An overview of

ETHICS
 Learning Objectives
What is ethics, and why is it important to act
according to a code of ethics?
Why is business ethics becoming increasingly
important?
What are organizations doing to improve their
business ethics?
Why are organizations interested in fostering
good business ethics?
What approach can you take to ensure ethical
decision making?
What trends have increased the risk of using
information technology in an unethical manner?
 WHAT IS ETHICS?

Ethics deals with right and wrong behavior

within a society.
Societies form rules (moral codes) to guide
behavior.
Ethical dilemmas arise when rules conflict
or are unclear.
Example: Is it right to be loyal to a friend
who is cheating, or to tell the truth?
 MORALITY

Morality is a set of widely shared social

rules about right and wrong.
Morals vary based on culture, religion,
personal experiences, etc.
Some issues, like murder or theft, are
universally seen as wrong, but others (e.g.,
abortion) are debated.
 VIRTUES AND VICES

Virtue: Habits that guide good behavior or

to do what is acceptable (e.g., fairness,
generosity)
Vice: Habit of unacceptable behavior (e.g.,
greed, anger).
These shape personal values, guiding how
people live.
 INTEGRITY

A person who acts with integrity acts in

accordance with a personal code of principles.
Acting with integrity means sticking to your
moral principles, even in tough situations.
Integrity involves being consistent and
applying the same moral standards in all
situations.
 ETHICAL DILEMMAS

Not always a clear choice between right and

wrong.
Sometimes, it’s a choice between two “right”
actions.
The Difference between

MORALS,
ETHICS,
AND LAWS
Morals:
Personal beliefs about right and wrong.
Shaped by culture, upbringing, and
personal experiences.
Ethics:
Standards or codes of behavior
expected by a group or profession.
Example: Lawyers must defend clients,
even if they know they are guilty.
Laws:
Rules enforced by the government.
Tell people what they can and cannot
do.
An act can be legal but still considered
immoral by some (e.g., abortion).
Ethics in the

BUSSINESS
WORLD
 Ethics in the Business World
Importance of Ethics in
Business:

Unethical behavior leads to serious consequences

(e.g., financial collapse, legal issues).
Examples: Countrywide Financial, Lehman Brothers,
AIG – bad decisions led to financial crises.

Unethical Behavior and

Examples:

Bernard Madoff defrauded clients of $65

billion, resulting in prison time.
Companies like Satyam Computer Services
overstated assets to inflate profits.
 Ethics in the Business World
Reasons for Increased
Unethical Behavior:

Globalization: Challenges in applying ethical standards

consistently across different cultures and countries.
Economic Pressure: Difficult economic conditions
tempt companies to act unethically to maintain profits.
Consequences of
Unethical Behavior:

Heightened scrutiny from employees,

shareholders, and regulators.
Risk of financial loss, legal fines, and
imprisonment for unethical actions.
 Ethics in the Business World
Why Fostering Good Businesses
Ethics is Important?

Gaining the goodwill of the community

Creating an organization that operates consistently
Fostering good business practices
Protecting the organization
Avoiding unfavorable publicity
Gaining the Goodwill of the
Community

Companies must balance profit-

making with their responsibilities to
society by engaging in socially
responsible activities.
 Organization Examples of IT organizations’ socially
responsible activities

Cisco System Inc. Donates networking equipment and supports

employee volunteerism with 148,000+ volunteer
hours.
Comcast Corporation Contributed more than $406 million to charity in
2009.
Dell Inc. Committed 1% of pretax profits to charity;
employees volunteered over 201,000 hours.
Google Supports scholarships and employees’ volunteerism
through its Corporate Giving Council and events like
"GoogleServe."

SAP, North America Focuses on education, employee volunteerism, and

corporate responsibility initiatives.
 CREATING AN ORGANIZATION THAT OPERATES
CONSISTENTLY
Core Values Define Culture
Values shape organizational culture and Common Organizational Values:
guide decision-making.
Consistency for Employees
Honesty & Integrity
Clear expectations help employees make
Ethical Conduct
decisions aligned with company principles.
Respect for Colleagues &
Stakeholder Trust Customers
Shareholders, customers, and suppliers rely Striving for Excellence
on the organization’s predictable behavior. Valuing Diversity
Importance for Multinational Fact-Based Decision Making
Companies
Consistent global approach builds trust
across regions.
Protecting the Organization and

Its Employees
from Legal
Actions
• U.S. Supreme Court established that an employer can
be held responsible for the acts of its employees.

• This principle is called respondeat superior vicarious

liability.

• Coalition of several legal organizations argues

establishment of ethics and compliance programs
should reduce criminal liability of organization.

• Others argue company officers should not be given

light sentences if their ethics programs are in
effective.
Avoiding Unfavorable Publicity

• Public reputation of company strongly influences:

–Value of its stock

–How consumers regard products and services
–Degree of oversight received from government
– Amount of support and cooperation received
 Improving Corporate Ethics

Characteristics of a successful ethics program

–Employees willing to seek advice about ethical issues

–Employees feel prepared to handle situations that
could lead to misconduct
–Employees are rewarded for ethical behavior
–Employees are not rewarded for success obtained
through questionable means
–Employees feel positive about their company
 Appointing a Corporate Ethics
Officer

Corporate ethics officer ( also called a

corporate compliance officer)
–Provides vision and leadership in business
conduct
–Should be well-respected, senior-level manager
who reports directly to the CEO
–Ensures ethical procedures are put in place
–Creates and maintains ethics culture
–Is responsible for key knowledge/contact
person for ethical issues
Ethical Standards Set by Board
of Directors

