1. Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Introduction to Business Dr. H. Ronald Moser Cumberland University

2. Demanding Ethical and Socially Responsibl e Behavior Chapter 04 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

3. While appearing on The Amazing Race, Mycoskie saw how badly local children in Argentina needed shoes. BLAKE MYCOSKIE TOMS Shoes He founded TOMS in 2006. TOMS gives a pair of shoes to a child in need for every pair sold. 4-3 PROFILE

4. 4-4 ETHICS IS MORE THAN LEGALITY Ethics are the standards of moral behaviors that are accepted by society as right versus wrong. Ethics serve as guidelines on how to act rightly and justly when faced with moral dilemmas. That just is not done around here. Ethical behavior covers a wider range of conduct than does legal behavior.

5. Bernie Madoff was once a respected investment manager. He swindled $65 billion from his investors, which included many charities and pension plans. He was sentenced to 150 years behind bars with no chance of parole. What motivates a person to risk everything by committing fraud? Source: Securities and Exchange Commission, www.sec.gov, accessed June 2011.www.sec.gov 4-5 ETHICS IS MORE THAN LEGALITY

6. 4-6 ETHICS IS MORE THAN LEGALITY L aws are society’s values and standards that are enforceable in the courts. Ethics deal with personal and moral principles while laws are society’s values and are enforceable in the courts. Following the law is just the first step in behaving ethically. Ethical behavior is going beyond the legal limits of the law.

7. Right: Integrity Respect for human life Self control Honesty Courage Self-sacrifice Wrong : Cheating Cowardice Cruelty Basic Moral Values 4-7 ETHICS IS MORE THAN LEGALITY Ethics Begins with Each of Us

8. Facing Ethical Dilemmas 4-8 ETHICS IS MORE THAN LEGALITY Ethics Begins with Each of Us An ethical dilemma describes a situation where one must choose between equally unsatisfactory alternatives. An ethical dilemma evolves when the only alternatives to making a decision are equally unattractive and/or unsatisfactory.

9. Plagiarizing from Internet materials is the most common form of cheating in schools today. Ethics and You Studies found a strong relationship between academic dishonesty and dishonesty at work. 4-9 ETHICS IS MORE THAN LEGALITY Ethics Begins with Each of Us

10. Ask yourself these questions:  Is it legal? Am I violating any law or company policy?  Is it balanced? This reflects the desire of a manager to achieve a “win-win” relationship in dealing with others. An ethical business person has a win-win attitude and tries to make decisions that benefit all.  How will it make me feel about myself? Do I feel proud about my decision? Facing Ethical Dilemmas 4-10 ETHICS IS MORE THAN LEGALITY Ethics Begins with Each of Us

11. 4-11 Ethics Start at the Top MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Organizational ethics begin at the top. Managers can help instill corporate values in employees. Trust between workers and managers must be based on fairness, honesty, openness and moral integrity.

12. When it comes to ethical behavior, “Actions speak louder than words!” is an old saying that has serious consequences because employees learn by observing what management does. 4-12 Ethics Start at the Top MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY People adopt values from observing what others do, not particularly from hearing what they say, making the actions of others more important in framing ethical behavior than what people say.

13. An increasing number of companies have adopted written codes of ethics. Compliance-Based Ethics Code -- Emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers. Integrity-Based Ethics Code -- Define the organization’s guiding values, create an environment that supports ethically sound behavior and stress a shared accountability among employees. Ethics Codes 4-13 MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Setting Corporate Ethical Standards

14. Integrity-Based Ethics Code – In an effort to help employees resist the pressure to make an unethical decision, the Johnston Petroleum Company has communicated their code of ethics statement to outsiders. Suppliers, subcontractors, distributors, and customers have been told of the firm’s core values and management stands behind shared accountability. This approach is consistent with an Integrity-Based Ethics Code. Ethics Codes 4-14 MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Setting Corporate Ethical Standards

15. 1. Top management must adopt and unconditionally support an explicit corporate code of conduct. 2. Employees must understand that senior management expects all employees to act ethically. 3. Managers and others must be trained to consider the ethical implications of all business decisions. How to Improve America’s Business Ethics 4-15 MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Setting Corporate Ethical Standards “Continued”

16. 4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers – People who report illegal or unethical behavior. 5.Involve outsiders such as suppliers, subcontractors, distributors and customers who must me told about the ethics programs. 6.The ethics code must be enforced with timely action if any rules are broken. 4-16 MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Setting Corporate Ethical Standards How to Improve America’s Business Ethics

17. 4-17 MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Setting Corporate Ethical Standards How to Improve America’s Business Ethics Whistleblowers are employees who report unethical or illegal actions of their employers An employee who reports illegal accounting procedures is an example of a Whistleblower. An employee who tells the Consumer Product Safety Commission his company falsified safety reports on a child’s car seat is a Whistleblower.

