CHAPTER 4
Demandin
g Ethical
and
Socially
Responsib
le
Behavior
McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
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Ethics
4-3
WHAT are ETHICS?
• Ethics -- The standards of moral
behavior. Behaviors that are accepted by
society as right versus wrong.
4-7
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
4-10
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
•Cruelty
life
• Self-control
• Honesty
• Courage
• Self-sacrifice 4-14
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.
4-15
The Importance of Business Ethics
• 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?
4-17
• 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
4-19
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
4-20
accountability.
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. 4-21
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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• 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?
4-24
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. 4-29
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
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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. 4-40
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 4-41
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 4-43
• 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?
4-46
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- 4-47
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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• 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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