1. Chapter 4: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
Doing Well by Doing Good

2. ETHICS AND SOCIAL RESPONSIBILITY
Beliefs about
right and wrong.
SOCIAL
RESPONSIBILITY
The obligation of a business
to contribute to society.
Ethics and social responsibility are often discussed together, they are not the same but they are closely related.
A Close Relationship, but Not the Same

3. ETHICS/PERSONAL CHARACTER
A study of 43,000 high school students revealed:
59% admitted that they cheated on a test at school within
the past 12 months – 38% admitted doing so two or more times.
62% admitted that they copied another’s homework two or more times
within the past 12 months.
18% admitted that they stole something from a friend within
the past 12 months.
Discuss the individual nature of ethics.
28% admitted that they stole something from a store within
the past 12 months.
39% believe that a person has to lie or cheat sometimes in
order to succeed.
A 2011 Study conducted by Josephson Institute of Ethics

4. ETHICS: MURKIER THAN YOU THINK
Legal and Unethical
Promoting R-rated movies to young teens
Producing products that you know will break before their time
Paying non-living wages to workers in developing countries
Consumer goods-producing companies subcontract to factories overseas in India, China, and Southeast Asia where there is use of child and sweatshop labor
Taking up an employee’s time to ask questions about a product with the intent to purchase it elsewhere
Legal and Ethical
Producing high quality products
Rewarding integrity
Leading by example
Treating employees fairly
Contributing to the community
Illegal and Unethical
Embezzling money
Engaging in sexual harassment
Practicing Collusion with competitors
Encouraging fraudulent accounting
Illegal and Ethical
Providing rock-bottom prices only to distributors in underserved areas
Collaborating with other medical clinics to guarantee low prices in low-income countries (collusion)
Stopping at a red light at a deserted intersection, out in the country, where you can see that there are no cars for miles, and then proceeding through the red light.
Smuggling of medicines into war- and disease-stricken areas

5. UNIVERSAL ETHICAL STANDARDS
Be honest
Don’t deceive, cheat, or steal
Do what you say you’ll do
Trustworthiness
Treat others how you’d like to be treated
Be considerate
Be tolerant of differences
Respect
Persevere
Be self-controlled and self-disciplined
Be accountable for your choices
Responsibility
Provide equal opportunity
Be open-minded
Don’t take advantage of others
Fairness
Be kind
Be compassionate
Express gratitude
Caring
Contribute to the community
Protect the environment
Cooperate where feasible
Citizenship
Universal Ethical Standards developed by Character Counts organization. Nonpartisan organization that worked with group of educators, community leaders, ethicists from variety of political, religious, class and ethnic divisions.
Developed by Character Counts, a nonpartisan organization of educators, community leaders, and ethicists.

6. BUSINESS ETHICS: NOT AN OXYMORON
Ethical Dilemma
Negative Consequences
Two unfavorable options
Ethical Dilemma
Negative Consequences
Two unfavorable options
Most challenging business decisions seem to arise when values are in conflict
Ethical Lapse
Clear misconduct
Business Ethics – the application
of right and wrong in the workplace
Business Ethics – the application of right and wrong in the workplace.

7. Ethical Dilemma:
You’ve just done a great job on a recent project at your company. Your boss has been very vocal about acknowledging your work and the increased revenue that resulted from it. Privately, she said that you clearly earned a bonus of at least 10%, but due to company politics, she was unable to secure the bonus for you. She also implied that if you were to submit inflated expense reports for the next few months, she would look the other way and you could pocket the extra cash as well-deserved compensation for your contribution.

8. Ethical Dilemma:
One of the engineers on your staff has an excellent job offer from another company and asks your advice on whether or not to accept the position. You need him to complete a project that is crucial to your company (and to your own career). You also have been told --- in strictest confidence by senior management --- that when the project is complete, the company will lay off all internal engineers. If you advise him to stay, he would lose the opportunity and end up without a job. If you advise him to go, you would violate the company’s trust and jeopardize your career.

