What are Business Ethics and What is Their Importance?

Business ethics are a matter of much debate. Every MBA entrant is taught the meaning of them, and yet many will never follow these guidelines in their real life careers. It has become a vast and complex field, and is the subject of much research. Business ethics encompass a large and significant portion of what it takes to do business today. Under the umbrella of business ethics comes:

• The social responsibility that a business is supposed to have towards the community in general, particularly the one in which it operates or has any interests. An example of this would be the Exxon Mobil oil spill. It is the responsibility of a business to protect the interests of the people, animals and environment where it uses resources. Due to improper handling of the issue, it became a public relations nightmare for the company. Exxon has now been ordered to clean up the area which it should have taken care not to damage in the first place. Indifference to business ethics in this case, caused a negative public image for the company and a huge lawsuit.

• Issues regarding a company’s responsibility towards its shareholders. This is a heavily regulated area but one that requires a lot of government intervention due to certain unethical practices adopted by many companies in the past. The concept of increasing shareholder value is part of the fundamental principles of a company and if business ethics are not brought into play here, the business can collapse due to the pressure exerted by shareholders.

• Inter-company dealings and negotiations. Often rivalries in business can turn ugly due to the amount of money and ego riding on them. Hostile takeovers and business espionage are some of the examples of unethical behavior within the business world. If discovered, these deeds can be punishable by law or simply public opinion. To allow for fair play and keeping the best interests of the consumers in mind, the government regulates a great deal of what goes on in company dealings. Microsoft has been the target of much abuse and outrage due to its allegedly monopolistic techniques of doing business. While this has not sunk the IT giant, many say that it may have long term repercussions. The government has also stepped in to make sure that other businesses and consumers are not harmed.

• Stakeholder protection. Every business has stakeholders other than its owners – the employees, the stockholders and the general public. The business has to ensure that the rights and interests of all of these groups are adequately protected in the course of its operations. The recent outcry about the harassment and bad working conditions of employees in Wal-Mart led to the generation of a lot of negative press about the outsized department store. This gives the competition the lead and rivals take the opportunity to get ahead while the company is busy trying to do some damage control.

• Fundamental business practices of a company. Underhanded dealings, the use of substandard products, spreading misinformation about the product, hiring illegal workers at lower than minimum wage, etc. prove that a business is run in an unethical way and that it is not a high quality work place or service provider. For instance, cigarette companies that spent most of the seventies telling people that it was not unhealthy to smoke, though they knew this to be untrue. In a recent judgment, one such company was forced to pay out $28 billion.

Idol: Songs that inspired them the most    Overall the night was somber yet heartfelt and moving. The show opened with the struggles that the impoverishment children in Africa face everyday. Simon Cowell and Ryan Seacrest traveled to Africa while Randy Jackson went to New Orleans. Paula Abdul went also to her neighborhood to see for herself the issues all countries face. The emotion of the night’s performances as Simon proclaimed was “sincere”, with each idol performing a song that inspired them in their lives. Each performance touched both the performer as well as the audience in a deeply moving way.   The show in partnership with major companies will raise an estimated 5 million dollars spread evenly over the impoverished areas of Africa. The devastation and hunger in Africa won’t go away over night, but with enough media attention, this Wednesday night another child in Africa will get the required nourishment to make it through another day. With every 10 cents of every call made during the voting period equaling a complete meal for a starving child in Africa; this will be the single largest charitable event in a long while. Tonight’s events will be a memorable one. Note: During the commercials I noticed another charitable organization which is also working on solving the poverty crisis, they can be found at www.one.org

Cobra Health Insurance Options For Small Business Owners

The Bureau of Labor Statistics of the U.S. Department of Labor recently reported that employment continued to fall sharply in February (-651,000), and the unemployment rate rose from 7.6 to 8.1 percent. Payroll employment has declined by 2.6 million in the past 4 months. In February, job losses were large and widespread across nearly all-major industry sectors. Are you or your spouse one of the 8.1% Are you worried about joining this group? If you own a small business or are thinking about starting that small business then you need to understand how COBRA can have a dramatic impact on your financial future. Here are 7 things you need to know right now!

1. What is COBRA continuation health coverage? Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. The law amends the Employee Retirement Income Security Act, the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.

2. What does COBRA do? COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves.

3. Who is entitled to benefits under COBRA? There are three elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

Qualifying Events for Employees:

Voluntary or involuntary termination of employment for reasons other than gross misconduct
Reduction in the number of hours of employment

Qualifying Events for Spouses:

Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
Reduction in the hours worked by the covered employee
Covered employee’s becoming entitled to Medicare
Divorce or legal separation of the covered employee
Death of the covered employee

Qualifying Events for Dependent Children:

Loss of dependent child status under the plan rules
Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
Reduction in the hours worked by the covered employee
Covered employee’s becoming entitled to Medicare
Divorce or legal separation of the covered employee
Death of the covered employee

 

4. How does a person become eligible for COBRA continuation coverage?
To be eligible for COBRA coverage, you must have been enrolled in your employer’s health plan when you worked and the health plan must continue to be in effect for active employees. COBRA continuation coverage is available upon the occurrence of a qualifying event that would, except for the COBRA continuation coverage, cause an individual to lose his or her health care coverage.

