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Business Essentials, 7th Edition Ebert/Griffin

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1 Business Essentials, 7th Edition Ebert/Griffin
Business Ethics and Social Responsibility Business Essentials, 7th Edition Ebert/Griffin Instructor Lecture PowerPoints PowerPoint Presentation prepared by Carol Vollmer Pope Alverno College © 2009 Pearson Education, Inc.

2 © 2009 Pearson Education, Inc.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. © 2009 Pearson Education, Inc. 2 2

3 L E A R N I N G O B J E C T I V E S After reading this chapter, you should be able to: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. Show how the concept of social responsibility applies both to environmental issues and to a firm’s relationships with customers, employees, and investors. In this chapter we will examine how individuals develop their personal codes of ethics and why ethics are important in the workplace. We will explore how to distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. And, finally, we will show how the concept of social responsibility applies both to environmental issues and to a firm’s relationships with customers, employees and investors. Teaching Tips: Ask the class to engage in the following way with the each objective: Objective 1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. Please take out a piece of paper and write down two or three of your own personal values. Now join with another student and share your response. Once you have shared your responses, each pair of students will discuss how these personal values could be important in the workplace. The team will share their responses. Answers will vary. Have the class discuss how their personal codes of ethics developed and how they will impact the workplace. Objective 2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. Please remain in your teams from Objective 1. I would like each team to provide an example of an organizational stakeholder and why it is important. Then join with another team and share your answers with your combined team. The combined team will also discuss what characterizes social consciousness in business today. Each team will then share their responses with the class. The stakeholders include: Employees Investors Customers Suppliers Local community The organization itself Answers to the rest of the questions may vary based on the views of social consciousness today. Objective 3: Show how the concept of social responsibility applies both to environmental issues and to a firm’s relationships with customers, employees and investors. Please form new pairs of two students. Each pair will write down an example of how social responsibility applies to one of the stakeholders we just discussed. Each team will also list one way in which environmental issues might be important to the stakeholder group they chose. Each pair will then share their response with the class. Answers should include one of the stakeholder groups noted above. Environmental issues could include things such as pollution, global warming, environmental advertising, etc. © 2009 Pearson Education, Inc.

4 L E A R N I N G O B J E C T I V E S (cont’d)
After reading this chapter, you should be able to: Identify four general approaches to social responsibility and describe the four steps that a firm must take to implement a social responsibility program. Explain how issues of social responsibility and ethics affect small business. We will also explore four general approaches to social responsibility and learn the four steps that a firm must take to implement a social responsibility program. In addition we will explain how issues of responsibility and ethics affect small business. Teaching Tips Objective 4: Identify four general approaches to social responsibility and describe the four steps that a firm must take to implement a social responsibility program. In your teams, please discuss and provide the rest of the class with the answer to the question “What is social responsibility?”. Answers should include: The overall way in which a business attempts to balance its commitments to relevant groups and individuals (stakeholders) in its social environment. Answers will also vary based on current business news and could include such things as the elimination of insider trading, environmental pollution, outsourcing of jobs to sweat shops in other countries, etc. Objective 5: Explain how issues of social responsibility and ethics affect small business. Please discuss how the ethics of a small business owner can affect his or her method of managing employees. Now please share your answer with the class. Answers can include the fact that the personality of the small business owner and his or her personal ethics will impact the way in which the business functions. Areas that could be addressed include the acceptance of gifts by the owner from suppliers, the way the owner treats his or her employees in terms of sick days, leaves of absence, personal use of office supplies, etc. The Gross Domestic Product is the value of all goods and services produced within a given period by a national economy through domestic factors of production. It measures aggregate output. © 2009 Pearson Education, Inc.

5 What’s in It for Me? By understanding the material in this chapter, you’ll be better able to: Assess ethical and socially responsible issues facing you as an employee and as a boss or business owner. Understand the ethical and socially responsible actions of businesses you deal with as a consumer and as an investor. “What’s in it for me?” you might ask. By understanding social responsibility and ethics in the workplace, you will be able to assess ethical and socially responsible issues that you may face as an employee and as a boss or business owner. You will also understand the ethical and responsible actions of the businesses you deal with as a consumer and as an investor or other stakeholder. Teaching Tips: Please join with your student partner and make a list of five ethical or socially responsible issues you may face in your future from the perspective of one of the stakeholder groups we discussed earlier. Answers will vary but should address all of the stakeholder groups noted above. Issues could include anything from global warming, use of energy, treatment of employees, outsourcing of jobs, etc. © 2009 Pearson Education, Inc.

