McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-1 Chapter 44 Demonstrating Ethical Behavior and Social Responsibility 4-1

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-2 Ethics  More Than Legality  Standards are Fundamental  Stem From Individual

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-3 SEC Investigations (2002) Accounting Arthur Andersen Deloitte & Touche Ernst & Young KPMG PriceWaterhouse Coopers Energy CMS Energy DynergyEnronHalliburton Reliant Resources Software Computer Associates Network Associates Telecom Global Crossing Lucent Technologies Qwest Communications WorldCom Wall Street Credit Suisse First Boston Hedge Funds Capital Markets Merrill Lynch Source: Business Week, June 10, 2002

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-4 Corporate Scandal Fines CompanyFineReason Arthur Andersen $500,000 Obstruction of Justice Shredding Enron Documents Citigroup$5,000,000 Analyst Issued Misleading Information Merrill Lynch $100,000,000 Conflict of Interest Between Investment Bank & Research Dept. Credit Suisse First Boston $100,000,000 IPO Shares Unfairly Distributed Source: Business Week, Nov. 4, 2002

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-5 Why People Volunteer Percent of Respondents Total is more than 100%- respondents could give more than one reason.

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-6 Ethics of MBA Students Percent of MBA Students Who Would:  Buy Stock on Inside Information52%  Reveal Corp. Secrets to Spouse/Family50%  Let a Gift Sway Purchasing Decision26%  Pay Someone Off to Close a Business Deal13% Business Deal13% Source: USA Today

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-7 Ethics Check Questions: ÔIs It Legal? ÔIs It Balanced? ÔHow Will It Make Me Feel About Myself?

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-8 Ethical Decision Resolved Through: Religious TeachingsReligious Teachings Individual RightsIndividual Rights LegislationLegislation Court DecisionsCourt Decisions

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 4-9 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 Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Codes of Ethics Compliance- BasedCompliance- Based Integrity- BasedIntegrity- Based

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Steps to Improve U.S. Business Ethics 1.Top Management 2.Employees 3.Managers 4.Ethics Office 5.Outsiders 6.Enforcement

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Levels of Corporate 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 Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Contributions to Charity (In Billions of Dollars)

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 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 Industry Company Source: Fortune Magazine

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Merck Johnson & Johnson Pfizer Eli Lilly IBMMicrosoftIntel Bank of America $221.0* Source: The Taft Group * In Millions Corporate Annual Giving

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Where Charitable Contributions Go (2001) In Billion $ Source: BusinessWeek. Dec. 2, 2002

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Social Audit By CompanyBy Company Outside CompanyOutside Company Socially-Conscious InvestorsSocially-Conscious Investors EnvironmentalistsEnvironmentalists Union OfficialsUnion Officials CustomersCustomers

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved International Ethics & Responsibility Ethics Not Unique To U.S.- Leaders Accountable Demand for Socially Responsible Behavior Inter-American Convention Against Corruption