chapter two business ethics and social responsibility copyright © 2006 by the mcgraw-hill...

Chapter TwoChapter TwoBusiness Ethicsand Social Responsibility

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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Business Ethics and Social Responsibility

Business Ethics:

The principles and standards that define acceptable conduct in business

Social Responsibility:

A business’s obligation to maximize its positive impact and minimize its negative impact on society

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Recognizing an Ethical Issue

An ethical issue is an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical

Did You Know?The most common types of observed misconduct are lying, withholding information, and abusive/ intimidating behavior.


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Reasons For Not Reporting Observed Misconduct

1. Fear of not being considered a team player

2. Didn’t believe corrective action would be taken

3. Feared retribution or retaliation from supervisor or management

4. No one else cares about business ethics so why should I

5. Didn’t trust organization to keep report confidential

Source: 1997 Society for Human Resource Management/Ethics Resource Center Business Ethics Survey Report, p. 21.

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Misconduct Observed in the Workplace

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Ethical Issue Categories

Conflict of interest

Fairness and honesty

Communications

Business relationships


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Conflict of Interest

Occurs when a person must choose whether to advance their own personal interest or those of others


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Fairness and Honesty

The heart of business ethics

General values of decision makers


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Communications

False and misleading advertising and deceptive personal-selling tactics anger customers and may cause a business to fail.


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Business Relationships

Businesspeople must be ethical toward their customers, suppliers, and others in their workplace.


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Questions to Consider in Determining Whether an Action is Ethical

Are there any potential legal restrictions or violations that could result from the action?

Question: If I do this will it break any laws?

Does your company have a specific code of ethics or a policy on the action?

Question: If I do this will I go against the employee handbook?


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Is this activity customary in your industry?

Are there any industry trade groups that provide guidelines or codes of conduct that address this issue?

Question: If I do this will I violate any trade practices?


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Would this activity be accepted by your coworkers?

Will your decision or action withstand open discussion with coworkers and managers and survive untarnished?

Question: Will my action cause peer acceptance or rejection, or any peer pressure?


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How does this activity fit with your own beliefs and values?

Question: Will my action violate any of my personal ethics, religious beliefs, or social values?


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Three Factors that Influence Business Ethics

IndividualStandardsandValues

IndividualStandardsandValues

Managers’andCoworkers’Influence

Managers’andCoworkers’Influence

Opportunity:Codes andComplianceRequirements

Opportunity:Codes andComplianceRequirements

Ethical/UnethicalChoicesin Business

Ethical/UnethicalChoicesin Business


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Codes of Ethics

Formalized rules and standards that describe what a company expects of its employees

Did You Know?Written ethics standards are more often found in larger companies than smaller ones.


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Whistleblowing

The act of an employee exposing the employer’s wrongdoing to outsiders

The media

Government regulatory agencies


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The Facts on Business Ethics Today

Of employees surveyed:

50% reported that their organizations have an ethics officer or a phone line for ethics advice

84% reported that their organizations offer mandatory ethics training

54% reported that ethics training was useful at work

Source: Ethics Resource Center, 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work.

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The Nature of Social Responsibility

Four Dimensions:

Economic – earn profits

Legal – comply with the law

Ethical

• Not just “for profit” only

Voluntary & Philanthropic

• Promote human welfare and goodwill


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The Pyramid of Social Responsibility

Ethical Responsibilitiesbeing ethical; doing what is right, just,

and fair; avoiding harm

VoluntaryResponsibilities

being a “good corporate citizen;”

contributing to thecommunity and quality of life

Source: Adapted from Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.

Legal Responsibilitiesobeying the law (society’s codification

of right and wrong)

Economic Responsibilitiesbeing profitable

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Best Corporate Citizens

1. Fannie Mae2. Procter & Gamble3. Intel Corporation4. St. Paul Companies5. Green Mountain Coffee

Roasters6. Deere & Company7. Avon Products8. Hewlett-Packard 9. Agilent Technologies10. Ecobab

11. Imation12. IBM13. Nuveen Investments14. Herman Miller15. J. M. Smucker16. Safeco17. Timberland18. Zimmer Holdings19. Cisco20. 3M

Source: Philip Johnansson, “The Best 100 Corporate Citizens,” Business Ethics, March/April 2001, p. 15.

