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A secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose. Typically involves an employee who assists the consumer in fraud.

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Collusion

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The relevant phrase in regard to business ethics, as it suggests trickery, misrepresentation, or a strategy designed to lead others to believe something less than the whole truth.

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"Deceitful Purpose"

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Broadly defined as a lack of integrity, incomplete disclosure, and an unwillingness to tell the truth. Lying, cheating, and stealing are actions usually associated with dishonest conduct.

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Dishonesty

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The quality of being just, equitable, and impartial. Fairness clearly overlaps with concepts of justice, equity, equality, and morality.

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Fairness

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Equality, reciprocity, and optimization.

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3 fundamental elements that seem to motivate people to be fair:

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How wealth or income is distributed between employees within a company, a country, or across the globe.

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Equality

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An interchange of giving and receiving in social relationships. This occurs when an action that has an effect upon another is reciprocated with an action that has an approximately equal effect.

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Reciprocity

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The trade-off between equity (that is, equality or fairness) and efficiency (that is, maximum productivity).

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Optimization

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In an organization, it means uncompromising adherence to ethical values. An organization's integrity usually rests on its enduring values and unwillingness to deviate from standards of behavior.

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Integrity

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A problem, situation, or opportunity that requires an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical.

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Ethical Issue

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A problem, situation, or opportunity that requires an individual, group, or organization to choose among several wrong or unethical choices. There is not a right or ethical choice in a dilemma, only less unethical or illegal choices as perceived by any and all stakeholders.

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Ethical Dilemma

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Can range from unauthorized use of equipment and computers to embezzling of company funds.

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Misconduct (Misuse of Company Resources)

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The most common ethical problem for employees. Can refer to physical threats, false accusations, being annoyed, profanity, insults, yelling, harshness, ignoring someone, and unreasonableness.

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Abusive or Intimidating Behavior

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When someone, or a group, is considered a target and threatened, harassed, belittled, verbally abused, or overly criticized.

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Bullying (Hostile Workplace)

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1) untruthful statements that result in damage or harm; 2) "white lies," which do not cause damage but instead function as excuses or a means of benefitting others; and 3) statements that are obviously meant to engage or entertain without malice.

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Lying

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Creating a perception or belief by words that intentionally deceive the receiver of the message; for example, lying about being at work, expense reports, or carrying out work assignments. Commission lying also entails intentionally creating "noise" within the communication that knowingly confuses or deceives the receiver.

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Commission Lying

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Technical explanations that the communicator knows the receiver does not understand. It can be the intentional use of communication forms that make it difficult for the receiver to actually hear the true message. Using legal terms or terms relating to unfamiliar processes and systems to explain what was done in a work situation facilitate this type of lie.

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Noise

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Intentionally not informing others of any differences, problems, safety warnings, or negative issues relating to the product, service, or company that significantly affect awareness, intention, or behavior.

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Omission Lying

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The point at which a lie becomes unethical in business is based on the context of the statement and its intent to distort the truth. A lie becomes illegal if it is determined by the courts to have damaged others.

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When does a lie become illegal?

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When an individual must choose whether to advance his or her own interests, those of an organization, or those of some other group.

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Conflict of Interest

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The practice of offering something (usually money) in order to gain an illicit advantage. The key issue regarding whether or not something is considered bribery is whether the act is illicit or contrary to accepted morality or convention.

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Bribery

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The person who promises or gives the bribe commits the offense.

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Active Bribery

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An offense committed by the official who receives the bribe.

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Passive Bribery

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Made to obtain or retain business or other improper advantages, but do not constitute bribery payments for U.S. companies in some situations.

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Facilitation Payments

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The collection and analysis of information on markets, technologies, customers, and competitors, as well as on socioeconomic and external political trends. There are three distinct types of intelligence models: a passive monitoring system for early warning, tactical field support, and support dedicated to top-management strategy.

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Corporate Intelligence

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Involves an in-depth discovery of information for corporate records, court documents, regulatory filings, and press releases, as well as any other background information about a company or its executives.

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Corporate Intelligence (CI)

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Considered one of the top three methods for obtaining trade secrets. Hacking has three categories: system, remote, and physical.

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Hacking

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Assumes that the attacker already has access to a low-level, privileged-user account.

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System Hacking

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Involves attempting to remotely penetrate a system across the Internet. A remote hacker usually begins with no special privileges and tries to obtain higher level or administrative access. Several forms of this type of hacking include unexpected input, buffer overflows, default configurations, and poor system administrator practices.

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Remote Hacking

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Requires that the CI agent enter a facility personally. Once inside, he or she can find a vacant or unsecured workstation with an employee's login name and password. Next, the CI agent searches for memos or unused letterheads and inserts the documents into the corporate mail system.

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Physical Hacking

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The tricking of individuals into revealing their passwords or other valuable corporate information. Tactics include casual conversations with relatives of company executives and sending e-mails claiming to be a system administrator and asking for passwords under the guise of "important system administration work."

