Business Ethics

1

Zen and the Art of Business Peace

Professor Derek ParkinProfessor Derek Parkin

2

“The Art of War”e t o a• 6th Century BC military treatise by Sun Tzu• Has (apparently) influenced and inspired:

– Napoleonp– General Douglas MacArthur– Mao ZedongMao Zedong– Planning of ‘Operation Desert Storm’

Business leaders– Business leaders….

3

Zen philosophyp p y

• Western societal interest post WWIIp• General haziness as to origin and beliefs

– Buddha legend– Buddha legend– Introduced to China 2nd century BC

L t h d J– Later reached Japan• “Zen” broadly translates as “meditation”• A state of mind, a state of being

4

What one might do for $500

• Stop going to the movies for 6 months (62%)Stop going to the movies for 6 months (62%)• Get a tattoo (39%)• Switch political parties (35%)• Switch political parties (35%)• Cheat on income taxes (9%)

Ch (4%)• Cheat on a spouse (4%)

(“Anything for money”, Business Week (USA), August 2004)

Ethics

• Can be defined as a “system of right and• Can be defined as a system of right and wrong”A i t i di id l d id h th t i• Assists individuals decide whether an act is:– Moral or immoral– Socially desirable or undesirable

6

Ethics• Many sources:

– Religious beliefs– National and ethnic beliefs– Community standards– Family practicesFamily practices– Educational experiences

Friends– Friends

7

What is Business Ethics?

• Principles and standards which guidePrinciples and standards which guide behaviour in the world of business

• “Right” or “wrong” “acceptable” or• Right or wrong , acceptable or “unacceptable” behaviour within the

i tiorganisation• Determined by key stakeholders

8

Some myths about business ethics• It’s easy to be ethical

U thi l b h i i t f b i• Unethical behaviour is part of business• There are no rewards for being ethical• Ethical behaviour will prevent me from being

successful• Business is like sport – push the rules and try not

to get caught• Business ethics is about character education and

teaching moral philosophy

Ethical issues for business

• Product safety standardsProduct safety standards• Advertising contents• Working environment• Working environment• Unauthorised payments

E l i• Employee privacy• Environmental issues

Common unethical acts (reported by employees)

Lying to supervisors• Lying to supervisors• Falsifying records• Alcohol and drug abuse• Conflict of interest• Stealing• Receiving a gift/entertainment in violation of company policyReceiving a gift/entertainment in violation of company policy• Improper accounting procedures• Sexual harassment

Di i i ti• Discrimination• Violation of environmental laws

(1997 Society for Human Resource Management)

11

(1997 Society for Human Resource Management)

Key causes of unethical behavioury• Meeting overly aggressive financial or business

bj tiobjectives• Meeting schedule pressures (“deadlines”)• Helping the organisation survive• Rationalising that others do it• Resisting competitive threats• Saving jobsg j

(1997 Society for Human Resource Management)

12

Key influences on ethical behavioury• Personal values• Supervisor influence• Senior management influenceg• Internal drive to succeed• Performance pressuresPerformance pressures• Lack of consequences• Friends/co worker influence (peer pressure)• Friends/co-worker influence (peer pressure)

13

Why misconduct is not reportedy p• Fear of not being considered a team player• Did not think that corrective action would be taken• Fear of retribution – from management• “No-one else cares – why should I?”• Did not trust the organisation to keep the report g p p

confidential

14

Principle of employee conduct

• 10% follow their own beliefs• 10% follow their own beliefs• 40% try to follow company policies and

lrules• 40% go along with the work group• Take advantage if the risk is low

(Ferrell, Marsh 2005)

Classification of ethical issues

• Conflict of interestConflict of interest• Honesty and fairness

C i i• Communications• Organisational relationshipsg p

16

Conflict of interest

• Exists when an individual must choose whether to advance his/her own interests, the organisation’s or others’

• Examples: Bribes/personal payments, gifts, or special favours intended to influence decision making

• Do auditor actual or alleged conflicts of interest represent unethical behaviour?