9. Ethical Dilemma:
As a successful entrepreneur, you see a new technology ready to be launched that is really good for the growth of your company and the clients. But, adopting the technology would mean reducing the man power of the company. You have to think about the betterment of the clients and provide them with the best of services, but on the other hand, you also have to think about the employees who have contributed in the growth of the company. If you think about your employees and reject the technology then are you doing justice with your clients? And if you accept the technology are you then betraying the employees?

10. Ethical Dilemma:
Mary works as a secretary in a department within a branch of a large corporation. The branch director has decided that the job of her department director, Jim, will soon be discontinued. Although Mary and a few others in her department have this knowledge, Jim does not.  For a few weeks, Jim was directed to work on an array of special projects at his home office. In the meantime, an employee from a different department is told to move in to Jim's office.
The branch director instructs Mary and other support staff to change Jim's voice mail, move his files out of the office, and erase his name from his assigned parking spot. Mary is told the human resources department will call Jim to let him know what has taken place.
That week Jim calls Mary because he cannot get into his voice mail. He wants to know if there are any technical problems about which he should know. Mary feels torn: should she tell him the truth now or should she rely on human resources staff to tell him?

11. Ethical Dilemma:
You are a psychiatrist and your patient has just confided to you that he intends to kill a woman. You're inclined to dismiss the threat as idle, but you aren't sure. Should you report the threat to the police and the woman or should you remain silent as the principle of confidentiality between psychiatrist and patient demands? Should there be a law that compels you to report such threats?

12. Ethical Dilemma:
On March 13, 1841, an American ship, the William Brown, left Liverpool, England for Philadelphia, Pennsylvania. In addition to her cargo, she carried 17 crewmen and 65 passengers, who were mostly Scots and Irish emigrants. On the night of April 19, 250 miles from Newfoundland, the William Brown struck an iceberg and began to sink rapidly. There were two lifeboats, one small and one large. The captain and most of the crew took the small lifeboat, and the passengers crowded aboard the large lifeboat. There was not enough space on the large lifeboat for all the passengers, and 31 died on board the William Brown when it sank.
First Mate Francis Rhodes, Alexander William Holmes, and another seaman commanded the large lifeboat. The passengers were still dressed in their night clothes and suffered terribly in the cold Atlantic weather, which was made worse by a pelting rain. The two lifeboats stayed together through the night but separated the morning of the 20th because the captain, George L. Harris, thought there was a better chance of rescue if the two boats took different directions.

13. Ethical Dilemma:
Rhodes said that his boat was overcrowded and that some people would have to be thrown overboard to keep it from capsizing. Captain Harris said, "I know what you'll have to do. Don't speak of that now. Let it be the last resort." Throughout the day of the 20th and into the night, the rain and the waves worsened. The boat began to leak and fill with water, despite constant bailing. Around ten o'clock that night, Rhodes cried out in despair, "This work won't do. Help me, God. Men, go to work."
Holmes and the other seaman began throwing people overboard. They threw 14 men and two women into the freezing water. They chose single men only, spared the married men on board, and threw the two women overboard only because they were sisters of a man already thus ejected and had demanded to be sacrificed with their kin. None of the crew was thrown out.

14. Ethical Dilemma:
Defendant: Alexander William Holmes Crime Charged: Manslaughter Chief Defense Lawyer: David Paul Brown Chief Prosecutor: William M. Meredith Judge: Baldwin (historical records do not indicate his first name) Place: Philadelphia, Pennsylvania Dates of Trial: April 13-23, Verdict: Guilty Sentence: 6 months in prison and a $20 fine

15. Ethical Dilemma:
Jane has been operating a consulting business for about a year and has been doing very well. About a month ago, she decided she needed to hire someone to help her. After interviewing several candidates, she decided to hire the best one of the group, Sara. She called Sara on Monday to tell her she had gotten the job. They both agreed that she would start the following Monday and that Sara could come in and fill out all of the hiring paperwork at that time. On Tuesday, of the same week, a friend of Jane's called her to say that she had found the perfect person for Jane. Jane explained that she had already hired someone, but the friend insisted. "Just meet Kim. Who knows, maybe you might want to hire her in the future!"

