Why Ethical Problems Occur in Business

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  • 0:01 Ethical Problems
  • 1:01 Lack of Integrity
  • 2:30 Organizational Problems
  • 3:36 Conflict of Interest
  • 4:30 Misleading Advertising
  • 5:08 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
In this lesson, you will learn that ethical problems occur because companies have a lack of integrity, organizational relationship problems, conflicts of interest, and misleading advertising.

Ethical Problems

Ethical challenges occur within every business organization. In this lesson, we will discuss the reasons why ethical problems happen in business and what companies can do to develop a positive ethical behavior.

Ethical behavior is acting in ways that are consistent with how the business world views moral principles and values. The four major factors that can cause ethical problems in the workplace are lack of integrity, organizational relationship problems, conflicts of interest, and misleading advertising.

Trendon is a large financial investment company on Wall Street. They have just been fined billions of dollars by the government, and most of their top executives have been sentenced to federal prison.

Why? They violated each of the four areas that can cause immense ethical problems. Here is how they accomplished the task.

Lack of Integrity

Trendon's executives were lacking integrity in how they operated their business. The employees at Trendon did not show any fairness or honesty in their dealings. In fact, most of their financial deals were formed through intimidation, harassment, or lies.

Trendon would hold meetings to teach their executives how to withhold certain data or misrepresent investments in order to acquire clients. This type of behavior can result in loss of clients, federal fines, and prison time. In order to prevent this ethical problem from occurring, Trendon needed to establish ethical codes of conduct that provide guidelines on how their employees should act at work.

The atmosphere of any company should reflect a belief in treating customers with the highest respect and honesty. Many companies offer a 24-hour hotline that customers and employees can use to report any unethical behavior. Trendon should have had something like this, which may have stopped them from getting into trouble.

Another recent integrity issue facing Trendon was how they used customer private information via the Internet to attain other information about their customers. New laws are being passed to protect consumer's personal and financial information from being shared with other companies or stolen by hackers.

Organizational Problems

Trendon also had issues with organizational relationship problems, which are problems that stem from a company not having a clearly stated mission, goals, and objectives. Employees need to put the company's goals ahead of their own personal agenda. Trendon's top executives stole millions from the company and then donated the money to their own charities to make themselves look impressive to their peers.

One executive stole five million dollars and donated to his alma mater so that a school would be named after him. In this instance, this executive did not put the company's financial goals ahead of his own personal ones.

Another organizational problem that Trendon also faced was when employees pressure other employees to act unethically. For example, one Trendon employee, who would use the company limo for personal trips, always harassed other employees to follow his lead. Companies need to have a zero tolerance policy for organizational rebellion.

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