Understanding Business
Understanding Business
12th Edition
ISBN: 9781259929434
Author: William Nickels
Publisher: McGraw-Hill Education
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Question

please read and answer questions: 

  • What did you think about while participating in the journal on Ethics as it pertains to your current workforce or personal experience?
  • What attitudes have you gained from participating in the journal on Ethics?
  • What did you know before and what did you learn in the journal on Ethics?
  • Why is Ethics important and how does it impact the workforce and/or community as a whole?
  • What did you learn in the journal that you won't forget tomorrow on Ethics?
Essentials of Management - ETHICS Courtesy of Various Wall Street Journals Source by: Alan Murray, Deputy Managing Editor The first decade of the twenty-first century has taken a horrendous toll on the reputation of business: the stunning collapse of Enron Corporation, the collapse of respected accounting firm Arthur Anderson, WorldCom, which improperly booked billions of dollars of expenses; Adelphia Communications Corporation founder charged with what the Securities and Exchange Commission identified as the most extensive financial frauds to take place at a public company, and Tyco's CFO charged with looting hundreds of millions of dollars from their firm. And yet there are so many others in more recent time, Maddox, Martha Stewart to name a few. The accounting scandals were followed by a steady stream of stories about excessive CEO pay practices, Pfizer Inc., Home Depot, and Sears and Kmart. The crowning blow to the public's view of business came with the financial crisis of 2007 and 2008. By the end of the decade, "business ethics" was seen by most of the public as a contradiction in terms. WHAT IS BUSINESS ETHICS? Peter Drucker argued that there is no such thing as "business ethics." The very phrase suggested those in business should live by different rules than everyone else lives by. Consider a simple example: a waiter at a popular restaurant offers free dessert to a table of customers who are upset about having to wait so long for their food. In return, the customers pay the waiter a big tip. Is that laudable conduct on the part of the waiter, who has turned unsatisfied customers into happy ones, and been rewarded for his success? Or has the waiter stolen from his employer, by trading off a smaller dinner check for a bigger tip? For managers, the difficulties of distinguishing your interests from those of your organization become greater. You likely have authority to spend the organization's resources; but you have to make decisions about which expenditures are legitimate, and which aren't. Traveling to meet with a critical customer can clearly be in the interests of the organizations. But what if the customer is in Paris, and you organize the visit for a Friday that coincides with a weekend when your friend is traveling to Paris as well? Are you acting in the organization's interests? Or your own? COMPANY POLICY The extravagant mixing of business and pleasure by CEOs at company expense was an astonishing common practice. Companies often defend such practices by saying they are consistent with the wishes of their boards of directors, which in turn are supposed to be looking after the interests of shareholders, who ultimately own the company. Corporate governance experts question whether boards filled with people who may have been suggested for the job by the CEO, and who can earn $100,000 to $200,000 a year in directors' fees, are in a position to adequately oversee use of the shareholders' resources. The importance of doing good even as you are doing well Page 1 of 4
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Transcribed Image Text:Essentials of Management - ETHICS Courtesy of Various Wall Street Journals Source by: Alan Murray, Deputy Managing Editor The first decade of the twenty-first century has taken a horrendous toll on the reputation of business: the stunning collapse of Enron Corporation, the collapse of respected accounting firm Arthur Anderson, WorldCom, which improperly booked billions of dollars of expenses; Adelphia Communications Corporation founder charged with what the Securities and Exchange Commission identified as the most extensive financial frauds to take place at a public company, and Tyco's CFO charged with looting hundreds of millions of dollars from their firm. And yet there are so many others in more recent time, Maddox, Martha Stewart to name a few. The accounting scandals were followed by a steady stream of stories about excessive CEO pay practices, Pfizer Inc., Home Depot, and Sears and Kmart. The crowning blow to the public's view of business came with the financial crisis of 2007 and 2008. By the end of the decade, "business ethics" was seen by most of the public as a contradiction in terms. WHAT IS BUSINESS ETHICS? Peter Drucker argued that there is no such thing as "business ethics." The very phrase suggested those in business should live by different rules than everyone else lives by. Consider a simple example: a waiter at a popular restaurant offers free dessert to a table of customers who are upset about having to wait so long for their food. In return, the customers pay the waiter a big tip. Is that laudable conduct on the part of the waiter, who has turned unsatisfied customers into happy ones, and been rewarded for his success? Or has the waiter stolen from his employer, by trading off a smaller dinner check for a bigger tip? For managers, the difficulties of distinguishing your interests from those of your organization become greater. You likely have authority to spend the organization's resources; but you have to make decisions about which expenditures are legitimate, and which aren't. Traveling to meet with a critical customer can clearly be in the interests of the organizations. But what if the customer is in Paris, and you organize the visit for a Friday that coincides with a weekend when your friend is traveling to Paris as well? Are you acting in the organization's interests? Or your own? COMPANY POLICY The extravagant mixing of business and pleasure by CEOs at company expense was an astonishing common practice. Companies often defend such practices by saying they are consistent with the wishes of their boards of directors, which in turn are supposed to be looking after the interests of shareholders, who ultimately own the company. Corporate governance experts question whether boards filled with people who may have been suggested for the job by the CEO, and who can earn $100,000 to $200,000 a year in directors' fees, are in a position to adequately oversee use of the shareholders' resources. The importance of doing good even as you are doing well Page 1 of 4
