McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-1 Chapter Two Business Ethics & 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 Business Ethics n Standards of conduct & moral values n Necessary for long-term survival n New ethical environment

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-4 Ethics Check Questions: The Power of Ethical Management by Blanchard & Peale Ô Is It Legal? Ô Is It Balanced? Ô How Will It Make Me Feel About Myself?

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 Ethical Challenges n Conflict of interest n Whistle-blowing n Loyalty versus truth n Honesty & integrity

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-7 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. 4-8 Fostering Ethical Behavior nLeadership nCodes of Conduct –Compliance-based –Integrity-Based nSocial Audits nWhistle Blowing

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 4-9 Enron Economic Stimulus Package n 40 Davis Polk & Wardwell attorneys for Arthur Andersen; 50 bankruptcy Weil, Gotshal attorneys for Enron ($200-$700/hr.) n 6 SEC investigators n $115,000 of Enron memorabilia sold on e-bay ($8,000 commission to e-bay) n 6 Houston Hyatt rooms for CNN reporters n 20% increase in CNN viewership (age25-54) WSJ 1-02 WSJ 1-02

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Business Ethics & Social Responsibility n Ethics- Values/Principles n Responsibility- Consequences of Actions

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Responsibilities to General Public n Public health issues n Protecting the environmentQuality of the workforce n Corporate philanthropy

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Responsibilities to Customers n Right to be safe n Right to be informed n Right to choose n Right to be heard

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Responsibilities to Employees n Workplace safety n Quality of life issues n Equal Opportunity n Age discrimination n Sexual harassment & sexism

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Responsibilities to Investors & the Financial Community n Securities & Exchange Commission (SEC) n Fairness n Honesty n Timely Action n Appropriate Compensation n Philanthropy

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Johnson & Johnson’s Credo n Our first responsibility is to the doctors, nurses & patients, to mothers & fathers and all others who use our products & services. …We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens-support good works & charities and bear our fair share of taxes. We must encourage civic improvements & better health & education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources…

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved n High ideals don’t have to conflict with a bottom line. When we started providing health coverage to our part- time employees, we noticed a lot less turnover. When we started setting goals for sustainable agricultture, we developed stronger relationships with coffee farmers. And when we reached out through community programs, people bought more of our coffee.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Outstanding Companies n Johnson and Johnson n Ben and Jerry’s n Timberland n The Body Shop n 3M n Newman’s Own n

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Most Admired Non-U.S. Firms n Toyota n BMW n Sony n Nokia n Nestle n Honda n BP n Singapore Air n Canon n Loreal n Japan n Germany n Japan n Finland n Switzerland n Japan n Britain n Singapore n Japan n France

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Most Admired 2004 U.S. Companies n Wal-Mart n Southwest n GE n Dell n Microsoft n Johnson & Johnson n IBM n FedEx n Starbucks

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved S. FLA Firms on Inc n Rent Rite n Cross Match n Starmark Intl. n Brightstar (Miami) n Card USA n Blue Star Products (Miami) n Vitacost.com n Swiss Watch Intl. n Governor’s Distributors (Miami) n A.M.E.’s Uniforms n Baci Fresh

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Gap’s Code of Vendor Conduct n Factories they deal with must treat workers fairly & provide safe working conditions. n Enforced by a global network of 80 vendor compliance officers. n In 1999, the Gap & 18 other companies named for alleged inhumane working conditions in a class action suit.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Ethical Decision Resolved Through: n Religious Teachings n Individual Rights n Legislation n Court Decisions

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Shopping for a Better World n Baptists vs. Mickey n Dolphin-safe Starkist Tuna n Proctor & Gamble Pampers n Nestle’s Infant formula n Nike n McDonalds

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Boycotts n Anheuser Bush - In Defense of Animals (Refused to free Sea World whale before she died) n Coors – Animal Emancipation (Major rodeo sponsor abusing animals) n Holiday Inn – American Family Association (Largest provider of in-room pornographic movies) n Mattel – Media Watch (Li’l Miss Make-up sexualizes young girls)

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved What Concerns Workers Most on the Job? n Hazardous Materials 23% n Injury 20% n Repetitive job motions 10% n Poor ventilation 7% n HIV/Aids 6% Percent

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Most Admired Companies by Industry  ApparelLevi-Strauss  AirlinesSouthwest  Food ServicesMcDonald’s  Food ProductsCampbell’s  BeveragesCoca-Cola  ElectronicsIntel IndustryCompany Source: Fortune Magazine

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved High Profiles in Hot Water n Arthur Andersen’s David Duncan, CEO- ordered destruction of documents related to Andersen’s Enron audits. Pleaded guilty to obstructing justice. n Enron’s Kenneth Lay, CEO- His company created & approved outside partnerships that allegedly kept billions of dollars in losses off Enron’s accounting books. n Living Omnimedia’s Martha Stewart, Chairman- insider trading, obstruction of justice, and making false statements.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved High Profiles in Hot Water n Tyco’s L. Dennis Kozolowski, CEO-failed to pay more than $1 million in sales tax on artwork, used Tyco funds for real estate & other personal expenses. n UTD’s Pat Tornillo, President-used pension funds for personal expenses. n WorldCom’s Scott Sullivan, CFO, inappropriately accounted for $3.8 billion in expenses, thereby inflating profits.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved International Ethics & Social Responsibilities nU.S. not unique –Japan/S. Korea/China = influence peddling –Mexico = child labor nLeaders being held to new/higher standards –Chinese prison labor –McDonald’s using rain forest land for cattle grazing

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Businesses Don’t Have Social Responsibilities; People Do Businesses Don’t Have Social Responsibilities; People Do