Business Ethics

Wong Yew Yip
yewyip@gmail.com
~ Ethical
behaviours and
practices
through ethical
values and
compliance

Designed & Developed by : Wong Yew Yip ~ updated 24 September 2021
What is Ethics?
Ethics refers to well-founded
standards of right and wrong
that prescribe what individuals
and organizations should do,
usually in terms of rights,
obligations, benefits to society,
fairness and specific virtues

 Honesty and correctness
 Respect of the law
 Prevention of corruption
 Impartiality and conflict of interest
 Loyalty and fidelity
 Duty and responsibility
 Transparency and completeness of
information
 Confidential information and
safeguarding of personal data
Ethics is:
What is Ethics?

Ethics is
what you do
when nobody
is looking
What is Ethics?

Ethics is the study of how people ought to act
 Law and ethics may not always agree …
 Sometimes it may be ethical to commit an illegal act
 Example - approving loan knowing the applicant’s
means to repay may be doubtful?
 And, some legal acts are unethical
 Example - testifying against your best friend in
court?
What is Ethics?

What is NOT Ethics
 a matter of following one's feelings
or conscience – feelings and
conscience frequently deviate from
what is ethical
 confined to religion nor is it the
same as religion
 the same as following the law
 the same as doing whatever is
acceptable by society or following
what everybody does
 an optional add-on, an
afterthought or window-dressing
Ethics is NOT:

What is Business Ethics?
Business Ethics is the application
of moral and ethical principles to
the marketplace and workplace. It
covers:
 How a business responds to
internal and external stimuli
 Rules of conduct based on the
idea of right or wrong
 A system of moral principles
 The sum of the actions of people
in a business

Kohlberg’s 6 Stages of Moral Development
Punishment Orientation
Reward Orientation
Good Boy Orientation
Authority Orientation
Social Contract
Orientation
Ethical
Principle
Stage1
Stage2
Stage3
Stage4
Stage5
Stage6
Obey rules to avoid
punishment
Obey rules to obtain
reward
Obey rules to receive
approval of others
Obey rules to avoid
censure by authority
Obey rules to obtain
respect
Guided by universal
ethical principles
 Kohlberg believed that individuals progress through one stage at a time
 Only about 25% of people grow to Stage 6, the majority at Stage 4

Truett Cathy,
founder of Chick-fil-A,
argues
“ there is no such
thing as business
ethics - only ethics “
What is Business Ethics?

Critical Importance of Ethics in Business
There is no industry where ethics is
not important
 Business organizations are a crucial
part of the infrastructure of a nation
and the entire world economy
 Unethical behaviors, practices and
trustworthiness have serious
implications for individuals and
organizations
 Organizations depend almost entirely
on trust to sustain their business -
people will shy away from an
organization that is untrustworthy

The other imperatives are:
 Legal imperative – penalties attach to
wrongdoing
 Societal imperative – reputation
 Pragmatic imperative – good for
business; easier to attract business, joint
ventures, and direct foreign investment
 Change imperative – enables one to
reason through new choices where no
policies and procedures are in place
 Multinational imperative – business
across borders
Critical Importance of Ethics in Business

Drivers of Unethical Behavior
 Pressure to meet unrealistic
business objectives and deadlines
 Desire to further one’s career
 Desire to protect one’s livelihood
 Following orders from a superior
 Working in an environment with
low morals
 Improper training and ignorance of
unethical practices

Relationship between Ethics & Fraud
 Fraud is a clear example of an
ethical lapse, but not all ethical
lapses are fraud
 Fraud is illegal while ethics is
doing the right thing, not just
what is legal
 Fraud is non-compliance while
ethics is more than compliance
 A strong ethics program will help
to prevent and detect fraud

Ethical Principles
 Business ethics are the moral or ethical principles that
organizations chose to abide by
 There isn’t an ethics ombudsman or a universal code of
ethical conduct in business
 Generally, ethical principles cover:
1. Integrity
2. Reliability
3. Impartiality
4. Compliance
5. Transparency
6. Social benefit

Why Code of Ethics in Business?
1. Define acceptable behaviors
2. Promote high standards of practice
3. Provide a benchmark for members to
use for self evaluation
4. Establish a framework for
professional behavior and
responsibilities
5. Discourage corruption, fraud and
other misconduct
6. Enhance credibility with stakeholders

7. Provide a guidepost for addressing potential
problems such as potential conflicts of interest
8. Compel people to think through their mission
and obligations, as a group & as individuals
9. Strengthen support for individuals’ moral
courage
10. A written document reinforces an intention
11. Act as a vehicle to address public concerns
12. Enhance the sense of community among
members, of belonging to a group with
common values and a common mission
Why Code of Ethics in Business?

