Business ethics: Facing the dilemma

It seems like, in the wake of big corporate scandals, a heightened awareness of business ethics pervades organizations of every size. Most ethical dilemmas, however, aren’t that momentous or dramatic. They’re rooted in commonplace business activities you and the people around you encounter every day.

How do you manage the ethical dilemmas you face? A number of common dilemmas are described here—along with ethical solutions. As you ponder these predicaments, ask yourself: How would you deal with them?

  • Off the books. You sell a product to a friend, and you receive cash compensation. No tax documentation exists. Do you “book” the sale and pay taxes? Of course. Clean tax practices help you avoid legal troubles. Just as important, your honesty serves as an example to the people around you.
  • Overcompensation. You’re about to bring on a new employee. She has a skill you critically need, and you’re thinking about paying her a salary far in excess of what her peers earn. What are the ethical implications of this decision? Paying for a critical skill makes sense, and paying a highly skilled employee a premium salary is common practice. The ethical issue involves employee morale; if the new hire’s peers perceive her salary as unfair, will their own loyalty be compromised? An ethical decision requires you to balance your need for the skill against employee perceptions.
  • Selective advertising. You’re selling a highly competitive product. To help make the sale, you emphasize only one feature of high importance to the prospective customer: post-sale training and troubleshooting. You ignore other features in which the competition often outperforms. Ethical? Probably. It’s common for prospective customers to make decisions on one or two product attributes, and it’s good sales practice to emphasize things important to prospects. But remember: When you’re asked questions, always respond truthfully.
  • Gratuities. A salesperson offers you a small appliance as a token of appreciation for buying from him. Ethical? Probably not. A sale should stand on its own merits. Accepting any tangible gift in association with a sale compromises the integrity of the sales process. In some cases, this could even be considered a kickback.
  • Regular absenteeism. An employee routinely takes off Thursday afternoons for physician’s appointments. After many months of this, one of his coworkers complains to you that other employees see this as favoritism. How do you resolve the ethical issues here? The ethical question is simple: Is the time off based on a thoughtful policy, consistently applied to all? If such a policy does not exist, favoritism—an unethical practice—is quick to result.
  • Product returns. A customer complains about the poor quality of a purchase, and asks for permission to make a return beyond your standard 30-day return allowance. Most codes of ethics stipulate that a business stand by the quality of what it sells. You can refuse permission to return. But you’re better off taking the merchandise back, particularly if it’s defective. That’s not only good ethics, but good salesmanship, too.
  • Business gossip. A friend asks how things are going at work. In the course of conversation, you happen to discuss your relationships with various customers and the state of the company’s financial health. Ethical? No. While there’s nothing wrong with exchanging pleasantries about work, giving confidential information—about customers, financial position, vendors, purchasing or other matters—is just as serious as giving away tangible assets.
  • Late payments. To free up operating cash, you decide to pay your bills at 40 days net instead of the usual 30 days net. Is this ethical? The rule of thumb is you’re ethically bound to pay obligations according to the terms you originally accepted. In the grand scheme of things, an extra 10 days is not an egregious ethical problem, but it does compromise your relationships with vendors.
  • Capital purchases. You’ve purchased a large amount of equipment over the past year and charged some of off as ordinary expense in excess of the tax capitalization rules so that you can minimize your tax burden. Does this create an ethical conflict? Yes—and a potential tax and legal conflict, as well. Once you set a capitalization policy, you’re generally obligated to follow it.
  • Romantic relationships. You have noticed a supervisor and one of his employees have become romantically involved. What ethical implications does this relationship bring? First, since one of the parties to the relationship has authority over the other, it’s difficult to enforce an appropriate supervisory relationship—a serious ethical issue. Beyond ethics, the situation has the potential for allegations of harassment and legal problems.
  • Grumbling about competitors. One of your staff has a great sales record, and she consistently brings in new business. Every so often, though, you hear that part of her sales technique involves speaking ill about your competition. Knocking the competition solely to make a sale is generally considered unethical. Your products and services should always stand by themselves. Set standards for the presentation of your business and your products, including “do’s and don’ts.” These, of course, cover what your staff says—and does not say—about competitors.
  • Staff criticism. Although you know you’re impatient by nature, you just can’t seem to help yourself when it comes to managing the office staff. When things don’t go as planned, you take verbal jabs at the staff. They’re used to it, and don’t complain. Is this a communication problem or an ethical problem? It’s both. The ethical problem exists because your behavior sets a standard for the behavior of others. Failing to live up to high standards of communication subtly breeds morale and communication problems among the people around you.
  • Quiet favors. From conversations with a customer, you happen to know some intimate details about him. Can you ethically share these with a colleague outside of your business, perhaps to repay a favor, or to send business his way? Probably not. While privacy standards are not absolute, most business leaders argue that confidential information gleaned during the course of business should remain confidential—unless both parties deem otherwise. In sharing confidential information, you create the impression that you don’t value the privacy rights of others—a dangerous perception.
  • Moonlighting. A good friend is employed by a competitor. He asks you to do some work for his company on the side. The ethical rule of thumb: When you’re associated with a company, you have an obligation to uphold its interests. Never work for a competitor without the knowledge and authorization from your own company.
  • Recommendations. A friend of yours has asked you to recommend his daughter for a job at your company. Ethical? There’s nothing wrong with this, as long as you’re above board in your recommendation. In fact, many companies appreciate recommendations from people they trust.
  • Drug suspicions. You suspect one of your employees is using illegal drugs at work, although you have no proof. What are your ethical responsibilities? Your responsibilities are commensurate with what you know. You have a responsibility to maintain a safe workplace, so if you have evidence of drug use, you’re probably obligated to take action. A mere suspicion of drug use, however, suggests only that you should remain vigilant.
  • Questionable expenses. You’re compiling an expense report for the last quarter. You purchased a few gifts and souvenirs on one of the trips you made during the period. Can you include them in your reimbursement request? Probably not—unless, though unlikely, your company reimburses for such expenses. Your expense report should include only authorized expenses, and even then, only expenses for which official documentation is available.
  • Extreme claims. You’re advertising a new product line. Because you’re in a highly competitive market, you want to take as much creative license with your ads as possible. But how much is too much from an ethical standpoint? Ask yourself if the ad contains any statement that a reasonable consumer would find untrue after purchasing the product. And distinguish between superlative terminology (for example, “outstanding” or “easy to use”) and statements of fact (for example, “highly rated” or “No. 1 seller”). The former are usually OK; the later may be problematic.
  • The candy seller. A co-worker regularly sells candy, cookies and other items at work on behalf of his children. While some of your colleagues appear happy to buy, others quietly grumble that he’s using his position at work inappropriately. If the individual is in a position of authority, he’s using his position improperly and should not sell his children’s items under any circumstances. No employee, however, should use the workplace to conduct personal business and, ideally, a policy clearly states this. A possible exception to the no-selling rule: the occasional sale to a close friend, handled privately.
  • Family members. The boss’s daughter works for your business. It seems she’s regularly taking off extra time, and shirking her routine duties—but she’s never reprimanded. Has the boss overlooked sound ethical practice? Probably. While hiring relatives depends on the nature of the business and internal policies (for example, family hiring is often the norm in family-owned businesses), managers still have a responsibility to treat all employees with fairness and equality.
  • Everyone does it. A customer complains to you about a particular business practice. Your response is that you simply model your practice on what everyone else does. Ethical behavior means upholding the reputation of your business or trade. Resorting to “common practice” without an explanation of the practice doesn’t fit most ethical norms.