Essentials of Management - ETHICS Courtesy of Various Wall Street Journals Source by: Alan Murray, Deputy Managing Editor 2006 unveiled another popular corporate tactic used to line the pockets of company executives - options backdating. Scouring corporate records found a large number of companies that seemed to have an uncanny ability to issue new stock options to executives when the company's stock was at a trough, ensuring big gains when the stock rose. The only plausible explanation was that the option issue date was set after the fact, once it became clear the stock was going to rise. Back-daters caught up more than 130 companies and led to the firing or resignation of more than fifty executives and directors. As a manager, you need to be constantly thinking, not about what you can get away with, but about what is right. And you need to be wary of complex schemes that lead to questionable outcomes. An important role of the manager is to lead by example. If you are fastidious about distinguishing between what rightfully belongs to the organization as opposed to you; if you don't pile on expenses that seem to benefit you more than the organization: if you don't take advantage of easy opportunities to overcharge a customer or underpay a supplier; if you don't allow anyone to play games with performance or financial metrics; then there's a much better chance that others will follow in your footsteps. Do the opposite, and you may soon find yourself the victim of ethical lapses by others. CREATING AN ETHICAL CULTURE Does ethics pay? It's simply misleading to assume that ethical values and financial imperatives will naturally coincide. There are too many cases in which unethical behavior has paid off in the short term and the long term. As a result, ethics has to be instituted as a separate discipline in corporations, distinct from the financial discipline. Managers have to take it as a central part of their job to make sure their organization is behaving in a moral fashion. How do you do that? Setting the right example is critical. But beyond that, asking the right questions imposes a useful discipline. All key decisions or actions should be subjected to a series of questions organized around the alternate four Ps: Purpose, principle, people, and power. 0 Purpose - Does this decision or action serve a worthwhile purpose? Do our goals here contribute to people's lives? Do we have a sound bas for pursuing the proposed path? Principle - Is this action consistent with relevant principles? What norms of conduct are relevant to this situation? Are there any relevant ethical principles that need to be considered? Are we violating any of our ideals, aspirations, laws, or company codes of conduct in doing this? People - Does this action respect the legitimate claims of the people likely to be affected? Who is likely to be affected, both directly and indirectly, from the action? Who will benefit form it? Who will be injured? Will anyone's rights be violated or infringed in any way? 0 The importance of doing good even as you are doing well Essentials of Management - ETHICS Courtesy of Various Wall Street Journals Source by: Alan Murray, Deputy Managing Editor Page 2 of 4 Power - Do we have the power to take this action? What is the scope of our legitimate authority in view of relevant laws, agreements, understanding, and stakeholder expectations? Have we secured the necessary approvals or consent? By instilling a discipline of asking these sorts of questions as part of your organization's decision- making process, you can help ensure you are considering the moral consequences of your actions. CORPORATE SOCIAL RESPONSIBILITY The basics of organizational ethics are fairly simple: Don't lie. Don't cheat. Don't steal. And obey the laws and regulations society imposes on you. In recent decades, there have been ever-rising demands on corporations to go further and engage in activities for the general benefit of society. The pressure started in the 1970s, when a group of religious and other nonprofits began pressuring companies to stop investing in South Africa, because of its apartheid policies, and when the American Jewish Congress introduced shareholder actions against companies it suspected of supporting the Arab boycott of Israel. In subsequent decades, environmental groups took the lead, pressuring companies to stop mining or drilling or logging ventures that they felt spoiled the environment. Today corporate responsibility has become a full-fledged movement. In theory, that means companies measure their activities not only for their effect on profit but also for their effect on people and the planet. The company's goal is no longer to simply benefit shareholders, but also to benefit "stakeholders," with stakeholders defined so broadly as to include anyone whose life may be affected by the company's action. Economist Milton Friedman, Adam Smith "the invisible hand", and former British Labor Prime Minister Tony Blair each weighed in on CSR. Friedman argued vociferously that the social responsibility of business is to make a profit; Smiths' belief is to ensure that profit seeking adds up to broad social benefit; and Blair echoed that the first responsibility of business is to run a good business. But as Drucker points out, the modern corporation can't really escape the fact that it has many responsibilities to society. First, and foremost, it must take responsibility for its own impact on society. If it is polluting the air or the water, if it is harming employees or people who live nearby, if it's creating unsafe products, or if it's otherwise doing things that infringe on the rights of people, it needs to be held accountable. No organization can afford to fully ignore the environment in which it operates. If the public educational system is deteriorating, corporations have a responsibility to address the problem, in part because their long-term business viability depends on it.
