Making Ethical Decisions and Managing a Socially Responsible Business Chapter 2 *includes other resources

I. Business Ethics I. Business Ethics Ethics:refers to principles of Ethics:refers to principles of behavior that distinguish between behavior that distinguish between right and wrong right and wrong Business Ethics: the evaluation of Business Ethics: the evaluation of business activities and behavior as business activities and behavior as right or wrong right or wrong

I. Business Ethics (cont’d) A. Factors influencing ethical behavior 1. the business environment 1. the business environment 2. the organization 2. the organization 3. the individual -- moral philosophy 3. the individual -- moral philosophy a. humanistic philosophy a. humanistic philosophy b. utilitarian philosophy b. utilitarian philosophy

II.Two ways that people judge fairness A. Procedural justice Is the process fair? B. Distributive justice Is the result fair?

III. How Organizations Influence Ethical Conduct A. Recognizing Unethical Business Actions 1. Taking things that don’t belong to you 1. Taking things that don’t belong to you 2. Saying things you know aren’t true 2. Saying things you know aren’t true 3. Giving or allowing false impressions 3. Giving or allowing false impressions 4. Buying influence or engaging in a conflict of 4. Buying influence or engaging in a conflict of interest interest 5. Hiding or divulging information 5. Hiding or divulging information 6. Taking unfair advantage 6. Taking unfair advantage

Unethical Business Actions (cont’d) 7. Committing improper personal behavior 7. Committing improper personal behavior 8. Abusing another person 8. Abusing another person 9. Permitting organizational abuse 9. Permitting organizational abuse 10. Violating the rules 11. Condoning unethical actions

III. How Organizations Influence Ethical Conduct (cont’d) B. Ways of Resolving Ethical Problems in Business in Business 1. Three-Questions Test 1. Three-Questions Test Is it legal? Is it legal? Is it balanced? (share joy/pain equally) Is it balanced? (share joy/pain equally) How does it make me feel? How does it make me feel? 2. Front Page of the Newspaper Test 2. Front Page of the Newspaper Test

III. How Organizations Influence Ethical Conduct (Cont’d) C. Preventing Unethical Actions 1. Leading by Example 1. Leading by Example -leaders/managers establish patterns of -leaders/managers establish patterns of behavior behavior 2. Ethics Training - awareness of questionable 2. Ethics Training - awareness of questionable activities and practice appropriate activities activities and practice appropriate activities 3. Establishing Formal Code of Ethics 3. Establishing Formal Code of Ethics -whistle-blowers -whistle-blowers

IV. Costs of Unethical Behavior A. Damage to firm’s reputation B. Lost sales; results in lost profits C. Fines and lawsuits D. Loss of control of the firm to regulators or others or others

V. Business Ethics Gone Wrong A. Financial Reporting 1. Enron 1. Enron 2. Arthur Andersen 2. Arthur Andersen B. Insider trading 1. ImClone C. CEO Salaries 1. Scandal CEOs make more 1. Scandal CEOs make more

VI. Social Responsibility the awareness that business activities have an impact on society, and the consideration of that impact by firms in decision making

VII. Responsibilities to Stakeholders A. Responsibility to Consumers 1. consumerism 2. Kennedy’s Consumer Bill of Rights a. The right to safety. a. The right to safety. b. The right to be informed. b. The right to be informed. c. The right to choose. c. The right to choose. d. The right to be heard. d. The right to be heard.

Responsibilities to Stakeholders (cont’d) B. Responsibility to Employees 1. Safety in the workplace (OSHA) 1. Safety in the workplace (OSHA) 2. Equality in the workplace -- EEOC 2. Equality in the workplace -- EEOC 3. Sexual harassment 3. Sexual harassment 4. Managing cultural diversity 4. Managing cultural diversity

Responsibilities to Stakeholders (cont’d) C. Responsibility to the environment 1. Water pollution 2. Air pollution 3. Land pollution 4. Green marketing

Responsibilities to Stakeholders (cont’d) D. Responsibility to investors 1. Proper management of funds 2. Access to information 3. Executive Compensation

VIII. Advancing Social Responsibility A. Community support -donations, scholarships, community involvement B. Self-regulation -Better Business Bureau - pros and cons C. The social audit

Discussion: What do You Expect from Companies? When I am a(n): EmployeeCustomer Member of Society Investor I expect:

Examples: When I am a(n): EmployeeCustomer Member of Society Investor I expect: n job security, benefits, flexibility, compensation n safe products, response to complaints, honest advertising n charitable contribution, minimal environmental harm n profits, disclosure, ethical practices

Strategic Giving Example In 1999, Bill Gates, CEO of Microsoft, donated a total of $3.35 billion to –The Gates Learning Foundation, which provides computers & software to libraries in low-income areas –The William H. Gates Foundation, which grants money to aid world health & human services and to local Seattle causes