1. Conducting Business Ethically and Responsibly
Chapter 4
Conducting Business
Ethically and Responsibly

2. Learning Objectives
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 to both environmental issues and to a firm’s relationships with customers, employees, and investors
These learning objectives are based upon those at the beginning of the chapter. For a review of learning objectives, see the summary at the end of the chapter, as well as the list of key terms.
Objectives: p.92
Summary: p

3. Learning Objectives
Identify four general approaches to social responsibility and describe the four steps a firm must take to implement a social responsibility program
Explain how social responsibility and ethics affect small businesses
These learning objectives are based upon those at the beginning of the chapter. For a review of learning objectives, see the summary at the end of the chapter, as well as the list of key terms.
Objectives: p.92
Summary: p

4. What Is Ethical Behaviour?
Ethics
Standards or moral values that dictate what is right and wrong
Culturally based
Formed upon society’s expectations
Vary by person, and by situation
Everyone develops their own “code of ethics”
Discussed on page 94.
This introduction to ethics provides some basic definitions and stresses that what constitutes ethical behaviour is to a great extent open to discussion.
Activities:
Review Questions: #1,2

5. Influences on Ethical Behaviour
Personal Code of Ethics
Family
Peer Group
Experiences
Discussed on page 94.
Activities:
Review Questions: #1,2

6. Managerial Ethics Behaviour toward employees
Behaviour toward the organization
Behaviour toward other economic agents
Discussed on page
Activities:
Review Questions: #1,2

7. Assessing Ethical Behaviour
Gather the relevant factual information
Make an ethical judgment based on the rightness or wrongness of the proposed activity or policy
Analyze the facts to determine the most appropriate moral values
Concepts discussed on pages
Activities:
Review Questions: #1,2

8. Company Practices & Business Ethics
Firms are creating ethical codes of conduct to guide employee decisions
Top management support is essential
Adopting written codes
Instituting ethics programs
Discussed on pages
Activities:
Review Questions: #1,2

9. Written Codes of Ethics
Increase public confidence in a firm or its industry
Help stem the tide of government regulation
Improve internal operations by providing consistent standards of both ethical and legal conduct
Help managers respond to problems that arise as a result of unethical or illegal behaviour
Discussed on page
Activities:
Review Questions: #1,2

10. Social Responsibility
A business’s collective code of ethics towards
The environment
Its customers
Its employees
Its investors
Discussed on page 102
Care should be taken to clarify how every action taken by a business can be perceived as socially responsible or not. All stakeholders must be treated equally where ethical behaviour is concerned. Care to treat one sector responsibly is not effective if other stakeholders are suffering.
Activities:
Review Questions: #4,5,6,8

11. Organizational Stakeholders
Groups, individuals, and organizations that are directly affected by the practices of an organization and that therefore have a stake in its performance
Discussed on page 102
Activities:
Review Questions: #4,5,6,8

12. Areas of Social Responsibility
Responsibility Towards
Environment
Responsibility Towards
Customers
Responsibility Towards
Employees
Social
Responsibility
Discussed on page
The ethical climate of a firm depends to a great extent on the ethics of individual employees.
Activities:
Review Questions: #4,5,6,8
Responsibility
Towards
Investors

13. Environmental Responsibility Issues
Air pollution
Water pollution
Land pollution
Toxic waste
Acid rain
Discussed on pages This is a list slide. Each topic is discussed separately on the slides which follow.
Legislation has been introduced to force clean up in some industries. In other cases, special interest groups are working to protect the environment against exploitation. However, in some industries the cost of the technology to clean up emissions is so great that it would force businesses out of business. This in itself is an ethical quandary.
Review Questions: #6.

14. Customer Responsibility Issues
Rights of consumers
Unfair pricing
Ethics in advertising
Discussed on page
This is a list slide. Each of the items listed appear separately on slides which follow.
Companies have two key areas which require interaction with customers. These areas are pricing and product. Responsibility to customers is concerned with the fair and ethical treatment of buyers in each of these areas.
Activities:
Review Questions: #6.

15. Consumer Rights Issues
Consumerism
Social movement that seeks to protect and expand the rights of consumers in their dealings with businesses
Consumers rights
Right to safe products
Right to be informed
Right to be heard
Right to choose what they buy
Discussed on page 107.
Activities:
Review Questions: #6.

