1. Business Ethics and Social Responsibility www.wileybusinessupdates.com
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Business Ethics and Social Responsibility
Chapter 2
Business Ethics and Social Responsibility
Chapter Two
Copyright  2017 John Wiley & Sons, Inc.

2. Learning Objectives 1
Explain the concern for ethical and societal issues
Describe the contemporary ethical environment
Discuss how organizations shape ethical conduct 4
Describe how businesses can act responsibly to satisfy society
Explain the ethical responsibilities of businesses to investors and the financial community 2 5
Review and discuss the learning objectives with students. Gauge their awareness and their current opinions. Use an example of a current business ethics issue/case throughout this chapter.
Learning objectives for chapter 2 include the following:
Explain the concern for ethical and societal issues
Describe the contemporary ethical environment
Discuss how organizations shape ethical conduct
Describe how businesses can act responsibly to satisfy society
Explain the ethical responsibilities of businesses to investor and the financial community
CLASS ACTIVITY: Before you begin the lecture, it may be interesting to have each student (anonymously) write down his/her definition of the word “ethics.” Read each aloud in class. 3
Copyright  John Wiley & Sons, Inc.

3. Concern for Ethical and Societal Issues
Business Ethics
The standards of conduct and moral values governing work actions and decisions
Social Responsibility
How a business decision impacts the environment, employees, and customers
Enhancement of society’s welfare through philosophies, policies, procedures, and actions
An organization with the goal of prospering long term, should consider business ethics.
Businesses must take into account a wide range of social issues, including how a decision will impact the environment, employees, and customers – these issues are at the heart of social responsibility.
The ethical climate within an organization is important – this includes codes of conduct and ethical standards.
Highlight the difference between social responsibility (whose primary objective is the enhancement of society’s welfare through philosophies, policies, procedures, and actions) and business ethics. Businesses must balance between doing what is right and what is profitable.
LECTURE ENHANCER: Can you think of a situation in which the needs of investors might be in conflict with the needs of customers?
CLASS ACTIVITY: Have students discuss being faced with a recent personal or professional ethical dilemma and its ethical climate.
Copyright  2017 John Wiley & Sons, Inc.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

4. Concern for Ethical and Societal Issues (continued)
Firms have many responsibilities—to customers, to employees, to investors, and to society as a whole
Often no clear-cut choices
Business ethics are often shaped by the organization’s ethical climate
Codes of conduct
Ethical standards
Doing the right things should be supported and applauded
An organization with the goal of prospering long term, should consider business ethics.
Businesses must take into account a wide range of social issues, including how a decision will impact the environment, employees, and customers – these issues are at the heart of social responsibility.
The ethical climate within an organization is important – this includes codes of conduct and ethical standards.
Highlight the difference between social responsibility (whose primary objective is the enhancement of society’s welfare through philosophies, policies, procedures, and actions) and business ethics. Businesses must balance between doing what is right and what is profitable.
LECTURE ENHANCER: Can you think of a situation in which the needs of investors might be in conflict with the needs of customers?
CLASS ACTIVITY: Have students discuss being faced with a recent personal or professional ethical dilemma and its ethical climate.
Copyright  2017 John Wiley & Sons, Inc.

5. The Contemporary Ethical Environment
High-profile investigations and arrests in headlines
Corporate Social Responsibility Benefits
Consumers
Investors
The environment
The companies themselves
The vast majority of businesses are ethical
New corporate officers charged with deterring wrongdoing and ensuring ethical standards
Access Coca-Cola’s Global Sustainability Report
Business ethics continues to be pervasive in the media. Gaining the trust of the general public as a company is work.
Corporate social responsibility benefits include consumers, investors, the environment, the companies themselves
Coca-Cola’s sustainability report highlights the company’s goals related to women, water, and well-being.
Despite the lack of ethics by some companies, many have maintained enduring companies without breaking the rules.
Johnson & Johnson and Starbucks are two companies with a well known basic code of ethics in place for years.
LECTURE ENHANCER: Common workplace ethical dilemmas include: conducting personal business on company time, taking credit for the work of others, withholding information, waste, and theft.
CLASS ACTIVITY: Make a list of newsworthy or high-profile investigations having to do with breaking codes of ethics. How many were financial related? Do you find these surprising or unexpected?
Copyright  2017 John Wiley & Sons, Inc.

