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chapter 5 bussiness notes

Additional Business Flashcards




1. Concern for ethical and societal issues
a. Business ethics are the standards of conduct and moral values governing actions and decisions in the work environment
b. Businesses must also take into account a wide range of social issues
i. How will a decision affect the environment?
ii. How will it affect its customers?
iii. Its employees?
c. These issues are part of social responsibility—the philosophies, policies, procedures, and actions that enhance society’s welfare
d. Through ethics and social responsibility, businesses find the balance between doing what is right and doing what is profitable
2. Business ethics in practice
a. In business, as in life, deciding what is right or wrong is not always clear cut
b. A company has responsibilities to many groups:
i. To its consumers
ii. To its employees
iii. To its investors
iv. To society as a whole
c. Conflicts can arise in trying to serve the different needs of each of these groups
d. The individual ethics of staff at all levels, not just executives, shape a firm’s decisions and actions
e. Business ethics are shaped by several factors:
i. By individuals weighing what’s right and wrong before deciding or taking action
ii. By the ethical climate, the prevailing combination of a company’s stated beliefs and its real actions
iii. By a firm’s codes of conduct, usually made up of statements in which the “right thing to do” is encouraged and applauded
iv. By a firm’s framework designed to encourage, or demand, high ethical standards from its workers
1. The new ethical environment
a. Business ethics are continually in the news—investigations, lawsuits, arrests, convictions, and business collapse due to fraud and corruption
b. These stories may have obscured the fact that many firms are ethical
i. One study (National Business Ethics Survey) said 80% of Americans felt that their employers kept promises and that honesty and respect were on the rise
ii. Most business owners and managers have led companies without breaking the rules; some have created formal documents that state the company’s beliefs
iii. General Electric’s CEO says that a firm stays on the “most admired” list due to virtue, execution, growth, and great people
c. But not all firms meet ethical standards
i. One study (Public Agenda, Kettering Foundation) said that Americans felt greed, poor values, and disinterest in preserving jobs affected too many companies
ii. The same study said that executives felt preserving jobs was a business issue, not an ethical issue
1. New government regulations
a. Sarbanes-Oxley Act
i. The Sarbanes-Oxley Act of 2002 was passed to set new rules for business trading and financial reporting
ii. It establishes new regulations for securities trading and accounting practices
iii. It requires companies to publish their code of ethics and inform public of changes in it
iv. It forces CEOs to make sure that financial statements are accurate
v. It may encourage companies to write codes and guidelines
b. U.S. Sentencing Commission
i. The U.S. Sentencing Commission was created by the federal government to create and enforce standards
ii. It institutionalizes ethics compliance programs and sets high ethical standards for corporate conduct
3. New ways for companies to regulate themselves
a. Ethics compliance officers are newly appointed to handle specific ethical issues:
i. To deter wrongdoing and upholding standards
ii. To train employees to spot fraud and abuse
iii. To investigate sexual harassment and discrimination issues
iv. To monitor conflicts of interest
b. Audit departments and financial statements are linked to ethics reviews
c. Most important, CEOs and top officers must now personally sign off on the accuracy of their firm’s financial statements
1. Individuals make a difference
a. Individuals can affect ethical expectations and behavior
b. Workers create current state of individual business ethics, and some act illegally or unethically on the job
i. One British survey said one-third of workers spend 30 minutes of each workday on the Internet and personal business
ii. One poll said unethical behavior most often seen was lying, withholding information, abusing or intimidating employees, inaccurately reporting the amount of time worked, and discrimination
iii. Consideration of co-workers is a less urgent but growing issue of personal ethics, particularly in tight quarters
c. Technology expands the range and impact of an individual’s unethical behavior
i. Computers allow anyone with access to steal, change data, or shut down a system
ii. Hackers are often employees, and inside attacks can be expensive
iii. Intellectual property, such as information involving patents or copyrights, can more easily be stolen
d. Nearly every employee wrestles with ethical questions
i. Some rationalize questionable behavior by believing that “everyone does it”
ii. Some act unethically when pressured or forced to meet performance quotas
iii. Others avoid actions that don’t mesh with their personal values and morals.
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