ethics and social responsibility bm003: examine the role of ethics and social responsibility in...
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Ethics and Social Responsibility
BM003: Examine the role of ethics and social responsibility in business decision making.
BM03.01 Explain the relationship between ethics and government laws and regulations.
Define “Business Ethics”
A collection of principles and rules that define correct and incorrect behavior/conduct for a member of an organization.
Notions of what is right and wrong vary from manager to manager, business to business, and country to country.
Laws Relating to Ethics in Business
Competition lawsConsumer Protection lawsEnvironmental Protection lawsEmployment laws
Competition Laws
The Sherman Act of 1890– Insures that companies remain able to compete fairly– Makes it illegal for companies to monopolize trade– Prohibits mergers of new company if merged
company controls too large a share of the market
Competition Laws (cont.)
The Clayton Act of 1914– Makes it illegal to charge different prices to different
wholesale customers– Bans practice of requiring a customer to purchase a
second good
Competition Laws (cont.)
The Robinson-Patman Act of 1936– Amended portion of the Clayton Act dealing with the
pricing of goods– Prevents price discrimination—setting different
prices for different customers
Competition Laws (cont.)
Wheeler-Lea Act of 1938– Passed to strengthen earlier laws outlawing unfair
methods of competition– Bans unfair unfair or deceptive acts or practices,
including false advertising
Consumer Protection Laws
Federal Food, Drug, and Cosmetic Act of 1938– Bans the sale of impure, improperly labeled, falsely
guaranteed, and unhealthful foods, drugs, and cosmetics
– Enforced by the Food and Drug Administration (FDA)
Consumer Protection Laws (cont.)
Consumer Product Safety Commission 1972– Establishes minimum product safety standards on
consumer products– If product is defective, CPSC has the authority to force
the manufacturer to recall the product
Consumer Protection Laws (cont.)
Truth in Lending Act of 1968– Creditors are required to let consumers know how much
being paid in finance charges and interest– Business must show finance charge on statements as
annual percentage rates to make comparing rates easier.
Consumer Protection Laws (cont.)
Equal Credit Opportunity Act of 1975– Illegal for business to deny credit because of age, sex,
marital status, race, national origin, religion, or public assistance
– Requires businesses to notify credit card applicants of application status within 30 days and give reason for rejection
Consumer Protection Laws (cont.)
Fair Credit Reporting Act—gives cardholders right to see their credit agency reports and to correct errors
Fair Debt Collection Practices Act—forbids debt collectors to use abusive, deceptive, or unfair collection methods
Environmental Protection Laws
The National Environmental Policy Act of 1969– Key piece of legislation in environmental protection– Created the Environmental Protection Agency (EPA)
whose mission is to protect human health and safeguard the air, water, and land
Environmental Protection Laws (cont.)
The Clean Air Act of 1970– Comprehensive federal law that regulates air
emissions– Original act set maximum air pollution standards for
each of the 50 states– Amended in 1990 to deal with acid rain, ground- level
ozone, stratospheric ozone depletion, and toxic substances in the air
Environmental Protection Laws (cont.)
The Toxic Substances Control Act of 1976– Enacted to give EPA the ability to track the 75,000
industrial chemicals currently produced in or imported into the U.S.
– EPA screens these chemicals and can require reporting or testing of any that may pose an environmental or human health hazard
Environmental Protection Laws (cont.)
The Clean Water Act of 1977– Give EPA authority to set standards on type and
quantity of pollutants that industries can put into bodies of water
– Illegal to discharge any pollutant into navigable waters unless permit is obtained
Environmental Protection Laws (cont.)
CERES Principles (Coalition of Environmentally Responsible Economies)– Developed as result of Exxon Valdez accident, which
spilled oil along coastal Alaska in 1989– Organizations are asked to follow the principles
voluntarily, but are not legally required
Employment Laws
Equal Employment Opportunity Law– Civil Rights Act of 1964– Age Discrimination in Employment Act– Americans with Disabilities Act– Equal Pay Act
Employment Laws (cont.)
Occupational Safety and Health Laws– Enforced by Occupational Safety and Health
Administration (OSHA)– Sets standards for keeping workplaces clean and
free of hazards
Employment Laws (cont.)
Fair Labor Standards Act (Wage-Hour Laws)– Sets minimum wage– Sets number of hours employees can work in a week
without overtime pay– Prohibits companies from employing children under
the age of 14
Employment Laws (cont.)
Benefits Laws– Social Security Act– Employment Retirement Income Security Act
(ERISA)– Unemployment Insurance– Workers’ Compensation– Family and Medical Leave Act (FMLA)
Employment Laws (cont.)
