Video: Lesson 5 – Business Ethics

Description:

Business ethics are moral standards that govern professional conduct. As an entrepreneur or employee, there will be times in your career when you face a difficult decision that requires you to do the right thing. Maintaining ethical business practices promotes good reputation and builds trust. It also builds esteem and encourages efficient and effective productivity.

In this lesson students will watch a video on business ethics. Then they will read and discuss an article on the importance of business ethics in a free economy. Students will read practice decision-making in the “What Would You Do? Activity. Finally, students will read an article for Self-Study titled “Lessons from an Entrepreneur” by David Laband.

 

Time Required:

45 min

 

Required Materials:

Internet connection, writing instrument 

 

Prerequisites:         

Lesson 7.3 – Markets and Morality

Lesson 7.4 – Individualism & Civil Society

 

7.5.A – Watch and discuss the following video using the questions below to guide your discussion [10 min]:

Video:(Human Relations Media, 2:25 min)

Students will watch a video and answer the following questions: The word “ethics” originates from the Greek word “ethos” meaning “character.” Many times ethics and morals are used interchangeably, however, ethics is a broader term describing external (societal) rights and wrongs- while morals are internal, personal values. We all face difficult decisions in our careers and it’s important to make the right ones as that determines the type of people we will become.

Discussion Questions: Business Ethics on the Job

1.  What is an ethical compass?

1. An ethical compass is knowing what is right and wrong and doing the right thing both in your personal life as well as in business.

 

2.  Why is business ethics important?

1. Having good business ethics helps build esteem, encourages productivity that is efficient and effective, and builds your reputation as a trustworthy employee.

 

3.  What are some ramifications of having bad business ethics?

1. First of all, making the wrong decisions is immoral and can negatively influence a person’s self-worth and overall happiness.
2. An employee may be fired from a job for making unethical decisions. It can look bad upon the employee as well as the company. In addition, there can be legal ramifications including fines and jail time.

7.5.B – Read and discuss the following article using the questions below to guide your discussion [25 min]:

Article: The Importance of Being Ethical (Inc.com)

“Companies with strong ethics programs have found that these efforts can reduce potential costly fines, decrease vulnerability, improve reputation, provide access to capital, favorably influence their bottom line, positively affect their employees' commitment to work and enhance customer loyalty.”

Discussion Questions: The Importance of Being Ethical

1.  What are some of the main benefits of an ethical business?

1. Potential avoidance of fines – businesses with strong ethical initiatives are less likely to be fined from not complying with laws
2. Decreased vulnerability – businesses with clearly defined ethics decrease the risk of negatively affecting brand image, management and profitability when they expand their business
3. Improved brand image and reputation – ethics can encourage positive media attention and recognition through business awards
4. Access to capital – studies show businesses with strong ethics have greater access to capital
5. Financial performance – businesses that have strong ethics perform better financially
6. Employee commitment – employees who believe in the ethical values of their employers work more productively and are more committed to their employer
7. Customer loyalty – studies show that ethics are one of the most influential business categories or activities 

 

2.  Research some companies that have strong ethics. What issues do they support? How successful are they?

1. Whole Foods – supermarket with stores through the US, Canada and Europe. Core values include: promoting health through healthy eating education, creating ongoing win-win partnerships with suppliers, practice and advance environmental stewardship, serve and support local and global communities, create wealth through profits and growth, support team members, satisfy customers and sell high quality and natural organic products. 
2. Body Shop – beauty products available for purchase online and in various countries worldwide. Values include: defending human rights, promoting education in war-torn areas, animal welfare, activating self-esteem, protecting the planet and raising awareness for health issues.
3. Unilever – Comprises of over 400 brands of products that relate to health and wellbeing. Core values include: sustainable living, embedding sustainability, own governance, reporting progress, engaging with stakeholders, public policy and advocacy and responding to stakeholder concerns. 

7.5.C – Students will decide how they would handle the following “real life” situations [10 min]:

Activity: What Would You Do?

Read the following three scenarios and consider the best action to take. Be prepared to share your decisions and actions with the class:

1. You are in the middle of a big end-of-year history test and notice that your best friend sitting next to you is struggling. As the teacher turns around, your friend points to a question and asks if the answer is True or False. He knows you’re a history wizard and really needs a good grade in order to pass the course. What would you do?

