Business Ethics - Introduction To Business - ثاني ثانوي

PLANNING A CAREER IN... THE PRIVATE SECTOR 49 E ducation & Training For most countries around the world, the private sector, or non-government employment, has the largest employment percentage, reaching 85% in the United States and 70% in China. In 2021, Saudi Arabia's private sector employment was less than 35%. However, Saudi Vision 2030 has set goals to grow the private sector and improve employment opportunities in small, medium sized, and large enterprises. Related Job Titles • Employee • Manager Vice President • President Graduates entering into private sector employment will follow a career path. This normally starts with a period of time as an employee, learning how to work in their field such as engineering, accounting, etc. As their skills grow, a private sector employee needs to learn how to work with and manage teams. This leads to a position as a manager, supervising employees to reach business goals. Successful managers will move up to higher levels of management and vice-presidential positions with responsibility over large divisions. For large businesses, the president is responsible for an entire business unit, such as the president of the Middle East division, and can oversee multiple vice presidents. The chief executive officer (CEO) is the highest-ranking person in a company responsible for the strategic planning and operations of an entire business enterprise. Successful private sector employees need to manage ethically. They also have the opportunity to transfer their skills across businesses, both in Saudi Arabia and internationally. • Chief Executive Officer Analyze Career Opportunities in ... THE PRIVATE SECTOR Use library and Internet resources to learn more about careers in the private sector in an employment field that interests you. Choose one of the job titles listed in the box above and answer the following questions. 1. How would you describe the nature of the work? Include examples of things that might happen in a typical workday. 2. Is this a position that interests you? Explain how the positions in this field match up with your goals and interests. What it's like to work in... The Private Sector Majid started working as an engineer for a large petroleum company. Over five years he worked from a new employee to supervising a team in chemical production. Because of Majid's reputation as a hardworking and ethical manager, he was approached by a new start-up company to take over a new product division as a vice president. Majid knows that this will mean more responsibilities, but also more opportunities. This means leaving a large corporation and moving to a dynamic growth company with more challenges and a higher salary. What about you? Would this type of work interest you? What types of opportunities do you see in private sector employment that would increase your desire to work in those jobs? وزارة التعليم Ministry of Education 2024-1446 Social Responsibility of Business | 145

5.1 Business Ethics Link to digital lesson www.ien.edu.sa Learning Outcomes Once you have completed this lesson, you should be able to: 5.1.1 Describe what is meant by business ethics. 5.1.2 Identify the types of ethical concerns that arise in the business world. 5.1.3 Explain the concept of Corporate Governance. Key Terms Ethics Business Ethics Code of Ethics Conflict of Interest Corporate Governance Focus on REAL LIFE Hasan and Abdullah are young entrepreneurs and, inspired by Saudi Vision 2030, want to set up a new business together. They are both ambitious and have lots of ideas, although they don't always agree on every decision, particularly those regarding the company's direction. Hasan thinks the business should only operate in Saudi Arabia, for local customers, whereas Abdullah thinks they should take advantage of the Internet and new technology to benefit from international customers and suppliers. While Hassan agrees this would open them up to a much larger market and provide a greater range of manufacturers for their products, he is worried that they will have less control over ethical considerations. He is concerned about workers' standards of some international suppliers, as well as the potential for inappropriate comments posted on the company's social media channels by customers in other regions. LO 5.1.1 WHAT IS MEANT BY BUSINESS ETHICS Managers must find ways to balance their business's socially responsible activities with the need to generate expected profits. An ethical business demonstrates values that attract employees, customers, and shareholders. In a highly competitive global business environment, an increasing number of companies are seeking to set themselves apart by developing a reputation for ethical and socially responsible behavior. This unit will outline the meaning of business ethics and identify the types of ethical concerns that arise in the business world. Larger corporations are faced with a challenge of implementing a corporate governance structure that ensures legal and ethical behavior across multiple divisions and countries with thousands of employees. Modern work is through teamwork participation and cooperation, so everyone should have a team spirit and perform their duties ethically. WORK ETHIC SUCCESS Why is an understanding of ethics important for businesses? 146 Chapter 5 | Social Responsibility of Business وزارة التعليم Ministry of Education Business Ethics A socially responsible business engages in ethical business practices. Ethics are principles of morality or rules of conduct. Ethical behavior involves conforming to these rules. Unethical behavior violates them. Business ethics are rules about how businesses and their employees should behave in business situations. In most countries, ethical 2024-1446 GE44.PATHWAYS.G02.ITB.SB.PP1.indb 146 08/05/2024 09:14