6 Ethics in the Workplace
Beliefs about what’s right and wrong or good and bad Ethical Behavior Behavior conforming to individual beliefs and social norms about what’s right and good Unethical Behavior Behavior conforming to individual beliefs and social norms about what is defined as wrong and bad Business Ethics The ethical or unethical behaviors by employees in the context of their jobs When we explore the concept of ethics in the workplace, we need to examine four different areas: These include ethics, or beliefs about what is right and wrong or good or bad. In addition we need to examine ethical behavior, which is behavior conforming to individual beliefs and social norms about what’s right and good. What is unethical behavior? It is behavior confirming to individual beliefs and social norms about what is defined as wrong and bad. In order to succeed in business, we need to address the ethical or unethical behavior by employees in the context of their jobs. Teaching Tips: In your student team, please develop a list of 5 examples of ethical behavior and 5 examples of unethical behavior in the workplace. Answers will vary. © 2009 Pearson Education, Inc.

7 Individual Values and Codes
Sources of Personal Codes of Ethics Childhood responses to adult behavior Influence of peers Experiences in adulthood Developed morals and values How does an individual develop a code of personal ethics? Here are some answers: First, a person can develop personal values through their own childhood responses to adult behavior. An example could include seeing parents yell at each other or at their children whenever something goes wrong in the household, whenever the child does not do something the parent likes, etc. By doing this, the child internalizes that whenever anything bad happens, they should yell or scream at the other people in their lives. On the opposite side, if children see that whenever they make an honest mistake or make an error, their parents correct them and demonstrate the appropriate behavior and give them a hug, then in the future, these children probably would be more patient with others when they make mistakes, correct them in an even tone, and show empathy. People may also be influenced by their peers, whether they are other children, teenagers or adults. For example, in middle school, one of the teens in a group of friends gets some cigarettes. The friends think it is cool and so they try it too. They may continue the behavior because they think it makes them look better in front of their friends. Adults do the same thing. They may see their friends buying new cars, new furniture and other things, and adults think they need to buy the same type of things, even though they may not have the money. Instead of paying cash, they use credit cards, and end up with a huge credit card balance they cannot pay. Other experiences in adulthood can also impact an individual’s values or codes. For example, an adult may decide they love working for their employer, and offer to stay late and work harder, but then when it comes time for a promotion, they are overlooked by someone who may have offered favors or friendship to the boss. The hard worker may begin to think it is not worth it to work hard. Of course, all of the above develop morals and values in a person. These are the foundation for their behavior both personally and within the workplace. Their morals and values seem correct to the individual, and so employees may need special attention or training if they come from another culture, where, for example, it is OK to stand very close to other people, while in the U.S. culture, people like to have about 3 feet of personal space around them in a business setting. Teaching Tips: Using your example from our last exercise, please remain in your teams and write down the possible source or personal code of ethics that might cause the ethical or unethical business behaviors you shared with the class. Once you have discussed these, we will share them with the class. Answers will vary but will include religion, family upbringing, culture or subculture, social class and income levels, etc. © 2009 Pearson Education, Inc.

