Identifying Ethical and Legal Issues

Published July 8, 2013 by Mayrbear's Lair

decision-making (1)

Resolving ethical business challenges is not a topic many leaders are anxious to address. However, to stay successful in a competitive business market, leaders are required to make decisions as best as they can. One of the most sensitive issues leaders deal with are trade secrets and the complex set of problems they present with respect to the rights and obligations of personnel and their competitors. Boatright (2009) defined trade secrets as information that is used in the conduct of the business that outsiders do not have access to.  It consists of formulas, patterns, devices or a combination of information that is used in a business operation to give a company the competitive edge in the marketplace (Boatright, 2009).  An example of trade secrets may include ingredients to recipes like Mrs. Field’s Cookies, chemical compositions of products, the schematics and design of machines, details of the manufacturing of products like iPhones, the methods of quality control, results of marketing surveys, financial projections and lists of customer and suppliers.

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Ethical misconduct is common in the brokerage and financial industries because of the large amounts of money are exchanged. Wall Wall Street after all pays attention to corporations that yield high returns. Managers want to impress their family and friends and work hard to achieve high levels of success and affluence. Most are highly educated and well trained. They develop work ethic and patterns from colleagues and peers who achieved higher levels of success. Unfortunately, they do not always engage in ethical tactics to achieve their goals. But, because that is how everyone else conducts business affairs, most new employees follow suit. Unethical conduct is observed by new recruits. They learn the ropes from other high achieving brokers that purport this is how it is done in a competitive market.  New hires gather and use information to achieve higher levels profit and in doing so, cross many ethical boundaries. In this atmosphere, it is easier to go with the flow rather than stand up and go against it which could cause an employee to lose their positions and high status. In a relentless pursuit to achieve respect and success in a firm, in the community, and with their family, who look up to these successful executives, many top managers make unethical choices like using insider information to help favored clients and themselves for reasons of personal gain, because that is what the organizational culture established. The behavior was learned and expected from the peer pressure of succeeding like their colleagues.

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The longer people engage in unethical behavior the sloppier they get and begin to make mistakes they are unable to disguise or cover up. Ferrel et al. (2013) cite one case study of an executive that was engaged in unethical behavior. The case cited an executive that was copied on an email which contained inappropriate language that violated organizational policy. When the rude emails began to surface, rather than address the bad behavior, the executive chose to ignore them and forward them. By this time, in the executive’s career, the leader may have been so accustomed to an imbalance of ethics she no longer had a grip on what was considered ethical conduct. By forwarding the emails that contained rude content, she was considered a participant. Because this behavior left a paper trail that could be traced, it required disciplinary action from all those who engaged. This eventually led to her termination because of further investigations of her other business affairs. She was spotlighted. Evidence uncovered other unethical behavior and questionable business practices she engaged in that she learned from fellow co-workers. In addition, the investigation revealed she used insider information to favor certain customers to yield higher profits and returns. When people are engaged in unethical practices and make one mistake, that mistake shines a light in their direction and usually leads to further probing. That is how ENRON and other corporate scandals were revealed. Once a few unethical practices become evident, investigators intervene and discover more evidence of additional ethical misconduct that can ultimately bring the entire conglomerate down. Ferrel et al. remind us that people are likely to make ethical decisions when they discover the ethical component of an issue. They suggested that the initial stage of understanding business ethics is to develop ethical issue awareness (Ferrell, Fraedrich, & Ferrell, 2013).  Any type of misrepresentation, manipulation, or an indication of the absence of transparency in the decision making process has the potential to bring harm to others. When people covertly engage in fraudulent, illegal, or deceitful behavior it suggests a strategic plan that is meant to represent only a fragment of the truth. That kind of behavior lacks honesty and truth. Without honesty and truth, there is no trust and most people will not support businesses or leaders that are not trustworthy.

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References:

Boatright, J. (2009). Ethics and the Conduct of Business (Sixth ed.). Upper Saddle River, NJ: Pearson Education, Inc.

Ferrell, Fraedrich, & Ferrell. (2013). Business ethics and social responsibility (9th ed.). Mason, OH: Cengage Learning.

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