BUSINESS ETHICS AND SOCIAL RESPONSIBILITY 2 BUSINESS ETHICS AND SOCIAL RESPONSIBILITY © 2007 Prentice Hall, Inc. All rights reserved.

Ethics in the Workplace Beliefs about what’s right and wrong or good and bad Ethical Behavior Behavior conforming to individual beliefs and social norms about what’s right and good Unethical Behavior Behavior conforming to individual beliefs and social norms about what is defined as wrong and bad Business Ethics The ethical or unethical behaviors by employees in the context of their jobs © 2007 Prentice Hall, Inc. All rights reserved.

Individual Values and Codes Sources of Personal Codes of Ethics Childhood responses to adult behavior Influence of peers Experiences in adulthood Developed morals and values © 2007 Prentice Hall, Inc. All rights reserved.

Business and Managerial Ethics The standards of behavior that guide individual managers in their work Ethics affect a manager’s behavior toward: employees the organization other economic agents—customers, competitors, stockholders, suppliers, dealers, and unions Ethical Concerns Ambiguity (e.g., financial disclosure) Global variation in business practices (e.g., bribes) © 2007 Prentice Hall, Inc. All rights reserved.

Assessing Ethical Behavior Simple Steps in Applying Ethical Judgments Gather the relevant factual information Analyze the facts to determine the most appropriate moral values Make an ethical judgment based on the rightness or wrongness of the proposed activity or policy © 2007 Prentice Hall, Inc. All rights reserved.

Assessing Ethical Behavior Ethical Norms and the Issues They Entail Utility: Does a particular act optimize the benefits to those who are affected by it? Do all relevant parties receive “fair” benefits? Rights: Does the act respect the rights of all individuals involved? Justice: Is the act consistent with what’s fair? Caring: Is the act consistent with people’s responsibilities to each other? © 2007 Prentice Hall, Inc. All rights reserved.

Company Practices and Business Ethics Encouraging Ethical Behavior Involves: Adopting written codes of conduct and establishing clear ethical positions for the conduct of business Having top management demonstrate its support of ethical standards Instituting programs to provide periodic ethics training Establishing ethical hotlines for reporting and discussion of unethical behavior and activities © 2007 Prentice Hall, Inc. All rights reserved.

FIGURE 2.2 Core Principles and Organizational Values © 2007 Prentice Hall, Inc. All rights reserved.

Social Responsibility The overall way in which a business attempts to balance its commitments to relevant groups and individuals (stakeholders) in its social environment Organizational Stakeholders Groups, individuals, and organizations that are directly affected by the practices of an organization and, therefore, have a stake in its performance © 2007 Prentice Hall, Inc. All rights reserved.

FIGURE 2.3 Major Corporate Stakeholders © 2007 Prentice Hall, Inc. All rights reserved.

The Stakeholder Model of Responsibility Customers Businesses strive to treat customers fairly and honestly Employees Businesses treat employees fairly, make them a part of the team, and respect their dignity and basic human needs Investors Businesses follow proper accounting procedures, provide information to shareholders about financial performance, and protect shareholder rights and investments Suppliers Businesses emphasize mutually beneficial partnership arrangements with suppliers Local and International Communities Businesses try to be socially responsible © 2007 Prentice Hall, Inc. All rights reserved.

Contemporary Social Consciousness The Concept of Accountability The expectation of an expanded role for business in protecting and enhancing the general welfare of society © 2007 Prentice Hall, Inc. All rights reserved.

Areas of Social Responsibility Responsibility Toward the Environment Controlling air, water, and land pollution Properly disposing of toxic waste Engaging in recycling © 2007 Prentice Hall, Inc. All rights reserved.

Areas of Social Responsibility (cont’d) Responsibility Toward Customers Involves providing quality products and pricing products fairly Consumerism Social activism dedicated to protecting the rights of consumers in their dealings with businesses Basic Consumer Rights To possess safe products To be informed about all relevant aspects of a product To be heard To choose what to buy To be educated about purchases To courteous service © 2007 Prentice Hall, Inc. All rights reserved.

Consumer Rights (cont’d) Unfair Pricing Collusion: When two or more firms agree to collaborate on such wrongful acts as price fixing Price gouging: Responding to increased demand with overly steep (and often unwarranted) price increases Ethics in Advertising Truth in advertising Morally objectionable advertising © 2007 Prentice Hall, Inc. All rights reserved.

Areas of Social Responsibility (cont’d) Responsibility Toward Employees Legal and social commitments to: not practice illegal discrimination provide a physically and socially safe workplace provide opportunities to balance work and life provide protection for whistleblowers (an employee who discovers and tries to put an end to a company’s unethical, illegal, or socially irresponsible actions by publicizing them) Responsibility Toward Investors Proper financial management (no insider trading) Proper representation of finances © 2007 Prentice Hall, Inc. All rights reserved.

K E Y T E R M S accommodative stance business ethics collusion consumerism defensive stance ethical behavior ethics insider trading managerial ethics organizational stakeholders social audit social responsibility unethical behavior © 2007 Prentice Hall, Inc. All rights reserved.