Recognizing an Ethical Issue (Ethical Awareness)
Although we have described a number of relationships and situations that may generate ethical issues, in practice it can be difficult to recognize them. Failure to acknowledge or be aware of such issues is a great danger to any organization. Some issues are difficult to recognize because they are gray areas that are hard to navigate. For example, when does a small gift become a bribe? Employees may engage in questionable behaviors because they are trying to achieve firm objectives related to sales or earnings. Our personal morals or values issues are easier to define and control but the complexity of the work environment, however, makes it harder to define and reduce ethical issues.
Business decisions, like personal decisions, may involve a dilemma. In a dilemma all of the alternatives have negative consequences, so the less harmful choice is made. An ethical issue in business is simply a situation involving a group, a problem, or even an opportunity that requires thought, discussion, or investigation before a decision can be made. Because the business world is dynamic, new ethical issues emerge all the time. Table 3-1 defines specific ethical issues identified by employees in the National Business Ethics Survey (NBES). Misuse of company time, abusive behavior, and lying to employees are personal in nature but are committed in the belief that the action is furthering organizational goals. Falsifying time or expenses, safety violations, and abuse of company resources are issues that directly relate to an ethical conflict that could damage the firm.
Table 3-1
Specific Types of Observed Misconduct
Behavior
Abusive behavior
Lying to employees
Conflicts of interest
Violating company Internet use policies
Discrimination
Health or safety violations
Lying to outside stakeholders
Retaliation against someone who reported misconduct
Falsifying time reports or hours worked
Stealing/theft
Employee benefit violations
Delivery of substandard products
Source: Ethics Resource Center, National Business Ethics Survey of the U.S. Workforce (Arlington, VA: Ethics Resource Center, 2014), 41
There are a wide range of issues that could be identified as misconduct; therefore many employees observed more than one type of misconduct. Although it is impossible to list every conceivable ethical issue, any type of manipulation or deceit, or even just the absence of transparency in decision making, can create harm to others. For example, collusion is a secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose. “Deceitful purpose” is the relevant phrase in regard to business ethics, as it suggests trickery, misrepresentation, or a strategy designed to lead others to believe something less than the whole truth. Collusion violates the general business value of honesty that is one of the three foundational values that are used to identify ethical issues.
3-2Foundational Values for Identifying Ethical Issues
Integrity, honesty, and fairness are widely used values for evaluating activities that could become ethical issues. Ethical issues can emerge from almost any decision made in an organization. Understanding these foundational values can help identify and develop discussions and a constructive dialogue on appropriate conduct. It is just as important to emphasize appropriate conduct associated with these values as it is to discover inappropriate conduct.
3-2aIntegrity
Integrity is one of the most important and oft-cited elements of virtue and refers to being whole, sound, and in an unimpaired condition. Integrity is a global value that relates to all activities, not just business issues. Integrity relates to product quality, open communication, transparency, and relationships. Therefore, it is a foundational value for managers to build an ethical internal organizational culture. In an organization, integrity means uncompromising adherence to a set or group of values. It is connected to acting ethically; in other words, there are substantive or normative constraints on what it means to act with integrity. An organization’s integrity usually rests on its enduring values and unwillingness to deviate from standards of behavior as defined by the firm and industry.
At a minimum, businesses are expected to follow laws and regulations. In addition, organizations should not knowingly harm customers, clients, employees, or even other competitors through deception, misrepresentation, or coercion. Although they often act in their own economic self-interest, business relations should be grounded in integrity. Failure to live up to this expectation or abide by laws and standards destroys trust and makes it difficult, if not impossible, to continue business exchanges. Integrity complements honesty, which becomes the glue that holds business relationships together to make everything else more effective and efficient.
3-2bHonesty
Honesty refers to truthfulness or trustworthiness. To be honest is to tell the truth to the best of your knowledge without hiding anything. Confucius defined an honest person as junzi, or one who has the virtue ren. Ren can be loosely defined as one who has humanity. Yi is another honesty component and is related to what we should do according to our relationships with others. Another Confucian concept, li, relates to honesty but refers to the virtue of good manners or respect. Finally, zhi represents whether a person knows what to say and what to do as it relates to honesty. The Confucian version of Kant’s Golden Rule is to treat your inferiors as you would want your superiors to treat you. As a result, virtues such as familial honor and reputation for honesty become paramount.
Issues related to honesty also arise because business is sometimes regarded as a game governed by its own rules rather than those of society as a whole. Author Eric Beversluis suggests honesty is a problem because people often reason along these lines:
1. Business relationships are a subset of human relationships governed by their own rules that in a market society involve competition, profit maximization, and personal advancement within the organization.