6. Starbucks Standards of Business Conduct
Operating in 65 countries with more than 21,000 stores, Starbucks has earned the number one ranking in the area of social responsibility from Fortune Magazine’s Most Admired Companies
An example of Starbucks Standards of Business Conduct.
LECTURE ENHANCER: Should a company code of ethics or Standards of Business Conduct be a necessity in the same way, say, accounting activities are performed?
LECTURE ENHANCER: Discuss how the company has repeatedly put its pledge to the test (research recent company events).
CLASS ACTIVITY: Have students read Starbucks Standards of Business Conduct. Identify each of the groups to which the company has made a commitment.
Copyright  2017 John Wiley & Sons, Inc.

7. Coca-Cola Company’s Global Sustainability Goals
To economically empower 5 million women entrepreneurs across its value chain by 2020
To meet 2020 water use and efficiency reduction and replenishment goals
to offer more than 400 new beverage options, more than 100 of which are reduced, low, or no-calorie.
Coca-Cola is conscientious of how ethical standards translate into concern for the environment.
The following goals are from its most recent Global Sustainability report.
LECTURE ENHANCER: Discuss Coca-Cola’s goal of lower calorie options in light of the current childhood obesity epidemic. Does this make good business sense?
CLASS ACTIVITY: Ask students to review the company’s Global Sustainability report, and to assess how environmental goals are measured.
Copyright © John Wiley & Sons, Inc.

8. The Contemporary Ethical Environment
Sarbanes Oxley Act
A 2002 law that added oversight for the nation’s major companies
Includes a special oversight board to regulate public accounting firms that audit the financial records of these corporations
New rules and regulations for securities trading and accounting practices
Companies are required to publish a code of ethics
Development of ethical compliance programs
Provides safeguards for whistleblowers
Today’s contemporary ethical environment includes stricter oversight of companies
The Sarbanes-Oxley Act of 2002 was established in response to the Enron Corporation scandal, along with others from 2000 on. New rules and regulations were created for securities trading and accounting practices, as outlined.
LECTURE ENHANCER: Opponents to Sarbanes-Oxley (SOX) have contended that SOX was an unnecessary and costly government intrusion into corporate management that drives business outside the US. and places U.S. corporations at a competitive disadvantage on a global basis.
CLASS ACTIVITY: The “whistleblower provision” of SOX protects employees of publicly traded companies from retaliation for bringing certain perceived corporate wrongdoings to light. Ask students their thoughts about an anonymous 800 number where employees can call to report corporate wrongdoings. Is this snitching? Or is it seen as reporting valid information?
Copyright © John Wiley & Sons, Inc.

9. Current Ethical Environment
Current environment includes ethical compliance officers
Companies adopt a three-pronged approach to ethics and social responsibility
Corporate philanthropy
Anticipating and managing risks
Identifying opportunities to create value by doing the right thing
For some companies, the current ethical environment includes the appointment of an ethical compliance officers specifically charged with deterring wrongdoing and ensuring that ethical standards are met
The three-pronged approach to ethics and social responsibility is more than just monitoring behavior. It includes: corporate philanthropy, which involves donating money to worthy causes, anticipating and managing risks, and creating value by doing the right thing.
LECTURE ENHANCER: How has technology benefited the workplace? Would you consider technology a contributor to the ethical lapses pervasive in today’s workplace?
CLASS ACTIVITY: Poll students to determine why ethics and compliance challenges have become increasingly complex. List the reasons online or on the board.
Copyright  2017 John Wiley & Sons, Inc.

10. Minimum Compliance
Table 2.1 provides an overview of the requirements of programs created by the federal government.
The federal government created the U.S. Sentencing Commission to institutionalize ethics compliance programs that would establish high ethical standards and end corporate misconduct.
Source: “An Overview of the United States Sentencing Commission and the Federal Sentencing Guidelines,” Ethics and Policy Integration Centre, accessed January 17, 2014, ; “The Relationship between Law and Ethics, and the Significance of the Federal Sentencing Guidelines for Organizations,” Ethics and Policy Integration Centre, accessed January 17, 2014, ; U.S. Sentencing Commission, “Sentencing Commission Toughens Requirements for Corporate Compliance and Ethics Programs,” USSC news release, , accessed January 17, 2014.
Copyright  2017 John Wiley & Sons, Inc.

