1 2. Business Ethics and Social Responsibility

2 Business Ethics: Relationships Issues arise out of relationships with: –Investors –Customers –Employees –Creditors –Competitors

3 Common Ethical Issues Fairness & honesty Organizational relationships –Loyalty & whistleblowing Conflict of interest Communications

4 Promoting Ethical Behavior Government –Stringent regulations (e.g., Sarbanes-Oxley Act) Trade associations –Pressure members: enforcement? Individual firms –Codes of ethics –Communication/modeling/training re. ethics –Ethics officer

5 Social Responsibility Recognize & consider impact of decisions on society –Set society’s needs equal to profitability Measured by firms through social audits Tracked by external groups Costs firms money –Green marketing –Corporate philanthropy But is good for business

6 Evolution of Social Responsibility Early 20th Century –Caveat emptor –Few laws; protection of competition, not consumers Sherman Antitrust, FTC, Clayton Act Great Depression of 1930’s –Robinson-Patman, Wheeler-Lea –Social Security –Securities Exchange Commission 1960’s activism –Environment; nat’l defense; civil rights; consumerism

7 Consumerism & Corporate Social Responsibility Ralph Nader No. 1 priority: consumer protection Consumer Product Safety Act/Consumer Product Safety Commission Bill of Rights for Consumers (JFK) –The right to be safe –The right to be informed –The right to be heard –The right to consumer education (Pres. Ford, 1975) –The right to service (Pres. Clinton, 1994)

8 Civil Rights & Corporate Social Responsibility Employment practices (see Table 2.2) –The Civil Rights Act of 1964 Prohibits discrimination in employment –Including sexual harassment –Affirmative action –Equal Employment Opportunity Commission (EEOC)

9 Environmental Concern & Corporate Social Responsibility Significant legislation: –National Environmental Policy Act of 1970 –Clean Air Amendment of 1970 –Water Quality Improvement Act of 1970 –Resource Recovery Act of 1970 –Resource Conservation and Recovery Act of 1984 –Clean Air Act Amendments of 1990 Who pays for cleanup, ultimately?