1. BUSINESS ETHICS AND SOCIAL RESPONSIBILITY2
BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
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2. L E A R N I N G O B J E C T I V E S
After reading this chapter, you should be able to:
Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace.
Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today.
Show how the concept of social responsibility applies both to environmental issues and to a firm’s relationships with customers, employees, and investors.
Identify four general approaches to social responsibility and describe the four steps that a firm must take to implement a social responsibility program.
Explain how issues of social responsibility and ethics affect small business.
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3. What’s in It for Me?
By understanding the material in this chapter, you’ll be better able to:
Assess ethical and socially responsible issues facing you as an employee and as a boss or business owner.
Understand the ethical and socially responsible actions of businesses you deal with as a consumer and as an investor.
Determine what type of organization you are working for, or are about to work for.
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4. Ethical Dilemmas
Is it OK to buy/sell a stock based on insider information?
What if that information came from your broker?
Meaning, you didn’t know it was inside information
Is it OK to play a friend’s video game from a burned copy?
Is it OK to use ANY software that comes to you on a blank CD?
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5. Ethics in the Workplace
Beliefs about what’s right and wrong or good and bad
Ethical Behavior
Behavior conforming to individual beliefs and social norms about what’s right and good
Unethical Behavior
Behavior conforming to individual beliefs and social norms about what is defined as wrong and bad
Business Ethics
The ethical or unethical behaviors by employees in the context of their jobs
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6. Ethics example
In the U.S., it is unethical to give bribes to influential people in order to gain favor
In some foreign countries, bribes are about the ONLY way to do business
So your manager assigns you to head the construction/opening of a new plant in one of these foreign countries. The only way you will be CLOSE to coming in on schedule is to bribe certain government officials
What should you do?
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7. Why should we care about business ethics?
Brief history of corporations/stores
We depend on the trustworthiness of business
How many fully understand the return policies on things they purchase?
You have to read them first….
Fair Profit
Triangle balance
Customer Satisfaction
Community service
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8. Individual Values and Codes
Sources of Personal Codes of Ethics
Childhood responses to adult behavior
Influence of peers
Experiences in adulthood
Developed morals and values
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9. Business and Managerial Ethics
The standards of behavior that guide individual managers in their work
Ethics affect a manager’s behavior toward:
employees
the organization
other economic agents—customers, competitors, stockholders, suppliers, dealers, and unions
Ethical Concerns
Ambiguity (e.g., financial disclosure)
Global variation in business practices (e.g., bribes)
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10. Assessing Ethical Behavior
Simple Steps in Applying Ethical Judgments
Gather the relevant factual information
Analyze the facts to determine the most appropriate moral values
Make an ethical judgment based on the rightness or wrongness of the proposed activity or policy
What does this cover?
Conflict of interest
Contracting a job out to a friend when it could be done with current employees
Taking bribes
Confidentiality agreements
And how do you enforce these?
What about letting the company pay for your education, then using that to get a better job elsewhere?
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11. Assessing Ethical Behavior
Ethical Norms and the Issues They Entail
Utility: Does a particular act optimize the benefits to those who are affected by it? Do all relevant parties receive “fair” benefits?
Rights: Does the act respect the rights of all individuals involved?
Justice: Is the act consistent with what’s fair?
Caring: Is the act consistent with people’s responsibilities to each other?
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12. Company Practices and Business Ethics
Encouraging Ethical Behavior Involves:
Adopting written codes of conduct and establishing clear ethical positions for the conduct of business
Having top management demonstrate its support of ethical standards
Instituting programs to provide periodic ethics training
Establishing ethical hotlines for reporting and discussion of unethical behavior and activities
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13. FIGURE 2.2 Core Principles and Organizational Values
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14. Social Responsibility
The overall way in which a business attempts to balance its commitments to relevant groups and individuals (stakeholders) in its social environment
Organizational Stakeholders
Groups, individuals, and organizations that are directly affected by the practices of an organization and, therefore, have a stake in its performance
How much privacy does your employer owe you?