business behavior is set in statutory and contract laws, but still requires that managers enforce ethical behaviors. The Saudi Labor Law adheres to the multiple concepts and pillars that govern business ethics in Islam. For example, those related to labor relations, non-discrimination, and other general behaviors and ethical practices. Ethical issues often arise out of a business's relationship with investors, customers, employees, creditors, suppliers, or competitors. Each of these stakeholder groups has specific concerns that exert pressure on the organization's managers. For example, investors want management to make sensible financial decisions that will boost sales, profits, and returns on their investments. Customers expect a firm's products to be safe, reliable, and reasonably priced. Employees demand to be treated fairly in hiring, promotion, and compensation decisions. Creditors require accounts to be paid on time and the accounting information presented by the firm to be accurate. Suppliers expect good communication and timely payments. Competitors expect the firm's competitive practices to be fair and honest. A code of ethics can help a business identify proper behavior. Code of Ethics A code of ethics is a set of rules for guiding the actions of employees or members of an organization. Saudi Basic Industries Corporation (SABIC) is one of the world's largest chemicals manufacturers. SABIC has a corporate code of ethics to ensure that it performs with integrity. Some of the areas covered in their code of ethics include antitrust statements and anti-corruption policies, as well as workplace environment, health, safety & security, and fair employment practices. Saudi Aramco, one of the largest companies in the world by revenue, has a code of ethics that commits the company to integrity, safety, and environmental protection, as well as stated commitments to employees, global competition, and to the shareholders of the company. Figure 5-1 lists topics to consider when developing a code of ethics. Once established, the code should be a guide for all employees within that company. A code must be worded in terms of acceptable behaviors rather than forbidden actions. For Saudi Arabian companies, Islamic concepts and pillars that govern business ethics need to be considered. The Saudi Ministry of Human Resources and Social Development has written a Guide Manual to Business Ethics to support businesses in their development of ethical business practices. Even with a code of ethics, the choice of proper behavior can cause dilemmas for decision makers within a business. Here are some examples of dilemmas: comments Should a company be responsible for offensive or privacy breaches posted by its customers on the company's social media channels? GUIDELINES FOR WRITING A CODE OF ETHICS 1. Determine the purpose of the code. 2. Tailor the code to the needs and values of the organization. 3. Consider involving employees from all levels of the company in writing the code. 4. Determine the rules or principles that all members of the organization will be expected to adhere to. 5. Include information about how the code will be enforced. 6. Determine how the code will be implemented and where it will be published or posted. 7. Determine how and when the code will be reviewed and revised. FIGURE 5-1 Do you think a code of ethics can increase a business's profits? How? Should a company continue to produce a popular product after it discovers that it causes negative impacts on ●⚫the environment? CHECKPOINT What is the purpose of a code of ethics? وزارة التعليم Ministry of Education 2024-1446 5.1 Business Ethics | 147

