classroom notes_business ethics

BUSINESS 2 (Business Ethics) Summer Classes_Year 2013

Chapter 1: THE BASICS OF ETHICS

What is “Ethics?” What is Business? What is Business Ethics?

ETHICS, also known as moral philosophy, is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct. The term comes from the Greek word ethos, which means "character". Ethics is a complement to Aesthetics in the philosophy field of Axiology. In philosophy, ethics studies the moral behavior in humans, and how one should act.

MORALITY (from the Latin moralitas "manner, character, proper behavior") is the differentiation of intentions, decisions, and actions between those that are "good" (or right) and those that are "bad" (or wrong). The philosophy of morality is ethics. A moral code is a system of morality (according to a particular philosophy, religion, culture, etc.) and a moral is any one practice or teaching within a moral code. Morality may also be specifically synonymous with "goodness" or "rightness." Immorality is the active opposition to morality (i.e. opposition to that which is good or right), while amorality is variously defined as an unawareness of, indifference toward, or disbelief in any set of moral standards or principles. An example of a moral code is the Golden Rule which states that, "One should treat others as one would like others to treat oneself."

Elements Determining Morality

1. The Act itself

In order to judge the morality of a human act, we must first consider the act itself. Selling products, can initially seem to be morally good, but using defective weighing scale, spraying harmful insecticides to fruits, mixing palay and rice, etc. The act itself is tainted with deception, and therefore, no longer considered as a morally good act.

2. Purpose or End

The differentiation of intentions, decisions and actions determines the purpose and end of an action. Some people tend to perform actions with the best intentions but sometimes resort to immoral means in order to arrive at the best results or end.

1 | P a g eDiscussion Notes of Mr. JASPER V. DULOSA, M.M.

ETHICS are about what is right and what is wrong

LAW is about what is lawful and what is

http://en.wikipedia.org/wiki/Golden_Rule

http://en.wikipedia.org/wiki/Synonym

http://en.wikipedia.org/wiki/Culture

http://en.wikipedia.org/wiki/Religion

http://en.wikipedia.org/wiki/Philosophy

http://en.wikipedia.org/wiki/Ethics

http://en.wikipedia.org/wiki/Social_actions

http://en.wikipedia.org/wiki/Latin

http://en.wikipedia.org/wiki/Axiology

http://en.wikipedia.org/wiki/Aesthetics

http://en.wikipedia.org/wiki/Ethos

http://en.wikipedia.org/wiki/Conduct

http://en.wikipedia.org/wiki/Philosophy


3. Circumstances

“Circumstances alter cases.” From the moral point of view, the circumstances of a human act are those factors, distinct from the act itself and from the purpose, which may affect the morality of the act. Euthanasia (from the Greek word meaning "good death") refers to the practice of intentionally ending a life in order to relieve pain and suffering.

The Concept of Responsibility

The general principle relating with responsibility is that whatever hurts the individual or the institutions necessary for his growth may be looked upon as evil in some way. Similarly, whatever truly promotes the growth of the individual and means available to him is morally good. For instance, the employer who must fire an employee knows that the man’s family will suffer. Is he responsible for this effect?

Guide Question:

1. What was the intent of firing the employee? 2. Was it for the common good or was it because he poses a threat to the employer

on some extent?3. Does the employee really deserve to be fired? What else should be done before

firing the employee?


Case Study No. 1: The Case of the Boss’ Daughter

As head of the Human Resource Department, you received a phone call from your Boss who was also the board president and your godfather, asking to determine whether or not you received his daughter’s application for a current job opening. You indicated that it had indeed, come in, but that the closing date for the paperwork/ filing of application has passed.

“Oh,” he said, “you are not going to let a qualified candidate be excluded because of a closing date, are you?” Then he added quickly, “but let me not interfere.” As you hung up the phone, you replayed the conversation in your mind and pondered the implications.

Later that day, your senior manager asked to see you. Despite offering him a chair, he chose to stand by the door that he just closed and said, “I heard that the boss’ daughter has applied for the opening. You are going to consider her, are you? She worked here years ago, and there were problems. The place will be up in arms if you take her back.” He smilingly added, “I just wanted to let you know and to help.” Then he turned on his heel and left.