11. Individuals Make a Difference
Individuals can make the difference in the ethical environment of an organization
Unethical behavior can be identified as:
Putting one’s own interest ahead of the organization
Lying to employees
Misrepresenting hours
Safety violations
Internet abuse
Technology has expanded unethical behavior
All employees face ethical dilemmas
By their actions, executives, managers, and employees are the individuals that create the ethical environment of an organization.
Codes of conduct and ethical standards play increasingly significant roles in business.
Companies with strong ethics cultures reduce the risk of unethical behavior.
At some point, most employees have wrestled with ethical issues and dilemmas at work
LECTURE ENHANCER: Target, eBay, Nordstrom, and the list of online and retail cyber attacks goes on. Companies are becoming more vulnerable to cyber attacks, making customer credit card information more vulnerable.
LECTURE ENHANCER: Have you ever been a victim of identify theft?
LECTURE ENHANCER: How much personal time do you spend online while at work? How do employees justify the ethics of web surfing on the company’s dime?
Copyright  2017 John Wiley & Sons, Inc.

12. Development of Individual Ethics
An individual’s stage in moral and ethical development is determined by a large number of factors. Experiences help shape responses to different situations.
There are three stages in which individuals develop ethical standards:
LECTURE ENHANCER: A person’s family, educational, cultural, and religious backgrounds can shape responses to different situations. CLASS ACTIVITY: Ask students about the origination of their moral compass. Has religion or family contributed?
CLASS ACTIVITY: Ask students which stage is more prevalent for someone who is on the job for one month, one year, or one decade.
Copyright  2017 John Wiley & Sons, Inc.

13. Common Business Ethical Challenges
Situation in which an action benefitting one person or group can potentially harm another
Telling the truth and adhering to deeply felt ethical principles in business situations
Employees are expected to be loyal, and to act in the best interests of the company, but an ethical conflict can arise when the truth about a company is not favorable
Ethical decisions are not always black and white, nor are they easy. They range from a decision to lie about a sick day to lying to customers and employees.
Many businesses have been challenged with the way they conduct business.
The text uses the examples of jewelry companies discontinuing purchases of rubies and gems from Myanmar.
Common Business Ethical challenges can fall into the following four categories:
Conflict of interest, whistle-blowing, honesty and integrity, and loyalty vs. truth
LECTURE ENHANCER: Think of a hypothetical situation where the honesty and integrity of an employee might help to inspire a customer’s trust in the company.
CLASS ACTIVITY: Ask students if they think accepting Super Bowl tickets and trip expenses from a potential major supplier might affect their decision- making as a buyer of that company’s products.
CLASS ACTIVITY: Obtain examples of workplace situations in which students struggled with whether their employer was misrepresenting important product information.
LECTURE ENHANCER: Discuss whether the companies for which students work have policies in place to protect whistleblowers by providing a clear process for reporting questionable incidents.
Employee’s disclosure of illegal, immoral, or unethical practices in the organization
Copyright © John Wiley & Sons, Inc.

14. Loyalty versus Truth
Employers and employees value honesty and integrity, but what should happen when employees misuse Internet privileges for personal purposes?
© August Columbo/Stockimo/Alamy Stock Photo
Copyright © John Wiley & Sons, Inc.

15. Structure of an Ethical Environment
Most ethical lapses in business reflect the values of the firms’ corporate cultures.
Developing a corporate culture to support business ethics happens on four levels:
Ethical awareness
Ethical education
Ethical action
Ethical leadership
Copyright  2017 John Wiley & Sons, Inc.

16. Ethical Awareness A code of conduct is a way to provide support
Awareness is the foundation of an ethical climate
Ethical dilemmas will occur
Help employees identify ethical problems
Give employees guidance to respond
A code of conduct is a way to provide support
A formal statement
Defines how the organization expects employees to resolve ethical questions
The first of four ways organizations develop a corporate culture to support business ethics is ethical awareness.
Ethical awareness helps employees identify ethical problems when they occur and gives them guidance to respond.
A code of conduct is a formal statement which defines how an organization expects employees to resolve ethical questions
LECTURE ENHANCER: Discuss a recent ethical dilemma you faced at work or school. How was it resolved?
CLASS ACTIVITY: Survey the class to see how many students work for companies that enforce a code of ethics.
Copyright  2017 John Wiley & Sons, Inc.