LO 5.1.2 ETHICAL CONCERNS THAT ARISE IN THE BUSINESS WORLD The ethical conduct of a business is largely determined by its top management. Executives who show strong moral character and make ethical business decisions set the ethical standards for a business. The Saudi Arabia Guide Manual to Business Ethics has outlined that business ethics sets behavioral rules that should be observed by the worker (employees through management) toward his or her duties, to the community as a whole, and him- or herself. Ethical Conduct Guidelines Business ethics covers both generally expected practices and industry specific concerns. There are also common ethics and principles such as transparency where workers are able to ask questions and express opinions and management listens. Violation of business ethics should allow for disclosure and reporting. The work environment should have safe working conditions and promote mutual respect and morality. There should be justice, equality, and non-discrimination. There should not be any bribery, acceptance of gifts, corruption, and unauthorized fundraising. As mentioned above, SABIC and Saudi Aramco have extensive business ethics policies and documents. Both companies have outlined policies of ethical behavior related to a commitment to integrity, safety and environmental protection, respect and privacy, and anti-bribery and anti- corruption. There is a commitment to shareholders to provide accurate records and disclosures. These global corporations also have a commitment to the communities where they operate to comply with local laws, observe human rights, and engage in charitable activities. Companies concerned about the ethical behavior of their employees will set up educational programs and training on ethical conduct. These programs are designed to promote employee honesty and integrity. Program topics will vary based on the employment level. Employees are also trained on how to make ethical decisions on the job. When considering the ethics of business situations, a worker should follow these guidelines: *i* Work as a TEAM Citizens can play a vital role in society by interacting with economic and social issues. Working as a team, select a business ethics topic that needs attention. Prepare a list of actions that governments, businesses, and consumers might take to address this concern. 1. Is the action legal? 2. Does the action violate professional or company standards? 3. Who is affected by the action and how? In addition to workplace codes of ethics, many employees, including accountants and engineers, adhere to codes of professional conduct established by their professional associations. They also participate in continuing education related to ethical issues specific to their professions. A common concern in ethical decision making involves a conflict of interest. This can occur when an action by a company or individual results in an unfair benefit. A businessperson may be tempted to place his or her personal welfare above the welfare of others or the welfare of the organization. For example, it would be a conflict of interest if a person serving on a company's board pressured the company to buy items only from businesses that the board member owns or controls. CHECKPOINT List at least four specific business ethics topics. 148 Chapter 5 | Social Responsibility of Business Ministry of Education 2024-1446

XXX XXX XXX Business Insight Bribery and Gifts In Saudi Arabia and many countries of the world it is illegal to pay a bribe to a business official or employee; for both the giver (who gives the bribe) and the receiver (who accepts the bribe) and is punishable by imprisonment and a fine. Bribery can appear in different forms, such as an employee who asks for himself or for others a sum of money or a gift to provide preferential treatment or to bypass some of the irregular practices, which is certainly considered a failure on the part of the employee to perform his duties in a proper and fair manner. In the field of business, bribery can appear through businessmen paying the bribe in the form of money or gifts to obtain commercial contracts or projects in an unfair manner. Imprisonment and a fine will be the penalty for the persons involved and large fines for the company involved. In some cases there could be a complete exclusion from entering into future contracts and project competitions. The Oversight and Anti-Corruption Authority, Nazaha, in Saudi Arabia is the body responsible for protecting integrity and combating and assisting in exposing various corruption cases. In some societies, giving gifts, offering sums of money as a bribe, or inviting businesspeople to a special occasion is common and widely practiced. People in these cultures may consider this as a means of expressing appreciation and strengthening social ties. This makes it difficult to distinguish between the crime of bribery, that could influence the recipient's behavior and understanding, and the real intent behind these behaviors. Bribery causes a lot of damage to economic progress in some countries and weakens the level of integrity in business. Think Critically 1. How should Saudi businesspeople handle situations where employees expect bribes to be paid as a condition of doing business there? 2. Suppose you work for the government entity that oversees the granting of general investment entrepreneurial licenses. A well-known chain wishing to gain this license and do business in Saudi Arabia sends you vouchers for use in its overseas outlets. What should you do? LO 5.1.3 CORPORATE GOVERNANCE Corporate governance is the system of rules, practices, and processes that outlines how companies are directed and controlled. Corporate governance must balance the interests of a company's many stakeholders, or those who have an interest in the corporation. This can include shareholders (both private investors and government investors), boards of directors, management, customers, suppliers, financiers, governments, and the community. Corporate governance starts with the board of directors (sometimes called the board) which is the governing body of a corporation. The board sets the corporation's strategy, hires the CEO, and oversees management. For a public corporation, the board of directors is elected by shareholders. For non-public corporations, board members can be determined by the owners, such as a government or private individuals. وزارة التعليم Ministry of Education 2024-1446 5.1 Business Ethics | 149