5. What Do I do if I Don’t Want To Take COBRA? Group Health Plans are very benefit rich. This means that you probably have dental, vision, low co-pays for doctor visits etc. Things you take for granted. Your employer if often paying 80% or more of your premium and your portion of the premium is just 20% or less. You don’t realize the true cost of your health plan until you qualify for COBRA and get that letter from your HR Department that gives you STICKER SHOCK. Why? Because you see that your new monthly premium could be up to 400% more that what was being pulled out of your paycheck. What do you do? You get on the computer and start looking for Health Insurance quotes and see a lot of quotes that look appealing as an alternative but you are comparing apples and oranges.

Here are three main points that are not clear when you look at these computer quotes

First of all, Group Plans in Georgia are “guarantee issued” which means that everyone MUST be accepted. Individual plans go through an underwriting process, so you have to qualify and may not be accepted.
Most insurance carriers usually decline major pre-existing conditions like diabetes, cancer and heart disease. Minor pre-existing conditions like weight, high blood pressure and elevated cholesterol etc. are rated up which means you’re charged more. This underwriting process can take up to a month, if done properly.
Also many of the benefits you take for granted on your benefit rich group plan are extras or “riders” with individual policies that increase your premium.

So what are my alternatives if I just lost my job?


6. How Does The American Recovery and Reinvestment Tax Act of 2009 affect COBRA and save me more money? The Act provides a 65% government subsidy to employees who are involuntarily terminated between September 1, 2008 and December 31, 2009. The premium reduction relates only to premiums for the coverage period beginning after the new law was enacted on February 17, 2009. The law does not allow reimbursement of premiums for coverage periods beginning before February 17, 2009. Qualified individuals can, however, receive the premium subsidy going forward, for up to nine months. So if you are already on COBRA you can get this subsidy for up to nine months. Also if you declined COBRA during this period, you can now enroll in the subsidized coverage. This a great deal if you are planning on finding another job that will provide Group Health Insurance because you only have to pay 35% of the COBRA costs and can keep your benefit rich coverage for up to 18 months.
BUT……
What If you are planning to focus on your business full time now, rather than get another job? Then you really need to look much closer at individual plans.

7. How does buying your own portable individual health plan protect your financial future? Let me tell you a story about how one of the most financially savvy guys I know got the surprise of this life after riding his bike one day in Florida. I lived in South Florida and played tennis with a friend who retired from a Fortune 100 Company when he was 49 years old. After many years of hard work he took early retirement and built his dream home in Florida. After several years his wife became bored and wanted to move to Atlanta. They bought into one of the most prestigious new developments in metro Atlanta. Six months after construction began my friend was riding his bike and got shortness of breath. He called a tennis buddy and neighbor who was also a cardiologist and the doctor said, “Come to my office and let me check you out”. The cardiologist sent him straight to the hospital and discovered that one of my friend’s coronary arteries was narrowed and a “heart stent” was inserted to relieve the condition. Within a few days my friend was busy playing tennis and riding his bike. Thinking about his upcoming move to Georgia, my friend decides to call his Health Insurance Company to move his plan from Florida. Mind you this was not some fly-by-night company but one of the best-recognized names in the insurance industry today! You can imagine his surprise when this insurance company told him that he was “UNINSURABLE” in the state of Georgia. What happened? When he retired my friend elected COBRA and when he moved to Florida took an individual plan in Florida. He assumed that because the insurance company had such a big name that is was a national company but it WAS NOT so he could not get health insurance, at any price, in Georgia because he had this MAJOR pre-existing condition of heart disease.
You might be subject to similar consequences or worse if you get sick or have a major accident during the period you’re on COBRA. To avoid this type of situation or worse you need to work with a licensed Health Agent who specializes in Small Business Entrepreneurs.

 

Implementing Business Ethics

“The ethics of a business are whatever the top-dog says they are.”
- Bryce’s Law

INTRODUCTION

We hear a lot these days about the deterioration of ethics in business, e.g., graft,
corruption, cheating, favoritism, skimming money, etc. This has resulted in a public
relations nightmare for business. If consumers do not trust a company, its a matter
of time before it goes out of business. This is supported by recent studies that give
evidence there is a correlation between business performance and ethical practices
(see the Institute of Business Ethics).

Basically, the Institute’s study suggests there are long-term benefits associated with
enacting an ethics programs. Such studies and recent corporate snafus (e.g., Enron)
are impetus for companies coming to grips with ethics in the workplace.

There are essentially two considerations for devising an ethics program in
business; first, knowing what your ethics are, and, second; implementing them
in a consistent manner.

