CHAPTER 4
Demanding
Ethical and
Socially
Responsible
Behavior
McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
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Ethics
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WHAT are ETHICS?
• Ethics -- The standards of moral behavior.
Behaviors that are accepted by society as right
versus wrong.
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ETHICS
Doing What Is Right…
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ETHICS
As You Know
It To Be Right.
ETHICS
Ethics Begins With Each
of Us
Stem From Individual
More Than Legality
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ETHICS
Ethical Dilemma
a situation requiring a choice
between equally undesirable
alternatives.
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FACING ETHICAL DILEMMAS
• Ask yourself these
questions:
- Is it legal?
- Is it balanced?
- How will it make me
feel about myself?
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BASIC MORAL VALUES
Right: Wrong:
• Integrity • Cheating
• Cowardice
• Respect for human life
• Cruelty
• Self-control
• Honesty
• Courage
• Self-sacrifice
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ETHICS and YOU
• Plagiarizing from online
materials is the most
common form of cheating
in schools today.
• Studies found a strong
relationship between
academic dishonesty and
dishonesty at work.
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The Importance of Business Ethics
TEST PREP
• What are ethics?
• How do ethics differ from legality?
• When faced with ethical dilemmas, what
questions can you ask yourself that might help
you make ethical decisions?
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ETHICS START at the TOP
• Organizational ethics begin at
the top.
• Managers can help instill
corporate values in
employees.
• Trust between workers and
managers must be based on
fairness, honesty, openness
and moral integrity.
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FACTORS INFLUENCING
MANAGERIAL ETHICS
Individual Organizational Environmental
• Values • Top Level • Competition
Management
• Work Philosophy • Economic
Background Conditions
• Firm’s Reward
• Family Status System • Social/Cultural
Institutions
• Personality • Job Dimensions
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ETHICS CODES
• An increasing number of companies have
adopted written codes of ethics.
• Compliance-Based Ethics Code -- Emphasize
preventing unlawful behavior by increasing control
and by penalizing wrongdoers.
• Integrity-Based Ethics Code -- Define the
organization’s guiding values, create an environment
that supports ethically sound behavior and stress a
shared accountability.
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HOW to IMPROVE AMERICA’S
BUSINESS ETHICS
1. Top management must adopt and unconditionally
support an explicit corporate code of conduct.
2. Employees must understand that senior
management expects all employees to act
ethically.
3. Managers and others must be trained to consider
the ethical implications of all business decisions.
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HOW to IMPROVE AMERICA’S
BUSINESS ETHICS
4. An ethics office must be set up with which
employees can communicate anonymously.
Whistleblowers -- Insiders who report illegal or
unethical behavior.
5. Involve outsiders such as
suppliers, subcontractors,
distributors and
customers.
6. The ethics code must be
enforced.
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TEST PREP
• What are compliance-based and integrity-based
ethics codes?
• What are the six steps to follow in establishing an
effective ethics program in a business?
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CORPORATE SOCIAL
RESPONSIBILITY
Corporate Social
Responsibility (CSR) is
management’s obligation
to make choices and take
actions that contribute to
the welfare and interests
of society as well as to
those of the organization.
CORPORATE SOCIAL
RESPONSIBILITY
• CSR is based on a commitment to integrity,
fairness, and respect.
• CSR proponents argue that businesses owe their
existence to the societies they serve.
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CORPORATE PHILANTHROPY
• Corporate
Philanthropy --
Includes charitable
donations.
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CORPORATE RESPONSIBILITY
and POLICY
• Corporate Responsibility -- Includes everything
from hiring minority workers to making safe products,
minimizing pollution, using energy wisely, and
providing a safe work environment.
• Corporate Policy -- The position a firm takes on
social and political issues.
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POSTIVE IMPACTS
of COMPANIES
• Xerox offers a Social Service Leave program.
• More and more companies are encouraging
employees to volunteer while on company time.
• The majority of MBA students surveyed reported
they would take a lower salary to work for a
socially responsible company.
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PRESIDENT KENNEDY’S BASIC
RIGHTS of CONSUMERS
• The Right to Safety
• The Right to be Informed
• The Right to Choose
• The Right to be Heard
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RESPONSIBILITES TO CUSTOMERS
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.
Consumer Product Safety Commission
[Link]
INSIDER TRADING
• Insider Trading -- Insiders
using private company
information to further their own
fortunes or those of their family
and friends.
• Unethical behavior does
financial damage to a
company and investors are
cheated.
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RESPONSIBILITY to
EMPLOYEES
• Create jobs and provide a chance for upward
mobility.
• Treat employees
with respect.
• Offer salaries and
benefits that help
employees reach
their personal
goals.
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WHEN EMPLOYEES
are UPSET…
• Employee fraud costs U.S. businesses about
5% of annual revenue and causes 30% of all
business failures.
• Disgruntled workers relieve frustration by:
- Blaming mistakes on others.
- Manipulating budgets and expenses.
- Making commitments they intend to ignore.
- Hoarding resources.
- Doing the minimum.
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SOCIETY and
the ENVIRONMENT
• Over one-third of working Americans receive their
salaries from nonprofits – who are dependent on
funding from others.
• The green movement emerged as concern about
global warming increased.
• Many companies are trying to minimize their
carbon footprints – the amount of carbon
released during an item’s production, distribution,
consumption and disposal.
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RESPONSIBILITY to the
ENVIRONMENT
• Environmental efforts may increase costs, but
can offer good opportunities.
• The emerging renewable-energy and energy-
efficiency industries account for 9 million U.S.
jobs.
• By 2030, as many as
40 million “Green”
jobs will be created.
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SOCIAL AUDITING
• Social Audit -- A systematic evaluation of an
organization’s progress toward implementing socially
responsible and responsive programs.
• Five Types of Watchdogs
1) Socially conscious investors
2) Socially conscious research
organizations
3) Environmentalists
4) Union officials
5) Customers
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TEST PREP
• What is corporate social responsibility, and how
does it relate to each of a business’s major
stakeholders?
• What is a social audit, and what kinds of activities
does it monitor?
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INTERNATIONAL ETHICS
• Many businesses want socially responsible
behavior from their international suppliers.
• In the 1970s, the Foreign Corrupt Practices Act
criminalized the act of paying foreign businesses
or government leaders in order to get business.
• Partners in the Organization of American States
signed the Inter-American Convention Against
Corruption.
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Social Responsibility
Bottom Line:
Should Companies Have?
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The Majority View
Companies are citizens in the
communities in which they reside,
therefore,
They do have a Social Responsibility
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An Economist’s View
Milton Friedman
– Argues that firms need to focus on making a
profit, not on social responsibility
– Claims that firms that focus on social
responsibility get distracted from their real
purpose
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CORPORATE SOCIAL
RESPONSIBILITY
To Sum It Up:
Doing Good vs. Doing Well
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TEST PREP
• How are U.S. businesses demanding socially
responsible behavior from their international
suppliers?
• Why is it unlikely that there will be a single set of
international rules governing multinational
companies soon?
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