8 Business and Managerial Ethics
The standards of behavior that guide individual managers in their work Ethics affect a manager’s behavior toward: Employees The organization Other economic agents—customers, competitors, stockholders, suppliers, dealers, and unions Ethical Concerns Ambiguity (e.g., financial disclosure) Global variation in business practices (e.g., bribes) Managerial ethics are the standards of behavior that guide individual managers in their work. Ethics can affect a manager’s behavior toward: Employees: For example, in a case in which an employee is constantly late for work, if a manager’s ethics include perfection in attendance, this could present an issue. The organization: For example, if the organization is very open and wants employee suggestions, this could cause discord for employees reporting to a manager who is not accustomed to this type of input. Other stakeholders or economic agents such as customers, competitors, stockholders, suppliers, dealers and unions: For example, a manager may have developed a certain communication style across his or her career, and may have a specific manner of dealing with such agents, or may hold them as equals or as outsiders. Ethical concerns that should be considered when addressing business situations can include many issues. Let’s look at two examples: Ambiguity: When an organization is not performing as well as its investors would like, the manager may consider not disclosing, or hiding, certain financial information. There have been many examples of this during the past ten years. Global variation in business practices: When an organization does business in another country, especially Latin America, it can be quite common to have to bribe a government official or pay a little extra money to an agent to get permits, get shipments through customs, etc. While this is illegal under U.S. law and the Foreign Corrupt Practices Act, this cannot be avoided in some countries, such as the Jeitinho in Brazil, which is more like a personal favor payment to “find a way” to make the transaction move forward more rapidly. Many Latin American countries, such as Paraguay, have taken a hard stance against such practices. The police, for example, used to make extra money by stopping cars on the road just to search for something that might be wrong. In so doing, they would ask for bribes to allow the person to pass. There were strikes and some rebellion, but now this practice has for the most part been eliminated. Teaching Tips: In your same student teams, please choose one of the three areas where a manager’s ethics could have an impact (employees, the organization or other economic agents), and take a few minutes to apply the ethical codes you discovered in our last exercise. Discuss how these might impact the group you choose (i.e., employees, the organization or other economic agents). We will then discuss this topic as a whole class. Answers will vary based on responses to the last two exercise. Be sure to refer back to the answers from the last two exercises, as well as the examples you provided in this slide when weighing student response. Now that you have an understanding of some of the ethical concerns faced by businesses and organizations, please answer the following questions based on your own values and ethics: “What would you do if your manager asked you to force billings for sales of a new product in your territory in order to make the sales numbers look better for this quarter?” Answers will vary based on individual values, but of course the correct answer should be that the sales should only be reported specifically when the sale occurs. Sometimes customers may ask to be pre-billed for consulting work because it is included in their budget for the current fiscal year. In some cases the manager will have to accept the billing and the funds, but can place the funds received into an “escrow” account, and only report the actual sales when the work occurs. © 2009 Pearson Education, Inc.

9 Assessing Ethical Behavior
Simple Steps in Applying Ethical Judgments Gather the relevant factual information Analyze the facts to determine the most appropriate moral values Make an ethical judgment based on the rightness or wrongness of the proposed activity or policy Let’s look at some simple steps in applying ethical judgments: First, it is important to gather the relevant factual information. This could include the example of a customer requiring a billing prior to work being provided in a consulting situation. Second, we need to analyze the facts to determine the most appropriate moral values to apply. In our example of the prepayment for consulting fees, we find that the customer’s fiscal year is ending, they have budgeted the money for this year, and will lose it if the billing is not presented by your firm right now, and your firm will lose the opportunity for this work. And finally we will make an ethical judgment based on the rightness or wrongness of the proposed activity or policy. In our example, we could say it is wrong to accept money for work we have not yet performed. However, we can bill the customer in advance, noting this on the invoice. When the money is received, we can create an “escrow” account in our accounting system and place the funds there, like a pre-paid receivable, and as the work is performed per a plan we have submitted to the client, which the client has approved, we internally bill the work and send a client a report on hours worked against their prepayment for services. Teaching Tips: In your teams, please think of an example of a business situation that may require an ethical assessment. Then apply the three steps we have just reviewed to the problem. We will then share the situations with the class. Answers will vary based on the situation, but make sure the student teams apply the three steps you reviewed in this slide to the situation, and assist them or have the class assist them in determining the most appropriate ethical business behavior. © 2009 Pearson Education, Inc.

10 Assessing Ethical Behavior
Ethical Norms and the Issues They Entail Utility: Does a particular act optimize the benefits to those who are affected by it? Do all relevant parties receive “fair” benefits? Rights: Does the act respect the rights of all individuals involved? Justice: Is the act consistent with what’s fair? Caring: Is the act consistent with people’s responsibilities to each other? Now let’s examine the Ethical Norms that we can use when gathering information. We can examine the issue we are facing in terms of: Utility: Utility answers the question, “Does a particular act optimize the benefits to those who are affected by it?” and the question, “Do all relevant parties receive ‘fair’ benefits?”. Rights: Rights answers the question, “Does the act respect the rights of all individuals involved?”. Justice: Justice answers the question, “Is the act consistent with what’s fair?”. Caring: Caring answers the question, “Is the act consistent with people’s responsibilities to each other?”. If we return to our example of the prepayment for consulting services by one of our customers, let’s apply these four ethical norms: Utility: The answer to these two questions is yes in this case. The customer receives the ability to deduct the expense during his or her current fiscal year and the consulting firm receives the revenue. Rights: The answer to this question is yes. The fiscal calendar year of the customer is respected as is the right for the consultant to receive payment. Justice: The answer is yes because the customer is paying a fair price, and is just paying in advance. The consultant is receiving payment in advance for agreed-upon services. Caring: The answer is yes because the consultant is putting the money in “escrow,” or is holding it and only taking it into its books as it provides the services, while the customer is receiving the right to pay in advance and thus take a tax advantage during the current fiscal year. Teaching Tips: Please join again with your same class team. In your team please refer back to one of the ethical issues you picked in our earlier discussion. Please discuss your example through the use of these norms. Let’s share our examples with the class. Answers will vary but can build upon examples presented earlier in this slide. © 2009 Pearson Education, Inc.