18. Source: James Gehrke, Magnify Leadership & Development, November 2008. 1. Managers must communicate the organization’s vision on ethical behavior. 2. Organizations must have a code of ethics. 3. Policies have to be enforced regarding ethical offences. 4. Ethical responsibility must be taught to all employees. “Continued” 4-18 MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Setting Corporate Ethical Standards How to Prevent Unethical Behaviors

19. 5. Discussions of ethics must be included in the decision-making process. 6. Accountability must be taken seriously at all levels in the organization. 7. Organizations must act fast when a crisis occurs. 8. Employees must know they have to defend and maintain the company’s reputation. How to Prevent Unethical Behaviors 4-19 MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Setting Corporate Ethical Standards “M an do I have something to tell you. ”

20. 4-20 CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility (CSR) Corporate Social Responsibility means that organizations are a part of a larger society and are accountable to that society for their actions. Profit responsibility, societal responsibility, and stakeholder responsibility are three forms or concepts of Social Responsibility. No profits, no jobs, no benefits.

21. 4-21 Profit Responsibility is the duty of a firm to maximize profits for its owners or stockholders. Stakeholder responsibility is the view that an organization has an obligation to those constituencies that can affect achievement of its objectives. Societal responsibility refers to obligations that organizations have to the general public and to preservation of the ecological environment. CORPORATE SOCIAL RESPONSIBILITY

22. Corporate Social Responsibility (CSR) -- The concern businesses have for the welfare of society. CSR is based on a commitment to integrity, fairness, and respect. CSR proponents argue that businesses owe their existence to the societies they serve and cannot exist in societies that fail. 4-22 CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility (CSR)

23. Corporate Social Responsibility (CSR) – When it comes to social responsibility, some people feel that before you can do good, you must do well. This reflects a firm’s responsibility to investors. 4-23 CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility (CSR) The late Milton Friedman made the statement that the only social responsibility that firms have is to their stockholders. If you increase the returns and profits for investors, you will be able to extend philanthropy to other organizations.

24. Corporate Philanthropy -- Includes charitable donations to nonprofit groups of all kinds. Eighty percent of the business leaders surveyed in a recent study said that their companies participated in philanthropic activities. Corporate Social Initiatives -- Includes enhanced forms of corporate philanthropy. 4-24 CORPORATE SOCIAL RESPONSIBILITY The social performance of a company has several dimensions:

25. Corporate Social Initiatives – Businesses have directed their attention to corporate social initiatives. These are initiatives that are geared toward social trends, such as sustainability. 4-25 CORPORATE SOCIAL RESPONSIBILITY The social performance of a company has several dimensions: Corporate social initiatives are volunteer actions by corporations that address social trends.

26. Corporate Responsibility -- Includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment. Corporate Policy -- The position a firm takes on social and political issues. Patagonia’s donate time, services and at least 1% of their sales to hundreds of grassroots environmental groups all over the world who work to help reverse the trend 4-26 CORPORATE SOCIAL RESPONSIBILITY The social performance of a company has several dimensions:

27. Xerox offers a Social Service Leave program. Allows employees to take up to a year to work for a nonprofit organization while earning their full Xerox salary and benefits.Social Service Leave Citizen Corps encourages volunteers to help strengthen homeland security by helping in their community. Volunteers handle administrative work at local police departments. Two-thirds of MBA students surveyed reported they would take a lower salary to work for a socially responsible company. The problem the students could not agree was how social responsibility is defined. 4-27 CORPORATE SOCIAL RESPONSIBILITY

28. The Right to Safety The Right to be Informed The Right to Choose The Right to be Heard President Kennedy’s Basic Right of Consumers 4-28 Responsibility to Customers CORPORATE SOCIAL RESPONSIBILITY

29. President Kennedy’s Basic Right of Consumers 4-29 Responsibility to Customer CORPORATE SOCIAL RESPONSIBILITY Consumer Bill of Rights Right to Be Safe Right to Be Informed Right to Be Heard Right to Choose Freely

30. 4-30 CORPORATE SOCIAL RESPONSIBILITY Mattel’s Cabbage Patch Snacktime Kids doll was designed to eat plastic toys that were drawn in to the doll’s motorized mouth. However, despite extensive testing, the doll was found to “eat” the child's hair and was subsequently recalled and discontinued. Mattel discontinued the item because of the consumer's: Consumer Bill of Rights Right to Be Safe Right to Be Informed Right to Be Heard Right to Choose Freely

31. 4-31 CORPORATE SOCIAL RESPONSIBILITY When shopping on the Internet, most consumers assume the personal information they give out is confidential. Subscribers of America Online (AOL) were upset when AOL proposed giving member information to partners without telling the subscribers. This is related most directly to the consumers right to be: Consumer Bill of Rights Right to Be Safe Right to Be Informed Right to Be Heard Right to Choose Freely

