1. Ethics and Corporate Responsibility
Chapter Four
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2. Learning Objectives
LO1 Describe how different ethical perspectives guide decision making LO2 Identify the ethics-related issues and laws facing managers LO3 Explain how managers influence their ethics environment LO4 Outline the process for making ethical decisions LO5 Summarize the important issues surrounding corporate social responsibility LO6 Discuss the growing importance of managing the natural environment

3. Ethics
Ethics- the moral principles and standards that guide the behavior of an individual or groupl

4. Telling the Truth and Lying: Possible Outcomes
Exhibit 4.1

5. It’s a Personal Issue
Most of us think we are good decision makers, ethical, and unbiased.
But most people have unconscious biases that favor themselves and their own group.

6. It’s a Personal Issue Managers often: Hire people who are like them
Think they are immune to conflicts of interest
Take more credit than they deserve
Blame others when they deserve some blame themselves

7. 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?

8. 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.

9. 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, such as honesty, rules against murder, deceit, oppression, etc. and other values that society needs to function.

10. Caux Principles Caux Principles
Ethical principles established by international executives based in Caux, Switzerland, in collaboration with business leaders from Japan, Europe, and the United States.
Two basic ethical ideals underpin the Caux Principles:
Kyosei
Human Dignity

11. Caux Principles Kyosei Human dignity
living and working together for the common good, allowing cooperation and mutual prosperity to coexist with healthy and fair competition
Human dignity
concerns the value of each person as an end, not a means to the fulfillment of others’ purposes

12. Core ethical principles found in all societies:
Truthfulness
Responsibility
Fairness
Respectfulness
Compassion

13. Question
Which ethical system bases ethical behavior on the opinions and behaviors of relevant other people?
Egoism
Utilitarianism
Relativism
Virtue ethics
The correct answer is c – relativism. See slide 5-14

14. Ethical Systems Egoism Utilitarianism
an ethical principle holding that individual self-interest is the actual motive of all conscious action. “Take action that promotes the greatest good for oneself.”
Utilitarianism
An ethical system stating that the greatest good for the greatest number should be the overriding concern of decision makers.

15. Ethical Systems Relativism Virtue ethics
Philosophy that bases ethical behavior on the opinions and behaviors of relevant other people
Virtue ethics
perspective that what is moral comes from what a mature person with “good” moral character would deem right
Moral individuals can transcend rules by appling their personal virtues such as faith, honesty, and integrity

16. Ethical Systems Kohlberg’s model of cognitive moral development
classification of people based on their level of moral judgment

17. Kohlberg’s Stages of Moral Development
Exhibit 4.2

18. Question
What act passed into law by Congress in 2002 established strict accounting and reporting rules?
Wagner Act
Sarbanes-Oxley Act
Chapin Act
GAAP Act
The correct answer is b – Sarbanes-Oxley. See next slide

19. Business ethics matter
Ethical dilemmas
Questions of ethics in business have been prominent in the news in recent years.
Insider trading, illegal campaign contributions, bribery, famous court cases and other scandals have created a perception that business leaders use illegal means to gain competitive advantage, increase profits, or improve their personal positions.
Shareholders tended to ignore fraudulent financial reporting, as long as profits and market share didn’t suffer.
Most business leaders believe they uphold ethical standards in business practices, and they deal with a wide range of ethical issues everyday.

20. Ethical Dilemmas Brands CEO Pay Commercialism in schools
Rel;igion at work
Sweatshops
Wages

21. Ethics and the law Sarbanes-Oxley Act
Passed by Congress in 2002, this act establishes an array of strict accounting and reporting rules in order to make senior managers more accountable and to improve and maintain investor confidence.
Law requires that companies and their auditors provide reports to financial statement users about the effectiveness of internal controls over financial reporting procedures.

22. The Ethical Climate Influences Employees
In an organization, the processes by which decisions are evaluated and made on the basis of right and wrong

23. 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.

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

25. Managers Shape Behavior
Ethical leadership
Business ethics are valued but sometimes lacking
Society demands an ethical climate
Corporate ethical standards
organizations must be explicit regarding their standards and expectations.
Ethical leader
One who is both a moral person and a moral manager influencing others to behave ethically.

26. Ethics Programs Compliance-based ethics programs
Company mechanisms typically designed by corporate counsel to prevent, detect, and punish legal violations.
Effective ethics programs include:
formal ethics codes
ethics committees to develop policies
evaluation of actions
ethics officers or ombudspersons to investigate allegations
ethics training programs
disciplinary processes

27. Ethics Programs Integrity-based ethics programs
Company mechanisms designed to instill in people a personal responsibility for ethical behavior
With such a program, companies and people govern themselves through set of guiding principles that they embrace.

28. 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

29. A Process for Ethical Decision Making
Exhibit 4.3

30. The Business Costs of Ethical Failure
Exhibit 4.4

31. Evaluating Ethical Decisions
Evaluating your ethical duties requires looking for actions that meet the following criteria:
You would be proud to see widely reported in newspapers
It would build a sense of community among those involved
It would generate the greatest social good
You would be willing to see others take the same action when you might be the victim
It doesn’t harm “the least among us”
It doesn’t interfere with the right of all others to develop their skills to the fullest.

32. Courage
Behaving ethically requires not just moral awareness and moral judgment but also moral character, including the courage to take actions consistent with your ethical decisions

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

34. Corporate Social Responsibility
Four levels of 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

35. Corporate Social Responsibility
Ethical responsibilities
Meeting other social expectations, not written as law.

36. Corporate Social Responsibility
Philanthropic responsibilities
Additional behaviors and activities that society finds desirable and that the values of the business support.

37. Pyramid of Global Corporate Social Responsibility and Performance
Figure 4.5

38. Corporate Social Responsibility
Transcendent education
An education with five higher goals that balance self-interest with responsibility to others
Empathy
feeling your decisions as potential victims might feel them, to gain wisdom
Generativity
Learning how to give as well as take, to others in the present as well as to the future generations
Mutuality
Viewing success not merely as personal gain, but a common victory
Civil aspiration
Thinking not just in terms of “don’ts”(lie, cheat, steal, kill), but also in terms of positive contributions
Intolerance of ineffective humanity
Speaking out against unethical actions

39. Contrasting Views
Shareholder model- holds that managers act as agents for shareholders and, as such, are obligated to maximize the present value of the firm Stakeholder model – holds that managers are obliged to look beyond profitability to help their organizations succeed by interacting with groups that have a stake in the organization

40. You can Do Good and Do Well
Profit maximization and corporate social responsibility used to be regarded as 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

41. The Natural Environment
Economic activity has environmental consequences
A risk society is one in which the creation and distribution of wealth generate by-products that can cause injury, loss, or danger to people and the environment.

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

43. Ecocentric Management
Sustainable growth
Economic growth and development that meet present needs without harming the needs of future generations

44. 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
Some organizations set environmental agendas
Companies not only have the ability to solve environmental problems; they are coming to see and acquire the motivation as well.

45. Video: Hewlett Packard
Why should an investor be concerned with a potential $40 million severance package for an exiting CEO?
Should severance clauses in an executive contact be considered unethical?