1. ©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

2. 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?

3. ©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

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. Defining Ethics 4  Ethics The study of right and wrong and of the morality of the choices individuals make An ethical decision is one that is “right” according to some standard of behavior  What’s Ethical? Different standards for different people, cultures, countries, etc. Gray areas? More than just following the law Fundamental standards (respect for life, honesty, integrity, etc.)  Business ethics  The application of moral standards to business situations  Good ethics is good business! The application of moral standards to business situations

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. Universal Ethical Standards 5  Fairness and honesty Businesspeople are expected to refrain from knowingly deceiving, misrepresenting, or intimidating others. Follow the “Golden Rule” (treat other people like you want to be treated)  Organizational relationships A businessperson should put the welfare of others and that of the organization above his or her own personal welfare.  Conflict of interest Issues arise when a businessperson takes advantage of a situation for personal gain rather than for the employer’s interest.  Communications Business communications that are false, misleading, and deceptive are both illegal and unethical.

6. ©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.

7. ©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 http://charactercounts.org/programs/reportcard/2010/installment02_report-card_honesty-integrity.html, accessed February 20, 2011

8. ©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. Factors That Influence Ethical Behavior 8  Three general sets of factors appear to influence the standards of behavior in an organization. Individual factors –Individual knowledge of an issue –Personal values –Personal goals Social factors –Business Climate (managers, co-workers) –Cultural norms –Significant others –Co. Enforcement –Code of Ethics –Co. Policies (ex. Use of the Internet) Opportunity –Presence of opportunity

9. ©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 9 © STOCKBYTE/GETTY IMAGES

10. ©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 10 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?

11. ©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 11 Source: Big Three auto CEOs flew private jets to ask for taxpayer money by Josh Levs, November 19, 2008, CNN website, http://www.cnn.com/2008/US/11/19/autos.ceo.jets/, accessed February 2, 2009. Lawmakers, Questioning Fed Bailout, Seek AIG `Junket' Refund By Ryan J. Donmoyer - October 9, 2008 Bloomberg website http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aPlPYw6JXIBU&refer=us, accessed February 21, 2011

12. ©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? 12 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 2006. 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.

13. ©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 13 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

14. ©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 14 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

15. ©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. Encouraging a More Ethical Climate 15  External to a specific organization Governmental legislation and regulations –Sarbanes-Oxley Act of 2002 Trade association guidelines –IFA (International Factoring Assoc.), TIA (Trans. Intermediaries Assoc)  Within an organization Developing a Code of ethics –A written guide to acceptable and ethical behavior as defined by an organization; it outlines policies, standards, and punishments for violations Organizational environment –Reward ethical behavior- Discipline unethical behavior –Reduce opportunity- Provide a forum for reporting –Ethics officer- Employee training –Leadership & Communication- Ethics Officer  Whistle-blowing Informing the press or government officials about unethical practices within one’s organization

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. Defining Social Responsibility Core stakeholder groups include employees, customers, investors, and community. 16 Social Responsibility is the obligation of a business to contribute to society. Social Responsibility costs money but is also good business. How socially responsible a firm acts may affect the decisions of customers to do or continue to do business with the firm.

17. ©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 17 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

18. ©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 18

19. ©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. Two Views of Social Responsibility 19  Socioeconomic model (Proactive Contribution) Business should emphasize not only profits but also the impact of its decisions on society. The corporation is a creation of society and it must act as any responsible citizen would. Firms take pride in their social responsibility obligations. It is in the best interest of firms to take the initiative in social responsibility matters.  Economic model (No Contribution) Society will benefit most when business is left alone to produce and market profitable products that society needs. Managerial attitude: social responsibility is someone else’s job; the firm’s primary responsibility is to make a profit for its shareholders. Firms are assumed to fulfill their social responsibility indirectly by paying the taxes that are used to meet the needs of society. Social responsibility is the problem of government, environmental groups, and charitable foundations.

20. ©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 Pros and Cons of Social Responsibility 20 Arguments for PROACTIVE social responsibility (i.e. Believers of Socioeconomic Approach to Social Responsibility): 1. Because business is part of our society, it cannot ignore social issues. 2. Business has the technical, financial, and managerial resources needed to tackle today’s complex social issues. 3. By helping resolve social issues, business can create a more stable environment for long-term profitability. 4. Socially responsible decision-making by firms can prevent increased government intervention, which would force businesses to do what they fail to do voluntarily.

