Lamb, Hair, McDaniel

Chapter 3Chapter 3

Ethics and Ethics and Social Social

ResponsibilityResponsibility

2014-2015

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1 © Cengage Learning 2015. All Rights Reserved.

1. Explain the determinants of a civil society

2. Explain the concept of ethical behavior

3. Describe ethical behavior in business

4. Discuss corporate social responsibility5. Describe the arguments for and against

society responsibility

6. Explain cause-related marketing

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Foundations of Ethical Behavior

• Individuals and companies must behave responsibly, based on certain ethical codes of conduct (what is right or wrong)

• Our moral reasoning guiding our decisions and actions can be….– Teleological-decisions are based on the

consequences of the action– Utilitarianism-an action is right if produces

greatest amount of good– Deontological-moral reasoning occurs per se,

independently, consequence is not an issue

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The Modes of Social Control in The Modes of Social Control in a Civil Societya Civil Society

Ethics comprise the moral principles or values that generally govern the conduct of an individual or a group. There is no law for “cutting in line,” however, cutting in line is not considered polite and may anger some people. Order is maintained by the following factors:•Ethics•Laws•Formal and informal groups•Self-regulation•The media•An active civil society

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Ethical Development LevelsEthical Development Levels

PreconventionalMorality

ConventionalMorality

PostconventionalMorality

MoreMature

MoreChildlike

• Based on what will be punished or rewarded

• Self-centered, calculating, selfish

• Moves toward the expectations of society

• Concerned over legality and the opinion of others

• Concern about how they judge themselves

• Concern if it is right in the long run

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Reward Punishment Model of Ethical Behavior in Business

(Un)ethicalBehavior

Economic Reward

Quantum ofPunishment

Probability ofPunishment~ > *

Source: Waheeduzzaman and Myers (2010), Influence of Economic Reward and Punishment on Unethical Behavior: An Empirical Study

Explanation of the Model

• The premise of the model is, ethical or unethical behavior depends on the relationship among three factors:– economic reward or benefit that a businessman receives

from the unethical practice– the quantum (severity) of punishment the society

imposes for such wrong-doing– and the probability of receiving the punishment.

• Severity of punishment and its probability work as a deterrent for unethical behavior.

• A businessman will risk the practice of unethical behavior as long as the economic reward is significantly greater than the product of punishment and its probability.

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Ethical Decision MakingEthical Decision Making

Influential FactorsInfluential Factors

Extent of Problems

Top Management Actions

Potential Consequences

Social Consensus

Probability of Harm

Time UntilConsequences

Number Affected

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Creating Ethical GuidelinesCreating Ethical Guidelines

A Code of Ethics:

• Helps identify acceptable business practices

• Helps control behavior internally • Avoids confusion in decision

making• Facilitates discussion about right

and wrong

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Ethics in Other CountriesEthics in Other Countries

• Prohibits U.S. corporations from making illegal payments to foreign officials.

• Has been criticized for putting U.S. businesses at a disadvantage.

• Has encouraged some countries to implement their own anti-bribery laws.

Foreign Corrupt Practices Act (FCPA)

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Corporate Social ResponsibilityCorporate Social Responsibility

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Corporate social responsibility is a business’s concern for society’s

welfare.

Stakeholder theory says that social responsibility is paying attention to the

interest of every affected stakeholder in every aspect of a firm’s operation.

Corporate Social ResponsibilityCorporate Social Responsibility

For• It is the right thing to do• Businesses have the

resources to devote to fixing social problems

• Prevents government regulation and potential fines

• It can be profitable

Against• Takes focus away from

making profits• Business executives

spend shareholder money on environmental initiatives

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The Pyramid of Corporate Social

Responsibility

Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/Aug. 1991. Copyright © 1991 by the Foundation

for the School of Business at Indiana University. Reprinted with permission.

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SustainabilitySustainability

• Socially responsible companies will outperform their peers.

• It is in business’s best interest to find ways to attack society’s ills.

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Green MarketingGreen Marketing

The development and marketing of products designed to minimize negative effects on the environment or improve the environment.

– Environmentally aware customers pay more for products

– Companies must try to educate customers of environmental benefits

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Cause-Related MarketingCause-Related Marketing

For-profit and non-profit organizations cooperate to generate funds. Generates about $7 billion annuallyToo many causes lead to customer cause fatigue

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Ch 3 Discussion Questions

1. Explain the reward punishment model of ethical behavior in business.

2. Explain the foundations of ethical behavior.

3. What is Corporate Social Responsibility? Explain the Pyramid of Corporate Social Responsibility.

4. Explain its arguments for and against.

Chapter 3 VideoChapter 3 Video

ZapposZappos, the world’s largest online shoe retailer, discusses its commitment to social responsibility and to ethical behavior. Developing employee activities and long-term relationships with charitable organizations allows Zappos to ingrain the

importance of helping the greater good into its organizational culture. Zappos culture also guides its employees to make

ethical decisions.

CLICK TO PLAY VIDEO

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