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Social Engineering

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Someone simply looks over an employee's shoulder while he or she types in a password.

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Shoulder Surfing

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If a person can find out personal things about someone, he or she might be able to use that information to guess a password.

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Password Guessing

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Once trash is discarded onto a public street or alley, it is considered fair game and can be taken. Phone books can give a hacker names and numbers of people to target and impersonate, organizational charts contain information about people who are in positions of authority within the organization, memos provide small amounts of useful information and assist in the creation of authentic-looking fake memos.

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Dumpster Diving

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Wireless hacking. To eavesdrop on wireless networks, all a CI agent needs is the right kind of radio and to be within range of a wireless transmission. Once tapped into a wireless network, an intruder can easily access anything on both the wired and wireless networks because the data sent of the networks are usually unencrypted.

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Whacking

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A person with a digital recording device can monitor and record a fax line. By recording and playing back an intruder can reproduce an exact copy of a message without anyone's knowledge. Even without monitoring a fax line, a fax sent to a "communal" fax machine can be read or copied. By picking up an extension or by tapping a telephone, it is possible to record the tones that represent someone's account number and password using a tape recorder. The tape recording can then be replayed over the telephone to gain access to someone else's account.

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Phone Eavesdropping

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1) refuses to hire an individual, 2) maintains a system of employment that unreasonably excludes an individual from employment, 3) discharges an individual, or 4) discriminates against an individual with respect to hiring, employment terms, promotion, or privileges of employment as they relate to the definition of discrimination.

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Suing Due to Discrimination If:

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Between 75,000 and 100,000 charges of discrimination are filed annually with this commission.

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Equal Employment Opportunity Commission (EEOC)

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Specifically outlaws hiring practices that discriminate against people between the ages of 49-69, as well as those that require employees to retire before the age of 70. The act prohibits employers with 20 or more employees from making employment decisions, including decisions regarding the termination of employment, on the basis of age or as a result of policies requiring retirement after the age of 40.

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Age Discrimination in Employment Act

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Help build workforces that reflect their customer bases. They involve efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against on the basis of race, gender, or other characteristics. Such initiatives may be imposed by federal law on an employer that contracts or subcontracts for business with the federal government, as part of a settlement agreement with a state or federal agency, or by court order.

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Affirmative Action Programs

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1) There must be a strong reason for developing an affirmative action program; 2) affirmative action programs must apply only to qualified candidates; and 3) affirmative action programs must be limited and temporary and therefore cannot include "rigid and inflexible quotas."

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Supreme Court Standards for Affirmative Action Programs:

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Any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another. It may be verbal, visual, written, or physical. It "may create a hostile work environment or constitute harassment, even though the private possession, reading, and consensual sharing of such materials is protected under the Constitution.

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Sexual Harassment

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Criteria: the conduct was unwelcome, the conduct was severe, pervasive, and regarded by the claimant as so hostile or offensive as to alter his or her conditions of employment; and the conduct was such that a reasonable person would find it hostile or offensive.

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Hostile Work Environment:

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A personal, loving, and/or sexual relationship with someone with whom you share professional responsibilities.

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Dual Relationship

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Those where the relationship could potentially cause a direct or indirect conflict or interest or a risk of impairment to professional judgment.

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Unethical Dual Relationships

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One example of the world's growing concern about global warming and is an international treaty on climate change committed to reducing emissions of carbon dioxide and five other greenhouse gases and to engaging in emissions trading if member signatories maintain or increase emissions of these gases.

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Kyoto Protocol

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Considered "green" because they are perceived to lower carbon emissions and create less pollution. Examples include wind power, solar power, geothermal power, hydropower, biofuels, and nuclear power.

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Alternative Energy

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Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression. When an individual engages in deceptive practices to advance his or her own interests over those of his or her organization or some other group, he or she is committing fraud.

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Fraud

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Usually involves a corporation's financial reports, in which companies provide important information on which investors and others base decisions that may involve millions of dollars. If the documents contain inaccurate information, whether intentionally or not, then lawsuits and criminal penalties may result.

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Accounting Fraud

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Generally prohibits accounting firms from providing both auditing and consulting services to the same firm. It also specifies the corporate boards of directors must include outside directors with financial knowledge on the company's audit committee.

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Sarbanes-Oxley Act (2002)

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The process of dishonesty creating, distributing, promoting, and pricing products.

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Marketing Fraud

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Addresses deceptive advertising. Abuses in advertising can range from exaggerated claims and concealed facts to outright lying, although improper categorization of advertising claims is the critical point. Courts place false or misleading advertisements into three categories: puffery, implied falsity, and literal falsity.

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Section 5 of the Federal Trade Commission (FTC) Act

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Exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely and is not actionable under the Lanham Act.

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Puffery

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Means that the message has a tendency to mislead, confuse, or deceive the public. Advertising claims that use implied falsity are those that are literally true but imply another message that is false. Determined through customer surveys.

