©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 4

4 4 Business Ethics and Social Responsibility: Doing Well By Doing Good 2 LO 1What is ethics? What are the universal ethics standards? LO 2What are business ethics? What is an ethical dilemma? LO 3How does ethics relate to the individual and the organization? LO 4What is social responsibility and how does it impact stakeholder groups? LO 5What is the role of social responsibility in the global arena? LO 6How do companies evaluate their efforts to be socially responsible?

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethics & Social Responsibility: A Close Relationship 3 ETHICS Beliefs about right and wrong SOCIAL RESPONSIBILITY The obligation of a business to contribute to society

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Defining Ethics 4

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Universal Ethical Standards 5

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Business Ethics: Not an Oxymoron 6 Ethical Dilemma Negative consequences Two unfavorable options Ethical Lapse Clear misconduct Most challenging business decisions seem to arise when values are in conflict. Business Ethics is the application of right and wrong in the workplace.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Bad News for Business—Worse News Tomorrow! 7 39% believe that a person has to lie or cheat sometimes in order to succeed. 59% admitted that they cheated on a test at school within the past 12 months. 72% agree that it’s sometimes OK to hit or threaten a person who makes me very angry. 18% admitted that they stole something from a friend within the past 12 months. 28% admitted that they stole something from a store within the past 12 months. A study of 43,000 high school students revealed: High school attitudes are a clear predictor of adult behavior. © DIGITAL VISION/GETTY IMAGES Source: The Ethics of American Youth. What would Honest Abe say? Josephson Institute Press Release, February 10, 2011, Character Counts website accessed February 20, 2011

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethics: Multiple Touchpoints Individuals must make their own ethical choices BUT The organization can have a significant influence on decisions 8 © STOCKBYTE/GETTY IMAGES

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethics and the Individual: The Power of One 9 Key Principles of Decisions: 1.Do you fully understand each dimension of the problem? 2.Who would benefit? Who would suffer? 3.Are the alternative solutions legal? Are they fair? 4.Does your decision make you comfortable as a “gut feel” level? 5.Could you defend your decision on the nightly TV news? 6.Have you considered and reconsidered your response to each question?

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethics and the Organization: It Takes a Village Ethical influence starts at the top, actions matter more than words. The Big Three Automakers went to Washington to request a $25 billion bailout package in corporate jets After the government gave AIG $85 billion to avoid bankruptcy; the company spent $440,000 on a sales retreat Disney CEO hired his friend who was fired for incompetence after 14 months; the 140 million settlement and his expense account details caused stockholders to sue 10 Source: Big Three auto CEOs flew private jets to ask for taxpayer money by Josh Levs, November 19, 2008, CNN website, accessed February 2, Lawmakers, Questioning Fed Bailout, Seek AIG `Junket' Refund By Ryan J. Donmoyer - October 9, 2008 Bloomberg website accessed February 21, 2011

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. How Would you Judge the Actions of these Business Leaders? 11 Stanley O’Neal began as Merrill Lynch began racking up losses that led to its collapse, he announced his “retirement.” Sanjay Kumar of Computer Associates was convicted of massive accounting fraud in Martha Stewart was convicted of obstructing justice in a $40,000 well timed stock sale. Sherron Watkins, former vice president of Enron reported the accounting Irregularities that led to the discovery of corporate fraud. Pierre Omidyar, the founder of eBay has given away over $100 million to Tufts University Micro Finance Fund. Whole Foods CEO, John Mackey posted thousands of comments on Yahoo Finance, hyping his company and attacking Wild Oats, which he was planning to purchase.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Creating and Maintaining and Ethical Organization 12 Role of Top Management the tone from the top must be reinforced by behavior Role of Top Management the tone from the top must be reinforced by behavior Organizational Culture strongest variable on ethical conduct Organizational Culture strongest variable on ethical conduct

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Bringing Code of Ethics to Life 13 Code of Ethics is a written document providing direction for employees to make ethical decisions. 1. Executive Buy-in 2. Clear expectations 3. Integrated approach 4. Global and local 5. Whistleblower support 6. Reporting and Enforcement © Brian A Jackson / Shutterstock.com