17. Ethical Education A code of conduct provides only a framework
Business must provide tools to evaluate options
Many firms have instituted ethics training programs
Some question whether ethics can be taught
Training gives employees the chances to apply ethical values to hypothetical situations
Codes of conduct cannot control ethical action alone. Many organizations have initiated training programs or hired outsiders to do so.
Though it is questioned whether ethics can be taught, the training allows employees to practice the application of ethics to different scenarios.
LECTURE ENHANCER: The purpose of a corporate ethics program is increase the likelihood that people will act ethically rather than making them ethical.
LECTURE ENHANCER: Clear statements of values and standards of conduct supplemented with quality training can reduce misconduct which results from ignorance or misinterpretation.
CLASS ACTIVITY: Have students discuss a business culture where it’s easier to do the wrong thing than the right thing, and, conversely, one where it’s easier to do the right thing than the wrong thing.
Copyright © John Wiley & Sons, Inc.

18. Ethical Action Firms must allow structures and approaches
Structure allow decisions to be turned into ethical actions
Set realistic goals
An employee hotline with ethics officers can provide advice
Ethics happen when employees make ethical decisions. Firms must allow structures and approaches that allow decisions to be turned into ethical actions.
LECTURE ENHANCER: More and more companies are realizing the value of ethical officers as a neutral third party.
CLASS ACTIVITY: Ask students if they can think of any examples where an action may be legal but unethical.
Copyright © 2017 John Wiley & Sons, Inc.

19. Starbucks
At Starbucks, after identifying an ethical problem, the “Ethical Decision Making Framework” outlines the following to help partners (employees) determine the best approach:
Is it consistent with Our Starbucks Mission, the Standards of Business Conduct, and any applicable law or regulation?
Would your approach embarrass you or Starbucks?
How would your approach look published in the newspaper?
Would you be comfortable with the example it sets for future decisions?
If the path isn’t clear, ask for guidance.
Follow through on your decision.
At Starbucks, after identifying an ethical problem, the “Ethical Decision Making Framework” is outlined to help partners (employees) determine the best approach.
LECTURE ENHANCER: Rank the Starbucksquestions in order of your own personal importance.
Copyright © John Wiley & Sons, Inc.

20. Ethical Leadership
Executives must demonstrate ethical behavior in their actions
Use clear, explicit language
Encourage behavior that generates and fosters values
Practice moral absolutism
Without a framework of ethics, damage can impact shareholders
Stakeholders include customers, investors, employees, and the public
Ethics becomes a core part of an organization when executives model ethical behavior and honest corrective action when necessary.
“Maverick” ethical leaders follow a moral code with three characteristics. Ethical leadership should go further and charge each employee at every level with the responsibility to be an ethical leader.
LECTURE ENHANCER: In today’s global economy, it can be increasingly complex and challenging for companies to meet profit expectations of shareholders, while addressing regulatory, compliance and environmental and sustainability issues. It requires the commitment of a strong leader. LECTURE ENHANCER: Marriott Corporation has an “ethics drives performance” mantra, and the company has won various awards for “Most Ethical Company,” presented by Ethisphere.
CLASS ACTIVITY: Ask students for examples of leaders who “walked the talk" and provided strong ethical leadership.
Copyright © John Wiley & Sons, Inc.

21. Acting Responsibly to Satisfy Society
Social Responsibility
Equal value in considering profit, consumer satisfaction, and societal well-being
Concerns with qualitative dimensions and traditional quantitative measures
A firm’s social performance is measured through a social audit, and by:
Equal employment opportunities
Cultural diversity
Environmental concerns
Safe and healthy workplace
Charitable contributions and community service
Although profits and employment remain important, today many factors contribute to an assessment of a firm’s social performance, including providing equal employment opportunities; respecting the cultural diversity of employees; responding to environmental concerns; providing a safe, healthy workplace; and producing high-quality products that are safe to use. This encompasses the issue of social responsibility, or management’s acceptance of the obligation of management to consider more than just profits.
A business is also judged by its interactions with the community. To demonstrate their social responsibility, many corporations highlight charitable contributions and community service in their annual reports and on their Web sites.
LECTURE ENHANCER: Provide an example of a business in your local area that makes environmental concerns a priority.
CLASS ACTIVITY: Ask students about the importance of their dollar votes. In other words, do students choose to spend their dollars with companies who are socially responsible?
Copyright  2017 John Wiley & Sons, Inc.

22. Acting Responsibly to Satisfy Society
Businesses are judged by their interactions with the surrounding community, including employees volunteering at charitable events.
© Steve Debenport/iStockphoto
Copyright © 2017 John Wiley & Sons, Inc.

