korea japan business ethics hill english

8/9/2019 Korea Japan Business Ethics Hill English

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The Importance of

Business Ethics Ned C. Hill, Dean

W. Steve Albrecht, Associate Dean

Marriott School of Management B righam Young University

2006


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O utlineWhat is ethical behavior and why is itimportant to business?

The ethical value proposition Laws, policies and ethics Evidence that good ethics means good business

Is ethical behavior improving? Teaching ethicsthe E thics Maturity Model


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Ethical Behavior

Conducting ones life in complete accordwith a firmly held set of values andprinciples

These principles may be derived from religious beliefs, philosophical understanding, etc.Application should be in all areas of ones life:

personal, family, business, social, etc. I ntegrity is the consistent application of ethical behavior.


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Is There a Universal Ethical Standard?

A re you comfortable with a world withyour standards?

Christian principle: T he Golden RuleT he Golden Rule

Do unto others as you would have them do unto you. L uke 6:29-38Thou shalt love thy neighbor as thyself.

L uke 10:27

Yes I n Principle


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Taught in All CulturesJ udaism: W hat you hate, do not do to anyone.slam: No one of you is a believer until he loves for his brother what he loves

for himself.Hinduism: Do nothing to thy neighbor which thou wouldst not have him do to

thee.Sikhism: Treat others as you would be treated yourself.Buddhism: Hurt not others with that which pains thyself.Confucius: W hat you do not want done to yourself, do not do to others.A

ristotle:W

e should behave to our friends as we wish our friends to behave tous.Plato: May I do to others as I would that they should do unto me.

T REA T PEOPLE TH E WAY YOU WAN T TH EM T O T REA T YOU


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Bad Ethics Increases Transaction Costs

PartyA

PartyB

T rade

SecurityL awyers

Regulators

Delays

I nterestDuplication

T esting

E tc, etc!


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Societal Costs of Unethical Behavior1. L aw enforcement and other security personnel2. Physical protection (locks, electronic security, fences,

vaults, etc.)3. A substantial portion of attorney and court system costs4. Some welfare costs5. Costs of collecting taxes6. Wasted/misused investment funds7. A substantial portion of accounting/auditing costs

8. A large fraction of costs for regulators and examiners9. Some marketing/advertising costs10.Costs for institutions like better business bureaus,

consumer protection agencies11.Some costs of bankruptcy

12.L ack of investment from outside investors, tourists


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Business Costs of Unethical Behavior1. L oss of physical assets2. I ncreased costs of security

3. L oss of customersespecially those who value ethics4. L oss of employeesespecially the more ethical5. L oss of reputation6. I ncreased legal costs7. Higher costs of debt8. L oss of investor confidence (lower stock price, difficulty

in raising funds, problems with lenders)9. Regulatory intrusion10.Costs of bankruptcy


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W hat is the Cost of Lack ofIntegrity in the US?

Employee fraud $400 B Time theft $230 B Industrial espionage $200 B

Counterfeiting $200 B Employee dishonesty $120 B Identity theft $ 50 B

(Quoted in Stephen R. Coveys preface to B usiness with Integrity, p. xx)


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Levels of Constraints on Behavior

E thical B ehavior T ied to Set

of Values

Professional Standards

L egal Requirements


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Ethical Issues Relating to BusinessHonestycommunication and behavior consistent with facts

Disclosure of information Promises/commitments L aws and professional standards

Representation of others like shareholders (applies to board members)Unfair competition Refrain from bribes and excessive gifts (that sway judgment) Avoid quid pro quo transaction Comply with anti-trust laws (these relate to pricing, monopolistic practices)

J ust compensation Respect intellectual property (product piracy) T reat employees fairly

Respecting rights of others T reat others with fairness and respect regardless of age, religion, ethnic group,

sex, economic status, etc., especially children, women, and subordinates Respect the community you operate in by paying fair share of economic costs

you create

Respect others and future generations by treating the environment well


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W hy Ethical Behavior Adds ValueBetter information T rust from investors L ower costs for audits, controls, investigations

B etter allocation of resources Customers will be more loyal (RC Willey example) L ower costs from suppliers (automotive company

example) Attracting and retaining better employees

Fair competition L owers cost of business in economy L eads to better decision-making (do whats best for

firm, not one individual)

I mproves competitive nature of a countrys economy


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W hy Ethical Behavior Adds ValueJ ust compensation Creates a more vibrant, entrepreneurial economy

Attracts and retains better employeesRights of others Draws upon talents of wider set of individuals Develops long-term respect from the community

(Godfrey study) Maintains the environment for long-term value to all

(Costa Rica)

Its the right thing to do!


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Is There Evidence that Ethical BehaviorYields Increased Value?1.Study of 2,100 firms with very strong,

well-governed boards of directors

outperformed overall market 15% vs. 12.5%in 20052.Firms with high level of democracy

outperformed dictatorial firms by 8% per

year in the decade of the 1990s.3. Philanthropy: Firms that contribute ahigher portion of their assets to thecommunities in which they reside fare

better in an economic downturn.


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H ow Important is Integrity in a Leader?

In a survey of 54,000 people Integrity was by far the number one attribute desired ina leader

(Quoted in Stephen R. Coveys preface to B usiness with Integrity, p. xx)


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Short-Term vs. Long-Term

O ne party may gain temporary advantage by unethical behavior E nron L ivedoor Ghana Airways

But in the long-term, individuals,companies and society are hurt


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Q uestionable State of O ur Integrity

Did You Cheat to Get Into Graduate School?