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Arguments for Social Responsibility

1. Business helped to create many of the social problems that exist today, so it should play a significant role in solving them

2. Businesses should be more responsible because they have the financial and technical resources to help solve social problems

3. As members of society, businesses should do their fair share to help others


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Arguments for Social Responsibility

4. Socially responsible decision making by businesses can prevent increased government regulation

5. Social responsibility is necessary to ensure economic survival

Businesses must take steps to help solve the social and environmental problems that exist today


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Arguments Against Social Responsibility

1. Managers are sidetracked from the primary goal of business

Earning profits

2. Participation in social programs gives businesses greater power, perhaps at the expense of particular segments of society


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Arguments Against Social Responsibility

3. Some people question whether business has the expertise needed to assess and make decisions about social problems

4. Many people believe that social problems are the responsibility of government agencies and officials


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Social Responsibility Issues


Organizational relationships with owners and stockholders:

Profit and ROI

Employee relations:Providing a safe workplace, adequate pay, information about the company, listening to grievances, and treating employees fairly

Consumer relations:Respecting the rights of customers and providing them with safe and satisfying products

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Social Responsibility Issues

Environmental issues:Animal rights

Pollution

Global warming

Community relations:Responsibility to the general welfare of the community

Did You Know?In one year, Americans generated 230 million tons of trash and recycled 23.5 percent of it.


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John F. Kennedy’s 1962Consumer Bill of Rights

The right to safety

The right to be informed

The right to choose

The right to be heard

Did You Know?John F. Kennedy was the 35th President of the United States.


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Responsibility of the Ethics Officer

Provide advice about ethics to employees and management

Distribute the company’s code of ethics

Create and maintain an anonymous, confidential service to answer questions about ethical issues

Take action on ethics violations

Review and modify the code of ethics as needed


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Solve the Dilemma

1. What are some of the ethical issues involved in giving a customer an award for consumption behavior without notifying him/her first?

2. Do you see this as a potential violation of privacy? Explain.

3. How would you handle the situation if you were Barnard?


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Explore Your Career Options

How do you explain the emergence of career opportunities in the field of business ethics and social responsibility?


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Additional Discussion Questions and Exercises

1. What makes ethical decisions so difficult?

2. Many organizations are primarily concerned with earning a profit or a return on their investment.

Does this concern for owners and investors present an ethical dilemma for companies when weighing business decisions that favor employees and/or the general public?

3. The right to be heard is one of the four rights in the consumer bill of rights.

How are some corporations addressing this consumer concern?


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Additional Discussion Questions and Exercises

4. Find examples of environmental issues in newspapers or business journals.

Do these issues influence businesses?

5. Imagine you are a salesperson. When does offering a gift, such as basketball tickets, become a bribe rather than just a sales practice?


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Chapter 2 Quiz

1. Which of the following has the greatest effect on ethical behavior in organizations?

a. authority of an employee’s superiorsb. an employee’s perception of the ethics of coworkers and

managersc. an employee’s personal beliefs about what is right or wrongd. investors perceptions of ethics

2. Copying someone else’s work and presenting it as your own is:

a. ethicsb. bribec. plagiarismd. greenmail


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Chapter 2 Quiz

3. A code of ethics is:a. a set of formalized rules and standards describing what the

company expects of its employees.b. a government legislation enforced by government agencies.c. a set of principles that describe what a person believes is

the right way to behave.d. the impact of a business’s activities on society.

4. Which one of the following is NOT one of the four rights provided in John F. Kennedy’s consumer bill of rights?

a. right to safetyb. right to be informc. right to sued. right to choose


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Multiple Choice Questions about the Video

1. Stew Leonard, Sr., brought scandal to the company he founded because he

a. hid unreported store funds to avoid paying taxes.b. charged customers too much money.c. illegally dumped spoiled dairy products.d. inflated his company’s revenues to satisfy investors.

2. Arthur Andersen’s __________ may have compromised the independence of its accounting auditors, a trait that is crucial to the execution of a credible audit.

a. code of ethics.b. integrity.c. tax evasion.d. consulting business.


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