INTERPRETING ETHICS

There is little point in my telling you what is ethically right or wrong. You already
have an interpretation of this. But let us understand what influences our interpretation
of ethics; our interpersonal relations with others, such as our family, friends, neighbors,
fellow workers, as well as the media. Ethics is learned more than it is taught. It is based
on observations of the conduct of others, people we like and respect as opposed to those
we do not. It is then up to each of us to interpret these perceptions from which we will
base our conduct and behavior. The point is, we act on our perceptions, however accurate
or inaccurate they may be. Another influential factor are our own human frailties of
competitiveness, love, greed and ambition. But then again, this goes back to
interpersonal relations.

Let us recognize that ethical behavior is interpreted differently from person to person. What
one person may consider right or wrong may be different for the next person. The objective
in business is to implement a uniform form of behavior thereby instilling consumer
confidence in a company overall.

IMPLEMENTATION

Writing a corporate code of conduct is in vogue today as a means of articulating the
ethics of a business. Such codes are proudly displayed on web sites and in corporate
brochures more for public relations than anything else. True, they are useful for
disciplining an employee for an infraction of the rules, but I do not see them as an
effective way of implementing an ethics program. Understand this, regardless of what
the code of conduct states, the ethics of a business are whatever the top-dog says they
are. Too often I have seen companies say one thing, then act another, e.g., 
Enron.

Printed codes of conduct are nice, but we have to recognize that it is one thing to
enact legislation, quite another to enforce it. As stated earlier, ethical behavior
is based on observations. Regardless of what a code of conduct says in print, ethical
behavior is based on the relationship of superior and subordinate worker
relationships. If a subordinate observes an indiscretion by his superior, in all
likelihood it will be emulated by the subordinate. This phenomenon occurs
top-down in the whole corporate chain of command. If it breaks down anywhere
in the corporate hierarchy, it will become visible to the subordinate layers and
potentially create a “trickle-down” effect. This means the boss has to be a role
model for ethical behavior; they must “walk-the-walk” as well as “talk-the-talk.” If
they do not, it will not go unobserved by their subordinates. Managers, therefore,
should avoid the “do as I say, not do as I do” phenomenon. They must lead by
example. Anything less is sheer hypocrisy and will inevitably lead to changes
in behavior.

It is simply not sufficient to issue platitudes as to what is and what isn’t ethical
behavior. The manager must follow-up and assure ethical behavior is implemented
accordingly. In other words, we shouldn’t just “desire” truth and honesty, we
must “demand” it. If one person gets away with an indiscretion, others will surely
follow. As such, when writing out a code of conduct, be sure to stipulate the
penalties for its violation.

The success of a business ethics program is ultimately measured by how well it
becomes ingrained in the corporate culture. As we have discussed in the past,
corporate culture pertains to the identity and personality of the enterprise. All
companies have a culture; a way they behave and operate. They may be organized
and disciplined or chaotic and unstructured. Either way, this is the culture which
the enterprise has elected to adopt. What is important is that in order for an employee
to function and succeed, they must be able to recognize, accept and adapt to the
culture. If they do not, they will be rejected (people will not work with them).

The intuitive manager understands the corporate culture and how to manipulate
it. Changing the Corporate Culture involves influencing the three elements of the
culture: its Customs, Philosophy and Society. This is not a simple task. It must be
remembered that culture is learned. As such, it can be taught and enforced. For
example, a code of conduct is useful for teaching, as is a system of rewards and
penalties. Designating people to act as watchdogs of the culture can also be useful,
but be careful not to create a climate of paranoia. Ultimately, as a manager, you
want to create a culture that promotes the ethical behavior you desire.

For more information on “Corporate Culture,” see:

http://www.phmainstreet.com/mba/pride/eespcc.htm

CONCLUSION

We now live in strange socioeconomic times. 40-50 years ago we
normally had one parent staying home to raise the kids. Now it is commonplace
to find families where both the husband and wife are working and paying
less attention to their children, thereby relegating their parenting duties to
teachers and coaches. In other words, the family unit, which is the basic
building block for learning ethical behavior, is becoming severely hampered.

In business today we have a “fast-track” competitive mentality which does not
encourage a spirit of teamwork but, rather, more rugged individualism. Nor
does it promote employee loyalty. Further, we now live in a society that
encourages people to go into debt, thereby causing financial tensions.

Bottom-line, ethics is about people and trust. Consequently, we should be
sharpening our people skills as opposed to avoiding it. We don’t need more
maxims of how we should conduct our lives; we need to lead by example. As
such, we need more role-models and heroes than we do paperwork.

Let me close with one last thought on how ethics impacts business; there
is probably nothing worse in business than being caught in a lie, particularly
by a customer. Any trust that there may have been before disintegrates
immediately and business is lost. In this day and age, there is something
refreshingly honorable about a person where their word is their bond. Ethics
just makes good business sense.