McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-1 Chapter Four Demonstrating Ethical Behavior & Social Responsibility

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-2

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-3 What Is an Ethical Dilemma? Choice A Advance one’s own interests at the expense of others Decision Maker is faced with two choices Choice B Forfeit a self-serving opportunity to protect the welfare of others

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-4 Classifying Business Decisions Ethical Unethical IllegalLegal Unethical and Illegal Ethical and Legal Unethical but Legal Ethical but Illegal

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-5 Factors That Cause Workers To Act Unethically n Pressure to meet sales, budget or profit goals n Lack of recognition n Personal financial worries n Balancing work & family n Poor communication

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-6 Top Five Unethical/Illegal Behaviors of Workers è Cut corners in quality control è Covered up incidents è Abused or lied about sick days è Lied to or deceived customers è Put inappropriate pressure on others

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-7 Factors Influencing Managerial Ethics Individual OrganizationalEnvironmental  Values  Work Background  Family Status  Personality  Top Level Mgmt. Philosophy  The Firm’s Reward System  Job Dimensions  Competition  Economic Conditions  Social/Cultural Institutions

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-8 Levels of Moral Development n Preconventional n Conventional n Post-conventional (principled)

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-9 What Really Works? Workplace Deviance (Counterproductive Behaviors) Overt Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personality-Based Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 82% Probability of success68%

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved What Really Works? (Cont’d.) Job Performance Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personality-Based Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success70% Probability of success69%

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved What Really Works? (Cont’d.) Theft Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success57%

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Ethical Decision Making Approaches n Utilitarian n Individual Rights n Justice Approach

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Fostering Ethical Behavior nLeading by Example nCodes of Conduct –Compliance-based –Integrity-Based nTraining Programs nProtecting Whistleblowers

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Johnson & Johnson Corporate Credo Johnson & Johnson Corporate Credo n WE BELIEVE THAT THAT OUR RESPONSIBILITY IS: n To the health care professionals who use our products and services n To our employees n To the communities in which we operate n To our shareholders

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Corporate Social Responsibility: Two Perspectives n Classical View (Shareholder View) n Socioeconomic View (Stakeholder View)

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Three Levels of Social Responsibility Societal Responsibility Stakeholder Responsibility Profit Responsibility Owners/Stockholders GeneralPublic Customers Employees Suppliers/Distributors EcologicalEnvironment Public Interest Groups Source: Marketing, 5/E by Berkowitz, Kerin, Hartley, and Rudelius.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Contributions to Charity (In Billions of Dollars) Source: Forbes Dec. 15, 1997

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved New Economy & New Philanthropy * In Billions Source: Business Week, Mar. 13, 2000

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Corporate Annual Giving Merck Johnson & Johnson Pfizer Eli Lilly IBMMicrosoftIntel Bank of America $221.0* Source: The Taft Group * In Millions

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Why Do Business Firms Support Social Causes? n Genuine altruism and social consciousness n Strategic philanthropy n Cause-related marketing