Ethical Employees:

Moral Choices Facing

Employees
Lecture 04
 Obligations to the firm

Some concerned
Abuse of employee behaviour:
official position

Bribes & kickbacks 回扣

Gifts & entertainment

Workplace violence
Obligations to the Firm (1)
 Loyalty to the firm: The employment contract
governs employer-employee relationships and
provides a framework for respective obligations of
employer and employee.
 Employees expect:

Reciprocity
互惠互换
 Obligations to the Firm (2)
 Conflicts of interest arise when employees have a
personal connection to a transaction – one
substantial enough that it might affect their
judgment or lead them to act against the interests
of the organization.
 Financial investments in suppliers, customers, or
distributors with whom their organizations do
business
 Co spell out the limits
 Report financial investments

https://www.youtube.com/watch?v=auePL3pYRb0 https://www.youtube.com/watch?v=UH5r3EoM9cc
Conflict of interest Ethics Illustrated: How to Avoid Conflicts of Interest
Abuse of Official Position (1)
 Using one’s official position for personal gain is
likely to violate one’s obligations to the
organization.

 Example: Using corporate funds for private

purposes such health club memberships,
extravagant parties, vacation travel, ordering
products/supplies from a company you or your
relatives own ……etc…….
 Abuse of Official Position (2)
 Insider trading: The buying or selling of stocks on the
basis of nonpublic information that is likely to affect
their price.
 Defenders of insider trading say ………
https://www.youtube.com/watch?v=2BtawLeS5fM
What Is Insider Trading And Why Is It Illegal?
 Even though you are an outsider
 Insiders and “Misappropriation”: Those people who trade on
confidential information, but are not traditional company
insiders, are still guilty of insider trading if they have
“misappropriated” sensitive information. 内幕交易罪
Abuse of Official Position (3)
 Critics of insider trading argue
that:
(a) It is unfair.

(b) It can injure other investors.

(c) It undermines public

confidence in the stock market.
Abuse of Official Position (4)

They put their

own interests
before those of
the company and
its shareholders
 Abuse of Official Position (5)
专有数据
 Proprietary data: Companies zealously guard
information that may affect competitive standing.
 Patented or copyrighted information:
 Novel information that it is legally protected but not secret –
others may access it but are forbidden to use it (without
permission) for the life of the patent or copyright.
 Without patent, no co would like to invest in R&D  no
innovation
https://www.youtube.com/watch?v=wMctmMin9vM
 Trade secrets: Secret Formula of Coca-Cola | National

 Any information that is not generally known, is valuable to its

possessor, and is treated confidentially.
 Formula, pattern, device or information.
Abuse of Official Position (6)
 There are at least three arguments for legally
protecting trade secrets:
(1) Trade secrets are the intellectual property of
the company.
(2) The theft of trade secrets represents unfair
competition.
(3) Employees who disclose trade secrets violate
the confidentiality owed to their employers.
Abuse of Official Position (7)
 Employees who join a competitor: An especially
troublesome problem for high-tech firms, where
employees are often privy to sensitive information
and are also prone to job-hopping.
 Complaints of Some MNCs in China
 Two factors conspire to make this a morally
complicated problem:
(1) Individual’s right to seek new employment.
(2) Difficulty of separating trade secrets from the
technical know-how, experience, and skills that
comprise the employee’s own intellect and talents.
Bribes and Kickbacks (1)
 Bribe: a remuneration for the performance of an
act that is inconsistent with the work contract or
the nature of assigned task – can be money,
entertainment, gifts, or preferential treatment.
 Mr. Lai ChangXing involved in importing/smuggling
of cars, cigarettes and oil…. One of his properties was
decorated like a palace where he invited a lot of
govern’t officials……
 Kickback: a form of bribery that involves a
percentage payment to a person who is able to
influence or control a source of income.
 Bribes and Kickbacks (2)
 The Foreign Corrupt Practices Act (FCPA) of 1977
made it illegal for American companies to engage in
bribery overseas. How about if your competitors
from South Africa do not have
this act (policy) in their country?

 Stiff fines and prison sentences for corporate officials

engaging in bribery overseas.
 Corporations are required to establish strict
accounting and auditing controls to guard against the
creation of slush funds from which bribes can be paid.
Gifts and Entertainment (1)
 Gifts and entertainment are familiar in business
practices and customer relations worldwide.
 But they can raise conflict-of-interest problems and
can border on bribery.
 Knowing where to draw the line is not always easy.
 Rules on entertainment are not as straight & direct
as gifts. But entertainment can serve the same
purpose as gifts.
 GSK, a pharmaceutical co, bribed doctors in China by
providing entertainment, e.g., trip
The value of the gift (or entertainment).

Gifts and Entertainment (2)

Its purpose (intention).

Seven factors that a conscientious

The circumstances under which it is given.
businessperson should consider:
The position & sensitivity to influence of the person receiving the gift.

Accepted business practices in the industry.

Company policy.

What the law says.

 Whistle-Blowing 举报 (1)

 An employee’s informing the public about the

illegal or immoral behavior of an employer or an
organization.

https://www.youtube.com/watch?v=QlSAiI3xMh4 https://www.youtube.com/watch?v=8qtAv9RpJdc
Snowden | Official Trailer Top 10 Whistleblowers in History
Unnecessary Violate human
Whistle-Blowing (2)
harm rights
Illegal

 The behaviour & activities of the company can:

Against the
defined purpose Immoral
of the org
Whistle-Blowing (3)

 “Whistle-blowing is the voluntary release of

nonpublic info, as a moral protest, by a member or
former member of an org outside the normal
channels of communication to an appropriate
audience about illegal &/or immoral conduct in the
org or conduct in the org that is opposed in some
significant way to the public interest.”
Whistle-Blowing (4)
 Not restricted to external… can be internal
whistle-blowing…
 What motivates whistle-blowers?

Public Professional
interest responsibility

https://www.fastcompany.com/65027/jeffrey-wigand-whistle-blowe
r
Jeffrey Wgand
Whistle-Blowing (5)

 When is it justified? Norman Bowie says it is

morally justified if and only if the whistle-blower:
(1) Is operating from an appropriate moral motive.
(2) Has exhausted all internal channels for dissent before
going public.
(3) Has found compelling evidence of wrongdoing.
(4) Has carefully analyzed the dangers.
(5) Has some chance of success
Whistle-Blowing (6)
 Prudential considerations 谨慎的考虑 based on self-
interest can conflict with moral considerations, which
take into account the interests of others.
 Possible consequences of being a whistle-blower?
 They pull in two different directions.
Whistle-Blowing (7)
 Some people suggested:
 If prudential concerns outweigh moral ones, then
employees may do what is in their own best
interest.
 If moral reasons override prudential ones, then
workers should honour their obligations to others.
 Other theorists say:
 Morality does not require us to make large
sacrifices to right small wrongs.
Whistle-Blowing (8)

 Some laws to protect whistle-blowers

 Sarbanes-Oxley Act of 2002
 Protect who report possible securities fraud
 Co is unlawful to discharge, demote, suspend, threaten,
harass, or in any other manner discriminate against blowers
 Fired workers can sue the co. They are guaranteed the right
to a jury trial instead of having to endure months or yrs of
administrative hearings.
 The Labour Dept can order co to rehire terminated blowers.
 Executives retaliate against whistle blowers face
imprisonment for up to 10 years.
Four important
Written conduct elements in
Ethics training
standards
ethics programs of companies
 A survey with 1500 participants
Systems for
anonymous
Ethics advice/lines
reporting of
wrongdoing