Can they go through your ?
Can they monitor your web activity?
Can they monitor your phone conversations?
Even if you are using your own cell phone?
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15. FIGURE 2.3 Major Corporate Stakeholders
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16. The Stakeholder Model of Responsibility
Customers
Businesses strive to treat customers fairly and honestly
Employees
Businesses treat employees fairly, make them a part of the team, and respect their dignity and basic human needs
Investors
Businesses follow proper accounting procedures, provide information to shareholders about financial performance, and protect shareholder rights and investments
Suppliers
Businesses emphasize mutually beneficial partnership arrangements with suppliers
Local and International Communities
Businesses try to be socially responsible
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17. Or is the Stakeholder Model of Responsibility more like:
Customers
Screw them – we just want their money
Employees
Screw them – we can always hire a replacement
Investors
Screw them – we already have their money
Suppliers
Screw them – we’re trying to maximize profit on our end
Local and International Communities
Screw them – we don’t even know how they factor into things
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18. Contemporary Social Consciousness
The Concept of Accountability
The expectation of an expanded role for business in protecting and enhancing the general welfare of society
Responsibility Toward the Environment
Controlling air, water, and land pollution
Properly disposing of toxic waste
Engaging in recycling
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19. Areas of Social Responsibility (cont’d)
Responsibility Toward Customers
Involves providing quality products and pricing products fairly
Consumerism
Social activism dedicated to protecting the rights of consumers in their dealings with businesses
Basic Consumer Rights
To possess safe products
To be informed about all relevant aspects of a product
To be heard
To choose what to buy
To be educated about purchases
To courteous service
And along comes outsourcing…
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20. Consumer Rights (cont’d)
Unfair Pricing
Collusion: When two or more firms agree to collaborate on such wrongful acts as price fixing
Price gouging: Responding to increased demand with overly steep (and often unwarranted) price increases
Ethics in Advertising
Truth in advertising
Morally objectionable advertising
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21. Areas of Social Responsibility (cont’d)
Responsibility Toward Employees
Legal and social commitments to:
not practice illegal discrimination
provide a physically and socially safe workplace
provide opportunities to balance work and life
provide protection for whistleblowers (an employee who discovers and tries to put an end to a company’s unethical, illegal, or socially irresponsible actions by publicizing them)
Responsibility Toward Investors
Proper financial management (no insider trading)
Proper representation of finances
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22. Implementing Social Responsibility (SR) Programs
Arguments Against SR
The cost of SR threatens profits.
Business has too much control over which and how SR issues would be addressed.
Business lacks expertise in SR matters.
Arguments for SR
SR should take precedence over profits.
Corporations as citizens should help others.
Corporations have the resources to help.
Corporations should solve problems they create.
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23. Approaches to Social Responsibility
Obstructionist Stance
A company does as little as possible and may attempt to deny or cover up violations
Defensive Stance
A company does everything required of it legally but no more
Accommodative Stance
A company meets its legal and ethical requirements and also goes further in certain cases
Proactive Stance
A company actively seeks to contribute to the well-being of groups and individuals in its social environment
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24. FIGURE 2.5 Spectrum of Approaches to Corporate Social Responsibility
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25. Managing Social Responsibility Programs
Social responsibility must start at the top and be considered as a factor in strategic planning.
A committee of top managers must develop a plan detailing the level of management support.
One executive must be put in charge of the firm’s agenda.
The organization must conduct occasional social audits—systematic analyses of its success in using funds earmarked for its social responsibility goals.
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26. K E Y T E R M S accommodative stance business ethics collusion
consumerism
defensive stance
ethical behavior
ethics
insider trading
managerial ethics
obstructionist stance
organizational stakeholders
proactive stance
social audit
social responsibility
unethical behavior
whistle-blower
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