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Implied Falsity

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The characterization of an advertising claim as literally false can be divided into two subcategories: tests prove (establishment claims), in which the advertisement cites a study or test that establishes the claim; and bald assertions (nonestablishment claims), in which the advertisement makes a claim that cannot be substantiated, as when a commercial states that a certain product is superior to any other on the market.

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Literal Falsity

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Like cigarettes vs. cigars issue with the FDA.

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Labeling Issues

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Involves intentional deception to derive an unfair economic advantage by an individual or group over an organization. Occurs when consumers attempt to deceive businesses for their own gain. Consumers engage in many other forms of fraud against businesses, including price tag switching, item switching, lying to obtain age-related and other discounts, and taking advantage of generous return policies by returning used items, especially clothing that has been worn (with the price tag still attached). Examples of fraudulent activities include shoplifting, collusion or duplicity, and guile.

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Consumer Fraud

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May involve a consumer staging and accident in a grocery store and then seeking damages against the store for its lack of attention to safety. A consumer may purchase, wear, and then return an item of clothing for a full refund. In other situations, a consumer may ask for a refund by claiming a defect.

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Duplicity

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Associated with a person who is crafty or understand right/wrong behavior but uses tricks to obtain an unfair advantage. The advantage is unfair because the person has the intent to go against the right behavior or result.

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Guile

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Developed to create more sales and higher personal compensation for lenders. Lenders would encourage subprime borrowers to provide false information on their loan application in order to qualify for and secure loans.

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"Liar Loans"

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The difference between bad business decisions and business misconduct can be hard to determine, and there is a thin line between the ethics of using only financial incentives to gauge performance and the use of holistic measures that include ethics, transparency, and responsibility to stakeholders. From CEOs to traders and brokers, all-too-tempting lucrative financial incentives existed for performance in the financial industry.

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Financial Misconduct

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Passed to increase accountability and transparency in the financial industry and to protect consumers from deceptive financial practices. Also gives federal regulators more power over large companies and financial institutions to prevent them from engaging in risky practices, or becoming "too big to fail." The act also holds CEOs responsible for the behavior of their companies.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)

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First, an insider is any officer, director, or owner of 10 percent or more of a class of a company's securities. Often done in a secretive manny by an individual who seeks to take advantage of an opportunity to make quick gains in the market. Two types: illegal and legal.

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Insider Trading

question

Someone caught "tipping" an outsider with nonpublic information can also be found liable. To determine is an insider gave a tip illegally the SEC uses the Dirks test, which states that if a tipster breaches his or her trust with the company and understands that this was a breach, he or she is liable for insider trading.

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"Tipping" & the Dirks Test

question

Involves legally buying and selling stock in an insider's own company, but not all the time.

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Legal Insider Trading

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Involve the legal protection of intellectual property such as music, books, and movies. Laws such as the Copyright Act of 1976, the Digital Millennium Copyright Act, and the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 were designed to protect the creators of intellectual property.

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Intellectual Property Rights

question

Include the monitoring of employees' use of available technology and consumer privacy. Current research suggests that even when businesses use price discounts or personalized services, consumers remain suspicious. However, certain consumers are still willing to provide personal information despite the potential risks.

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Privacy Issues

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Include the beliefs, values, and voluntary contractual obligation of a business.

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Voluntary Practices

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A management-initiated boundary of conduct (beliefs, values, voluntary policies, and voluntary contractual obligations).

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Voluntary Boundary

question

Most firms engage in giving back to communities and causes.

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Philanthropy

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A highly appropriate and common practice that helps ensure compliance with legal requirements, industry self-regulation, and societal expectations.

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Core Practice

question

A leading self-regulatory body that provides directions for managing customer disputes and reviews advertising cases.

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Better Business Bureau

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Suggests that the governing authority (board of directors) be responsible for and assess an organization's ethical and compliance activities.

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Federal Sentencing Guidelines for Organizations (FSGO)

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An externally imposed boundary of conduct (laws, rules, regulations, and other requirements).

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Mandated Boundary

question

Defines the rights and duties of individuals and organizations (including businesses).

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Civil Law

question

Not only prohibits specific actions-such as fraud, theft, or securities trading violations-but also imposes fines or imprisonment as punishment for breaking the law.

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Criminal Law

question

1) regulation of competition, 2) protection of consumers, 3) promotion of equity and safety, 4) protection of the natural environment, and 5) incentives to encourage organizational compliance programs to deter misconduct.

answer

Most of the laws and regulations that govern business activities fall into one of five groups:

question

Laws that have been passed to prevent the establishment of monopolies, inequitable pricing practices, and other practices that reduce or restrict competition among businesses.

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Procompetitive Legislation

question

Prohibits monopolies.

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Sherman Antitrust Act (1890)

question

Prohibits price discrimination, exclusive dealing, and other efforts to restrict competition.

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Clayton Act (1914)

question

Created the Federal Trade Commission (FTC) to help enforce antitrust laws.

answer

Federal Trade Commission Act (1914)

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