As head of the HR department, how are you going to resolve the issue?

http://en.wikipedia.org/wiki/Suffering

http://en.wikipedia.org/wiki/Pain

http://en.wikipedia.org/wiki/Greek_language


The Principle of Double Effect

The principle of double effect justifies certain actions that produce “indirectly” certain evil consequences, provided at least four (4) conditions are met:

1. The action, by itself and independently of its effect, must not be morally evil;2. The evil effect must not be a means to producing the good effect;3. The evil is sincerely not intended, but merely tolerated; and4. There is a proportionate reason for performing the action, in spite of its evil

consequences.

The Concept of Proportionality

The fourth condition of the principle of double effect mentions the importance of proportionate reason in performing a moral action. What do we mean by proportionality?

Proportionality is to be judged by:

1. The type of goodness or evil involved.2. The urgency of the situation.3. The certainty or probability of the effects.4. The intensity of one’s influence on the effects.5. The availability of alternate means.

In the abstract, a necessary goodwill outweighs a merely useful good. For example, something necessary to keep a business in existence will take precedence over a cut in the ordinary dividend.

In the concrete, necessity is influenced by the urgency of the situation. Thus, staying in business nowadays involves both research and the ability to meet one’s payroll. However, since research can be postponed without irreparable harm, it would take second place to meeting the payroll because both the company and the employees depend on this for their existence.

The intensity of one’s influence must be considered since often something or someone else is the major cause of the evil side effect. In firing a man for absenteeism, the employer foresees some hardship in the family. The major cause is not the employer but the employee whose fault created the situation.

The availability of alternate means must be considered. If the good effects can be obtained by a method which involves lesser or no evil effects, it would be irrational and therefore unethical not to choose the alternate means, all other things being equal.The Ethical Concerns in Business



Public concerns about ethical practices in business usually relate to issues like embezzlement, accepting bribes or poisoning the environment. Such examples suggest managers’ problems with ethics consist of nothing more than violations of clear-cut, well-defined laws, rules and codes of conduct.

One set of relationships and responsibilities is directly related to employees, and includes such areas as discipline, performance appraisal, safety, and the administration of reward system. Another set is concerned with customers and suppliers, and includes the intricate aspects of such elements of timing, quality and price. Ethical dilemmas also arise when managers have conflicts in values with superiors or peers over such things as strategy, goals, policy and administration.

The Implications of Managerial Action

Those who were engaged in business sometimes appear to lose their perspective when making decisions that affect people. Perhaps they are busy, or maybe they just don’t take time to think through the implications of their actions. It seems unlikely they have not had some ethical training. Whatever the reason, the outcome is the same – an employee or group of employees, ends up being treated arbitrarily and unfairly. Ethics is sacrificed for the expedient accomplishment of a goal.

Case Study No. 2: Harass Him Until He Quits

Danilo Magtanggol is 62 years old and has been with the company for 28 years. He has had a varied career, and possesses a number of skills and abilities. Mr. Magtanggol is quite set in his ways and somewhat eccentric. His supervisor and other senior managers would like to see him retire or let him go, but his performance meets the standards of the company in all respects and he has no interest in retirement. No one has been able to identify any deficiencies that would warrant discharge.

The senior manager in Mr. Magtanggol’s department recently decided to create a work environment for him that would be so uncomfortable that it would ultimately cause Mr. Magtanggol to quit. The manager presented the idea to Mr. Magtanggol’s immediate supervisor who accepted the idea readily. They began to give Danilo thankless assignments and assigning him the “graveyard” shift. Younger employees with less experience and service were given better assignments and shifts. Danilo appealed the decision but was told by his manager that “the assignments have all been made; if you don’t like yours, you can look elsewhere.” There is no union or employee problem-solving process.

Chapter 2: Principles and Forces that Shape Ethical Behavior


Embezzlement is the act of dishonestly withholding assets for the purpose of conversion (theft) of such assets by one or more individuals to whom such assets have been entrusted, to be held and/or used for other purposes.