17

Honesty and fairnessy

• Following applicable laws and regulations and not g pp gknowingly harming stakeholders– Is advertising cigarettes at the cricket fair? WhyIs advertising cigarettes at the cricket fair? Why

was it phased out?– Are mobile phone ads that ‘mask’ the effectiveAre mobile phone ads that mask the effective

cost of the call, especially if the limit is exceeded, fair?

18

Communications• Refers to the transmission of information and the

sharing of meaning– eg: deceptive advertising, product safety

information, product composition– Financial Statements – is this not simply a

means of communication to stakeholders?– Continuous disclosure obligations for ASX

companies?

19

Organisational relationshipsg p

• Behaviour of organisational members toward gstakeholders

• Includes confidentiality, meeting obligations andIncludes confidentiality, meeting obligations and deadlines, not pressuring others to behave unethicallyy

20

So what does this mean to you and me?

• We have a personal obligation to ourselves and our employers to act ethically in our business y ydealings– Personal and corporate reputational riskp p

21

So what does this mean to you and me?

• We are also bound by the Ethical Rules of professional bodies (ICAA, CPAA, NIA, CMA)( )– Disciplinary consequences for bringing the bodies into

disrepute – Includes fines, suspension or expulsion

22

What does this mean for our company or business?

• We may be officers of the company or business– possibly a listed company

• “Rules of engagement”:– Corporations Act

C i A– Crimes Act– Anti-money laundering legislation

Income tax legislation– Income tax legislation – ASX listing rules

23

What does this mean for our company or business?

• Obligation to:– Directors– Auditors– Shareholders– Other stakeholders

24

What is the company’s responsibility?

C d f C d t• Code of Conduct• Attitude of the Board & senior management

– “The tone from the top”• Provide a ready avenue for discussion of ethical

iissues– Designated “privacy officer(s)”

T i i d f h thi– Training and open forums, such as this

25

So, what do we do when faced with a difficult ethical issue?

• Define problem• Identify stakeholders• Identify practical alternatives• Determine measurable impact of each alternative• Identify immeasurable consequences of each

alternative• Arrive at tentative decision• Arrive at tentative decision• Decide how to implement decision

26

So, what do we do when faced with a difficult ethical issue?

Always:• Take time out to reflect on issue

– Consideration before action• Discuss with a trusted person (could be a peer

‘ ff ’)employee or the ‘privacy officer’)• Consider taking up with senior management, if

appropriateappropriate

27

So, what do we do when faced with a difficult ethical issue?

Also:• Consider Whistleblower legislation provisionsg

– Communicate with auditors• Consider communication to Chair of Audit

C fCommittee, if appropriate• Consider Chartered Accountants’ Advisory Group

services and similarservices and similar

28

So, where does this “Zen” thing fit in?

• Ethics can be a learned behaviour….to a pointpoint

• Rather, a way of thinking which underpins l b h ipersonal behaviour

29

So, where does this “Zen” thing fit in?

• Will be assimilated over a period of time, primarily during more vulnerable years– Youth – family/schooling– Young adult – university/workplace

• Will be dispersed during more secure years– Mature adult – workplace/social group

30

ONE SIMPLY CANNOT MAKE ANOVERNIGHT DECISION TO BE ETHICAL AS OF TOMORROWETHICAL AS OF TOMORROW

31

Ethics and committed employeest cs a d co tted e p oyees

• Creates employee loyaltyp y y y• Encourages personal sacrifices• Focuses on organisational success• Focuses on organisational success• Honours organisational policies and contractual

obligationsobligations• Reduces staff turnover

S ti fi t• Satisfies customers

32

Remember...

“If you have ethics nothing elseIf you have ethics, nothing else matters.

If you don’t have ethics, nothing else matters.”else matters.

Remember…

Consider your own reputationConsider your own reputation…..

Consider the reputation of the people around you…..y

Consider the reputation of your companyConsider the reputation of your company.

34

...and don’t forget your Zen!