 

1. You are interning for the summer at a university research laboratory which is being sponsored by one of the big pharmaceutical companies (let’s call it PharmX). One afternoon you see a good friend steal a piece of lab equipment for a personal project she is working on. On one hand, you know that stealing is wrong. On the other hand, you know that PharmX is a big corporation that has billions of dollars. They probably would not even know the piece of equipment is missing. What would you do?    

 

1. You are an entrepreneur making ice pops. One day you discover that there is mold on your latest inventory of strawberries. You would lose about $100 if you dispose of the molded fruit. On the other hand, if you blend the strawberries to make your ice pops, there is a good chance nobody would notice the mold. Perhaps freezing the ice pops will kill the mold. Maybe no one would get sick. Do you really want to throw away $100? What would you do?

7.5.D Self-Study – Read the following article and answer the questions below. Be prepared to share your answers with the class  [20 min]:

Article:  Lessons from an Entrepreneur by David Laband (FEE.org)

“Businesses that lose their competitive edge to a more efficient rival have three options. They can: (1) change their product/service mix to reflect more accurately what they do best, (2) exit the market, or (3) petition consumers and/or the state for protection against “unfair competition.” The first two responses enhance consumer welfare. To the extent consumers voluntarily purchase more expensive, lower-quality goods produced by domestic manufacturers, no self-respecting economist would argue with their choices: de gustibus non est disputandum. However, the instant the state regulates to protect domestic firms from “unfair competition,” the result is higher prices, reduced choice, and lower quality and service for American consumers.”

Discussion Questions:  Lessons from an Entrepreneur

1.  When Walmart came into the American market who was ultimately responsible for the many smaller companies that went out of business?

1. The author states: “Every dollar spent at Walmart was a figurative dollar and a quarter not spent for similar merchandise at Sears, K-Mart, J.C Penney, or any of the other large chain department stores. Perhaps more importantly, it was a dollar and fifty cents not spent at local, small businesses, they argued. Some owners of small businesses, unable to take advantage of Walmart’s economies of scale, sought to prevent Walmart from being built in their local communities. The everyday low-price strategy employed by Walmart would put them out of business, they argued. They were (and continue to be) half correct. It is true that Walmart’s competitors lost business. However, let’s get the cause and effect straight: Walmart never put anybody out of business, American consumers did.”
2. The author shows that Walmart didn’t put smaller less competitive businesses out of business, the American consumers who stopped shopping at these places and starting shopping at Walmart did.

 

2.  Should businesses have protection against bigger or overseas competitors?

1. Walmart gained more customers because it was better able to meet customers wants – it featured lower prices, good service and better quality brands in comparison to other similar chain stores
2. The author explains that having competition in the market forces businesses to keep prices low, and continuously find new ways to be more productive and better service consumers. Consumers always benefit from increased competition in the market, regardless of whether the competitors are domestic or overseas businesses
3. Imposing protectionist policies against bigger or overseas competitors would mean that everyone loses – all consumers would have to pay in the form of increased taxes to fund the domestic businesses subsidies & they would have to pay higher prices for goods as well as having a smaller range of goods and services.

Lesson Recap

• Companies with strong ethics programs have found that these efforts can reduce potential costly fines, decrease vulnerability, improve reputation, provide access to capital, favorably influence their bottom line, positively affect their employees' commitment to work and enhance customer loyalty.

 

• Ethical business practices ensure a good reputation & long term relationship with customers. It also builds trust among business associates and suppliers.

 

• Having good business ethics helps build esteem, encourages productivity that is efficient and effective, and builds your reputation as a trustworthy employee.

 

 

Additional Resources

Podcast: Sam Altman on Start-Ups, Venture Capital, and the Y Combinator  (EconTalk, 1:05:41 min)

“Sam Altman, president of start-up accelerating firm Y Combinator, talks to EconTalk host Russ Roberts about Y Combinator’s innovative strategy for discovering, funding and coaching groundbreaking startups, what the company looks for in potential startups and Silicon Valley’s attitude toward entrenched firms. The two also discuss Altman’s thoughts on sectors of the economy that are ripe for innovation and how new firms are revolutionizing operations in these industries”

 

Article: Ethical Behavior is Good Business (entre-ed.org)

“Ethical business practices include assuring that the highest legal and moral standards are observed in your relationships with the people in your business community. The day-to-day operations of a business require everyone to make decisions all the time. Practice in developing a code of ethics and then applying it to situations is important to establishing an ethical business image.”