneurs Rationalize Cheating on Taxes
Everybody does it. Its the way I get paid
for unnecessary government red tape. I have to
compete with people who cheat. Big operators
have their loopholes this just evens things
up. Taxes are too high the government
doesnt deserve that much money.

• Small Business Management, 11th edition
• Longenecker, Moore, and Petty
• 2000
• South-Western College Publishing

12
Difficult Ethical Issues Facing Small Firms
Putting old parts in a new device and selling
it as new Lying to customers about test
results Reporting to an unethical
person Being asked by my superiors to do
something that I know is not good for the
company or its employees Receiving kickbacks
by awarding overpriced contracts Theft of
corporate assets Getting people to do a full
days work Vendors want a second chance to bid
if their bid is out of line. The ordering of
supplies when cash flows are low and
bankruptcy may be coming
Relationship with outside parties in the
marketplace Superior subordinate
relationships Employee responsibilities and
actions that in some way conflict with the best
interests of the employer Relationships with
suppliers

• Small Business Management, 11th edition
• Longenecker, Moore, and Petty
• 2000
• South-Western College Publishing

13
Difficult Ethical Issues Facing Small Firms
Compliance with governmental requirements and
reporting to government agencies Human
resource decisions Environmental and social
responsibilities
Having to deal with so-called antidiscrimination
laws which in fact force me to
discriminate Employing people who may not be
legal citizens to work Whether to lay off
workers who are surplus to our needs and
would have a problem finding work or to deeply
cut executive pay and perks Sexual
harassment Whether to pay to have chemicals
disposed of or just throw them in a
dumpster Environmental safety versus cost to
prevent accidents

• Small Business Management, 11th edition
• Longenecker, Moore, and Petty
• 2000
• South-Western College Publishing

14
Results of 386 Questionnaires

• 186 respondents were graduating university
  seniors, post-graduate students, or graduate
  students
• 200 respondents were business practitioners
• Summary of respondents perceptions follow in
  Tables 1 through 8

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Tables 1 - 6
Tables 1 - 6 compare student and practitioner
responses to questions on business ethics
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Table 1
I believe I am living in a time of general
ethical decline in ( of respondents that
Agree) Students Practitioners Society 80 79
Business 62 64
Have you ever made a
decision in the workplace that some may construe
as unethical? Yes No Practitioners 33 67
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Table 2
I believe that ethical business practices lead
to ( of respondents that Agree) Students P
ractitioners increased profits 68 75 increas
ed returns on investment 65 74 a positive work
environment 91 96 a positive public
perception of 89 94 the organization

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Table 3
I corporate decision-makers should be accountable
to ( of respondents that Agree) Students P
ractitioners the government 58 57 stockholde
rs 88 98 employees 92 97 the
communities in which 87 91 they operate


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Table 4
I believe I will face/have faced the following
issues in my work experience ( of respondents
that Agree) Students Practitioners growing
presence of women minorities 95 72 ecologica
l responsibility 83 40 illegal
activity 74 36 global complexities 88
55 restructuring reorganization 91 85 merge
rs and acquisitions 87 64 technological
surveillance of employees 81 53
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Table 5
I believe business managers should consider
ethical/social implications before they make
business decisions ( of respondents that
Agree) Students Practitioners 95 96
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Table 6
I believe the following should be LEADERS in
teaching ethics/ social responsibility in
BUSINESS decision-making to future managers (
of respondents that Agree) Students Practitio
ners parents 88 91 teachers/professors 90
97 clergy 70 74 employers 88 94
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Tables 7 - 8