11 Company Practices and Business Ethics
Encouraging Ethical Behavior Involves: Adopting written codes of conduct and establishing clear ethical positions for the conduct of business Having top management demonstrate its support of ethical standards Instituting programs to provide periodic ethics training Establishing ethical hotlines for reporting and discussing unethical behavior and activities A company can encourage ethical behavior in a number of ways. These include: Adopting written codes of conduct and establishing clear ethical positions for the conduct of business. These codes can include rules of conduct, for example not allowing employees to accept gifts from suppliers or customers. Having top management demonstrate its support of ethical standards. This can include having management be very public in its manner of following the rules established for employees, as in not accepting gifts, trips, event tickets, etc. Instituting programs to provide periodical ethics training. This can include providing media training for key managerial employees so if they are contacted by the media during a potential crisis or product recall situation, they will know exactly what to say. Establishing ethical hotlines for reporting and discussing unethical behavior and activities. This practice encourages employees to call in and report on or discuss unethical behavior or activities in an anonymous manner. Teaching Tips: In your same team, please choose one of the four ways firms encourage ethical behavior. Please discuss and describe an example of your choice. Please share your example with the class. Answers will vary but could build on the examples listed above in this slide. © 2009 Pearson Education, Inc.

12 Social Responsibility
The overall way in which a business attempts to balance its commitments to relevant groups and individuals (stakeholders) in its social environment Organizational Stakeholders Groups, individuals, and organizations that are directly affected by the practices of an organization and, therefore, have a stake in its performance Let’s discuss the concept of social responsibility. Social responsibility is the overall way in which a business attempts to balance its commitments to relevant groups and individuals, or stakeholders, in its social environment. Who are stakeholders? They include groups, individuals, and organizations that are directly affected by the practices of an organization and therefore have a stake in its performance. Teaching Tips: Please form a team with a different student in the class. In your team, please discuss one way in which a business could act in a socially responsible manner. Please discuss which type of organization stakeholder might be affected by the social responsibility of the company. Answers may vary, but could include addressing local pollution with a group of citizens who are impacted by the pollution; donating a portion of the organization’s profits to a group of people who are in need, such as the homeless, AIDS victims in Africa, etc. © 2009 Pearson Education, Inc.

13 The Stakeholder Model of Responsibility
Customers Businesses strive to treat customers fairly and honestly Employees Businesses treat employees fairly, make them a part of the team, and respect their dignity and basic human needs Investors Businesses follow proper accounting procedures, provide information to shareholders about financial performance, and protect shareholder rights and investments Suppliers Businesses emphasize mutually beneficial partnership arrangements with suppliers Local and International Communities Businesses try to be socially responsible Major corporate stakeholders include the following: Customers: Businesses work to treat customers fairly and honestly. For example, car dealers are required to disclose financing deals to customers within their advertising. Employees: Businesses treat employees fairly, make them feel like they are part of the team, and respect their dignity and basic human needs. For example, a multinational corporation would commit to paying fair wages to employees in third-world developing countries and to not allowing children to work in sweat shops. Investors: Businesses follow proper accounting procedures, provide information to shareholders about financial performance and protect shareholder rights and investments. For example, a large publicly held consulting firm would report the prepayment for services by their customers as a pre-paid receivable asset in its accounting statement to shareholders. Suppliers: Businesses emphasize mutually beneficial partnership arrangements with suppliers. For example, Mercury SUVs promote the fact that they have Microsoft Sync technology in their vehicles. Microsoft is a supplier to Lincoln Mercury. The local and international communities in which the company operates: Businesses try to act in a socially responsible manner. For example, Microsoft has established the Bill and Melinda Gates Foundation, which offers medical assistance to eliminate malaria in Africa and meeting other United Nations Millennium Goals. Teaching Tips: In your student teams, please choose one stakeholder and one ethical issue that might affect that particular stakeholder. Discuss how the company should act toward the stakeholder your team has chosen. We will then share these with the class. Answers will vary but must include one of the five stakeholders discussed in this slide and can build on examples provided or contain additional examples of social responsibility to different stakeholder groups. © 2009 Pearson Education, Inc.