As a businessman, it is essential that you do not lose your ethical

perspective when making decisions.

http://en.wikipedia.org/wiki/Theft

http://en.wikipedia.org/wiki/Conversion_(law)


When and where do we develop ethical values?

Over time, codes of conduct were developed to ensure survival. These codes included the nurturing of children, forming of family and tribal units, and hunting rituals. Below are few of the “influencers” of a person’s conduct:

1. Father2. Mother3. Brother/ Sister4. Other relatives5. Friend6. Teacher7. Religious Leader8. Youth/ Peer Group9. Sports Idol10. Military Hero11. Movie Idol12. Books13. Religious Writings

Sources of Ethical Values

1. Experience. The values we hold are inseparable from the endlessly changing experiences of our lives

2. Culture. Human Nature Orientation / Environment Orientation / Time and Activity Orientation

3. Science. Science helps make judgment only if we can relate scientific information to value assumptions made on other bases.

4. Religion. Religion involves not only formal system of worship but prescription for social relationships.

Identifying values (acquired) in life:

Thru experience: _____________________________________________________________________________Thru culture: _____________________________________________________________________________Thru Science: _____________________________________________________________________________Thru Religion: _____________________________________________________________________________

List all your values acquired from each of the sectors of society as listed above:

Identifying your own stand on different moral and social issues:



What are the influences/ issues/ values you can think of on the issues below? Say something about each of the terms listed:

1. Poverty2. Labor Unions3. Whistle blowing (informing the public about the illegal or immoral behaviour of

an employee or organization4. Abusing the environment for profit5. Graft and Corruption6. Exposing workers to unhealthy and unsafe conditions (hazardous workplace)7. Job discrimination and exploitation of workers8. Wages

We are not always good (We neglect the real meaning of the Issue)

1. We would never steal money from the cash drawer, but we use the company carwe use the company car to run personal errands “while doing our tasks.”to run personal errands “while doing our tasks.”

2. We observe working hours scrupulously and often put in overtime, so telling thetelling the boss we get caught in traffic, when we actually overslept, seems excusable enough.boss we get caught in traffic, when we actually overslept, seems excusable enough.

3.3. We give out best to the company and work hard, so gossiping about my supervisorgossiping about my supervisor to fellow employees just helps me let off a little steam.to fellow employees just helps me let off a little steam.

4.4. We know our co-worker is running a small business of her own on the side using the company’s resources (machines, etc.) but we’ve been friends for years, and shebut we’ve been friends for years, and she is a single parent with a son in college. No one knows it but me.is a single parent with a son in college. No one knows it but me.

Ethical values on the Job

VALUES/ ISSUESVery

ImportantSomewhat Important

Not Important

1 Honesty2 Fairness3 Obedience to Law4 Compassion (concern for pain of others)

5 Respect for others6 Loyalty7 Dependability8 Courage 9 Helpfulness

10 Self-Control11 Truthfulness12 Tardiness and Punctuality13 Deference to AuthorityEthical ConflictsEthical Conflicts



Conflicting loyalties, fear or failure, and/or fear of being fired put our ethical values onConflicting loyalties, fear or failure, and/or fear of being fired put our ethical values on the line. This time, we will check some actual job situations that would test our ethicalthe line. This time, we will check some actual job situations that would test our ethical standards. Honest and brief explanation is required for each situation.standards. Honest and brief explanation is required for each situation.

Would you:Would you:

1.1. Alter a financial report at your boss’ direction?Alter a financial report at your boss’ direction?2.2. Protect a friend whose drinking is causing problem in the company?Protect a friend whose drinking is causing problem in the company?3.3. Take credit for work done/ prepared by someone else?Take credit for work done/ prepared by someone else?4.4. Put off safety measure because the cost will affect profitability?Put off safety measure because the cost will affect profitability?

Change a performance appraisal to reflect more positively on an individualChange a performance appraisal to reflect more positively on an individual whose advancement is important to your supervisor?whose advancement is important to your supervisor?

What are the things that What are the things that YOU WOULD NOT DOYOU WOULD NOT DO, , even at the risk of being firedeven at the risk of being fired??