2. Business can therefore be considered a game people play, comparable in certain respects to competitive sports such as basketball or boxing.
3. Ordinary ethics rules and morality do not hold in games like basketball or boxing. (What if a basketball player did unto others as he would have them do unto him? What if a boxer decided it was wrong to try to injure another person?)
4. Logically, then, if business is a game like basketball or boxing, ordinary ethical rules do not apply.
This type of reasoning leads many to conclude that anything is acceptable in business. Indeed, several books have compared business to warfare—for example, The Guerrilla Marketing Handbook and Sun Tsu: The Art of War for Managers. The common theme is that surprise attacks, guerrilla warfare, and other warlike tactics are necessary to win the battle for consumer dollars. New England Patriots coach Bill Belichick uses lessons from The Art of War to help shape his coaching philosophy. Believing that games can be won before players even take to the field, Belichick believes attention to detail and the ability to use an opponents’ weaknesses against him is crucial to success. Although this business-as-war mentality can help a company remain competitive, it could also foster the idea that honesty is unnecessary in business. For instance, accusations that the New England Patriots used slightly deflated footballs during a game to gain an advantage could be construed as a dishonest way to win. The National Football League suspended Patriots quarterback Tom Brady for the first four games of the season, fined the Patriots $1 million, and took away two draft picks.
Many argue that because people are not economically self-sufficient, they cannot withdraw from the relationships of business. Therefore, business must not only make clear what rules apply but also develop rules appropriate to the involuntary nature of its many participants. Such rules should contain the value of honesty.
The opposite of honesty is dishonesty. Dishonesty can be broadly defined as a lack or absence of integrity, incomplete disclosure, and an unwillingness to tell the truth. Lying, cheating, and stealing are actions usually associated with dishonest conduct. The causes of dishonesty are complex and relate to both individual and organizational pressures. Many employees lie to help achieve performance objectives. For example, they may be asked to lie about when a customer will receive a purchase. Lying can be defined as
1. untruthful statements that result in damage or harm;
2. “white lies,” which do not cause damage but instead function as excuses or a means of benefitting others; and
3. statements obviously meant to engage or entertain without malice.
These definitions become important in the remainder of this chapter.
3-2cFairness
Fairness is the quality of being just, equitable, and impartial. Fairness clearly overlaps with the concepts of justice, equity, and equality. There are three fundamental elements that motivate people to be fair: equality, reciprocity, and optimization. In business, equality is about the distribution of benefits and resources. This distribution could be applied to stakeholders or the greater society.
Reciprocity is an interchange of giving and receiving in social relationships. Reciprocity occurs when an action that has an effect upon another is reciprocated with an action that has an approximately equal effect. It is the return of favors approximately equal in value. For example, reciprocity implies workers be compensated with wages approximately equal to their effort. Walmart tried to display ethical reciprocity by increasing the wages it paid to its lowest level employees to $10 per hour and begin paying bonuses. It is estimated that $157 million in bonuses have been paid to its 850,000 employees.
Optimization is the trade-off between equity (equality) and efficiency (maximum productivity). Discriminating on the basis of gender, race, or religion is generally considered unfair because these qualities have little bearing upon a person’s ability to do a job. The optimal way to hire is to choose the employee who is the most talented, proficient, educated, and able. Ideas of fairness are sometimes shaped by vested interests. One or both parties in the relationship may view an action as unfair or unethical because the outcome was less beneficial than expected.
3-3Ethical 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.
A constructive next step toward identifying and resolving ethical issues is to classify the issues that are relevant to most business organizations. Table 3-2 reflects some pressing ethical issues to shareholders. Some of these issues deal with the economic conditions and/or misconduct at firms from other countries. In this section, we classify ethical issues in relation to misuse of company time and resources, abusive or intimidating behavior, lying, conflicts of interest, bribery, corporate intelligence, discrimination, sexual harassment, fraud, financial misconduct, insider trading, intellectual property rights, and privacy issues.
Table 3-2
Shareholder Issues
1. Core values
2. Shareholder participation in electing directors
3. Equitable compensation strategies
4. Ethical and legal compliance
5. Community and regulatory integrity
6. Reputation management
7. Big data and cybersecurity
8. Supply chain relationships and human rights
Source: Adapted from Jaclyn Jaeger, “Top Shareholder Issues for 2012 Proxy Season,” Compliance Week, March 8, 2012, http://www.complianceweek.com/blogs/the-filing-cabinet/top-shareholder-issues-for-2012-proxy-season#.VOy0wnnTBVI (accessed April 15, 2017).
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