ETHICAL ISSUES AND

DILEMMAS
IN BUSINESS
Learning outcomes
After studying this chapter students will be able to explain;
• Ethical issues and dilemmas in business
• Shareholder issues
• Misuse of company time and resources
• Abusive or intimidating behaviour
• Actions associated with bullies
• Lying
• Conflict of interest
• Bribery
 ETHICAL ISSUES AND DILEMMAS IN BUSINESS

As mentioned earlier, stakeholders and the firm define ethical

issues.

An ethical issue is a problem, situation, or opportunity that

requires an individual, group, or organization to choose among
several actions that must be evaluated as right or wrong, ethical
or unethical.

An ethical dilemma is a problem, situation, or opportunity that

requires an individual, group, or organization to choose among
several actions that have negative outcomes. There is not a right
or ethical choice in a dilemma, only less unethical or illegal
choices as perceived by any and all stakeholders.
TABLE: Shareholder Issues

1. Core values
2. Shareholder participation in electing directors
3. Executive compensation
4. Legal compliance
5. Lobbying and political activities
6. Reputation management
7. Integrity in collecting and managing data
8. Supply chain relationships and human rights
Misuse of Company Time and Resources

Time theft can be difficult to measure but is estimated to cost

companies hundreds of billions of dollars annually.

It is widely believed the average employee “steals” 4.25 hours per

week with late arrivals, leaving early, long lunch breaks,
inappropriate sick days, excessive socializing, and engaging in
personal activities such as online shopping and watching sports
while on the job.
Although companies have different viewpoints and policies, the
misuse of time and resources has been identified by the Ethics
Resource Center as a major form of observed misconduct in
organizations.

In the latest survey 33 percent of respondents observed others

misusing company time, and 20 percent observed company
resource abuse such as theft of office supplies. Therefore, over 50
percent noted misconduct related to resources issues.

Often lax enforcement of company policies creates the impression

among employees that they are entitled to certain company
resources, including how they spend their time at work. Such
misuse can range from unauthorized equipment usage to misuse of
financial resources.
Using company computer software and Internet services for
personal business is one of the most common ways employees
misuse company resources.

While it may not be acceptable for employees to sit in the lobby

chatting with relatives or their stock brokers, these same
employees go online and do the same thing, possibly unnoticed by
others.

Typical examples of using a computer to abuse company time

include sending personal emails, shopping, downloading music,
doing personal banking, surfing the Internet for information about
sports or romance, or visiting social networking sites such as
Facebook.
It has been found that March Madness, the NCAA basketball
tournament, is one of the most significant periods during which
employees engage in time theft.

Many firms block websites where employees can watch sports

events. Because misuse of company resources is such a widespread
problem, many firms, such as Boeing, implemented policies
delineating the acceptable use of such resources.

Boeing’s policy states resource use is acceptable when it does not

result in “significant added costs, disruption of business processes,
or any other disadvantage to the company.”

The policy further states use of company resources for non-

company purposes is only acceptable when an employee receives
explicit permission to do so.
Abusive or Intimidating Behavior

Abusive or intimidating behavior is another common ethical

problem for employees, but what does it mean to be abusive or
intimidating?

These terms refer to many things— physical threats, false

accusations, being annoying, profanity, insults, yelling,
harshness, ignoring someone, and unreasonableness—and their
meaning differs from person to person.

It is important to understand that within each term there is a

continuum.
For example, behavior one person might define as yelling could be
another’s definition of normal speech.

The lack of civility in our society has been a concern, and it is as

common in the workplace as elsewhere.

The productivity level of many organizations has been damaged by

time spent unraveling problematic relationships.

Is it abusive behavior to ask an employee to complete a project

rather than be with a family member or relative in a crisis
situation? What does it mean to speak profanely? Is profanity only
related to specific words or terms that are, in fact, common in
today’s business world? If you are using words acceptable to you
but that others consider profanity, have you just insulted, abused,
or disrespected them?
Within abusive behavior or intimidation, intent should be a
consideration. If the employee tries to convey a compliment, then
he or she probably simply made a mistake.

What if a male manager asks a female subordinate if she has a date

because she is dressed nicely? When does the way a word is said
(voice inflection) become important?

There is also the problem of word meanings by age and within

cultures. Is it okay to say “honey” to an employee, fellow
employee, employee friend, and/or your superior, and does it
depend on gender or location?
Bullying is associated with a hostile workplace where someone (or a
group) considered a target is threatened, harassed, belittled, verbally
abused, or overly criticized.

Bullying creates what is referred to as a “hostile environment,” but

the concept of a hostile environment is generally associated instead
with sexual harassment.