I would refuse to:I would refuse to:

1.1. ____________________________________________________________________________________________________________________________________________________________________2.2. ____________________________________________________________________________________________________________________________________________________________________3.3. ____________________________________________________________________________________________________________________________________________________________________4.4. ____________________________________________________________________________________________________________________________________________________________________5.5. ____________________________________________________________________________________________________________________________________________________________________

Case Study No. 3: Using the Office PhoneCase Study No. 3: Using the Office Phone

Suppose a Makati-area manager, Mr. Toledo, learns that his assistant, Miss Mary Telebabad, is using the office phone at least once a week to talk to her sister in Cebu for an hour or so. The manager confronts her with the discovery by asking Mary, if, in fact, she is making the long distance personal telephone calls.

Mary answers, Yes. Why? Have I done anything wrong? What is so terrible about my using the phone anyway? The company is big enough to afford it; what is one phone call or two to Cebu? Feeling expansive, she adds, I phoned my mother a couple of time last week because I wanted to find out her trip to Hong Kong. What is the problem?

1. If you are Mr. Toledo, how would you respond?2. What are your views on using the company phone to make personal calls?3. What are your views on employees using company resources/ small items?

Case Study No. 4: The Dilemma at Affordable Homes Company



Affordable Homes company is in stiff competition for the dwindling amount of prime residential building land available near a fast-growing urban area. Although the law of supply and demand has drive house prices to astronomical heights, costs of building have kept rapid pace, and profit margins for Affordable Homes are narrow.

A thicket of local building regulations, environmental impact reports, developer fees and permits complicate the process, but they have also provided for special “arrangements” with two discreet municipal officials who will expedite transactions for an added gratuity. It is common practice with some of Affordable Homes’ competitors.

Affordable Homes’ President, Gene Aguila, has wrestled with the question of gratuities for some time. There is increasing legal risk in the situation. Also, Mr. Aguila has provided himself through the years for being totally honest. He is also an active member of the Knights of Columbus in his church and a lay minister. But now that competition has never been together, and Mr. Aguila is starting to suffer economically because his projects move slower than those of competitors.

Mr. Aguila calls in Robert, who has responsibility for obtaining the necessary permits. We need to stay competitive, says Mr. Aguila, We’ve got nearly 300 people on the payroll, and that is lot of jobs to lose if we cannot compete. See who you can talk to, Robert. I don’t care what you need to do to get the permits approved... just do it.

Guide Questions to answer using the standard format of Case Analysis:

1. What is the present situation of the case? Give the highlights of the case.2. Provide a competitive analysis on the situation. 3. What actions are demanded? Specify all actions required.4. What ethical issues are visible on this case?5. How would you solve the problem of the Affordable Homes company?6. How do you think Robert should respond? Cite all the possible responses of

Robert.7. How should Gene act and react to the problem? Cite all the possible reactions of

Gene.8. What solutions can you think for this case?9. What advise can you give to both Robert and Gene.10. What should Affordable Homes do in order to avoid encountering same problem

in the future?

Case Study No. 5: Taking Other People’s Credit



Mr. Adan, a supermarket Manager, asks Henry to submit a report which is to include a background analysis of some data, and recommendations based on the interpretation of that data. Mr. Adan asks Henry to get the report together within two weeks. Off Henry goes. He delegates the research, analysis, and report writing to one of his subordinates, Rhoda, who completes the work in ten days and gives the report to Henry. Henry takes Rhoda’s work, reads it, is satisfied with the content, retypes the cover page to show his name, not Rhoda’s, and then submits it to Mr. Adan as if it were his own work. He accepts praise and gives no credit to Rhoda, who, in fact, did the research and wrote the report.

Class Discussion: What is your reaction to not being given acknowledgment for work that you have done and then seeing someone else being praised for it?

The Norm of Morality (Characteristics)

1. Norms are purely internal. Internal norms, such as conscience, make sense only if they are based on something outside of us as individuals, which can rightfully lay total claim to us.

2. Norm based on current opinions and customs. “Everybody is doing thus it is right,” but right is still right no matter how many people are wrong. (Ex: annulment; Marriage of the same gender; Pre-Marital Sex; Graft and Corruption; formal and liberal courtship; drugs and abuses; etc.)

