Chapter:1 An Overview of Ethics

1.1 What is "Ethics"?

1.2 What are "Ethics,Morality,Intigrity"?
1.3 Ethics in Business World
1.3.1.Why Fostering Good Business Ethics Is Important
1.3.2. Improving Corporate Ethics
1.3.3. Creating an Ethical Work Environment
1.3.4. Ethics in Information Technology
1.4.Summary

Define Ethics:

Ethics is a set of beliefs about right and wrong behaviour within a society

What are Ethics,Morality,Intigrity:

Each society forms a set of rules that establishes the boundaries of generally accepted
behaviour. These rules are often expressed in statements about how people should behave,
and they fit together to form the moral code by which a society lives.

Morality:

The term morality refers to social bonds about right and wrong that are so widely
shared that they become the basis for an established agreement

However, individual views of what is moral may vary by age, cultural group, ethnic
background, religion, life experiences, education, and gender.

The Importance of Integrity:

Your moral principles are statements of what you believe to be rules of right conduct. As a
child, you may have been taught not to lie, cheat, or steal. As an adult facing more complex
decisions, you often reflect on your principles when you consider what to do in different
situations:

A person who acts with integrity acts in accordance with a personal code of principles. One
approach to acting with integrity—one of the cornerstones of ethical behaviour—is to extend
to all people the same respect and consideration that you expect to receive from others.

The Difference between Morals, Ethics, and Laws:

Morals are one’s personal beliefs about right and wrong, while the term ethics describes
standards or codes of behaviour expected of an individual by a group (nation, organization,
profession) to which an individual belongs.

Law is a system of rules that tells us what we can and cannot do. Laws are enforced by a set
of institutions (the police, courts, law-making bodies).
Ethics in Business World:

Ethics has been important in business world because the risks associated with
inappropriate behaviour have increased, both in their likelihood and in their potential
negative impact.

In the past decade, we have seen the failure of major corporations and numerous corporate
officers and senior managers sentenced to prison terms for their unethical behaviour. Clearly,
unethical behaviour has led to serious negative consequences that have had a major global
impact.

Several trends have increased the likelihood of unethical behaviour. First, for many
organizations, greater globalization has created a much more complex work environment that
spans diverse cultures and societies, making it much more difficult to apply principles and
codes of ethics consistently.

Second, in today’s recessionary economic climate, organizations are extremely challenged to

maintain revenue and profits. Some organizations are sorely tempted to resort to Unethical
behaviour to maintain profits.

Here are a just a few examples from around the world about ethical issues:

• Hewlett-Packard hired investigators to identify members of its board of directors who were
responsible for leaking confidential company information to the press.

• Comverse Technology develops, designs, manufactures, and supports computer and

telecommunications systems for multimedia communications. It provides its products to more
than 500 service providers in over 130 countries. In 2008, the company’s founder and former
CEO Jacob Alexander admitted he backdated Comverse stock options for personal gain and
is being sued by the firm for $70 million.

• The chairman of the India-based outsourcing firm Satyam Computer Services admitted he
falsified his firm’s profits for years—by as much as $1 billion. The revelation represents
India’s largest ever corporate scandal.

These are just a small sample of the scandals that have led to an increased focus on business
ethics within many IT organizations.

Why Fostering/Development of Good Business Ethics Is Important:

Organizations have at least five good reasons for promoting a work environment in which
employees are encouraged to act ethically when making business decisions:

1. Gaining the good will of the community

2. Creating an organization that operates consistently
3. Developing good business practices
4. Protecting the organization and its employees from legal action
5. Avoiding unfavourable publicity
Gaining the good will of the community: Example of socially responsible activity

Although organizations exist primarily to earn profits or provide services to customers, they
also have some fundamental responsibilities to society.

Major Companies contributed good will and shown their responsibility to the world they are

Examples of IT organizations’ socially responsible activities

Organisation Example of Socially responsible activity

Google, Inc. Donated $33 million in free ads to non-profit organizations in
low-income areas

Hewlett-Packard Employees work to implement technology solutions to benefit

residents of central city communities
IBM Awards millions of dollars of grants each year to support the arts

Microsoft Matches its employees’ direct contributions to thousands of non-

profit organizations
Intel Supplied 100,000 computers to schools in low-income neighbour
hoods

The good will that socially responsible activities create can make it easier for corporations to
conduct their business.

On the other hand, companies viewed as harmful to their community may suffer a
disadvantage. For example, a corporation that pollutes the air and water (see Figure 1-2) may
find that adverse publicity reduces sales, impedes relationships with some business partners,
and attracts unwanted government attention.

Creating an Organization That Operates Consistently

Organizations develop and abide by values to create an organizational culture and to define a
consistent approach for dealing with the needs of their stakeholders—shareholders,
employees, customers, suppliers, and the community. Such consistency means that
employees know what is expected of them and can employ the organization’s values to help
them in their decision making.