16. Ethical Dilemma:
Rather reluctantly, Jane consented. "All right, if she can come in tomorrow, I'll meet with her, but that's all." "Oh, I'm so glad. I just know you're going to like her!" Jane's friend exclaimed. And Jane did like her. She like her a lot. Jane had met with Kim on Wednesday morning. She was everything that Jane had been looking for and more. In terms of experience, Kim far surpassed any of the candidates Jane had previously interviewed, including Sara. On top of that, she was willing to bring in clients of her own which would only increase business. All in all, Jane knew this was a win-win situation. But what about Sara? She had already given her word to Sara that she could start work on Monday and she only had the resources to hire one person at this point.

17. Ethical Dilemma:
Clearly, the best business decision was to hire Kim. But what about the ethical decision? If her business did poorly or Sara couldn't provide enough support, the business would suffer. As a result, her family would suffer. Money was already tight, what with two boys in college. And yet she knew Sara also had a family she was supporting. Plus, she had been so enthusiastic about starting to work.
Obviously, Jane had a problem - an ethical problem. Should she hire Sara (whom she'd already given her word) or Kim (who was obviously the best person for the job)?

18. Ethical Dilemma: Is it legal? Is it balanced? Is it right?
In other words, will you be violating any criminal laws, civil laws or company policies by engaging in this activity?
Is it legal?
Is it fair to all parties concerned both in the short-term as well as the long-term?
Is this a win-win situation for those directly as well as indirectly involved?
Is it balanced?
Most of us know the difference between right and wrong, but when push comes to shove, how does this decision make you feel about yourself?
Are you proud of yourself for making this decision?
Would you like others to know you made the decision you did?
Is it right?
According to Kenneth Blanchard and Norman Vincent Peale, authors of The Power of Ethical Management, there are three questions you should ask yourself whenever you are faced with an ethical dilemma.

19. Ethics: Multiple Touchpoints
Individuals must make their own
ethical choices
BUT
The organization can have a significant influence on decisions

20. Creating and Maintaining an Ethical Organization
Organizational Culture
Role of Top Management
Code of Ethics
Executive Buy-in
Clear expectations
Integrated approach
Global and local
Whistleblower support
Reporting and Enforcement
Click Internet icon to view the corporate governance/corporate responsibility site for Texas Instruments. Click the Quick Test on the left to further discuss a specific company’s definition of ethics. Also highlight the connection made between social responsibility and ethics defined by Texas Instruments.

21. ETHICS FAME AND SHAME
Sherron Watkins, former vice president of Enron reported the accounting
Irregularities that led to the discovery of corporate fraud.
Stanley O’Neal began as Merrill Lynch began racking up losses
that led to its collapse, he announced his “retirement.”
Martha Stewart was convicted of obstructing justice in a $40,000
well timed stock sale.
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.
Highlight the details from the textbook.
Sanjay Kumar of Computer Associates was convicted of
massive accounting fraud in 2006.
Pierre Omidyar, the founder of eBay has given away over
$100 million to Tufts University Micro Finance Fund.

22. SPECTRUM OF SOCIAL RESPONSIBILITY
No Contribution
Responsive Contribution
Proactive Contribution
Businesses that do not
recognize obligations
to society and do only
what’s legally required
Businesses that respond on a case-by-case basis to requests for contributions
Businesses that integrate social responsibility into their strategic plans
LESS
Responsible
MORE

23. SOCIAL RESPONSIBILITY
Responsibility to
Whom?
Stakeholders are any
groups that have a stake –
or a personal interest - in the
performance and actions
of an organization.
Discuss: should companies care about more than profits? What companies do you shop at because of their social responsibility? Which companies do you choose not to shop patronize?
Review Social Responsibility Hall of Fame/Shame.

24. RESPONSIBILITY TO…… EMPLOYEES CUSTOMERS INVESTORS COMMUNITY
Creating Jobs that Work
EMPLOYEES
Value, Honesty and Communication
CUSTOMERS
Fair Stewardship and Full Disclosure
INVESTORS
Business and the Greater Good
COMMUNITY
Sustainable Development
ENVIRONMENT
Discuss call-out: What’s in it for me. Discuss the pay-off of social responsibility.
Highlight the consumerism movement and consumer rights.
Discuss the importance of quality and planned obsolescence in regards to consumerism and company responsibility to consumers.
Discuss Sarbanes-Oxley, its role and development (Enron). Reference Social Responsibility Hall of Shame/Fame.
Highlight corporate philanthropy and cause-related marketing.
Comment on corporate responsibility as an aspect of social responsibility.