3. Norm of expediency. Other people regulate their actions in accordance with what is useful at the moment rather than what is objectively right or wrong. (Case No. 4 – bribing two municipal officials to facilitate speedy registration)

4. Norm of preference. There are others who act in accordance with what is desirable, what one “prefers” doing rather than what is right or wrong. (Ex: Tax collection is most often done with fraud – friends and relatives are computed less taxes; other sales and incomes are not declared so as to avoid taxes)

5. Situation ethics. There are no standards for human activity; we must always act in what we perceive to be right, by letting the situation speak to us. We must always do what we feel is right for us. Discretion and proper judgment of the situation makes the situation itself a valid basis of next actions.

6. Evaluation. Ethics and morality is not a matter of current opinions or actions of the majority. Proper evaluation of the “potential action” will guide to ethics.

Moral and Nonmoral Standards



Some actions are contrary to “normally-accepted” acts are oftenly considered nonmoral provided they do not pose a serious threat to human well-being:

1. Wearing shorts to formal gatherings is an “unacceptable” gesture2. Murdering the british-english with the commonly used “Tag-Lish”3. Photographing the finish of a high-speed race with a low-speed camera4. Wearing red-colored clothing or garments during funerals5. Whistling during night-times6. Pointing at the rainbow7. Playing music or singing during bereavement

But the violation does not pose a serious threat to human well-being.

Characteristics of Moral Standards

1. They concern behaviour that can be of serious consequence to human welfare

2. Their validity depends on the adequacy of the reasons that support or justify them

Morality and Etiquette

Etiquette refers to any special code of behaviour or courtesy.Etiquette refers to what is “socially appropriate.”

Examples:

1. Eating using one’s fingers during formal dinner or fine-dining (no etiquette)2. Saying “please” or “thank you” (good etiquette)3. Giving a knife with the sharp-point facing the other person (no etiquette)4. Carrying one’s elbows on the table while eating (bad etiquette)5. Cleaning one’s nostrils in public (bad etiquette)6. Chewing food with your mouth open7. Assisting ladies in going in and out of the door8. Whistling to ladies9. Observing proper telephone manners10. Communication etiquette (when to talk and when to listen, maintaining eye

contact)11. Responding to invitations (RSVP)12. Formal greetings to strangers

Morality and Law

Law can be defined as follows:



1. A rule of conduct or procedure established by custom, agreement, or authority.

2. The body of rules and principles governing the affairs of a community and enforced by a political authority.

3. The condition of social order and justice created by adherence to such a system.

4. A set of rules or principles dealing with a specific area of a legal system.

5. The system of judicial administration giving effect to the laws of a community.

C Statutes are laws enacted by legislative bodies.C Ordinances are laws enacted by local governing bodies like city councils.C Common Law refers to laws applied in the English-speaking world before

there were any statutes.C Constitutional Law refers to court rulings on any law.

Relationship between Law and Morality:

In theory and practice, law codifies customs, ideals, beliefs, and a society’s outlooks, its views of right and wrong, good and bad. But it is a mistake to view law as sufficiently establishing the moral standards on an individual, a profession, an organization, or society. Law simply cannot cover the variety of individual and group conduct.

Although useful in alerting us to moral issues and informing us of our rights and responsibilities, law cannot be taken as an adequate standard of ethical or moral conduct. Conformity with law is neither requisite nor sufficient for determining moral behaviour, any more than conformity with law is not necessarily immoral, for the law disobeyed may be unjust.

Chapter 3: RESPONSIBILITIES OF THE CORPORATION

Case Study No. 6: Building a Dam



A dam was proposed to be built on a certain river in a natural setting that would produce hydroelectric power and create recreational activities, such as boating, swimming and water-skiing. The only problem, as environmentalist see it, is that there is a certain species of small fish found only in this river that will become extinct if the dam is built. The fish is not used for food or sport; in fact, no one knows what purpose it serves by being in the river. Should the dam be built or not? Why or why not? Would it make a difference to your answer if the small fish were a good food fish or could it be used in some other commercial way, or is its extinction sufficient reason not to build the dam? Explain your answer in detail.

