© 2009 south-western, a division of cengage learning 1 chapter 4: business ethics and social...
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© 2009 South-Western, a division of Cengage Learning 1
Chapter 4: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
Doing Well by Doing Good
© 2009 South-Western, a division of Cengage Learning
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ETHICS AND SOCIAL RESPONSIBILITY
ETHICSBeliefs about
right and wrong.
© 2009 South-Western, a division of Cengage Learning
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BUSINESS ETHICS: NOT AN OXYMORON
Business Ethics – the application of right and wrong in the workplace.
Ethical Dilemma
Negative Consequences
Two unfavorable options
Ethical Lapse
Clear misconduct
most challenging business decisions seem to arise
when values are in conflict
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ETHICS/PERSONAL CHARACTER
82% admitted that they lied to parent within the past 12 months about something significant.
60% admitted that they cheated on a test at school within the past 12 months.
33% admitted that they copied an Internet document within the past 12 months.
19% admitted that they stole something from a friend withinthe past 12 months.
28% admitted that they stole something from a store withinthe past 12 months.
A study of 36,000 high school students revealed:
A 2006 Study conducted by Josephson Institute of Ethics
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ETHICS: MURKIER THAN YOU THINK Unethical vs. Ethical
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UNIVERSAL ETHICAL STANDARDS
Developed by Character Counts, a nonpartisan
organization of educators, community leaders, and
ethicists.
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ETHICS AND THE INDIVIDUAL
• Framework for Ethical Decisions– Do you understand the
dimensions of the problem?– Who would benefit? Who would
suffer?– Are the alternative solutions
legal? Are they fair?– Does your decision make you
comfortable?– Could you defend your decision
on the nightly news?
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Creating and Maintaining an Ethical Organization
• Organizational Culture• Role of Top Management• Code of Ethics
– Executive Buy-in– Clear expectations– Integrated approach– Global and local– Whistleblower support– Reporting and Enforcement
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ETHICS FAME AND SHAME
Dennis Kozlowski, former CEO of Tyco was convicted of looting
millions from the company.
Ethics Hall of Shame
Sanjay Kumar of Computer Associates was convicted of massive accounting
fraud in 2006.
Martha Stewart was convicted of obstructing justice in a $40,00 well
timed stock sale.
Sheron Watkins, former vice president of Enron reported the accounting irregularitiesthat led to the discovery of corporate fraud.
Ethics Hall of Fame
Pierre Omidyar, the founder of eBay has given away over $100 million to
Tufts University Micro Finance Fund.
Paul Newman’s food company donates 100% of the profits to charity, totaling
more than $150 million to date.
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ETHICS AND SOCIAL RESPONSIBILITY
SOCIAL RESPONSIBILITYThe obligation of a business
to contribute to society.
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ETHICS AND SOCIAL RESPONSIBILITY
ETHICSBeliefs about
right and wrong.
SOCIAL RESPONSIBILITYThe obligation of a business
to contribute to society.
A Close Relationship, but Not the Same
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SOCIAL RESPONSIBILITY
Responsibility to Whom? Stakeholders are any
groups that have a stake –
or a personal interest - in the
performance and actions
of an organization.
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RESPONSIBILITY TO……
EMPLOYEES
INVESTORS
COMMUNITY
ENVIRONMENT
CUSTOMERS
Creating Jobs that Work
Sustainable Development
Value, Honesty and Communication
Fair Stewardship and Full Disclosure
Business and the Greater Good
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RESPONSIBILITY TO EMPLOYEES: CREATING JOBS THAT WORK
• Meet Legal Standards• Workplace Safety• Minimum Wage/Overtime
Requirements• Value Employees• Provide Work/Life Balance
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DOES IT PAY TO PAY MORE?
Costco Wal-Mart’sSam’s Club
Average hourly wage $15.97 $11.52
Annual health costs per worker $5,735 $3,500
Covered by health plan 82% 47%
Employee turnover 6%/yr 21%/yr
Labor and overhead costs 9.8% of sales 17% of sales
Profits per employee $13,647 $11,039
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RESPONSIBILITY TO CUSTOMERS
CONSUMERISM:
• The Right to Be Safe
• The Right to Be Informed
• The Right to Choose
• The Right to be Heard
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ROTTEN APPLE?
Planned Obsolescence –
Deliberately designing products to fail in order to shorten
the time between consumer repurchases
APPLE COMPUTERS:
• iPods had irreplaceable battery.
• Batteries died after 18 months.
• Customers were encouraged to purchase new iPods
• Two customers posted high profile protest movies online.
• APPLE announced replacement program.
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RESPONSIBILITY TO INVESTORS
• Legal Requirements– Sarbanes-Oxley
• Responsible use of Corporate Dollars– Honesty
• Is Optimism or Pessimism Socially Responsible?
FAIR STEWARDSHIP AND FULL DISCLOSURE
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RESPONSIBILITY TO COMMUNITY
Corporate Philanthropy - business donations to
nonprofit groups, including both money and time.
Corporate Responsibility - The actions of the business
rather than donations of money and time.
Cause-related Marketing – partnerships between businesses
and nonprofit organizations, designed to spike sales for the
company and raise money for the nonprofit.
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RESPONSIBILITY TO ENVIRONMENT
Green Marketing – marketing environmental products and practices
to gain a competitive edge.
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RESPONSIBILITY TO ENVIRONMENT
• Responsibility to environment is a part of responsibility to community
• Reducing the amount of trash is more important than recycling
• Although consumers support green marketing, they may not be willing to sacrifice quality
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CAUSE RELATED MARKETING
• The term was coined in 1983 by American Express– Raise Funds for Statue of Liberty
Restoration
• Campaign to donate $.01 for every dollar charged on credit card.– New Cardholders Grew 45%– Card Usage Grew 28%– Statue of Liberty Restored Early
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ETHICS & SOCIAL RESPONSIBILITY IN THE GLOBAL ARENA
• Corruption is part of the culture in many countries– Bribes or Gifts
• Labor issues in host countries can be complicated– Living Wage– Child Labor
• Code of Conduct
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MONITORING ETHICS AND SOCIAL RESPONSIBILITY
A systematic evaluation of how well a firm is meeting its
ethics and social responsibility objectives.
SOCIAL AUDIT
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LOOKING BACK
• What is ethics and the universal ethics standards?
• What is business ethics and ethical dilemmas?
• How does ethics relate to individuals and the organization?
• What is social responsibility and its impact on stakeholder groups?
• What is the role of social responsibility in the global arena?
• How do companies evaluate their efforts to be socially responsible?