Regardless, bullying can cause psychological damage that may result

in health-endangering consequences to the target.
TABLE: Actions Associated with Bullies

1. Spreading rumors to damage others

2. Blocking others’ communication in the workplace
3. Flaunting status or authority to take advantage of others
4. Discrediting others’ ideas and opinions
5. Use of e-mails to demean others
6. Failing to communicate or return communication
7. Insults, yelling, and shouting
8. Using terminology to discriminate by gender, race, or age
9. Using eye or body language to hurt others or their reputations
10. Taking credit for others’ work or ideas
Workplace bullying is illegal in many other countries. Some
suggest employers take the following steps to minimize workplace
bullying:

• Create policies that place reprimand letters and/or dismissal for

such behavior.
• Emphasize mutual respect in the employee handbook.
• Encourage employees who feel bullied to report the conduct via
hotlines or other means.
In addition to the three items mentioned, firms are now helping employees
understand what bullying is by the use of the following questions:

 Is your supervisor requiring impossible things from you without

training?
 Does your supervisor always state that your completed work is never
good enough?
 Are meetings to be attended called without your knowledge?
 Have others told you to stop working, talking, or socializing with them?
 Does someone never leave you alone to do your job without
interference?
 Do people feel justified screaming or yelling at you in front of others,
and are you punished if you scream back?
 Do human resources officials tell you that your harassment is legal and
you must work it out between yourselves?
 Do many people verify that your torment is real, but do nothing about it?
Lying

Earlier in this chapter, we discussed the definitions of lying and

how lying relates to distorting the truth. We mentioned three types
of lies, one of which is joking without malice. The other two can
become troublesome for businesses: lying by commission and lying
by omission.

Commission lying is creating a perception or belief by words that

intentionally deceive the receiver of the message; for example, lying
about being at work, expense reports, or carrying out work
assignments.

Commission lying also entails intentionally creating “noise” within

the communication that knowingly confuses or deceives the
receiver.
Lying by commission can involve complex forms, procedures,
contracts, words that are spelled the same but have different
meanings, or refuting the truth with a false statement.

Forms of commission lying include puffery in advertising. For

example, saying a product is “homemade” when it is made in a
factory is lying. “Made from scratch” in cooking technically
means that all ingredients within the product were distinct and
separate and were not combined prior to the beginning of the
production process.

One can lie by commission by showing a picture of the product

that does not reflect the actual product. For example, many fast-
food chains purchase iceberg lettuce for their products but use
romaine lettuce in their advertising because they feel it is prettier
and more appealing than shredded iceberg lettuce.
Omission lying is intentionally not informing others of any
differences, problems, safety warnings, or negative issues relating
to the product or company that significantly affect awareness,
intention, or behavior.

A classic example of omission lying was in the tobacco

manufacturers’ decades-long refusal to allow negative research
about the effects of tobacco to appear on cigarettes and cigars.

Another example is the behavior of [Link], a

company that promotes itself as a way for consumers to check
their credit scores. Many customers do not realize that
[Link] is a credit-monitoring service that costs $
14.95 per month and they will be charged if they do not cancel the
service within 30 days. When lying damages others, it can be the
focus of a lawsuit.
Conflicts of Interest

A conflict of interest exists when an individual must choose

whether to advance his or her own interests, those of the
organization, or those of some other group.

The three major bond rating agencies—Moody’s, Standard &

Poor’s, and Fitch Ratings—analyze financial deals and assign
letters (such as AAA, B, CC) to represent the quality of bonds and
other investments.

Prior to the financial meltdown, these rating agencies had

significant conflicts of interest.

The agencies earned as much as three times more for grading

complex products than for corporate bonds.
They also competed with each other for rating jobs, which
contributed to lower rating standards.

Additionally, the companies who wanted the ratings were the ones
paying the agencies.

Because the rating agencies were highly competitive, investment

firms and banks would “shop” the different agencies for the best
rating.

Conflicts of interest were inevitable. To avoid conflicts of interest,

employees must be able to separate their private interests from
their business dealings. Organizations must also avoid potential
conflicts of interest when providing products.
Bribery

Bribery is the practice of offering something (often money) in

order to gain an illicit advantage from someone in authority. Gifts,
entertainment, and travel can also be used as bribes.

The key issue regarding whether or not something is considered

bribery is whether it is used to gain an advantage in a relationship.

Bribery can be defined as an unlawful act, but it can also be a

business ethics issue in that a culture includes such fees as standard
practice.
Related to the ethics of bribery is the concept of active corruption
or active bribery , meaning the person who promises or gives the
bribe commits the offense.

Passive bribery is an offense committed by the official who

receives the bribe. It is not an offense, however, if the advantage
was permitted or required by the written law or regulation of the
foreign public official’s country, including case law.
In most developed countries, it is generally recognized that
employees should not accept bribes, personal payments, gifts, or
special favors from people who hope to influence the outcome of a
decision.

However, bribery is an accepted way of doing business in other

countries, which creates challenging situations for global
businesses.

Bribes have been associated with the downfall of many managers,

legislators, and government officials. The World Bank estimates
that more than $ 1 trillion is paid annually in bribes.
Reference
BUSINESS ETHICS
Ethical Decision Making and Cases
TENTH EDITION

O. C. Ferrell
University of New Mexico
John Fraedrich
Southern Illinois University—Carbondale
Linda Ferrell
University of New Mexico
 • Thank You
• Best of Luck for the Learning Process