1. Ethics and Social Responsibility
BM003: Examine the role of ethics and social responsibility in business decision making.

2. BM03.01 Explain the relationship between ethics and government laws and regulations.

3. Define “Business Ethics”
A collection of principles and rules that define correct and incorrect behavior/conduct for a member of an organization.
Notions of what is right and wrong vary from manager to manager, business to business, and country to country.

4. Laws Relating to Ethics in Business
Competition laws
Consumer Protection laws
Environmental Protection laws
Employment laws

5. Competition Laws The Sherman Act of 1890
Insures that companies remain able to compete fairly
Makes it illegal for companies to monopolize trade
Prohibits mergers of new company if merged company controls too large a share of the market

6. Competition Laws (cont.)
The Clayton Act of 1914
Makes it illegal to charge different prices to different wholesale customers
Bans practice of requiring a customer to purchase a second good

7. Competition Laws (cont.)
The Robinson-Patman Act of 1936
Amended portion of the Clayton Act dealing with the pricing of goods
Prevents price discrimination—setting different prices for different customers

8. Competition Laws (cont.)
Wheeler-Lea Act of 1938
Passed to strengthen earlier laws outlawing unfair methods of competition
Bans unfair unfair or deceptive acts or practices, including false advertising

9. Consumer Protection Laws
Federal Food, Drug, and Cosmetic Act of 1938
Bans the sale of impure, improperly labeled, falsely guaranteed, and unhealthful foods, drugs, and cosmetics
Enforced by the Food and Drug Administration (FDA)

10. Consumer Protection Laws (cont.)
Consumer Product Safety Commission 1972
Establishes minimum product safety standards on consumer products
If product is defective, CPSC has the authority to force the manufacturer to recall the product

11. Consumer Protection Laws (cont.)
Truth in Lending Act of 1968
Creditors are required to let consumers know how much being paid in finance charges and interest
Business must show finance charge on statements as annual percentage rates to make comparing rates easier.

12. Consumer Protection Laws (cont.)
Equal Credit Opportunity Act of 1975
Illegal for business to deny credit because of age, sex, marital status, race, national origin, religion, or public assistance
Requires businesses to notify credit card applicants of application status within 30 days and give reason for rejection

13. Consumer Protection Laws (cont.)
Fair Credit Reporting Act—gives cardholders right to see their credit agency reports and to correct errors
Fair Debt Collection Practices Act—forbids debt collectors to use abusive, deceptive, or unfair collection methods

14. Environmental Protection Laws
The National Environmental Policy Act of 1969
Key piece of legislation in environmental protection
Created the Environmental Protection Agency (EPA) whose mission is to protect human health and safeguard the air, water, and land

15. Environmental Protection Laws (cont.)
The Clean Air Act of 1970
Comprehensive federal law that regulates air emissions
Original act set maximum air pollution standards for each of the 50 states
Amended in 1990 to deal with acid rain, ground- level ozone, stratospheric ozone depletion, and toxic substances in the air

16. Environmental Protection Laws (cont.)
The Toxic Substances Control Act of 1976
Enacted to give EPA the ability to track the 75,000 industrial chemicals currently produced in or imported into the U.S.
EPA screens these chemicals and can require reporting or testing of any that may pose an environmental or human health hazard

17. Environmental Protection Laws (cont.)
The Clean Water Act of 1977
Give EPA authority to set standards on type and quantity of pollutants that industries can put into bodies of water
Illegal to discharge any pollutant into navigable waters unless permit is obtained

18. Environmental Protection Laws (cont.)
CERES Principles (Coalition of Environmentally Responsible Economies)
Developed as result of Exxon Valdez accident, which spilled oil along coastal Alaska in 1989
Organizations are asked to follow the principles voluntarily, but are not legally required

19. Employment Laws Equal Employment Opportunity Law
Civil Rights Act of 1964
Age Discrimination in Employment Act
Americans with Disabilities Act
Equal Pay Act

20. Employment Laws (cont.)
Occupational Safety and Health Laws
Enforced by Occupational Safety and Health Administration (OSHA)
Sets standards for keeping workplaces clean and free of hazards

21. Employment Laws (cont.)
Fair Labor Standards Act (Wage-Hour Laws)
Sets minimum wage
Sets number of hours employees can work in a week without overtime pay
Prohibits companies from employing children under the age of 14

22. Employment Laws (cont.)
Benefits Laws
Social Security Act
Employment Retirement Income Security Act (ERISA)
Unemployment Insurance
Workers’ Compensation
Family and Medical Leave Act (FMLA)

23. Employment Laws (cont.)
Labor Relations Laws
Enacted by Congress to protect groups of employees
National Labor Relations Act (NLRA)
Organizing a union
Collective bargaining
Striking

24. Ethics and Social Responsibility
BM03.02 Examine business codes of ethics and how they contribute to ethical business environments.