A. The Purpose of Business Firm

Two Points of Views relating to the firm’s purpose:

1. Social Point of View. The firm exists to supply goods and services to consumers as efficiently as possible.

2. Individual Point of View. The firm exists to supply income, power, prestige, creative satisfaction, or a combination of these to work for it or with it.

“The manager must reconcile claims and“The manager must reconcile claims and harmonize means harmonize means

so that all legitimate goals are obtained byso that all legitimate goals are obtained by ethical means.”ethical means.”

B. Ethical Considerations in Transactions with Employees

1. Identifying ethical concerns in employee transactions.

a Selecting new employees h Terminating employee services

b Awarding merit increases i Communicating c Setting goals and performance

standardsj Supporting employee ideas

and effortsd Evaluating performance k Delegating worke Giving performance feedback l Arranging, training and dev’t

opportunitiesf Disciplining m Providing health, safe working



conditionsg Selecting personnel for

promotionn Granting time off with or

without pay2. Hiring

Employers generally hire people who will maximize the efficiency of the firm, which is an organizational ideal. In meeting this obligation, employers must be careful to honor the moral ideal of treatment of employees.

2.1 Screening. When done properly, screening ensures a competent pool of candidates and guarantees that everyone is dealt with fairly. But when screening is done improperly, it undermines effective recruitment and invites injustices into the hiring process.

2.2 Tests. Tests are generally designed to measure the applicant’s verbal, quantitative, and logical skills.

Aptitude Tests help determine job suitability Skill Tests measure the applicant’s proficiency in specific areas such as

typing and shorthand. Personality Tests help determine the applicant’s maturity and sociability Dexterity Tests help to determine how nimbly applicants can use their

hand and fingers.

2.3 Interviews. When ethical issues arise in interviewing, they almost always relate to the manner in which the interview was conducted. The literature of personnel management rightly cautions against rudeness, coarseness, hostility, and condescension in interviewing job applicants. In guarding these qualities, personnel managers would do well to focus on the humanity of the individuals who sit across the desk from them, mindful of the very human need that has brought those people into the office.

3. Promotions

One essential criterion that applies to hiring also applies in promotion: job qualification. The “other” factors involved in this process are:

a) How long have you been with the firm?b) How well are you liked?c) Whom you know?d) When were you last promoted?



To highlight ethical issues in promotion, the following factors serve as bases for promotion:

3.1 Seniority. It refers to the longevity on a job or with a firm. Frequently, job transfers or promotions are made strictly on the basis of seniority; individuals with the most longevity automatically receive the promotion.

“A policy that provides for promotions strictlyon the basis of qualifications seems heartless,

whereas the ones that promotes seniority alone seems mindless”...

3.2 Inbreeding. It is the practice of promoting exclusively from within the firm. In theory, whenever managers must fill positions, they should look only to competence. The most competent, whether within or without the firm, should receive the position. In this way, responsibilities to owners are best served.

3.3 Nepotism. It is the practice of showing favouritism to relatives and close friends. For instance, when a firm is strictly a family corporation and has its purpose providing work for family members, nepotistic practices are generally justified. But, even if relatives and/or close friends qualify the position, responsible management must also consider the impact of nepotistic hiring:

Will the selection breed resentment and jealousy among other employees? Will it discourage qualified outsiders from seeking employment with the firm? Will it create problems in future placement, scheduling, or dismissal of the

relation? Will it make the relation an object of distrust and hostility within the

organization?

4. Discipline and Discharge. Personnel departments establish guidelines for behaviour based on such factors as appearance, punctuality, dependability, efficiency, and cooperation. Discharge should go through 3 processes: reprimand, suspension, termination.

