The main skill is spotting which part of the topic a scenario is testing before you read the answer choices.
The key ideas
How unethical behavior happens
Unethical behavior can happen at any level, from a front-line employee to a senior executive. The course gives examples: falsifying or hiding information, misusing company property, and harming employees or customers.
Incentive structures make it more likely. A bonus, quota, or commission tied to a number can push people to chase the number in ways that break the rules.
In 2016, Wells Fargo faced penalties after it emerged that employees had opened accounts customers never asked for while chasing aggressive sales goals. Hitting the number mattered more than following the rule.
How businesses encourage ethical behavior
Four tools help: a written code, training, consequences for breaking the rules, and bosses who set the example.
Ethics also pays. Ethical practices can attract customers and employees and build brand loyalty. How a company responds to wrongdoing affects its relationships, its public image, and its profit.
A restaurant group puts its food safety rules in a written code, trains every new hire, suspends managers who skip checks, and has the owner follow the same checklist she hands her staff. In 1982, Johnson & Johnson pulled Tylenol capsules from shelves nationwide after tampering killed seven people, even though the company was not at fault, and customers kept trusting the brand.
Ethical dilemmas
An ethical dilemma exists when a core value, such as transparency, fairness, or empathy, clashes with another core value or with a business goal. No option satisfies everyone, so the answer is a trade-off.
Not every bad situation is a dilemma. If one choice is plainly wrong, it is just misconduct. A dilemma needs a real conflict.
A small clothing company learns that its cheapest factory pays lower wages than the company would like, though everything is legal. Switching suppliers would raise prices by about 20 percent and could cost customers. Fairness to workers clashes with the goal of keeping prices low.
Stakeholders, reputation, and culture
Leaders weigh how each option affects internal stakeholders, external stakeholders, the company's reputation, and its culture.
Internal stakeholders are directly involved in running the business: owners, managers, and employees. External stakeholders are not employed by it but still care about what it does: customers, government agencies, and community members. To sort people, ask whether they are directly involved in running the business.
Leaders can decide in two ways. They can pick the option that does the most good or least harm across everyone affected, or the option that best fits the company's vision and goals.
A software company finds a bug that exposed a few user emails. Employees worry about blame and workload, while affected users and regulators want to know what happened. The company discloses because its vision promises user trust.
Key terms
- Unethical behavior
- an action that violates accepted standards of right conduct, such as falsifying information, misusing company property, or harming others.
- Incentive structure
- a system of rewards such as bonuses, commissions, or quotas that motivates behavior.
- Code of conduct
- a business's written rules for acceptable and unacceptable employee behavior.
- Internal repercussions
- consequences a business applies to its own employees for ethical violations.
- Brand loyalty
- a customer's tendency to keep choosing the same business over competitors.
- Ethical dilemma
- a situation where a core value conflicts with another core value or with a business goal or practice.
- Internal stakeholder
- a person or group directly involved in running the business, such as an owner, manager, or employee.
- External stakeholder
- a person or group outside the business with a vested interest in its decisions, such as customers, regulators, or the community.
- Reputation
- how the public perceives a business based on its actions and decisions.
- Company culture
- the shared values and everyday norms that shape how people inside a business behave.