25. Ethical Issues in Business
Accepting business gifts
Bribing government officials
Respecting the privacy and dignity of employees
Using company property for personal use

26. General Content of Ethical Codes
Honesty
Adherence to the law
Product safety and quality
Health and safety in the workplace
Conflicts of interest
Employment practices

27. General Content of Ethical Codes
Selling and marketing practices
Financial reporting
Pricing, billing, and contracting
Trading in securities/using confidential information
Acquiring and using information about competitors

28. General Content of Ethical Codes
Security
Payments to obtain business
Political activities
Protection of the environment
Source: Business Management, Real World Applications & Connections, Glencoe/McGraw-Hill

29. Code of Ethics in a Business Environment
Removes or reduces opportunities for unethical conduct
Must be communicated to all employees
Must have procedures in place to handle violations of the code
Must have full support of top-level managers
Must be enforced to be effective

30. Ethical Dilemmas Course of action not always clear
Notions of what is right or wrong changes over time
Values differ among nations
Corporate gift-giving
Intellectual property
Copyrights
Patents
Trademarks

31. Solving Ethical Dilemmas
Have you defined the problem accurately?
How would you define the problem if you stood on the other side of the fence?
Whom could your decision or action injure? Can you discuss the problem with the affected parties before you make your decision?

32. Solving Ethical Dilemmas
Are you confident that your position will be as valid over a long period of time as it seems now?
Could you disclose without qualm your decision or action to your boss, your CEO, the board of directors, your family, and society as a whole?

33. Standards by Which Ethical Decisions Are Made
The Golden Rule
Utilitarian Principle
Kant’s Categorical Imperative
The Professional Ethic

34. Standards by Which Ethical Decisions Are Made
The TV Test
The Legal Test
The Four-Way Test
Rights View
Theory of Justice

35. Guidelines for Acting Ethically
Know your organization’s policy on ethics
Understand the ethics policy
Think before you act
Ask yourself “what-if” questions
Seek opinions from others
Do what you truly believe is right

36. BM03.03 How does a business demonstrate social responsibility?
Social Responsibility—changing views
Profit Maximization (19th-early 20th century)
Trusteeship Management (1920s and 1930s)
Social Involvement(1960s-present)
Stakeholder—All people affected by the actions of a company

37. Measuring Social Responsibility
Social Audit
Philanthropy & Volunteerism
Environment Awareness
Sensitivity to diversity and quality of work life
Flexible work hours
On-site day care centers

38. Stakeholders & Social Obligations Owed to Them
Stockholders/owners of the organization
To increase the value of the organization
Suppliers of materials
To deal with them fairly
Banks and other lenders
To repay debts
Government agencies
To abide by laws
Employees and unions
To provide safe working environment and negotiate fairly with union-representatives
Consumers
To provide safe products
Competitors
To compete fairly and to refrain from restraints of trade
Local communities and society at large
To avoid business practices that harm the environment

39. Arguments FOR the assumption of social responsibilities by a business
Public expectations
Long-run profits
Ethical obligation
Public image
Better environment
Discouragement of
further government regulation

40. Arguments AGAINST the Assumption of Social Responsibilities by a Business
Violation of profit maximization
Dilution of purpose
Costs
Too much power
Lack of skills

41. Ethics and Social Responsibility
BM Emerging and Social Responsibility Issues in a Multinational Business Environment

42. Multinational Firms Home country—where business has its headquarters
Host country—foreign location where business has its facilities
Parent firm—company headquarters
Subsidiaries—foreign branches

43. Challenges—Working in an International Environment
Differences in local laws
Differences in local customs

44. Challenges—Working in an International Environment
Differences in business practices
Use of food at meetings
Punctuality or lateness
Use of business cards
Greetings
Formal/informal conduct
Bribes and unethical behavior
Foreign Corrupt Practices Act—Prohibits use of bribes
Corporate gift-giving and stealing of intellectual property

45. Challenges—Working in an International Environment
Cultural Differences
Customs, beliefs, values, and patterns of behavior
Language
Religion
Attitudes toward work, authority, and family
Cultural Differences (cont.)
Practices regarding courtship, etiquette, gestures, and joking
Manners and traditions
Differences within racial and ethnic groups of same culture
Low-context culture
High-context culture

46. Maintaining Ethics in International Management
Respecting core human rights
Opportunity to achieve economic advancement and improved standard of living
Right to be treated with respect
Respecting local tradition
Customs held in high regard
In countries like Japan, gift-giving is a tradition, not a bribe

47. Maintaining Ethics in International Management
Determining right from wrong
Evaluate specifics of the situation to determine if the activity is ethical
Some actions are unethical in one setting, but acceptable in another

48. The End of Competency 003