14 Contemporary Social Consciousness
The Concept of Accountability The expectation of an expanded role for business in protecting and enhancing the general welfare of society Accountability is important in this electronic age. It is the expectation of an expanded role for business in protecting and enhancing the general welfare of society. What does this mean? It could mean, for example, that a company has a duty to place information on its website about product content, potential side effects from its use, or potential harm that could come if the product is not used properly, like not following directions for use or instructions on installation or assembly. Teaching Tips: In your teams of two, please choose an example of how an organization could protect or enhance the general welfare of society. After your team discussion, you will share your examples with the class. Answers will vary but could expand on other ways an organization could be accountable for society such as product packaging, health warnings, labeling, assembly instructions, etc. © 2009 Pearson Education, Inc.

15 Areas of Social Responsibility
Responsibility Toward the Environment Properly disposing of toxic waste Engaging in recycling Controlling air, water, and land pollution Green Marketing The marketing of environmentally friendly goods Includes a number of strategies and practices: Production processes Product modifications Carbon offsets Packaging reduction Sustainability Greenwashing: Using advertising to project a green image without substantially altering processes or products Federal Trade Commission (FTC) started hearings in January 2008 regarding green marketing claims Responsibility toward the environment is an important area of social responsibility for an organization. This can include: Properly disposing of toxic waste from manufacturing processes. Engaging in recycling of materials. This could include making sure computers that are outdated are recycled through appropriate state-level, prison-industry recycling programs. Green marketing, which includes the marketing of environmentally friendly goods such as power saving computers and monitors, flex fuel vehicles, etc. Such strategies can include a number of practices including: Production processes. Product modifications, such as the addition of flex fuel capabilities for cars. Carbon offsets that reduce the carbon footprint consumers and producers leave on the planet. Packaging reduction, for example, eliminating the foil wrapper from Hershey candy bars and just using paper. Sustainability, such as a product that is made from recycled plastics. Green marketers need to be aware of “green washing” or the use of advertising to project a “green” image without substantially altering the processes or products they produce. The Federal Trade Commission started holding hearings in January 2008 regarding false green marketing claims. Teaching Tips: What is an example of a product that uses “green washing”? BP was accused of promoting its company as being environmentally friendly with no backing for that claim. The company was charged in 2000 with not disclosing that a subcontractor was dumping toxic waste in Alaska. Other examples from the BP case in the introduction to this chapter can also be presented as well as other examples from current affairs. In your student teams, choose one of the “green marketing” strategies and practices we have just discussed and provide an example. We will then share the examples with the class. Answers may vary but can include those from the slide or those presented in the text. © 2009 Pearson Education, Inc.

16 Areas of Social Responsibility (cont’d)
Responsibility Toward Customers Involves providing quality products and pricing products fairly Consumerism Social activism dedicated to protecting the rights of consumers in their dealings with businesses Basic Consumer Bill of Rights To possess safe products To be informed about all relevant aspects of a product To be heard To choose what to buy To be educated about purchases To receive courteous service Other examples of areas of social responsibility for a company include: Responsibility toward customers: This involves providing quality products and pricing products fairly. Consumerism: This includes social activism dedicated to protecting the rights of consumers in their dealings with business. The basic consumer bill of rights, which includes the rights: To possess safe products. To be informed about all relevant aspects of a product. To be heard. To choose what to buy. To be educated about purchases. To receive courteous service. Teaching Tips: In your student teams, choose one of the basic rights of consumers presented in the basic consumer bill of rights. Then in your team, discuss three products that have or have not granted that right to consumers. Also discuss how they did or did not accomplish providing this right. Answers will vary. © 2009 Pearson Education, Inc.

17 Areas of Social Responsibility (cont’d)
Unfair Pricing Collusion: When two or more firms agree to collaborate on such wrongful acts as price fixing Price gouging: Responding to increased demand with overly steep (and often unwarranted) price increases Ethics in Advertising Truth in advertising Morally objectionable advertising Two other areas of social responsibility include unfair pricing and ethics in advertising. 1. Unfair pricing includes: Collusion: Collusion occurs when two or more firms agree to collaborate on such wrongful acts as price fixing. This practice has been outlawed for years by the Robinson-Patmann Act. An example is when airlines charge the same fare to the same destination. Price gouging: This occurs when businesses respond to an increased demand with overly steep and often unwarranted price increases. Anytime there is a natural disaster or act of war, stores may engage in this practice by allowing the demand for the products they have within their stores to drive prices much higher than would be normal for certain items. 2. Ethics in advertising includes: Providing truth in advertising, and not making false claims when stating product benefits. Avoiding morally objectionable advertising such as ads for women’s undergarments, condoms, etc. Teaching Tips: In your student teams, please list an example of unfair pricing and ethics in advertising. Discuss the strategies that were applied and be prepared to discuss these with the class. Answers will vary based on the product or company chosen, but must include either collusion or price gouging, such as occurred after Hurricane Katrina. Answers to the ethics in advertising issue must deal with truth in advertising or morally objectionable advertising. These answers could include examples from the text such as Victoria’s Secret ads, ads for condoms or ads promoting sexuality. © 2009 Pearson Education, Inc.