Good corporate governance policies can have a direct impact on a company's brand image, build trust in stakeholder relations, and increase profitability. Strong corporate governance would include policies for environmental awareness, ethical behavior, accountability, transparency, strong corporate strategy, fair employment and compensation, and risk management. Good corporate governance firms have an investor relations website that outlines the corporate leadership, board of directors, and corporate governance documents, such as bylaws, stock ownership guidelines, articles of incorporation, and financial reports. Bad corporate governance can result in short-term profits, but long-term problems and cast doubt on a company's operations and its ultimate profitability. One example is Volkswagen AG's "Dieselgate." Volkswagen deliberately built into its engine emission system a cheat to manipulate pollution test results in America and Europe. When this was revealed, Volkswagen's stock lost almost half its value, or about U.S. $42.5 billion. In addition, Volkswagen has had to record a U.S.$35 billion in losses due to the strategy. Perceptions over the purpose of corporations are changing. Previously, it was generally accepted that corporations should focus primarily on returns to stockholders. Today, however, their role includes serving an expanded group of stakeholders. That is, delivering value to customers, investing in employees, dealing fairly and ethically with suppliers, supporting communities, and generating long-term value for shareholders. Today, good corporate governance needs to go beyond profitability; corporations need to be good corporate citizens, demonstrate environmental awareness, and engage in ethical behavior. Why must corporations consider the interests of all their stakeholders? 150 Chapter 5 | Social Responsibility of Business Ministry of Education 2024-1446

NET KNOWLEDGE Q Visit the Riyadh Chamber of Commerce website. The website provides information on its structure, management, strategies, and other initiatives. Evaluate the Riyadh Chamber of Commerce using the principles of corporate governance. Identify the strengths and or weaknesses of the Chamber's corporate governance practices. CHECKPOINT One example of strong corporate governance is establishing a policy for ethical behavior. List at least three others. 5.1 ASSESSMENT Key Concepts Determine the best answer. 1. A code of ethics is designed to a. meet government regulations b. reduce operating costs of a company c. provide guidelines for proper behavior d. improve employee productivity 2. Which of the following behaviors would be considered unethical? a. allow workers to ask questions b. allow for disclosure of ethics violations c. offer a bribe to government officials d. ensure safe working conditions for everyone 3. Corporate governance starts with a. employees b. managers c. company president d. board of directors Make Academic Connections 4. Technology Search the Internet to locate an example of a code of ethics. Describe the benefits of this code of ethics for the organization. وزارة التعليم Ministry of Education 2024-1446 5.1 Business Ethics | 151

5. Communication Ask your fellow students to identify the behaviors of an ethical business. Create a list of these behaviors and compare them to the ideas in this lesson. Present this to the class. 6. History Use the Internet to research the history of a Saudi Arabian corporation. Compare the corporate governance of the corporation in its early history to how the corporate governance is structured today. P152 152 Chapter 5 | Social Responsibility of Business Ministry of Education 2024-1446

LIFE/WORK SKILLS COMMUNICATION AND COLLABORATION Working in Teams Each day, thousands of workers make decisions and apply business actions in team settings. The ability to work in a team is rated by most employers as one of the most important career skills. The combined skills of the people in a team are greater than that of individuals working alone. When working in a team in class or on the job, consider the following: • Be prepared for minor conflicts in the first phase of a team project. Differences in opinions will surface. Be ready to adapt to the personalities, behaviors, and actions of others. • Agree upon guidelines for project goals, meeting times, location, agenda, missed meetings, conflict resolution, and other procedures. • Define leadership and other roles. Some team members will keep notes and bring needed materials. Others will conduct research or create visuals for a presentation. Determine methods for decision making. Usually this will be done based on agreement among team members after discussion of various issues and opposing points of view. • Keep focused on your goals. Avoid being distracted by minor issues and personality conflicts. Maintain a team-oriented environment by saying "we," "us," or "ours." Avoid using "I," "me," "my," or "mine." Be courteous to others. Respect differences in opinions, personalities, and decision-making styles. Working in teams is something you are likely to do throughout your life. These experiences can be enjoyable and productive. Members of an effective team take responsibility for its work and take pride in its accomplishments. Some team projects will be frustrating. It is important to maintain a positive attitude. Some of the best learning and most valuable experiences result from encounters with others from different backgrounds and with diverse points of view. Think Critically 1. What do you like about working in teams? Are there any aspects about working in teams that you dislike? Describe them. 2. Describe a problem that might occur when working in teams. Explain how this situation might be resolved. وزارة التعليم Ministry of Education 2024-1446 5.1 Business Ethics | 153