Consistency also means that shareholders, customers, suppliers, and the community know
what they can expect of the organization—that it will behave in the future much as it has in
the past. It is especially important for multinational or global organizations to present a
consistent face to their shareholders, customers, and suppliers no matter where those
stakeholders live or operate their business. Although each company’s value system is

• Operate with honesty and integrity, staying true to organizational principles

• Operate according to standards of ethical conduct, in words and action
• Treat colleagues, customers, and consumers with respect
• Strive to be the best at what matters most to the organization
• Make decisions based on facts and principles

Protecting the Organization and Its Employees from Legal Action:

In a 1909 ruling (United States v. New York Central & Hudson River Railroad Co.), the U.S.
Supreme Court established that an employer can be held responsible for the acts of its
employees even if the employees act in a manner contrary to corporate policy and their
employer’s directions.

Indeed, in 1991, the Department of Justice established sentencing guidelines that suggest
more lenient treatment for convicted executives if their companies have ethics programs.
Fines for criminal violations can be lowered by up to 80 percent if the organization has
implemented an ethics management program and cooperates with authorities.

Avoiding Unfavourable Publicity:

The public reputation of a company strongly influences the value of its stock, how consumers
regard its products and services, the degree of oversight it receives from government
agencies, and the amount of support and cooperation it receives from its business partners.

Thus, many organizations are motivated to build a strong ethics program to avoid negative
publicity. If an organization is observed as operating ethically, customers, business partners,
shareholders, consumer advocates, financial institutions, and regulatory bodies will usually
regard it more favourably.

Improving Corporate Ethics:

Research by the Ethics Resource Center found that only one in four organizations has a well-
implemented ethics and compliance program. The Ethics Resource Center has defined the
following characteristics of a successful ethics program:

• Employees are willing to seek advice about ethics issues.

• Employees feel prepared to handle situations that could lead to misconduct.
• Employees are rewarded for ethical behaviour.
• The organization does not reward success obtained through questionable means.
• Employees feel positively about their company.

Appointing a Corporate Ethics Officer

A corporate ethics officer (also called a corporate compliance officer) provides an

organization with vision and leadership in the area of business conduct. Organizations send a
clear message to employees about the importance of ethics and compliance in their decision
about who will be in charge of the effort and to whom that individual will report. Ideally, the
corporate ethics officer should be a well-respected, senior-level manager who reports directly
to the CEO. Ethics officers come from diverse backgrounds, such as legal staff, human
resources, finance, auditing, security, or line operations.

Ethical Standards Set by Board of Directors

The board of directors is responsible for the careful and responsible management of an
organization.

In a profit organization, the board’s primary objective is to manage the organization’s

business activities and management for the benefit of all stakeholders, including
shareholders, employees, customers, suppliers, and the community.

In a non-profit organization, the board reports to a different set of stakeholders, particularly

the local community that the non-profit serves.

The board fulfils some of its responsibilities directly and assigns others to various
committees. The board is not normally responsible for day-to-day management and
operations these responsibilities are delegated to the organization’s management team.
However, the board is responsible for supervising the management team.

Conducting Social Audits

An increasing number of organizations conduct social audits of their policies and practices. In
a social audit, an organization reviews how well it is meeting its ethical and social
responsibility goals, and communicates its new goals for the upcoming year. This information
is shared with employees, shareholders, investors, market analysts, customers, suppliers,
government agencies, and the communities in which the organization operates.

Requiring Employees to Take Ethics Training

Ethics training not only makes employees more aware of a company’s code of ethics and how
to apply it, but also demonstrates that the company intends to operate in an ethical manner.
The existence of formal training programs can also reduce a company’s liability in the event
of legal action.

Creating an Ethical Work Environment:

Most employees want to perform their jobs successfully and ethically, but good employees
sometimes make bad ethical choices. Employees in highly competitive workplaces often feel
pressure from aggressive competitors, cutthroat suppliers, unrealistic budgets, unforgiving
quotas, tight deadlines, and bonus incentives. Employees may also be encouraged to do
“whatever it takes” to get the job done. Such environments can make some employees feel
pressure to engage in unethical conduct to meet management’s expectations, especially if the
organization has no corporate code of ethics and no strong examples of senior management
practicing ethical behavior. Table 1-3 shows how management’s behavior can result in
unethical employee behavior; Table 1-4 provides a manager’s checklist for establishing
an ethical workplace (the preferred answer to each question in this table is yes).
.

Ethics in Information Technology:

The growth of the Internet, the ability to capture and store vast amounts of personal data, and
greater reliance on information systems in all aspects of life have increased the risk that
information technology will be used unethically.

In the middle of the many IT breakthroughs in recent years, the importance of ethics and
human values has been minimized—with a range of consequences. Here are some examples
that raise public concern about the ethical use of information technology:
• Many employees might have their e-mail 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 in apparent
violation of copyright laws at tremendous expense to the owners of those copyrights.

• Organizations contact millions of people worldwide through unsolicited e-mail

(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 downloading 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.

IT professionals and users need to recognize this fact when they formulate policies that will
have legal consequences and affect the well-being of millions of consumers.

The second tenet on which this book is based is that in the business world, important
decisions are too often left to the technical experts. General business managers must assume
greater responsibility for these decisions, but to do so they must be able to make broad-
minded, objective decisions based on technical savvy, business know-how, and a sense of
ethics. They must also try to create a working environment in which ethical dilemmas can be
discussed openly, objectively, and constructively.