Ethical approaches to maintaining discipline:

a. Make sure your people know the standards of the performance desiredb. Teach them how to maintain standardsc. Encourage them as they progress in the direction desired



Disciplinary Guidelines (Rating Sheet):

CRITERIA 5 4 3 2 11. I determine whether or not the employee has been warned and

understands the consequences of such conduct.2. I assure myself that the order or rule violated is reasonably

related to safe, ethical, legal or efficient operations.3. I make sure disciplinary action is not taken until a complete

investigation has been completed.4. I make every effort to assure that the investigation is fair,

objective and includes the employee’s input.5. I analyze the evidence carefully to determine whether or not it

provides substantial proof of guilt.6. I check to see if the rules or orders violated have been

consistently enforce in the past.7. I make sure that penalty is reasonably related to the seriousness

of the offense, and it applied even-handedly and without discrimination.

TOTAL SCORE

Instructions:

1. Add and the total your score: _______________________________2. If you scored 28 or above, you seem to be on target in administering discipline.

If you scored between 21 and 27, you have the right idea but need to work harder in those areas where your score is 3 or lower. If you scored under 21, you need to re-examine your approach to discipline and seek appropriate training.

5. Wages. From the ethical point of view, it is very easy to say that firms should pay a fair and just wage, BUT WHAT CONSTITUTES SUCH A WAGE?

Variables involved in setting wage rates and establishing salaries:

1. The employee’s contributions to the firm2. The market for labor and products3. The competitive position of the company4. The creative power of the firm and its union5. Seasonal fluctuations



6. Employee’s individual needs

Fair Wage is one that significantly help individuals satisfy their basic needs.

Ethical Guidelines in Setting Wage System:

1. What is the prevailing wage in the industry? The salaries of similar positions in the industry can provide some direction for arriving at a fair wage.

2. What is the community wage level? Highly urbanized cities have higher rates than in the countryside.

3. What is the nature of the job itself? Some jobs require more training, experience, education; some are physically or emotionally demanding; some are downright dangerous; risky or unskilled jobs often attract the least educated and most desperate for work.

4. Is the job secure? Compensation could take the form of higher pay, fringe benefits, or a sensible distribution of the two. On the other hand, guarantees of job security are grounds for wage compromises by labor.

5. What are the employer’s financial capabilities? What can the organization afford to pay? Can it afford wages higher than the minimum wage?

6. What is the law? The law requires that businesses pay at least the minimum wage.

Non-Agriculture P 456.00Agriculture (Plantation & Non-Plantation) 419.00Private Hospitals with bed capacity of 100 or less 419.00Retail/ Service Establishments regularly employing 15 workers or less 419.00Manufacturing Establishments regularly employing less than 10 workers 419.00

Ethical Implications in Choosing Between People

Manager’s Bottlenecks in Choosing between People:

1. Am I biased toward an employee for any reason?2. Am I evaluating demonstrated skills bona fide against job requirements?3. Am I being overly influenced one way or the other by irrelevant or surface

characteristics?4. Am I being pushed in a direction not of my choice by someone else?5. Am I measuring all people against the same criteria?6. Is age or salary level influencing my thinking more than it should?



7. Am I really analyzing the important elements of this transaction or am I simply following a past practice that should be tested?

8. Would I be willing to have my decision criteria applied to me under similar circumstances?

Ethics and Performance Appraisal

Business managers sometimes resist doing performance appraisal on the grounds they do not want to be judge and jury with respect to an employee’s career. Some feel positive feedback will cause employees to let down. Other think that negative feedback is demoralizing, demeaning, and perhaps unethical, so they often give employees better performance appraisals than they deserve.

Managers who follow correct performance evaluation and feedback procedures create an environment in which there are no surprises, and employees have the opportunity to correct deficiencies and grow.

Case Study No. 7: The Dance on the Lemons

When Romeo Mendoza joined the Swerte Corporation, he sat down with Elsa Cruz, the senior executive to whom he reported, to learn the goals of the organization, and to find out as specifically as possible what was expected of him. As the discussion progressed, Romero became increasingly ill at ease. Miss Cruz seemed reluctant to talk in specifics, and avoided sharing confidential information pertinent to Romeo’s position.

As the discussion progressed and Romeo’s frustration grew, he asked Miss Cruz about the new assignment his predecessor had been given. “Oh,” Miss Cruz said with a sly grin, “he has joined the Dance of the Lemons.” “What do you mean?” asked Romeo. “Well,” said Miss Cruz, “he was not performing effectively, so we moved him to another assignment.” “Will he do better there?” asked Romeo. “Who knows?” said Miss Cruz “but at least he is out of my hair.”