Board oversees the organization’s business

activities and management
Board members of company are expected to:
–Conduct themselves according to the highest
standards of personal and professional integrity
–Set standard for company-wide ethical conduct
–Ensure compliance with laws and regulations
–Create environment in which employees can
seek advice about business conduct, raise issues,
and report misconduct
Establishing a Corporate Code of
Ethics

• Code of ethics
–Highlights an organization’s key ethical issues
–Identifies overarching values and important
principles that are important to the organization
and its decision making.
–Focuses employees on areas of ethical risk
–Offers guidance for employees to recognize and
deal with ethical issues
–Provides mechanisms to report unethical conduct
–Help employees abide by the law, follow necessary
regulations, and behave in an ethical manner.
 Sarbanes-Oxley Act of 2002

• Enacted in response to public outrage over several major accounting scandals

• Section 404 requires that the Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) sign any Securities and Exchange Commission(SEC) filing to attest to its accuracy
• Section 406 requires public companies to disclose whether or not they have a code of
ethics and if any waivers to that code have been granted
• Cannot gain company-wide acceptance unless it is:
-Developed with employee participation
-Fully endorsed by organization’s leadership
•Must continually be applied to company’s decision making and emphasized as part of its
culture
•Breaches in the code of ethics must be identified and dealt with appropriately
 Conducting Social Audits

Social audit
–Reviews how well organization is meeting ethical
and social responsibility goals
–Communicates new goals for upcoming year
–Shared broadly with employees, shareholders,
investors, market analysts, customers, suppliers,
government agencies, and local communities
 Requiring Employees to Take
Ethics Training
• Personal convictions improved through education
• Comprehensive ethics education program encourages employees to act responsibly and
ethically
–Often presented in small workshop formats
–Employees apply code of ethics to hypothetical but realistic case studies
–Demonstration of recent company decisions based on principles from the code of ethics
• Critical that training increase the percentage of employees who report incidents of
misconduct
• Employees must:
–Learn effective ways of reporting incidents
–Be reassured their feedback will be acted on without retaliation
 Including Ethical Criteria in
Employee Appraisals

Only 43% of companies include ethical conduct in

employee’s performance appraisal

Ethical criteria include:

–Treating others fairly and with respect
–Operating effectively in a multicultural environment
–Accepting personal accountability
–Continually developing themselves and others
–Operating openly and honestly with all.
 Creating an Ethical Work
Environment

Good employees may make bad ethical choices.

May be encouraged to do “whatever it takes” to
get the job done
 Example of how managerial behavior can
encourage unethical employee

A manager set and holds people accountable to meets “ stretch” goal, quotas, and
budgets, causing employees to think.
A manager fails to provide a corporate code of ethics and operating principles to make
decision so employees think.
A manager to act in an ethical manner and instead sets a poor example for others to
follow so employees think.
Manager fail to hold people accountable for unethical actions so employees think.
Manager put a 3 inch thick binder entitled “Corporate Business Ethics, Policies, and
Procedures” on the desk of new employees and tell them to “ read it when you have time
and sign the attached form that says read and understand the corporate policy.
Including Ethical Considerations in

DECISION
MAKING
Steps in a Decision-Making
Process

Develop problem statement

Identify alternatives
Evaluate and choose alternative
Implement decision
Evaluate results
Success
DEVELOP PROBLEM STATEMENT

clear, consice description of the issue

is a most critical steps in decision making
Example of a good problem statement:
"Our product supply organization is
continually running out of stock of finished
products, creating an out-of- stock
situation on over 15 percent of our
customer orders, resulting in over
$300,000 in lost sales per month."
Examples of poor problem statements:
"We need to implement a new inventory
control system."
"We have a problem with finished product
inventory."
IDENTIFY ALTERNATIVES

enlist the help of others, including the

stakeholders, to identify several
alternative solutions to the problem.
brainstorming
 EVALUATE AND CHOOSE AN
ALTERNATIVE

evaluate by weighing laws, guideslines and

principles
consider likely consequences of each
alternative
Alternative selected must;
- Should be ethically and legaly defensible
-Be consistent with policies and Code of Ethics
-Provide a good solution to the problem
 Four common approaches to ethical decison making

Approach to dealing with moral issues Principle

The ethical choice best reflects moral virtues in

Virtue ethics approach
yourself and your community

The ethical choice produces the greatest excess of

Utilitarian approach
benefits over harm

The ethical choice treats everyone the same and

Fairness approach
shows no favoritisn or discrimination

Common good approach The ethical choice advances the common good
 IMPLEMENT DECISION

it should be effecient, effective and timely

implemented
communication is the key to helping people
accept a change
transition plan made easy and pain-free
 EVALUATE RESULTS

monitor for results for desired effect

observe impact on the organization and
stakeholders
return to “Develop problem statement”
step if further refinements may be needed
 ETHICS IN INFORMATION TECHNOLOGY
Many employees have their email and internet access monitored while at work, as
employers struggle to balance their need to manage important company assets
and work time with employees’ desire for privacy and self-direction.
Millions of people have downloaded music and movies at no charge and inapparent
violations of copyright laws at tremendous expense to the owner of those
copyrights.
Organizations contact millions of people worldwide through unsolicited email
(spam) as an extremely low-cost marketing approach.
Hackers break into databases of financial and retail institutions to steal customer
information, then use it to commit identity theft-opening new accounts and
charging purchases to unsuspecting victims.
Students around the world have been caught dowloading material from the Web
and plagiarizing content for their term papers.
web sites plant cookies or spyware on visitors’ hard drives to track their online
purchases and activities
 ETHICS IN INFORMATION TECHNOLOGY

This book is based on two fundamental ideas.

QUESTIONS?