1. Ethics and Corporate Responsibility
Chapter 05
McGraw-Hill/Irwin
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
LO1 Describe how different ethical perspectives guide decision making
LO2 Explain how companies influence their ethics environment
LO3 Outline a process for making ethical decisions
LO4 Summarize the important issues surrounding corporate social responsibility
LO5 Discuss reasons for businesses’ growing interest in the natural environment
LO6 Identify actions managers can take to manage with the environment in mind

3. Ethics Ethics The system of rules that governs the ordering of values
What about yourself?
How are they formed?
Jimmy cricket

4. Ethical Dilemma
An ethical dilemma arises in a situation concerning right or wrong when values are in conflict. Right and wrong cannot be clearly identified.
© 2006 by South-Western, a division of Thomson Learning. All rights reserved.

5. Criteria for Ethical Decision Making
Criteria for Ethical Decision Making
Most ethical dilemmas involve
A conflict between needs of the part & whole.
The individual versus the organization.
The organization versus society as a whole.
© 2006 by South-Western, a division of Thomson Learning. All rights reserved.

6. Telling the Truth and Lying: Possible Outcomes
Do the $.10 game here.

7. It’s a Personal Issue
Most of us believe we are ethical but most have unconscious biases that favor ourselves and their own group
Competition
Consequences
Degrees
Win-win
5-7

8. It’s a Personal Issue Is it ethical to:
Shop online during company time?
Using office equipment for personal use?
Read personal s while at work?
Cheating-code of conduct
Steve Rellis story
5-8

9. Ethics Ethical issue Business ethics
Situation, problem, or opportunity in which an individual must choose among several actions that must be evaluated as morally right or wrong
Business ethics
The moral principles and standards that guide behavior in the world of business.
What is upside. What is downside? Will I get caught? How will I feel?

10. Ethical Systems Moral philosophy Universalism
Principles, rules, and values people use in deciding what is right or wrong
Universalism
The ethical system stating that all people should uphold certain values that society needs to function.
The Golden rule. The 10 Commandments.

11. Ethical Systems Egoism Utilitarianism
An ethical system defining acceptable behavior as that which maximizes consequences for the individual
Utilitarianism
An ethical system stating that the greatest good for the greatest number should be the overriding concern of decision makers.

12. Ethical Systems Relativism Virtue ethics
Philosophy that bases ethical behavior on the opinions and behaviors of relevant other people
Virtue ethics
Classification of people based on their level of moral judgment.
Kohlberg’s model of cognitive moral development
Perspective that what is moral comes from what a mature person with “good” moral character would deem right.
Jiminy cricket

13. The Ethics Environment
Sarbanes-Oxley Act
An act passed into law by Congress in 2002 to establish strict accounting and reporting rules in order to make senior managers more accountable and to improve and maintain investor confidence
Why?

14. Some Ethical Issues in Business
Grade inflation. Wrong change in the supermarket. My cousin Vinny.
Table 5.2

15. Business Ethics Ethical climate
In an organization, the processes by which decisions are evaluated and made on the basis of right and wrong
Examples from the class

16. Danger Signs
Excessive emphasis on short-term revenues over longer-term considerations.
Failure to establish a written code of ethics.
A desire for simple, “quick fix” solutions to ethical problems.
An unwillingness to take an ethical stand that may impose financial costs.

17. Danger Signs (cont.)
Consideration of ethics solely as a legal issue or a public relations tool
Lack of clear procedures for handling ethical problems.
Responding to the demands of shareholders at the expense of other constituencies
Heroes/rewards
Leaders

18. Ethics Programs Compliance-based ethics programs
Company mechanisms typically designed by corporate counsel to prevent, detect, and punish legal violations.
Integrity-based ethics programs
Company mechanisms designed to instill in people a personal responsibility for ethical behavior

19. A Process for Ethical Decision Making
Figure 5.1

20. Ethical Decision Making
Making ethical decisions takes:
Moral awareness
realizing the issue has ethical implications
Moral judgment
knowing what actions are morally defensible
Moral character
the strength and persistence to act in accordance with your ethics despite the challenges

21. Courage Why might employees lack courage in ethical issues?
A belief that the company would not take corrective action
A fear that management would retaliate against the employee for speaking up
Doubt that the employee’s report would be kept confidential
Financial
5-21

22. The Business Costs of Ethical Failure
Figure 5.2

23. Corporate Social Responsibility
Corporate social responsibility (CSR)
Obligation toward society assumed by business.

24. Corporate Social Responsibility
Economic responsibilities
To produce goods and services that society wants at a price that perpetuates the business and satisfies its obligations to investors.
Legal responsibilities
To obey local, state, federal, and relevant international laws
Public relations

25. Pyramid of Global Corporate Social Responsibility and Performance
Stay in business, obey the law,perception, do what is right, give back.
Figure 5.3

26. Contrasting Views
First - holds that managers act as agents for shareholders and, as such, are obligated to maximize the present value of the firm Second - managers should be motivated by principled moral reasoning

27. Reconciliation
Profit maximization and corporate social responsibility used to be regarded as antagonistic, leading to opposing policies. But the two views can converge
Recent attention has also been centered on the possible competitive advantage of socially responsible actions

28. Ecocentric Management
Goal is the creation of sustainable economic development and improvement of quality of life worldwide for all organizational stakeholders.

29. Ecocentric Management
Life-cycle analysis (LCA)
A process of analyzing all inputs and outputs, though the entire “cradle-to-grave” life of a product, to determine total environmental impact
Sustainable growth
Economic growth and development that meet present needs without harming the needs of future generations