23. Business’s Social Responsibilities
The responsibility of businesses has evolved to include four key areas.
Businesses must balance their responsibility in all four areas, and these four areas require multiple areas of focus, including its relationship to the general public, to customers, to investors and the financial community, and to employees.
LECTURE ENHANCER: Some companies are committed to employees in a way that sets them apart from their competitors.
CLASS ACTIVITY: Of the four areas, rank how businesses view their commitment to social responsibility. Discuss how this differs from the way customers view business’s commitment to social responsibility.
Copyright © 2017 John Wiley & Sons, Inc.

24. Responsibilities to the General Public
Public Health Issues
Dangerous products
Protecting the Environment
Using resources efficiently
Developing a quality workforce
Education and diversity initiatives
Corporate philanthropy
Contributions and volunteer efforts
These are the areas of responsibility that businesses have to the public. Protecting the environment has become a major concern to the public, covering issues such as sustainable energy and agriculture, recycling, packaging, and green products and services. Many argue that responsibility to the public includes corporate philanthropy.
CLASS ACTIVITY: Can students think of any examples of businesses that have portrayed or distorted their food products or beverages as healthier than they actually are?
LECTURE ENHANCER: Discuss how students have disposed of their old computers, smart phones, printers, or related equipment.
LECTURE ENHANCER: Can you think of a product that uses green marketing?
LECTURE ENHANCER: What is one way a company could improve the quality of its workforce?
Copyright  2017 John Wiley & Sons, Inc.

25. Public Health Issues
To do their part to aid the general public, some businesses collaborate with urban neighborhoods to set up community gardens as a way of showing kids how to eat healthy.
© Jani Bryson/iStockphoto
Copyright © 2017 John Wiley & Sons, Inc.

26. Responsibilities to Customers
The public demands that a company considers the wants and needs of its customers in making decisions
Consumers have certain rights, as follows:
The right to be safe
The right to be informed
The right to choose
The right to be heard
There are numerous responsibilities that businesses have to customers. Consumerism is the public demand that a business consider the wants and needs of its customers in making decisions. Consumerism has been a key requirement since prompted by John F. Kennedy in 1962.
LECTURE ENHANCER: What is a company ethically required to do if it discovers one of its products may not be safe?
CLASS ACTIVITY: For each of the consumer rights, provide an example using your personal experience as a consumer.
Copyright  2017 John Wiley & Sons, Inc.

27. Responsibilities to Employees
Workplace Safety
Quality-of-Life Issues
Ensuring Equal Opportunity on the Job
Age Discrimination
Sexual harassment and sexism
Responsibilities to employees are imperative. There are numerous areas that businesses must consider. Click the highlighted links to view a few of the organizations that govern the rights of employees.
Lecture Enhancer: How do you think firms should handle absenteeism?
Class Activity: Ask students if they have ever observed a workplace safety issue at work.
CLASS ACTIVITY: Ask students to provide examples of executives by age group.
CLASS ACTIVITY: Ask students to provide recent examples in the media of sexual harassment.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Copyright  2017 John Wiley & Sons, Inc.

28. Workplace Safety
Workplace safety is an important business responsibility. In potentially dangerous areas, workers are required to wear safety equipment, including hard hats and protective eyewear.
Laurentiu Iordache/iStockphoto
Copyright  2017 John Wiley & Sons, Inc.

29. Age Discrimination
Employers are responsible for avoiding age discrimination in the workplace. As the average age of workers rises, employers will benefit from the older generation’s knowledge.
Gregg Matthews/The New York Times/Redux Pictures
Copyright  2017 John Wiley & Sons, Inc.

30. Responsibilities to Investors and the Financial Community25
Obligation to make profits for shareholders
Expectation of ethical and moral behavior
Protection of investors by the Securities and Exchange Commission and state regulations
Many of the scandals that have shifted the thinking about ethics have been in the area of responsibility to investors. These points highlight the areas of responsibility to investors. The Securities and Exchange Commission develops regulations to protect investors. Click the highlighted link to view the SEC website.
LECTURE ENHANCER: What are the consequences for investors if a business does not act ethically or legally?
CLASS ACTIVITY: Explore the Securities and Exchange website and examine the most recent fraud cases under “enforcement,” then “litigation.”
Copyright  2017 John Wiley & Sons, Inc.