1. Disgrace, scandal, ostracism, repudiation,
protests
2. Litigation, prosecution
3. Decreased employee morale, loyalty,
commitment, performance, productivity
4. Loss of business and profits
5. Loss of customers, suppliers, partners, trust,
goodwill, loyalty
6. Loss of reputation & shaken public confidence
7. Increased government and regulatory scrutiny &
regulation
Cost of Ethical Misconduct

Examples of Unethical Behaviors/Actions
1. Acceptance of gifts/hampers
during festive seasons
2. Asking for discount (below
market value) or abnormal
discount for purchase of items
from customers
3. Acceptance of sponsorship for
trips or holidays from
customers or vendors
4. Abuse of entertainment
claims/expenses

5. Fabricate documents to qualify
for loans
6. Misuse of official documents for
personal use
7. Unauthorised access to clients’
account and divulge to 3rd
parties
8. Misuse of company’s time for
personal matters
9. Use corporate credit card for
personal use, e.g. family dinner

10. Abuse of position and taking
advantage of the company to enrich
oneself
11. Imposition of previously
undisclosed charges on clients’
accounts
12. Running down competitors through
deliberate misinformation
13. Misuse of confidential information
gained through business operations
14. Lack of appropriate disclosure in
dealing with clients

Other Examples - 1

Other Examples - 2

CONSPIRACY
An agreement between
competitors before they
approach customers is a
conspiracy
e.g. pricing of products,
terms and conditions for
services
Other Examples - 3

Ethical Dilemma
An ethical dilemma is a debate between
two moral principles, where two sides
argue about what is right or wrong
There may be no real answer as it is a
matter of what one believes in

Ethical Dilemma
 In a perfect world, businesses and their employees would
always do the right thing
 Unfortunately, in the real world, ethical dilemmas are a
common occurrence in the workplace
 Employees must deal with pressures to perform and help
the company succeed as well as personal temptations to
take the easy way out
 These ethical dilemmas can be difficult for employees to
grapple with, especially if they don't know what the
company's official guidelines are
 As employees will likely face many dilemmas in their
careers, companies should have an ethical policy and
provide training and information to assist them in making
the right decision

What is an ethical choice?
 Choosing values-driven actions
 Understanding and adopting core values
 Living core values in practice
 Solving ethical dilemmas
 Choosing right over wrong
 Respecting moral/legal rights
 Discharging moral/legal obligations
 Choosing good over bad
 Promoting good consequences
 Avoiding and minimising bad consequences
 Choosing fair over unfair
 Impartially balancing interests

1. Declining moral standards
2. Situational ethics or moral
relativism
3. Rapid expansion and
decentralization of control
4. Company/personal
immaturity
5. Parties perceived as
enemies or not worthy of
ethical treatment/moral
exclusion
Causes of Failures in Business Ethics

6. Failure to realize cost of unethical actions
7. Lack of ownership or accountability
8. Fixation on “Results”
9. Ethical illiteracy
10. Perceived accepted behavior
Causes of Failures in Business Ethics

Ethical Quick Test
Ask yourself:
1. Is it legal?
2. What does my company or
industry Code of Ethics say
about this option?
3. How would it look in tomorrow’s
newspaper?
4. Does it have to comply with the
Golden Rule?
5. How does it make me feel when I
tell my family over dinner?

Building an Ethical Culture
 In a “strong” ethical culture, ethical
values matter - actions of employees
(especially management), company
policy & procedures, and decisions
 In a “weak” ethical culture, ethical
values aren’t promoted and “getting the
job done” is far more important than
getting the job done in the ethically right
way
 Basically, the strength of a company’s
ethical culture is the extent to which the
organization makes doing the right
thing a priority

Why build an Ethical Culture?
 Right thing to do
 Regulations require it
 Society demands it
 Stakeholders deserve it
 Strategic partners expect it
 Special interest groups and
media are watching

Approaches to reinforce Ethics
• Rule-based (emphasis)
• Prevent unethical conduct
• External enforcement
• Formal accountability
1
Compliance
Approach
Values
Approach
2
Blended
Approach
3
• Values-based (emphasis)
• Promote ethical behaviour
• Internal commitment
• Personal responsibility
• Balances values and rules
• Both - promoting ethical
conduct, without tolerating
unethical conduct (e.g. zero
tolerance)
• Internal commitment with
external enforcement
structures in place
3 Approaches to Reinforce Ethics