Yes 43% L iberal Arts 52% E ducation

63%L

aw and Medicine 75% B usiness

Source: Rutgers University survey of students


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Q uestionable State of O ur Integrity

MB As

76% were willing to understate expenses that cutinto their companies profits Nearly all believe shareholder value is moreimportant than customer service

Convicts in 11 minimum security prisons hadhigher scores on an ethical dilemma exam thanMB As


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Q uestionable Integrity at W ork

76% of employees observed a high level of illegal or unethical conduct at work in the

past 12 months49% of employees observed misconduct

that, if revealed, would cause their firms to significantly lose public trust

KPMG 2000 O rganizational Integrity Survey


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Survey of EmployeesMost (65%) dont report ethical problemsthey observe96% feared being accused of not being ateam player 81% feared corrective action would not betaken anyway68% feared retribution from their supervisors

Source: Society of Human Resource Management


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D eterioration in H onesty over Time

Y ear Y ear

College students who cheated in H.S. 1940 (20%) 2002 (75-98%)Self-reported cheating 1983 (11%) 1993 (49%)B elieve cheating is common 1940 (20%) 1997 (88%)Used cheat sheets 1969 (34%) 1989 (68%)L et others copy work 1969 (58%) 1989 (98%)Willing to lie to get job 2000 (28%) 2002 (39%)Students who had stolen 2000 (35%) 2002 (38%)

(B ased on several different ethics studies)


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Another Study of Student H onestyResponses 50,000 college students at 69 schools26% of business majors admitted to serious cheating onexams

54% admitted to cheating on written assignments Journalism majors were worse with 27% admitting tocheating on exams.

The most honeststudents in the sciences (19% reportedcheating on tests)

Author observescheating has increased since he begandoing surveys 15 years ago

He partly blames technologymakes it easier to cheat

B iz Majors Get an F for Honesty by Donald McCabe published on February

6, 2006, by the Center for AcademicIntegrity


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W ill O ur Ethics Improve?S urvey of High S chool S tudents

74% (71%) cheated on an exam in the last year;45% (45%) said they did it at least twice in the lastyear 93% (92%) lied to their parents in the past year;79% (79%) say they lied twice78% (78%) have lied to their teachers37% (27%) said they would lie to get a job38% (35%) took something from a store in the lastyear

J osephson (2002)(2001)

2002 2001


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W hy Is D ishonesty Increasing?Bad Modeling/Lack of Good Modeling Makes up our news

more explicit than ever Focus of T V/movies Dishonest leaders Sports, business,

entertainment heroes Good models are rare

Lack of PositiveLabeling Home.average

family spends 10 hoursless time together aweek than 20 years ago

Vocabulary of

kindergarten children Schools Churches


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Confession of Fraudulent Executive Even when put in jail, I didnt feel like a criminal. I

somehow felt we were different and I started noticingevery white collar guy I did talk to began every sentencewith: all I did was. O nce youre in jail and you startfeeling the animosity the other prisoners have towardwhite-collar guys, where they say to you, youre nodifferent than us, youre just a thief, you use other words. E ven the word embezzlement is a nicewordthey said youre a thief, you lie to people and taketheir money, thats what I do to and that hit me like a tonof bricks.

Mike Morze, ZZZZ B est


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Can Ethical Values be Taught?Level 1: The Foundation

Personal Ethical UnderstandingRight/wrong, Fairness, Honesty, Personal Integrity, Respect for Others


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P ersonal Ethical Understanding

Concepts of right and wrong, fair play, respectfor rights of others, honesty, personal integrity

Best learned in the home at an early ageandfollow-up is needed throughout life

Institutions (churches, schools, etc.) can helpDifficult to back fill in adulthood


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A pplication of Ethics to Business SituationsFraudulent Practices, Misleading Advertising, Unfairness

Level 2: Application to Business



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Application of Ethics to BusinessSituationsFraudulent practices, misleading advertising,unfairness

Can be taught in management education andorganizationsprovided students have a personalunderstanding of ethics

Taught by modeling (cases and personal exampleare helpful)Can be reinforced by policies, codes of ethics,training


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Application of Ethics to BusinessSituations

Businesses can teach through proper modeling:

Companies also have to further strengthen ethicsmanagement and social responsibility activities toimprove their public image

Korean Commerce- Industry- E nergy Minister L ee Hee-beom


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Ethical CourageWillingness to Pay the Price for Ethics


Level 3: Ethical Courage



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Ethical Courage

It is not sufficient to simply understand ethical

principles O ne must have the courage to pay a price for being ethical

Examples can be helpfulcase studies showing people willing to stand up for ethical principlesAgain, it helps to have practiced ethical

behavior over many yearsespecially in smallthings


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Ethical LeadershipHelping Others to be Ethical

Ethical CourageWillingness to Pay the Price for Ethics


Level 4: Ethical Leadership



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Ethical Leadership The ability and willingness to encourage others to behave ethically

Can be taught through cases, problem solving,study of successful organizations

Includes Developing an organizational climate that fosters

ethical behavior Structuring policies that encourages ethics B ehaving ethically while facing the pressures of

leadership


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The Importance of Ethical Leadership

Swing GroupCould Go E ither Way

Dishonest EmployeesPolicies Wont Help Much

Honest EmployeesWill be Honest Always

Ethical Leadership will significantly impact anorganization since the vast majority, in this view,

can be influenced to behave ethically.


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Importance of Ethical Leadership




Strong Ethical Leadership induces the middlegroup to behave as if they were the honest

employees.


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Importance of Ethical Leadership




Weak Ethical Leadership permits the middlegroup to behave as if they were the dishonest

employees.


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W hich W ay W illYour O rganization

Swing?


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Good Ethics MeansGood Business


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Questions?

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