7 - Common Unethical Practices of Business Establishments Flashcards
2 types of unethical problems of business establishments
- Misinterpretation
- Over-persuasion
Actively misrepresenting about the product or customers
Direct Misinterpretation
Placing the product in containers of exaggerated sizes to give false impression of its actual contents; only filled up to 85-95% of their capacity
Deceptive Packaging
Practice of making false statements on the label of a product making its container similar to a well-known product
Misbranding
Greatly exaggerates the virtues of a product and tells only half of the truth.
False Advertising
Useful purpose if it conveys the right information; principal means by which people are informed about the availability.
Advertising
Unethical practice of debasing a pure or genuine commodity by imitating or counterfeiting it.
Adulteration
Mechanism of the weighing scale is tampered so that the scale registers more than the actual weight.
Short weighing
Measurement is shorter than the real length or smaller in volume than the standard.
Short measurement
Seller gives customer less than the number ask or paid for
Short numbering
Omitting unfavorable information about the product or service
Indirect Misinterpretation
Means “let the buyer beware”
Caveat emptor
Seller is not obligated to reveal any defect in the product; it is the responsibility of the customer to determine for himself
Caveat emptor
Deliberate withholding of significant info; no business transaction is fair where one of the parties does not exactly know what he is giving away or receiving in return
Deliberate Withholding of Information
Contributes to the impression that businessmen are liars and are out to make a fast buck.
Passive deception
Unable to provide the customer with the complete information that they need to make a fair decision
Business ignorance
Process of appealing to the emotions of a prospective customer and urging him to buy an item; necessary in the selling of goods if done in the interest of a buyer
Persuasion
Persuasion used for the sole benefit of selling a product without considering the interest of the buyer is not ethical
Over-Persuasion
2 types of unethical practices of corporate management
- practices of the BOD
- practices of executive officers
BOD help themselves to the earnings that otherwise would go to other stockholders
Plain Graft
Often practiced by a person who holds directorial positions in 2 or more corporation that do business with each other and may involve conflict or interest and can result to disloyal selling.
Interlocking Directorship
Happens when this person is compelled to decide which of the two corporation’s interest should be protected or upheld.
Disloyal selling
When they fail to attend board meetings regularly; non-attendance of board meetings could result to betrayal of trust of the parties who elected them to their positions
Negligence of Duty
Involved trading in a public company’s stock by someone who has non-public material information
Insider Trading
Insider trading is ____ if material information is still non-public
Illegal
Any information that could substantially impact on investor’s decision to buy or sell the security
Material non-public information
Insider trading is ____ when directors purchase or sell shares but disclose their transactions legally
Legal
President or Vice President reports his personal vacation as a business trip so he can get reimbursement for his expenses
Claiming a vacation trip to be a business trip
Ask company employees to do personal things for them on company time
Having employees do work unrelated to the business
Managers do not provide adequate controls to discourage employees from engaging in unethical practices.
Loose or ineffective controls
Unfair labor practices committed by employer
Unfair labor practices
Employers claim non-existent losses so they can be exempted from paying minimum wage required by law.
Making false claims about losses to free themselves form paying the compensation and benefits provided by law.
Committed by a person having authority over another
Sexual Harassment
Arises when employee who is duty bound to protect interests of his employer violates this obligation by getting himself into situations where his decision is influenced by what he can gain personally from it.
Conflicts of Interest
Dishonest acts
Dishonesty