Chapter 1 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 3 Ethics and Social Responsibility © Quayside/Shutterstock.com 1 © 2013 by Cengage Learning Inc. All Rights Reserved.

4 Learning Outcomes 12 3 Explain the concept of ethical behavior Describe ethical behavior in business Discuss corporate social responsibility-CSR Explain cause-related marketing-CRM 2

3 Values, Morals and Ethics Values Personal/Family Right and Wrong/Should and Shouldn’t Morals Social/Society Good and Bad Ethics Professional/Business Formal system/set of rules adopted by a group of people ns/values/values_morals_ethics.htm

The Concept of Ethical Behavior Explain the concept of ethical behavior 1 4

Ethical Behavior The moral principles or values that generally govern the conduct of an individual or a group. There is no law for “cutting in line.” (Cutting in line would anger most people) Is it legal? Is it ethical? 1 5

Describe ethical behavior in business 6 2 Ethical Behavior in Business

Morals Ethics The rules people develop as a result of cultural values and norms. The moral principles or values that generally govern the conduct of an individual Morals: involve “good” and “bad” Ethics: standards or codes of behaviors 7 2

Fast Food Nation 8 2 Ethical Behavior in Business ?

Ethical Development Levels Preconventional Morality Conventional Morality Postconventional Morality More Mature More 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 9 2

Dell: An Ethics Case Documents from a lawsuit revealed that Dell shipped over 11.8 million faulty computers from 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 used faulty components to fix broken computers. Dell took a $300 million charge to fix the computers, but only in response to stakeholder demands. At what level of ethical development did Dell operate? 10

Ethical Decision Making Influential Factors Extent of Problems Top Management Actions Potential Consequences Social Consensus Probability of Harm Time Until Consequences Number Affected 11 2

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 12 2

Ethics in Other Countries 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. Foreign Corrupt Practices Act (FCPA) 13 2

Corporate Social Responsibility Discuss corporate social responsibility 14 3

Corporate Social Responsibility Pros It is the right thing to do Businesses have the resources to devote to fixing social problems Prevents government regulation and potential fines It can be profitable Cons Takes focus away from making profits Business executives spend shareholder money on environmental initiatives Do companies know what is best for the world? (Milton Friedman) 15 3

Sustainability Socially responsible companies will outperform their peers. It is in business’s best interest to find ways to attack society’s ills

Exhibit 3.1 Corporate Social Responsibility Pyramid of Corporate Social Responsibility 17

Growth of Social Responsibility According to a recent study, (IBM Global Survey) the percentage of firms that consider social responsibility factors when making business decisions are as follows: Brazil 62% 54% Canada Australia 52% 47% United States India 38% 35% China Mexico 26% 18 3

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 –Implications of Pricewaterhouse study (raw materials depleted in 25 years) 19 3

20 Cause-Related Marketing Explain cause-related marketing 4

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Cause-Related Marketing For-profit and non-profit organizations cooperate to generate funds. Generates about $7 billion annually Too many causes cause customer cause fatigue 22 4