Labor Relations Laws– Enacted by Congress to protect groups of
employees– National Labor Relations Act (NLRA)
• Organizing a union• Collective bargaining• Striking
Ethics and Social Responsibility
BM03.02 Examine business codes of ethics and how they contribute to ethical business environments.
Ethical Issues in Business
Accepting business giftsBribing government officialsRespecting the privacy and dignity of employeesUsing company property for personal use
General Content of Ethical Codes
HonestyAdherence to the lawProduct safety and qualityHealth and safety in the workplaceConflicts of interestEmployment practices
General Content of Ethical Codes
Selling and marketing practicesFinancial reportingPricing, billing, and contractingTrading in securities/using confidential informationAcquiring and using information about competitors
General Content of Ethical Codes
SecurityPayments to obtain businessPolitical activitiesProtection of the environment
Source: Business Management, Real World Applications & Connections, Glencoe/McGraw-Hill
Code of Ethics in a Business Environment
Removes or reduces opportunities for unethical conductMust be communicated to all employeesMust have procedures in place to handle violations of the codeMust have full support of top-level managersMust be enforced to be effective
Ethical Dilemmas
Course of action not always clearNotions of what is right or wrong changes over timeValues differ among nations– Corporate gift-giving– Intellectual property
• Copyrights• Patents• Trademarks
Solving Ethical Dilemmas
Have you defined the problem accurately?
How would you define the problem if you stood on the other side of the fence?
Whom could your decision or action injure? Can you discuss the problem with the affected parties before you make your decision?
Solving Ethical Dilemmas
Are you confident that your position will be as valid over a long period of time as it seems now?
Could you disclose without qualm your decision or action to your boss, your CEO, the board of directors, your family, and society as a whole?
Standards by Which Ethical Decisions Are Made
The Golden RuleUtilitarian PrincipleKant’s Categorical ImperativeThe Professional Ethic
Standards by Which Ethical Decisions Are Made
The TV TestThe Legal TestThe Four-Way TestRights ViewTheory of Justice
Guidelines for Acting Ethically
Know your organization’s policy on ethicsUnderstand the ethics policyThink before you actAsk yourself “what-if” questionsSeek opinions from othersDo what you truly believe is right
BM03.03 How does a business demonstrate social responsibility?
Social Responsibility—changing views– Profit Maximization (19th-early 20th century)– Trusteeship Management (1920s and 1930s)– Social Involvement(1960s-present)
Stakeholder—All people affected by the actions of a company
Measuring Social Responsibility
Social AuditPhilanthropy & VolunteerismEnvironment AwarenessSensitivity to diversity and quality of work life– Flexible work hours– On-site day care centers
Stakeholders & Social Obligations Owed to Them
Stakeholder Social Obligations Owed
Stockholders/owners of the organization To increase the value of the organization
Suppliers of materials To deal with them fairly
Banks and other lenders To repay debts
Government agencies To abide by laws
Employees and unions To provide safe working environment and negotiate fairly with union-representatives
Consumers To provide safe products
Competitors To compete fairly and to refrain from restraints of trade
Local communities and society at large To avoid business practices that harm the environment
Arguments FOR the assumption of social responsibilities by a businessPublic expectationsLong-run profitsEthical obligationPublic imageBetter environmentDiscouragement of further government regulation
Arguments AGAINST the Assumption of Social Responsibilities by a Business
Violation of profit maximizationDilution of purposeCostsToo much powerLack of skills
Ethics and Social Responsibility
BM03.04 Emerging and Social Responsibility Issues in a Multinational Business Environment
Multinational Firms
Home country—where business has its headquartersHost country—foreign location where business has its facilitiesParent firm—company headquartersSubsidiaries—foreign branches
Challenges—Working in an International Environment
Differences in local lawsDifferences in local customs
Challenges—Working in an International Environment
Differences in business practices– Use of food at meetings– Punctuality or lateness– Use of business cards– Greetings– Formal/informal conduct– Bribes and unethical behavior
• Foreign Corrupt Practices Act—Prohibits use of bribes• Corporate gift-giving and stealing of intellectual property
Challenges—Working in an International Environment
Cultural Differences– Customs, beliefs, values,
and patterns of behavior– Language– Religion– Attitudes toward work,
authority, and family
Cultural Differences (cont.)– Practices regarding courtship,
etiquette, gestures, and joking– Manners and traditions– Differences within racial and
ethnic groups of same culture– Low-context culture– High-context culture
Maintaining Ethics in International Management
Respecting core human rights– Opportunity to achieve economic advancement and
improved standard of living– Right to be treated with respect
Respecting local tradition– Customs held in high regard– In countries like Japan, gift-giving is a tradition, not a
bribe
Maintaining Ethics in International Management
Determining right from wrong– Evaluate specifics of the situation to determine if the
activity is ethical– Some actions are unethical in one setting, but
acceptable in another
The End of Competency 003