32. 4-32 CORPORATE SOCIAL RESPONSIBILITY Martine signed up for a time-management seminar that promised to share with her 101 ideas for the more efficient use of time. After attending the seminar, which lasted less than two hours, Martine was extremely disappointed with its content and decided to complain to the Better Business Bureau about the poorly conducted seminar. The Consumer Bill of Rights guarantees Martine the right to: Consumer Bill of Rights Right to Be Safe Right to Be Informed Right to Be Heard Right to Choose Freely

33. 4-33 CORPORATE SOCIAL RESPONSIBILITY People who fly regularly collect frequent flyer miles that can be used for free flights at later dates. The existence of blackout days (days when frequent flyer miles cannot be redeemed) could interfere with the consumers: Consumer Bill of Rights Right to Be Safe Right to Be Informed Right to Be Heard Right to Choose Freely

34. Insider Trading -- Insiders using private company information to further their own fortunes or those of their family and friends. Unethical behavior does financial damage to a company and investors are cheated. Insider Trading 4-34 CORPORATE SOCIAL RESPONSIBILITY Responsibility to Investors A few investors have chosen unethical means to improve their financial health.

35. Create jobs and provide a chance for upward mobility. Treat employees with respect. Offer salaries and benefits that help employees reach their personal goals. 4-35 Responsibility to Employees CORPORATE SOCIAL RESPONSIBILITY

36. Source: Fortune, www.fortune.com, March 21, 2011.www.fortune.com 1. Apple 2. Google 3. Berkshire Hathaway 4. Southwest Airlines 5. Procter & Gamble 6. Coca-Cola 7. Amazon 8. FedEx 9. Microsoft 10. McDonald’s 4-36 CORPORATE SOCIAL RESPONSIBILITY America’s Most Admired Companies

37. Over one-third of working Americans receive their salaries from nonprofits – who are dependent on funding from others. The green movement emerged as concern about global warming increased. Many companies are trying to minimize their carbon footprints – the amount of carbon released during an item’s production, distribution, consumption and disposal. 4-37 Responsibility to Society and the Environment CORPORATE SOCIAL RESPONSIBILITY Society and the Environment-

38. Society and the Environment-Green Movement 4-38 CORPORATE SOCIAL RESPONSIBILITY Green Movement consists of marketing efforts to produce, promote, and reclaim environmentally sensitive products. Chrysler recycles thousands of tons of wooden pallets, cardboard, and paper annually. The Chrysler car itself is 75 percent recyclable. Chrysler’s programs to recycle waste are examples of Green Movement.

39. With public concern over the environment, companies are finding greener ways of doing business. Some companies are claiming they are more environmentally responsible than they actually are, a practice called “greenwashing”. Web sites such as Greener Choices and Greenwashing Index screen ads for greenwashing.Greener ChoicesGreenwashing Index 4-39 Green Greed (Thinking Green) CORPORATE SOCIAL RESPONSIBILITY

40. Environmental efforts may increase costs but can offer good opportunities. The emerging renewable-energy and energy-efficiency industries account for 9 million U.S. jobs. Responsibility to the Environment By 2030, as many as 40 million “Green” jobs will be created. 4-40 Responsibility to Society and the Environment CORPORATE SOCIAL RESPONSIBILITY

41. Environmental quality is considered to be a public good. The implication is: like a metropolitan airport, everyone enjoys a cleaner environment regardless of who pays for it. Responsibility to the Environment 4-41 Responsibility to Society and the Environment CORPORATE SOCIAL RESPONSIBILITY Environmental quality is a public good; that is, everyone gets to enjoy it regardless of who pays for it. The trick for companies is to find the right public good that will appeal to their customers.

42. Social Auditing 4-42 CORPORATE SOCIAL RESPONSIBILITY A Social Audit is a systematic assessment of a firm’s objectives, strategies, and performance in terms of social responsibility.

43. 4-43 CORPORATE SOCIAL RESPONSIBILITY A Social Audit: Would tell a plastics manufacturer if helping raise money for a local playground was consistent with its missions. Would identify the type and amount of resources needed for a company that wanted to raise money for a local after-school program. Is a systematic assessment of a firm’s objectives, strategies, and performance in the domain of social responsibility. Would be used to evaluate current social responsibility programs to see what future involvement was reasonable.

44. Social Audit -- A systematic evaluation of an organization’s progress toward implementing programs that are socially responsible and responsive.  Socially conscious investors - insist that a company extend its own high standards to its suppliers.  Environmentalists - which companies don’t abide by environmentalists’ standards?  Union officials - hunt down violations and force companies to comply to avoid negative publicity.  Customers – make buying decisions based on their conscience. Which companies are green? 4-44 CORPORATE SOCIAL RESPONSIBILITY Four Types of Social Audit Watchdogs

45. Many businesses want socially responsible behavior from their international suppliers. The Joint Initiative on Corporate Accountability and Workers’ Rights was designed to make creating a single set of labor standards and inspecting factories easier. In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business. INTERNATIONAL ETHICS AND SOCIAL RESPONSIBILITY 4-45

46. 3-46 The End!