“Was there any particular reason why you assigned him to another position, rather than terminate him?” Romeo asked. “Oh, we seldom terminate senior employees, we just move them around the organization hoping we will find a place they will fit in. All of us know these moves happen – we call it Dance of the Lemons.”

Sixty days later, after having located another position, Romeo Mendoza resigned.

1. Why do you think Romeo resigned?2. What would you have done under similar circumstances?



3. Does this case involve managerial ethics? Why or why not?

Improve Your Ethical Batting Average

You can be successful at performance appraisal and have a clear conscience, or be a miserable failure filled with doubt and remorse. Below are the factors that make the difference:

No. SUCCESSFUL APPRAISERS MISERABLE FAILURES

1. Leaders who engage in mutual goal-setting and open communication.

Those who establish arbitrary, unilateral performance goals or standards. They may or may not communicate them to employees.

2. Leaders who establish clear, measurable expectations and provide a climate conducive to success.

Those who have not though through what they expect or don’t know how to measure success, thereby creating a threatening atmosphere in which to work.

3. Leaders who ask questions, listen carefully, and appreciate and use the ideas of others.

Those who never seek the ideas of others or listen, yet have a solution for everyone else’s problems.

4. Leaders who publicly recognize positive performance, and privately correct improper performance when it occurs.

Those who spend too much time looking for things that are wrong and too little time looking for things that are right.

5. Leaders who give honest feedback on performance against mutually understood goals.

Those who accept substandard performance or misrepresent it in providing feedback.

6. Leaders who follow through on their commitments

Those who do not take their commitments seriously.

An ethical appraisal is a fair and honest assessment ofAn ethical appraisal is a fair and honest assessment of performance performance

against mutually established and understood goals and standards against mutually established and understood goals and standards



that leave both parties feeling that have gained something.that leave both parties feeling that have gained something.

Ethics and Communication with Employees

When employees discuss how trust is built in work groups, they stress the importance of open and honest communication. They refer to this kind of communication as leveling, or telling it like it is.

Managers wanting to be fairer and open in their communication should ask themselves the following questions frequently:

1. What do employees working for me need to know?2. What do employee working for me want to know?3. How do I provide it?4. When do I get someone else to provide it?

Most people “listen” by interpreting and judging what the other person says and them preparing responses or thinking about something else. This behaviour is unconscious, but it obstructs the ability of the other side to be able to reach him.

Administering Reward Systems

Incentive systems are designed to reward people on the basis of performance and their overall contribution to the organization. Managers must be honest. They must understand the work being performed and be able to differentiate clearly between levels of performance by individuals. They must also have some personal convictions about what is right and wrong, as well as the courage to stand behind their decisions.

Guidelines for Ethical Administration of Reward System: When I administer rewards systems:

CRITERIA1. I lay ground work by ensuring there is mutual understanding

about what is expected in terms of performance.5 4 3 2 1

2. I update job descriptions as changes occur and insist that the salary grade of employees remain appropriate to their positions.

5 4 3 2 1

3. I consistently monitor performance against expectations and give all employees appropriate standards

5 4 3 2 1

4. I am alert for both superior and inferior performance as related to goals and standards.

5 4 3 2 1

5. I note and communicate to other employees efforts to development and increase their potential.

5 4 3 2 1

6. I refuse to let non-performance factors like friendship, race, religion, family background, sex, or age influence my decisions.

5 4 3 2 1

7. I test my decisions to be sure that are based on assumptions or impressions.

5 4 3 2 1



8. I make decisions on objective data and push aside any unwillingness to help my employees face reality.

5 4 3 2 1

9. When I observe other who are unethical in distributing awards, I resist the same impulse in myself.

5 4 3 2 1

10.I strive to maintain equity between employees and am prepared to justify with facts my decisions to anyone.

5 4 3 2 1

TOTAL SCORE

Note: A score below 40 suggests you need to do some hard work to improve the ethical administration of your reward system.


classroom notes_business ethics

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