• Tables 7 - 8 present practitioners
• experiences with business ethics

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Table 7
I have personally made/witnessed others make
decisions in the workplace that involve(s)
business ethics/ social responsibility ( of
respondents that Agree) Personally Others
at least weekly 49 54 between weekly and
monthly 26 27 between monthly and
yearly 17 12 less than once a year 4 4
never 5 3
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Table 8
What do you believe are the motivating reasons
for unethical behaviors by managers/non-management
employees ( of respondents that
Agree) Managers Employees career
advancement 74 69 financial
benefit 80 71 no formal ethics
training 33 45 upbringing lacks ethics
emphasis 57 64 lack of accountability 64
66 company policies do not address
ethics 28 33 corporate culture 56 46 foll
owing directives 31 37
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Class Scenarios
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Scenario 1
Jeff is a salesman working at a small business
that manufactures small tools. He is paid
strictly on a commission basis. The higher the
price he negotiates with his customers, the
higher his commission, and thus, his
paycheck. Many of Jeffs customers are small
businesses like the one he works for. While he
needs to provide for a family, his
small businesses customers cannot afford high
prices for tools. How can Jeff balance the needs
of his family and his customers? What are the
ethical implications of the decisions Jeff makes?
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Scenario 2
Sarah started a small Internet company two years
ago. She sees that she is beginning to lose a lot
of business to companies that pop up, produce
advertisements that promise the world, do not
deliver, and are gone in a year. Sarah has
decided she has several options (1) compete
with them head to head by making the same
promises, (2) exposing the fly-by-night
businesses for what they are, (3) wait it
out, hoping her business will survive and even
thrive in the long run. What course of action
should Sarah take? How will her actions affect
all of her stakeholders?
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Scenario 3
Samantha runs an antique store in Madisonville,
Texas. She has an assistant manager, two sales
clerks, one buyer, and a bookkeeper that work for
her full time. The assistant manager resigns. One
sales clerk with 15 years of experience, the
buyer who has 6 years, and the bookkeeper who
has 1 year all want the promotion. The sales
clerks performance has been marginal, but she is
a steady, dependable employee. The buyer has
excellent connections to the auction market,
which is why he was hired however, Samantha and
the buyer dont always get along. The bookkeeper
is a go-getter who always gives 200. Who should
Samantha promote, and why? Are there
trade-offs between what is fair to the employees
and what is best for the business?
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Scenario 4
Paul works for a small communications company.
His earnings and benefits are enough to provide
nicely for his family of 4. He has just lost his
largest customer, 2 million, because of an
unethical decision made by Pauls boss. Paul has
discovered several things he could do (1) go to
his boss and address the unethical decision with
him, (2) go to the customer and try to cut a
personal deal with him, (3) leave the
company. What should Paul do? Who will his
decisions affect?
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Scenario 5
Elena is the bookkeeper for a small oil gas
firm. She posts all entries, including all
routine monthly entries that are required to
close the books. The business is attempting to
get a large loan from a bank, and so Elena works
day and night to get the books closed
quickly. After presenting the month-end reports
to the business owner, the owner says, we are at
____ in net income we need to be at _____. He
subsequently gives her entries to make into
the accounting records for which she has no
backup. Elena calculates that including those
entries, the net income will be where the
owner wanted it to be. What should Elena do?
What are her choices and who will her decisions
affect?
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Scenario 6
Joyce works for a small real estate brokerage
firm. They buy and sell property that has been
abandoned or repossessed for non- payment of
taxes. Although an initial environmental
assessment of a property came up clean when a
property was first purchased, Joyce has recently
learned that a part of the property was used as a
dumping ground for paints and other chemicals
in the past. Joyce and her employer feel since
the property passed an initial environmental
inspection, it will pass again, and the
company does not wish to disclose the
environmental hazards. What are Joyces options
when placing the property for sale? What are the
implications of the decisions she makes? Who
will her decisions affect?
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Scenario 7
Jake, the owner of Mustang Supplies, believes
that employees are stealing from him by placing
small tools and equipment into their lunch boxes.
A friend has suggested that Jake place hidden
surveillance cameras in the break room and in the
employee locker area. What should Jake do? Are
there privacy issues involved in the decisions he
makes? What are the implications of the decisions
he makes?
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Scenario 8
Max works for a small used car dealership. The
owner has always allowed him to create his own
advertisements. Recently, the owner has started
pressuring Max about the fine print in his
advertisements. That is, the owner wishes to
price one vehicle at a super sale price, with the
small print in the advertisement stating one at
this price. He wants to bring in more potential
customers. What are your options? What are the
ethical implications of these advertisements?
What should Max do?
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What may we learn from practitioners?
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Scenario 1--a balancing act
I'm in Sales. By definition I sell a product,
service, etc., and try to increase the overall
margin of a job. This means that I am trying to
"bleed" money out of my customers. I have a
budget. If I obtain the budgeted goal, I am
rewarded by increased commissions. Question
What's at stake? I am constantly torn between
putting the "screws" to a cust that trusts me and
a company signs my pay check! This far, I believe
I have been able to balance them both.
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Scenario 2--my decisions affect millions of
people
Know yourself your ethical boundaries. Be
honest with yourself about what you can cannot
do. Be sure you understand the repercussions of
your decisions-the consequences to
your community, your family, your
company/employees, friends and the consequences
to yourself. One decision affects millions of
people, more times than you think. That's a lot
of responsibility. Always be prepared to take
responsibility for your actions, but never expect
to get credit for them.
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Scenario 3--be fair
Treat everyone fairly. I have seen so much
back-stabbing either for getting ahead or getting
out of trouble. You might have personality
conflicts with people--but you still need to try
to be neutral. Hope this helps with your study
try to make this world a better place by teaching
ethics!
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Scenario 4--time to leave
I lost a 2 plus million dollar account because of
the lack of ethics the president of the company
had. I left the company shortly after.
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Scenario 5--stand your ground
"Awareness" is the key! Understand that
eventually a situation will arise where ethics is
an issue. If it comes from a client or
management, don't be afraid to stand your ground.
You can always get a new job, but it's very
difficult to change your reputation.
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Scenario 6--stepping over the line
Students need to be informed how ethical
decisions apply to everyone and that the
decisions they make will affect everyone. Once
upper management learns that you are willing to
ethically lean toward the company's side or
decision, they will return again and again for
your help. If you make an unethical decision
for the company's benefit you will be expected to
cover it up and forget about it, until they need
you to do it again. My ethical situations deal
mainly with the environment.
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Scenario 7--all-knowing Big Brother
Continue teaching ethics, but aside from that
place an emphasis on "Big Brother." The
technological surveillance of employees is out of
control. Welcome to Dell.
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Scenario 8--bait advertising--reputation is all
you have to lose
Let them be fully aware that unethical behaviors
will happen, and that they will be faced with it
and will have to make a decision (be prepared).
Unethical behavior always catches up to people.
It may never catch up with them financially,
however reputation" in the business world will
make or break you. Being in sales, I encounter
unethical behaviors frequently. Large
corporations are just as guilty as small
businesses (it is not isolated to any segment of
the market).
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An Ethical Culture
An ethical culture is one in which the company
makes a good faith effort to meet its
obligations to all its stakeholders not just to
its employees, but also to its customers,
shareholders, the community and the environment.
The list of stakeholders gets longer every day,
and their interests often conflict, but they
cannot be ignored. Shaun OMalley, chairman
emeritus of Price Waterhouse

• Small Business Management, 11th edition
• Longenecker, Moore, and Petty
• 2000
• South-Western College Publishing

44
Cultivate literature and useful knowledge, for
the purpose of qualifying the rising generation
for patrons of good government, virtue, and
happiness. ? George Washington