expand button
Transcribed Image Text:Essentials of Management - ETHICS Courtesy of Various Wall Street Journals Source by: Alan Murray, Deputy Managing Editor 2006 unveiled another popular corporate tactic used to line the pockets of company executives - options backdating. Scouring corporate records found a large number of companies that seemed to have an uncanny ability to issue new stock options to executives when the company's stock was at a trough, ensuring big gains when the stock rose. The only plausible explanation was that the option issue date was set after the fact, once it became clear the stock was going to rise. Back-daters caught up more than 130 companies and led to the firing or resignation of more than fifty executives and directors. As a manager, you need to be constantly thinking, not about what you can get away with, but about what is right. And you need to be wary of complex schemes that lead to questionable outcomes. An important role of the manager is to lead by example. If you are fastidious about distinguishing between what rightfully belongs to the organization as opposed to you; if you don't pile on expenses that seem to benefit you more than the organization: if you don't take advantage of easy opportunities to overcharge a customer or underpay a supplier; if you don't allow anyone to play games with performance or financial metrics; then there's a much better chance that others will follow in your footsteps. Do the opposite, and you may soon find yourself the victim of ethical lapses by others. CREATING AN ETHICAL CULTURE Does ethics pay? It's simply misleading to assume that ethical values and financial imperatives will naturally coincide. There are too many cases in which unethical behavior has paid off in the short term and the long term. As a result, ethics has to be instituted as a separate discipline in corporations, distinct from the financial discipline. Managers have to take it as a central part of their job to make sure their organization is behaving in a moral fashion. How do you do that? Setting the right example is critical. But beyond that, asking the right questions imposes a useful discipline. All key decisions or actions should be subjected to a series of questions organized around the alternate four Ps: Purpose, principle, people, and power. 0 Purpose - Does this decision or action serve a worthwhile purpose? Do our goals here contribute to people's lives? Do we have a sound bas for pursuing the proposed path? Principle - Is this action consistent with relevant principles? What norms of conduct are relevant to this situation? Are there any relevant ethical principles that need to be considered? Are we violating any of our ideals, aspirations, laws, or company codes of conduct in doing this? People - Does this action respect the legitimate claims of the people likely to be affected? Who is likely to be affected, both directly and indirectly, from the action? Who will benefit form it? Who will be injured? Will anyone's rights be violated or infringed in any way? 0 The importance of doing good even as you are doing well Essentials of Management - ETHICS Courtesy of Various Wall Street Journals Source by: Alan Murray, Deputy Managing Editor Page 2 of 4 Power - Do we have the power to take this action? What is the scope of our legitimate authority in view of relevant laws, agreements, understanding, and stakeholder expectations? Have we secured the necessary approvals or consent? By instilling a discipline of asking these sorts of questions as part of your organization's decision- making process, you can help ensure you are considering the moral consequences of your actions. CORPORATE SOCIAL RESPONSIBILITY The basics of organizational ethics are fairly simple: Don't lie. Don't cheat. Don't steal. And obey the laws and regulations society imposes on you. In recent decades, there have been ever-rising demands on corporations to go further and engage in activities for the general benefit of society. The pressure started in the 1970s, when a group of religious and other nonprofits began pressuring companies to stop investing in South Africa, because of its apartheid policies, and when the American Jewish Congress introduced shareholder actions against companies it suspected of supporting the Arab boycott of Israel. In subsequent decades, environmental groups took the lead, pressuring companies to stop mining or drilling or logging ventures that they felt spoiled the environment. Today corporate responsibility has become a full-fledged movement. In theory, that means companies measure their activities not only for their effect on profit but also for their effect on people and the planet. The company's goal is no longer to simply benefit shareholders, but also to benefit "stakeholders," with stakeholders defined so broadly as to include anyone whose life may be affected by the company's action. Economist Milton Friedman, Adam Smith "the invisible hand", and former British Labor Prime Minister Tony Blair each weighed in on CSR. Friedman argued vociferously that the social responsibility of business is to make a profit; Smiths' belief is to ensure that profit seeking adds up to broad social benefit; and Blair echoed that the first responsibility of business is to run a good business. But as Drucker points out, the modern corporation can't really escape the fact that it has many responsibilities to society. First, and foremost, it must take responsibility for its own impact on society. If it is polluting the air or the water, if it is harming employees or people who live nearby, if it's creating unsafe products, or if it's otherwise doing things that infringe on the rights of people, it needs to be held accountable. No organization can afford to fully ignore the environment in which it operates. If the public educational system is deteriorating, corporations have a responsibility to address the problem, in part because their long-term business viability depends on it.
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