21. ©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 Pros and Cons of Social Responsibility 21 Arguments for No Contribution social responsibility (i.e. believers of Economic Model approach to Social Responsibility): 1. Business managers are primarily responsible to stockholders, so management must be concerned with providing a return on owners’ investments. 2. Corporate time, money, and talent should be used to maximize profits, not to solve society’s problems. 3. Social problems affect society in general, so individual businesses should not be expected to solve these problems. 4. Social issues are the responsibility of government officials who are elected for that purpose and who are accountable to the voters for their decisions.

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. Stakeholders 22 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.

23. ©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 23 Responsibility to Employees: Creating Jobs that Work © Purestock/ Jupiterimages

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. How Would You Judge the Actions of These Firms? 1.Clorox introduced a line of “99% natural cleaning” products called Green Works. The Sierra Club endorsed the product line. Clorox makes annual contributions to the Sierra Club 2.Tyson has been accused of unfair business practices and unsavory labor/environmental practices. In 2009, the farmer gave 11% of its profits to charity. 3.As obesity among kids grows, Kraft Foods pledged to stop advertising unhealthy yet profitable foods to young children. 4.After receiving $45 billion in taxpayer bailout funds, Bank of America sponsored a five-day carnival-like event outside the 2009 Super Bowl. 24 © The Studio Dog/Photodisc/Getty Images

25. ©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 25 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.

26. ©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. Amazon: Who Owns the Books In 2009, Amazon remotely and abruptly deleted digital editions of books from customers’ Kindle devices Customers were furious at the privacy violation Amazon refunded the purchases and issued an apology Amazon recovered; the Kindle remains Amazon’s best selling product and sales of digital books has hit 48% 26 © David Robertson / Alamy The year in technology industry apologies By Bob Brown, Network World, 12/01/2009, Network World website http://www.networkworld.com/slideshows/2009/120109-apologies.html#slide2, accessed February 22, 2011; Amazon Erases Orwell Books From Kindle by Brad Stone July 17, 2009, New York Times website, http://www.nytimes.com/2009/07/18/technology/companies/18amazon.html, accessed February 22, 2011; The Customer Is Always Right by Daniel Lyons, December 21, 2009, NewsWeek website, http://www.newsweek.com/2009/12/20/the-customer-is-always-right.html, accessed February 22, 2011.

27. ©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. Apple Angst Apple introduced the iPhone on June 9 th, 2007 to rave reviews despite $599 price tag Apple dropped the price to $200 to increase customers Customers were livid! Steve Jobs (former Apple CEO) apologized and gave customers $100 store credit 27 Source: http://www.apple.com/hotnews/openiphoneletter/, accessed February 3, 2009; Apple’s customer satisfaction up despite struggling industry by Jeff Smykil, August 19, 2008, Ars Technica website, http://arstechnica.com/apple/news/2008/08/apples-customer-satisfaction-up-despite-struggling-industry.ars, accessed February 3, 2009.

28. ©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? 28 Responsibility to Investors: Fair Stewardship and Full Disclosure

29. ©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 29 Responsibility to the Community: Business and the Greater Good © The Studio Dog/Photodisc/Getty Images

30. ©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. Greenwashing Greenwashing is when an organization spends time/money claiming to be “green” through marketing An energy company advertises “green” technology they’re working on — but the technology is only a small part of a “not-so green” business. A hotel chain calls itself “green” because it asks guests to sleep on the same sheets and reuse towels but does very little to save water and energy Can “doing good” be unethical? 30 © The Studio Dog/Photodisc/Getty Images Source: http://www.greenwashingindex.com/what.php, accessed August 4, 2011.

31. ©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 31

32. ©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 32 Source: U.S. Corporations Size Up Their Carbon Footprints by Rachel King, June 1, 2009, Bloomberg Businessweek, Businessweek website, http://www.businessweek.com/technology/content/jun2009/tc2009061_692661.htm, accessed February 24, 2011

33. ©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 33

34. ©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, http://www.arrowheadwater.com/KnowH2O/Be-Green.aspx, accessed February 25, 2011. http://www.arrowheadwater.com/KnowH2O/Be-Green.aspx © Jamey Ekins / Shutterstock.com

35. ©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. A Loaf of Bread and a Packet of Shampoo? C.K. Prahalad believes companies could add to the global economy by providing small luxuries to those at “the bottom of the pyramid” 35 Critics suggest that the strategy is exploitation of the “aspirational poor” What do you think? © imagebroker / Alamy

36. ©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? 36 SOCIAL AUDIT A systematic evaluation of how well a firm is meeting its ethics and social responsibility objectives

37. ©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? 37