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Defining Social Responsibility Core stakeholder groups include employees, customers, investors, and community. 14 Social Responsibility is the obligation of a business to contribute to society.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Stakeholder Approach 15 EMPLOYEES INVESTORS COMMUNITY ENVIRONMENT CUSTOMERS Creating Jobs that Work Sustainable Development Value, Honesty and Communication Fair Stewardship and Full Disclosure Business and the Greater Good

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Spectrum of Social Responsibility 16

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stakeholders 17 Stakeholders are any groups that have a stake or a personal interest in the performance and actions of an organization. Stakeholders are any groups that have a stake or a personal interest in the performance and actions of an organization.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Meet Legal Standards Workplace Safety Minimum Wage/Overtime Requirements Protection from Sexual Harassment Provide Work/Life Balance  Family and Medical Leave 18 Responsibility to Employees: Creating Jobs that Work © Purestock/ Jupiterimages

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Right to Be Safe The Right to Be Informed The Right to Choose The Right to be Heard The Right to Be Safe The Right to Be Informed The Right to Choose The Right to be Heard Planned Obsolescence – Deliberately designing products to fail in order to shorten the time between consumer repurchases 19 Responsibility to Customers: Value, Honesty, and Communication Consumerism: a social movement suggests that consumer rights should be the starting point. President Kennedy defined these rights.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Legal Requirements Sarbanes-Oxley Responsible use of Corporate Dollars Honesty Is Optimism or Pessimism Socially Responsible? 20 Responsibility to Investors: Fair Stewardship and Full Disclosure

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Corporate Philanthropy - business donations to nonprofit groups, including both money and time. Corporate Responsibility - actions of the business rather than donations of money and time Cause-related Marketing – partnerships between businesses and nonprofit organizations, designed to spike sales for the company and raise money for the nonprofit 21 Responsibility to the Community: Business and the Greater Good © The Studio Dog/Photodisc/Getty Images

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sustainable Development Doing business to meet the needs of this generation without harming the ability of future generations Carbon Footprint Amount of harmful greenhouse gases a firm emits Green Marketing Marketing environmental products and practices for competitive advantage Responsibility to the Environment 22

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Corporations Tracking Emissions The goal is for companies to become carbon neutral; emit zero gasses or to counteract impact of emissions Dell Inc. became carbon neutral in 2008 Corporations track three types of emissions:  Scope 1: direct emissions from operations  Scope 2: emissions from electricity, heat and steam  Scope 3: outside the company boundary that it has some control 23 Source: U.S. Corporations Size Up Their Carbon Footprints by Rachel King, June 1, 2009, Bloomberg Businessweek, Businessweek website, accessed February 24, 2011

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethics and Social Responsibility in the Global Arena: A House of Mirrors? Corruption is part of the culture in many countries Bribes or Gifts Labor issues in host countries can be complicated Living Wage Child Labor 24

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Going Green: It’s Not Just Governments Bank of America reduced paper use by 32% from 2000 TO 2005 despite 24% customer growth. Arrowhead bottled water introduced smaller “Eco Shape” bottles that helped save 245 million pounds of plastic resin. DuPont reduced greenhouse gas emissions during the 1990s by 63%. Telsa Motors is developing environmentally friendly sports cars with virtually no emissions Hewlett-Packard owns gigantic e-waste recycling plants that reclaim steel, plastic and toxic chemicals. Sources: BusinessPundit, “25 Big Companies That Are Going Green,” July 29, 2008,,(accessed May 17, 2010); CNNMoney, “Ten Green Giants,” (accessed May 17, 2010) Arrowhead website, accessed February 25, © Jamey Ekins / Shutterstock.com

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethics and Social Responsibility: Who is Minding the Store? 26 SOCIAL AUDIT A systematic evaluation of how well a firm is meeting its ethics and social responsibility objectives

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Gather Around the Water Cooler: Let’s Talk 27 © iStockphoto.com/DNY59 If ethical behavior depend on individuals in an organization, how do managers promote ethical behavior? Why are all the actions of managers important to model ethical behavior? Do small favors count in modeling ethical behavior?

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 4 Looking Back What is ethics? What are the universal ethics standards? What are business ethics? What is an ethical dilemma? How does ethics relate to the individual and the organization? What is social responsibility and how does it impact stakeholder groups? What is the role of social responsibility in the global arena? How do companies evaluate their efforts to be socially responsible? 28