1. > > > > Chapter 2 Business Ethics and Social Responsibility

2. Concern for Ethical and Societal Issues Business Ethics The standards of conduct and moral values governing actions and decisions in the work environment. –Social responsibility. –Balance between what’s right and what’s profitable. –Often no clear-cut choices. –Often shaped by the organization’s ethical climate (History, Managers/CEO’s views on ethics, etc…).

3. High expectation of business/organizations to uphold ethical standards. i.e NFL & domestic abuse. Vast majority of businesses ethical. New corporate officers charged with deterring wrongdoing and ensuring ethical standards. The Contemporary Ethical Environment

4. Common areas where ethics are violated: –Putting own interest ahead of the organization –Lying to employee –Misrepresenting hours –Safety violations –Internet Abuse Technology is expanding potential for unethical behavior Individuals Make A Difference

5. Development of Individual Ethics

6. Situation in which a business decision may be influenced for personal gain. Telling the truth and adhering to deeply felt ethical principles in business decisions. Businesspeople expect employees to be loyal and truthful, but ethical conflicts may arise. Employee’s disclosure of illegal, immoral, or unethical practices in the organization. On-the-Job Ethical Dilemmas

7. Social Responsibility Management must consider profit, consumer satisfaction, and societal well-being when trying to determine ethical actions. Each are equally important in todays 21 st century business world. Contributions to the overall economy, job opportunities, and charitable contributions/service. Organizations measure their effectiveness through social audits. Acting Responsibly to Satisfy Society

8. Areas of Responsibility

9. Public Health Issues. What to do about inherently dangerous products such as alcohol, tobacco, vaccines, and steroids. Protecting the Environment. Using resources efficiently, minimizing pollution. Recycling. Reprocessing used materials for reuse. Developing the Quality of the Workforce. Enhancing quality of the overall workforce through education and diversity initiatives. Corporate Philanthropy. Cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees. Responsibilities to the General Public

10. The Right to Be Safe. Safe operation of products, avoiding product liability. The Right to Be Informed. Avoiding false or misleading advertising and providing effective customer service. The Right to Choose. Ability of consumers to choose the products and services they want. The Right to Be Heard. Ability of consumers to express legitimate complaints to the appropriate parties. Responsibilities to Customers

11. Workplace Safety. Monitored by Occupational Safety and Health Administration.Occupational Safety and Health Administration Quality-of-Life Issues. Balancing work and family through flexible work schedules, subsidized child care, and regulation such as the Family and Medical Leave Act of 1993.the Family and Medical Leave Act Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees without discrimination; many aspects regulated by law. Age Discrimination. Age Discrimination in Employment Act of 1968 protects workers age 40 or older.Age Discrimination in Employment Act Sexual Harassment and Sexism. Avoiding unwelcome actions of a sexual nature; equal pay for equal work without regard to gender. Responsibilities to Employees

12. Obligation to make profits for shareholders. Expectation of ethical and moral behavior. Investors protected by regulation by the Securities and Exchange Commission and state regulations. Securities and Exchange Commission Responsibilities to Investors

13. 1.Reputation 2.Investor confidence 3.Financial performance 4.Unlocking human potential 5.Building trust Reasons for importance of ethics

14. 1. Reputation Reputation “The collective opinion of stakeholders towards an organisation based on its past record” (Nakra)

15. 1. Reputation Importance of reputation  Credibility of leaders  Ability to sell products/services  Attract investors  Hire talented staff  Loyalty of supply chain  Exert influence on government

16. Reputation as competitive edge  “Ethical behaviour is good business. Companies that operate ethically have a competitive edge over those that do not” (Moore: Former Chairman of PWC)

17.  Do you think Reputation matters?  Can you think of examples where companies reputations were hurt or enhanced because of ethical/a lack of ethical practices? Ethics and reputation

18. 2. Investor confidence  Investors are looking for: Responsible, Accountable, Fair and Transparent management Enterprises with a strong ethical foundation  Why? Because they want to know that their money will be safe, and that their own reputation will not be damaged by being associated with a company.

19. McKinsey Investor Opinion Survey 200+ institutional investors surveyed (Managed more than US $2 trillion)  85% consider corporate governance as important as financial performance.  73% will pay more for shares of well governed company than for a poorly governed company with comparable financial results.

20. “Markets exists by the grace of investors. If a country does not have a reputation for strong corporate governance practices, capital will flow elsewhere. It serves us well to remember that no market has a divine right to investor’s capital.” Arthur Levitt (Former Chair of US Securities Exchange)

21. 3. Financial performance

22. Ethics and financial performance

23. So, does ethics pay?  Possible bad consequences of detected unethical business –Corporate collapses Enron, Worldcom, Parmalat –Losses of jobs, investments, pensions  Still, in the short term, there is no guarantee that good ethics will be good (profitable) business

24. 4. Unlocking human potential Effects of unethical treatment on employees:  Job dissatisfaction  High employee turnover  Absenteeism  Theft  Sabotage  Inhibit creativity

25. Ethics unlocks human potential Respect for the individual “ “Respect for the individual “ The most pervasive theme in excellent companies Peters and Waterman: In Search of Excellence

26. Ethics unlocks human potential In a recent US study 3 factors ranked among employees’ five top-ranked goals, before good pay and job security  Ethical corporate behavior  Honest company communications  Respectful treatment

27. 5. Building trust Why trust is needed in organisations:  Distrust is expensive  Trust facilitates co-operation  Trust unlocks knowledge  Trust promotes loyalty

28. Trustworthiness  Trustworthiness = being worthy of others’ confidence/trust that one will act with the right motive in accord with moral values (norms)  The facilitators of trustworthiness Openness Competency Integrity Benevolence Reputation

29. For all cases, answer the following questions: 1.What is the ethical issue in play here? 2.What rights does the main character have in this situation? 3.How do you feel company management should handle the situation? 4.If you were in that situation, how would you handle things?