1. Chapter 2
Ethics and Social Responsibility

2. Business Ethics
Ethics can be defined as the study of what constitutes right or wrong behavior.
Business ethics focuses on how moral and ethical principles are applied in the business context.
The law reflects society’s convictions on what constitutes right or wrong behavior.
Case Time Warner Entertainment Co. v. Six Flags Over Georgia, LLC (2002).

3. Setting the Right Ethical Tone
Ethical Leadership.
Attitude of Management.
‘Looking the Other Way’.
Creating Realistic Goals.
Periodic Evaluation.
Ethical Codes of Conduct.
Costco as an example .
Clear Communications.
Johnson & Johnson – web training.

4. Code of Ethics
Notice how PriceCostco’s code uses compliance with the law as the baseline. Compliance with ethical standards may take more.
OBEY THE LAW
The law is irrefutable! Absent a moral imperative
to challenge a law, we must conduct our business
in total compliance with the laws of every
community where we do business.

5. Corporate Compliance Programs
The Sarbanes-Oxley Act.
Employers must set up confidential reporting and auditing systems.
Web-based system by Ethicspoint.
Integrating Compliance Programs.
Ethics programs must be disseminated and coordinated among all departments.

6. Conflicts and Trade-Offs
Today’s corporate decision makers must balance profitability against ethical responsibility when making their decisions.
Instead of maximum profits, corporations increasingly aim for optimum profits—profits that can be realized by the firm while pursuing actions that are not only legal and profitable but also ethical.
Case Remsburg v. Docusearch, Inc. (2003).

7. Defying the Rules: The Enron Case
Growth of Enron.
Accounting Issues.
Fudging and ‘Anticipated’ Earnings.
Bonuses based on whether earnings were met.
Off-The-Book Transactions.
Subsidiaries inflated net worth of Enron.
Most transactions occurred in Cayman Islands.
Self-Dealing.

8. Business Ethics and the Law
Legal compliance is the moral minimum, but simply obeying the law does not mean it is ethical.
Laws regulating business.
“Gray” areas in the law.
Technological Developments and Legal Uncertainties.
Case Blakey v. Continental Airlines, Inc. (2000).

9. Sources of Ethical Standards
Duty-based ethics:
Ethics based on religious beliefs and philosophical reasoning, such as that of Immanuel Kant.
Example: Ten Commandments.
Outcome-based ethics:
Ethics based on philosophical reasoning, such as that of John Stuart Mill.
Example: utilitarianism.

10. Corporate Social Responsibility
Assumes corporations should conduct their affairs in a socially responsible manner, but there is disagreement as to what constitutes socially responsible behavior.
Views on Corporate Social Responsibility.
Profit Maximization.
Stakeholder Approach.
Corporate Citizenship.

11. Corporate Social Responsibility
Corporations are perceived to hold duties to the following groups, duties that often come into conflict:
Consumers
Shareholders
Employees
Community
Society

12. Measuring Corporate Social Responsibility
It is difficult to measure corporate social responsibility because different yardsticks are used.
Traditionally, corporate philanthropy has been used as a means of measuring corporate social responsibility.
Increasingly, corporate process, or how a corporation conducts its business on a day-to-day basis, is a key factor in determining whether a corporation is socially responsible.

13. Ethics In The Global Context
Despite the cultural and religious differences among nations, the most important ethical precepts are common to virtually all countries.

14. Ethics in the Global Context
The Foreign Corrupt Practices Act of 1977 (FCPA), prohibits the bribery of foreign officials through such side payments, put U.S. businesspersons at a relative disadvantage to businesspersons from other countries who are not subject to such laws.
Two notable differences relate to:
The role of women in society.
The practice of giving side payments to foreign officials to secure favorable contracts.

15. Ethics in the Global Context
What is considered ethical in society may change over time as social customs change and new developments alter our social and business environment.