Frequent ethical issues

Question 1

Business contracts

Answer 1

A contract is an agreement or exchange of promises between two or more parties (individuals or groups) by which the parties committed themselves to some course of action.

In business, the subject of matter of a contract is usually an exchange of products (raw materials, facilities, funds or other goods or services) for money.

This is the case of trade (purchase-sale) contracts, rental contracts and labor contracts.

Question 2

Pacta sunt servanda

Answer 2

“Pacts must be kept”

A general principle established from ancient Roman Law.

Question 3

The three key elements of a contract:

Answer 3

1) The OBJECT or matter of the contract, which includes the specific commitments assumed.

2) The AGREEMENT reached by the will of each party, which produces a certain link between them.

3) The CONTRACTUAL DUTIES and rights derived from the agreement.

Question 4

The three conditions required for the validity of a contract:

Answer 4

1) Capacity of the parties- Sufficient mental discernment of each party. A contract has to be possible: the parties must have the capacity and power to do what is established.

2) Appropriate matter- A contract with our licit matter is not legitimate: that is, a commitment to carry out wrongdoing is not morally acceptable. Example: Corporate espionage. However, if the contract is executed the party who agreed to pay is obliged to do so.

3) Fair agreement- This requires acting in good faith; that is, with honest conviction about the truth or falsehood of any proposition, without duress or intimidation, and seeking equitable agreements.

Question 5

Misappropriation and fraud

Answer 5

There are a number of well-know ethical issues in which the right to private property is violated. In essence, all these are forms of theft; that is, appropriating personal property without the reasonable will of the owner.

Question 6

Misappropriation

Answer 6

Is a kind of theft, and consists of an intentional usurpation of the property or funds of another for one´s own use or another unauthorized purpose.

Examples:
- the appropriation for private use of the goods of the company one works
- claiming excessive expenses or making inefficient use of resources
- artificial price manipulation through unlawful monopolies

Question 7

Three types of infringement of intellectual property:

Answer 7

1) Copyright infringement
2) Trademark infringement
3) Patent infringement

Question 8

Copyright infringement

Answer 8

Using, and especially trading, material without the permission of the copyright holder, even when no formal copyright exists.

Often not necessary because its usually easy with written work to see who the work belongs to.

Question 9

Trademark infringement:

Answer 9

The violation of the exclusive right attached to a registered trademark (a distinctive sign of some kind, used by an organization to distinguish its products from those of others) without the authorization of the trademark owner or any license (provided that such authorization was within the scope of the license)

Example: Ferrari red or the Coca Cola font

Question 10

Patent infringement:

Answer 10

Occurs when someone utilizes an invention protected by patent without the permission of the patent proprietor. This is so because a patent allows its proprietor the right to exclude others from utilizing the invention in question.

Occasionally there are controversial issues, such as patents regarding certain pharmaceuticals for developing countries, in which the right to life, morally speaking, takes priority over the right to patent property.

Question 11

Industrial or corporate espionage:

Answer 11

Someone tries to obtain secret or confidential information for commercial purposes, without the permission of the firm that owns it.

Question 12

Fraud:

Answer 12

Fraud is theft by means of deception. It takes place when deception is deliberately practiced in order to secure unjust gain.

In business, fraud can for example be:
- deception over the quality or weight of products
- forgery of cheques or invoices
- false billing

Question 13

False billing:

Answer 13

Requests for funds from an individual or firm when no obligation to pay exists

Question 14

Counterfeit:

Answer 14

• Usually produced with the intent to represent the content of origins of a product deceptively.
• Generally includes patent or trademark infringements
  -Gucci, LV, Hermes ++ are not angry because the person that buys it is no longer going to buy the real one, they are angry because it loses the exclusivity of the design
• the exclusivity is the problem, not in terms of clientele because it is not the same client

Question 15

Embezzlement:

Answer 15

Fraudulent theft of funds or property by a trustee (one who holds property on behalf of a beneficiary) or by a person with the responsibility to care for and protect another’s assets (for example managers and treasurers)

Question 16

Types of misappropriation:

Answer 16

• infringement (three types)
• industrial or corporate espionage
• fraud
• counterfeit
• embezzlement

Question 17

Confidential information:

Answer 17

• Confidential information regarding trade might be complete or might consist of essential details on new products, inventions, studies of competitors, key information about clients or customers, new business ideas or business plans and so on.
• Generating this information might have required costly investment, and its disclosure can provoke a loss of competitive advantage or otherwise damage the firm.
• Facilitating a competitor’s access to this information, directly or indirectly, without an institutional agreement, is not only a great disloyalty to one´s own firm but also a clear misappropriation of intellectual property.