16 Ways
to
Reinforce
Business
Ethics
16 Ways to Reinforce Business Ethics
Leadership
1
Character
2
Transparency
5
Communication
6
No Anger
7
Emotional
Ownership
8
Recognized
9
Risk
Assessment
16
Moral
Behavior
15
No Situational
Honesty
14
Compliance
13
Follow
Through
12
Promise
3
Support
4
Hotline
11
Appreciation
10

3. Keep promises and commitment at all times
4. Give full support in complying with ethical standards
5. A climate of transparency at all levels
6. Communicate directly and honestly
1. Leadership sets the tone and
example, there is no substitute
for leadership
2. Character of senior
management is critical -
trustworthy, transparent and fair

7. No place for acting in anger or
bullying in the work place
8. Employees feel part of a team
that encourages them to be
ethical
9. Employees recognized for speaking up
10. Ethical behaviors and actions are appreciated
11. Use of hotline for reporting unethical behaviors and
actions

12. Follow through, keep records
and respond to all reported
unethical behaviors and actions
13. Non-compliances will not be
tolerated
14. No such thing as situational honesty, whatever the
situation
15. Moral behavior is not subjective and any immoral
behavior is wrong
16. Conduct regular risk assessment, don’t assume
things are fine

 Discuss the Cases 1 & 2
 What would you do and
why?

You took the family out to dinner and used your corporate
credit card because you forgot your personal one. When it
comes to payment, would you:
A) Put in the name of a client whose account you know has
plenty of cash in it and claim it under entertainment
expense
B) Mark it as a personal expense and reimburse your
employer
C) Tell your Manager that it was a family dinner and ask
him to approve the expense on the grounds that, with all
of the late nights you've been putting in, you've missed
a lot of meals with your spouse and children
Case 1

Sometime ago, you (a manager) saw your lady
employee holding hands with a married male staff of
another department and she admitted that she is having
an affair with the said staff. Another manager has
informed you that he is writing up a positive performance
evaluation for this male staff for promotion. Do you tell
your co-manager what you know?
A) No, what's personal is personal
B) Yes, this behavior could eventually affect the
company
C) I hint at it but avoid making any definite claim
Case 2

Ethical Leadership
A leader’s integrity is the single most
important factor in an organization’s
ability to develop an ethical culture
Leaders must be trustworthy
If a leader cannot be trusted, there is
no leadership and certainly no future
for that particular leader!
A leader sets the tone for the team and the
organization, doing the right things, even when
the right thing isn’t popular or easy

Ethical Leadership
Ethical leaders do the right
thing, at the right time, for the
right reasons
They put their ethics before the
bottom line
As a result, they have dedicated
teams and individuals that
would do almost anything for
them

What Ethical Leaders do?
1. Lead your team with character and
integrity
2. Set an example as your team looks to
you
3. Know your own values as well as your
organization's values
4. Know the organization’s written rules
and codes of conduct and make sure
you enforce them without fear or
favour

What Ethical Leaders do?
5. Set the tone and create the right
environment for your team
6. It's what you do, not what you say,
that demonstrates to your team what
you care about
7. Spell out consequences for team
members who violate corporate
values, rules and code of conduct
8. Set up some kind of “reward” system
for team members who consistently
act according to the company values,
rules and code of conduct

AUKUS Alliance - A Business Ethics Case Study
❖ AUKUS is the 3-way security alliance
between Australia, the UK and US
announced on 15 September 2021 to
build a class of nuclear-powered
submarines
❖ Australia will terminate the contract
worth A$90 billion given to France in
2016 to build 12 diesel electric-powered
submarines to replace its existing Collins
submarine fleet
❖ French foreign minister, Jean-Yves Le Drian, could not hide his anger and
less diplomatically called the deal “ a stab in the back”, a total shock, an act
of betrayer and a break of trust
❖ This has caused a diplomatic storm between Australia, UK, USA and France
Geopolitics aside, is AUKUS good Business Ethics?

Ethical Leadership Action Plan
➢ Complete this Action Plan to identify opportunities for
improvement
➢ To monitor your progress, repeat this exercise half-yearly to
help you assess whether you have achieved your
improvement objectives
No. Ethical Leadership Action
Current
Practice
Goal Set Action Steps

Ethical Leadership Action Plan - Example
No. Ethical Leadership Action
Current
Practice
Goal Set Action Steps
1 I explicitly consider
ethical issues when
making management
decisions.
Almost
Never
Always Ask myself “Are there
ethical issues in this
decision?” when
making management
decisions

Thank You
Contact :
yewyip@gmail.com
for PowerPoint file

Business Ethics

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