16. Unfair Pricing Issues
Illegal pricing practices may occur due to the intentional (illegal) limiting of competition
Collusion
A group of companies conspiring to fix prices
Results in inflated prices and a lack of competition
Discussed on page 108
Activities:
Review Questions: #6.

17. Ethics in Advertising Issues
Increased attention to ethics in advertising and product information
Words and phrases such as “light”, “diet”, “low fat”
Concerns about advertising that is considered morally objectionable
Ad campaigns by tobacco and alcohol companies
Discussed on page 108
Activities:
Review Questions: #6.

18. Employee Responsibility Issues
Human resource management issues
Social responsibility issues
Privacy issues
Encouraging ethical behaviour
Whistle-blowers
Discussed on page This is a list slide. Each of these topics is discussed on a later slide.
Activities:
Review Questions: #3,6,7

19. Human Resource Management Issues
Fair and equitable treatment of all employees without discrimination based upon sex, race, or other factors
Recruiting
Hiring
Training
Promoting
Compensating
Discussed on page 109.
Activities:
Review Questions: #3,6,7

20. Social Responsibility Towards Employees
Safe workplaces
Socially and emotionally - no abuse or harassment
Physically - safe work environment
Discussed on page 109.
Activities:
Review Questions: #3,6,7

21. Privacy of Employees How much control is acceptable in the workplace?
Drug testing
Video monitoring
Internet/ Monitoring
Employees may not be aware or may not know when they are being monitored
Results in increased job stress
Discussed on page 109.
Activities:
Review Questions: #3,6,7

22. Encouraging Ethical Employee Behaviour
Top management support for ethical behaviour is critical
“Whistle-blowers” are employees who report unethical, illegal, and/or socially irresponsible behaviour
The company should support its “whistle blowers” rather than threatening them with dismissal or other penalties
Discussed on page 109.
Activities:Review Questions: #3,6,7

23. Responsibility Towards Investors
Improper financial management
Cheque kiting
Insider trading
Misrepresentation of finances
Discussed on pages This is a list slide. Each topic is discussed separately on the slides which follow.
Activities:
Review Questions: #6
Assign a student, or a group of students, to monitor the local newspaper for one month. Ask them to clip out articles describing financial misrepresentation. After the one-month monitoring period is over, have students select one of the stories to present to the class. Following the presentation, have the students in the class do a post-mortem of the situation to determine what ethical violations occurred and what could have been done to prevent them.

24. Improper Financial Management
Doing a poor job of managing the financial resources of a company
Payment of high salaries, lavish expense accounts, & other perks with little control over how money is spent
May be legally unpunishable because no law has been broken
It may be difficult to replace management because unrest in the firm may devalue its stock
Discussed on page 110.
Activities:
Review Questions: #6

25. Cheque Kiting
Illegal practice of writing cheques against money that has not yet arrived in the bank account
A creative “cheque kiter” can write cheques from account to account with very little money to back it up
Discussed on page 110.
Cheque kiting s not the same as post-dating a cheque, whereby the cheque is dated for the day the money will actually arrive in the account (post-dating is not illegal as the bank will hold the cheque until the processing date). It is important that students understand the difference.
Activities:
Review Questions: #6

26. Insider Trading
Using confidential (non-public) information to gain from the purchase or sale of stock
Martha Stewart (ImClone shares)
Involves gaining knowledge of inside information about the company prior to making the purchase
Discussed on page 110 .
The only way the perpetrators know when the time is right for purchase or sale is through information they are not allowed to have, which other investors have no legal access to.
Activities:
Review Questions: #6

27. Misrepresenting Financial Information
Companies must conform to accounting guidelines called “generally accepted accounting principles” (GAAP)
Failure to follow GAAP in order to inflate expected profit figures can mislead investors
Discussed on page 110.
Activities:
Review Questions: #6

28. Small Business Ethics
A small business does not have the same impact on society if it acts in an irresponsible way
Many entrepreneurs decide to conduct themselves in a socially responsible manner because they feel it is important to contribute to society
Individual entrepreneurs make independent decisions
Discussed on page 115.
The structure and focus of a small business make it difficult to follow the social responsibility model. Many times, the small business consists of too few employees. Their personal codes of ethics will likely be the basis of the small business’s ethical and social orientations.