Question 18

Conflict of interests:

Answer 18

A conflict of interest is understood as a situation in which the private interest and the official responsibilities of a person in position of trust are in conflict, or when someone who ought to be serving people has competing interests. A typically illustrative example is an attorney or a law firm that simultaneously represent two opposed clients.

Question 19

Cases of conflict of interest:

Answer 19

1) A person responsible for purchases having an interest in some supplier, either directly or through a close relative (spouse, child and so on)

2) An official of a governmental institution with interest in a firm that offers good or services to such institutions.

3) Working for a competitor or taking on any outside employment in which the interest of one job contradict those of another.

4) A director of a large company who, as a member of the board of directors, has voted on whether to buy a small firm for a certain price, if he is one of the owners of that firm.

5) Auditing and providing consultancy services to the same company, which impedes auditing with independence and impartiality (as happened with Arthur Andersen in Enron)

Question 20

Tax evasion

Answer 20

Refers to avoiding the payment of taxes lawfully due

Question 21

Tax avoidance

Answer 21

Making use of legal methods to one’s own advantage in order to reduce the amount payable

Might not be illegal but could hurt the image of the company

Question 22

Insider trading

Answer 22

The trading of stocks or other securities of a firm or corporation, such and bonds or stock options, using internal information that has not been disclosed to the public that, if and when it were disclosed, could substantially influence the price of such stocks or securities.

Question 23

Examples of insider trading

Answer 23

• knowledge about a company’s profit or losses
• launch of a new product
• promising research project
• changes at top-level management
• capital increases
• mergers and acquisitions

Question 24

Two questions that arise regarding insider trading:

Answer 24

1) Why is insider trading wrong?
2) Who is guilty for trading with inside information?

Question 25

Whistle-blowing

Answer 25

The reporting of an organization's unethical practices by a current or former employee. - requires rectitude- must be revealing the wrongdoing on moral grounds and not, for instance, revenge. - must be something that is of public concern

Question 26

External whistle-blowing:

Answer 26

Reports conduct contrary to the common good or public interest to people or entities that have the power, and presumably, the willingness to take corrective action. These entities might be governmental or watchdog agencies, local authorities or law enforcement agencies, Sometimes the mass media can also be an appropriate channel for whistle-blowing. Whistle-blowing favors the common good and does not work against any legitimate commitment. A whistle-blower who acts uprightly is being loyal to the moral good as well as to his/her employer.

Question 27

Criteria for whistle-blowing:

Answer 27

1) Should be done with UPRIGHTNESS 2) Should relate to an issue of SUFFICIENT MORAL IMPORTANCE 3) One should possess RELEVANT INFORMATION before blowing the whistle 4) One should explore all ORDINARY CHANNELS within the organization for dealing with misconduct and exhaust all possibilities before undertaking any external whistle-blowing 5) One should have REASONABLE GROUNDS for believing whistle-blowing would be effective 6) One should chose THE BEST WAY to blow the whistle

Question 28

Bribery

Answer 28

An action in which someone gives cash, a gift or some other benefit such as an emolument or privilege, to obtain an unjust judgement, a vote or some other type of behavior by someone in a position of trust. Those who receive a bribe take advantage of their position for personal benefits and act against the duties of their position.

Question 29

Extortion

Answer 29

This takes place when someone (the extortionist) demands money, or some other gift to which he/she is not entitled, through intimidation or undue exercise of authority. Example: When a politician demands money for bypassing the usual process and giving a contract to a chosen. company, or when a purchase manager demands money/ a gift for his/her personal benefit under the threat that otherwise the company will buy from a competitor.

Question 30

Tacit extortion

Answer 30

Might be subtly insinuated, without explicit demands, where it is known to be general practice. In this case it might appear to be a bribe but is actually extortion

Question 31

Explicit extortion

Answer 31

Blatant extortion- done openly and unashamedly

Question 32

Blackmail

Answer 32

A particular form of extortion that occurs when a person threatens to expose discreditable information about someone unless the victim gives money or some other things of value to the blackmailer.

Question 33

Kickbacks

Answer 33

Refers to the return of a percentage of a sum of a contract received by a civil servant, politician or some other person who selects such a contract. For an ethical perspective, a kickback is a form of bribery or extortion, depending on whether it is offered (bribery) or required (extortion) Example: The 3% in Cataluna

Question 34

Facilitating payments

Answer 34

Consist of giving some moderate amount of money to public officials (or employees of a private company) for actions such as processing papers, issuing permits and so on, in order to expedite performance of duties of a non-disrectionary nature; that is. duties they are already bound to perform. These payments are not intended to influence the outcome of the official´s action, but the timing. It is not a bribery but a tacit extortion.