25. RESPONSIBILITY TO EMPLOYEES: CREATING JOBS THAT WORK
Meet Legal Standards
Workplace Safety
Minimum Wage/Overtime Requirements
Value Employees
Provide Work/Life Balance

26. DOES IT PAY TO PAY MORE? Costco Wal-Mart’s Sam’s Club
Average hourly wage
$15.97
$11.52
Annual health costs per worker
$5,735
$3,500
Covered by health plan
82%
47%
Employee turnover
6%/yr
21%/yr
Labor and overhead costs
9.8% of sales
17% of sales
Profits per employee
$13,647
$11,039

27. RESPONSIBILITY TO CUSTOMERS
The Right to Be Safe
The Right to Be Informed
The Right to Choose
The Right to be Heard
Consumerism: a social movement suggests that consumer rights should be the starting point…
Planned Obsolescence –
Deliberately designing products to fail in order to shorten
the time between consumer repurchases

28. Planned Obsolescence –
APPLE COMPUTERS
Planned Obsolescence –
APPLE COMPUTERS:
iPods had irreplaceable battery.
Batteries died after 18 months.
Customers were encouraged to purchase new iPods
Two customers posted high profile protest movies online.
APPLE announced replacement program.

29. APPLE iPHONES
Apple introduced the iPhone on June 9, to rave reviews despite $599 price tag
Apple dropped the price to $200 to increase customers
Customers were livid!
CEO, Steve Jobs apologized and gave customers $100 store credit

30. RESPONSIBILITY TO INVESTORS
FAIR STEWARDSHIP AND FULL DISCLOSURE
Legal Requirements
Sarbanes-Oxley
Responsible use of Corporate Dollars
Honesty
Is Optimism or Pessimism Socially Responsible?
Legal Requirements
Sarbanes-Oxley
Responsible use of Corporate Dollars
Honesty
Is Optimism or Pessimism Socially Responsible?

31. RESPONSIBILITY TO COMMUNITY
Cause-related Marketing –
partnerships between businesses
and nonprofit organizations,
designed to spike sales for the
company and raise money
for the nonprofit.
Corporate Responsibility -
The actions of the business rather than donations of money and time.
Corporate Philanthropy -
business donations to
nonprofit groups, including
both money and time.

32. RESPONSIBILITY TO ENVIRONMENT
Green Marketing –
marketing environmental
products and practices
to gain a competitive edge.

33. RESPONSIBILITY TO ENVIRONMENT
Responsibility to environment is a part of responsibility to community
Reducing the amount of trash is more important than recycling
Although consumers support green marketing, they may not be willing to sacrifice quality
Responsibility to environment is a part of responsibility to community
Reducing the amount of trash is more important than recycling
Although consumers support green marketing, they may not be willing to sacrifice quality

34. CAUSE RELATED MARKETING
The term was coined in 1983 by American Express
Raise Funds for Statue of Liberty Restoration
Campaign to donate $.01 for every dollar charged on credit card.
New Cardholders Grew 45%
Card Usage Grew 28%
Statue of Liberty Restored Early

35. ETHICS & SOCIAL RESPONSIBILITY IN THE GLOBAL ARENA
Corruption is part of the culture in many countries
Bribes or Gifts
Labor issues in host countries can be complicated
Living Wage
Child Labor
Code of Conduct
Discuss statistics and attempts to monitor corruption.
Click the Internet link to review an overview of Starbucks and their approach to stakeholders. Click the Social Responsibility link on the left to see more about the areas of social responsibility in which they focus. Finally, note the global aspect of their responsibility.
Levis established a code of conduct for all its suppliers.
Discuss how the US rates in regards to bribery and corruption according to Transparency International.

36. MONITORING ETHICS AND SOCIAL RESPONSIBILITY
SOCIAL AUDIT
A systematic evaluation of
how well a firm is meeting its
ethics and social
responsibility objectives.
Discuss other monitors of social responsibility – government, environmentalists, and activists consumers.