Ethics and Social Responsibility Lamb, Hair, McDaniel Chapter 3 Ethics and Social Responsibility 2011-2012 CHAPTER 3 Ethics and Social Responsibility If you have ever resented a line-cutter, then you understand ethics and have applied ethical standards in life. © Quayside/Shutterstock.com

Learning Outcomes LO 1 Explain the concept of ethical behavior Chapter 3 Ethics and Social Responsibility Learning Outcomes LO 1 Explain the concept of ethical behavior LO 2 Describe ethical behavior in business LO 3 Discuss corporate social responsibility 2

The Concept of Ethical Behavior Chapter 3 Ethics and Social Responsibility The Concept of Ethical Behavior Explain the concept of ethical behavior LO1 3

Chapter 3 Ethics and Social Responsibility Ethical Behavior The moral principles or values that generally govern the conduct of an individual or a group. Example: There is no law for “cutting in line.” Cutting in line would anger most other people. Notes: Ethical questions range from practical, narrowly defined issues, such as a businessperson’s obligation to be honest with his customers, to broader socials and philosophical questions, such as whether a company is responsible for preserving the environment and protecting employee rights. LO1 4

Ethical Behavior in Business Chapter 3 Ethics and Social Responsibility Ethical Behavior in Business Describe ethical behavior in business LO2 5

Ethical Behavior in Business Chapter 3 Ethics and Social Responsibility Ethical Behavior in Business Ethics Morals The moral principles or values that generally govern the conduct of an individual. The rules people develop as a result of cultural values and norms. Notes: Morals can be considered a foundation of ethical behavior. Ethical values are situation specific and time oriented. One approach to developing a personal set of ethics is to examine the consequences of a particular act. A second approach stresses the importance of rules. Another approach emphasizes the development of moral character within individuals. Discussion Questions: Ask students to think up a situation based around a particular action, and answer the following questions. Who is helped or hurt? How long do the consequences last? What actions produce the greatest good for the greatest number of people? Morals involve “good” and “bad” as well as “deviant” behaviors LO2

Ethical Development Levels Chapter 3 Ethics and Social Responsibility Ethical Development Levels Pre-conventional Morality Conventional Post-conventional More Mature Childlike Based on what will be punished or rewarded Self-centered, calculating, selfish Moves toward the expectations of society Concerned over legality and the opinion of others Concern about how they judge themselves Concern if it is right in the long run Notes: Ethical development can be thought of as having three levels. LO2 7

Dell: An Ethics Case Beyond the Book Chapter 3 Ethics and Social Responsibility Dell: An Ethics Case Documents from a lawsuit revealed that Dell shipped over 11.8 million faulty computers between 2003 and 2005. An internal investigation revealed extensive problems, but Dell tried to cover up the problem, telling its sales team not to mention bring it up. Dell at times used faulty components to fix broken computers. Dell took a $300 million charge to fix the computers, but only in response to stakeholder demands. What level of ethical development is Dell operating at? Beyond the Book 8

Ethical Decision Making Chapter 3 Ethics and Social Responsibility Ethical Decision Making Influential Factors Extent of Problems Top Management Actions Potential Consequences Social Consensus Probability of Harm Time Until Consequences Number Affected Notes: There is no cut-and-dried formula for making ethical decisions, but these factors influence ethical decision making and judgments. LO2 9

Creating Ethical Guidelines Chapter 3 Ethics and Social Responsibility Creating Ethical Guidelines A Code of Ethics: Helps identify acceptable business practices Helps control behavior internally Avoids confusion in decision making Facilitates discussion about right and wrong © iStockphoto.com/Steve Cady Notes: Businesses must be careful not to make their code of ethics to vague or too detailed. LO2 10

Ethics in Other Countries Chapter 3 Ethics and Social Responsibility Ethics in Other Countries Foreign Corrupt Practices Act (FCPA) Prohibits U.S. corporations from making illegal payments to foreign officials. Has been criticized for putting U.S. businesses at a disadvantage. Has encouraged some countries to implement their own anti-bribery laws. Notes: In order to maintain ethical practices overseas, companies must comply with the Foreign Corrupt Practices Act (FCPA). Foreign U.S. ethical standards on to foreign cultures has been said to put U.S. corporations at a disadvantage by not allowing them to participate in foreign cultural norms (such as giving gifts). However, the pressure to work with U.S. corporations and avoid law suits has encouraged some countries to implement anti-bribery laws. LO2 11

Corporate Social Responsibility Chapter 3 Ethics and Social Responsibility Corporate Social Responsibility Discuss corporate social responsibility LO3 12

Chapter 3 Ethics and Social Responsibility Sustainability Socially responsible companies will outperform their peers. It is in business’s best interest to find ways to attack society’s ills. Notes: Corporate social responsibility (CSR) is a business’s concern for society’s welfare. LO3

Pyramid of Corporate Social Responsibility Chapter 3 Ethics and Social Responsibility Exhibit 3.1 Pyramid of Corporate Social Responsibility The components of CSR are: Economic: Profit is the foundation on which all other responsibilities rest. Legal responsibilities: Law is society’s codification of right and wrong; play by the rules of the game. Ethical responsibilities: Do what is right, just, and fair; avoid harm. Philanthropic responsibilities: Contribute resources to the community; improve the quality of life. These components are distinct but together constitute the whole. However, if the company doesn’t make a profit, the other three responsibilities are moot. Discussion/Team Activity: Research companies that are America’s most admired companies: Apple Google Wal-Mart Amazon.com Coca-Cola Berkshire Hathaway Goldman Sachs Procter & Gamble LO3 14

Arguments Against Social Responsibility Chapter 3 Ethics and Social Responsibility Arguments Against Social Responsibility Businesses should focus on making a profit and leave social and environmental concerns to nonprofits. Milton Friedman argued that the free market, and not companies, should decide what is best for the world—socially responsible companies are using shareholders’ money to further their own agendas. LO3 15

Growth of Social Responsibility Chapter 3 Ethics and Social Responsibility Growth of Social Responsibility According to a recent study, the percentage of firms that consider social responsibility factors when making business decisions: Brazil 62% 54% Canada Australia 52% 47% United States India 38% 35% China Mexico 26% Notes: Another survey pointed out that 47 percent of American firms simply was not adequate. Seventy-five percent felt that U.S. companies needed to do more in the area of social responsibility. LO3 16

Cost of Ignoring Social Responsibilities Chapter 3 Ethics and Social Responsibility Cost of Ignoring Social Responsibilities Some surveys indicate that consumers would be willing to pay more for a socially responsible company’s product. Making false claims about social responsibility can be especially costly. LO3

Chapter 3 Ethics and Social Responsibility Green Marketing The development and marketing of products designed to minimize negative effects on the environment or improve the environment. Environmentally aware customers pay more for products Companies must try to educate customers of environmental benefits Discussion Questions/Team Activities: Have students come up with examples of products using green marketing, then have them research the legitimacy of those claims. LO3

Method – Social Responsibility, Ethics, and the Marketing Environment Chapter 3 Ethics and Social Responsibility Chapter 3 Videos Method – Social Responsibility, Ethics, and the Marketing Environment Does method have a societal marketing orientation, or is it just a market-oriented company that integrates a number of environmental practices into its operation? Explain http://www.cengage.com/marketing/book_content/1439039429_lamb/company_clips/ch03.html Beyond the Book 19