18 Areas of Social Responsibility (cont’d)
Responsibility Toward Employees Legal and social commitments to: Not practice illegal discrimination Provide a physically and socially safe workplace Provide opportunities to balance work and life Provide protection for whistleblowers (an employee who discovers and tries to put an end to a company’s unethical, illegal, or socially irresponsible actions by publicizing them) Responsibility Toward Investors Proper financial management (no insider trading) Proper representation of finances Responsibility toward employees and investors includes both legal and social commitments to: Not practice illegal discrimination in hiring, job duties, firing, etc. Provide a physically and socially safe workplace, meeting OSHA and the Americans with Disabilities Act standards. Provide opportunities to balance work and life, such as providing fitness opportunities at work or memberships at gyms. Provide protection for whistleblowers (an employee who discovers and tries to put an end to a company’s unethical, illegal or socially irresponsible actions by publicizing them with the media). In addition, responsibility toward investors includes: Proper financial management, including no insider trading. Proper representation of finances, such as we discussed earlier in our prepaid consulting services example. Teaching Tips: In your student teams please choose one of the legal or social commitments toward employees and provide an example of it. We will share these with the class. Answers will vary, but need to be from one of the above mentioned legal and social commitments. Please give an example of insider trading. What is it and who has done this? One answer could be trading securities or stocks with knowledge of upcoming financial reports prior to their release to the public. Martha Stewart is an example of someone who was convicted of insider trading. © 2009 Pearson Education, Inc.

19 Implementing Social Responsibility (SR) Programs
Arguments Against SR The cost of SR threatens profits. Business has too much control over which SR issues would be addressed and how SR issues would be addressed. Business lacks expertise in SR matters. Arguments for SR SR should take precedence over profits. Corporations as citizens should help others. Corporations have the resources to help. Corporations should solve problems they create. There are arguments for and against an organization’s implementation of a social responsibility program. Let’s first examine the arguments against implementation of social responsibility programs: The cost of social responsibility programs threatens profits. Or, essentially, why should we spend money we don’t have to? This is truly a short-term business perspective. The business or organization would have too much control over which programs would be addressed and how they would be addressed. In this argument, people believe that business would not choose the most appropriate socially responsible project to fund, and only fund those that enhance its image and reputation. The business or organization lacks expertise in social responsibility matters. There is a new trend toward what is called “philanthrocapitalism,” whereby businesses are learning how they can apply their for-profit frameworks to the non-profit sector. Next we will examine the arguments for the implementation of social responsibility programs by business: Social responsibility should take precedence over profits. Corporations as citizens should help others, or those less fortunate. Corporations have the resources to help. This is true of many multinational corporations. Examples include Warren Buffet and Bill Gates and the combining of their foundations to address those less fortunate. Corporations should solve problems they create. This position believes that corporations will continue to cause problems or continue to be socially irresponsible, and hence need to implement social responsibility programs to fix what they have broken. It is important to note that the United Nations developed its Millennium Development Goals (http://www.un.org/millenniumgoals/), which were formed to end world poverty and hunger by There are eight specific goals to achieve the overarching development goal. The eighth goal specifically addresses the development of partnerships with businesses and other organizations to assist in meeting employment goals to help end poverty and thus hunger. Teaching Tips: In your student teams, please choose an argument either for or against the implementation of social responsibility programs and choose an example from current or past business news that supports your position. We will then share our team positions with the class. Answers will vary but should show direct evidence to the arguments for and against implementation of social responsibility programs as stated above in this slide. © 2009 Pearson Education, Inc.

20 Approaches to Social Responsibility
Obstructionist Stance A company does as little as possible and may attempt to deny or cover up violations Defensive Stance A company does everything required of it legally but no more Accommodative Stance A company meets its legal and ethical requirements and also goes further in certain cases Proactive Stance A company actively seeks to contribute to the well-being of groups and individuals in its social environment These different arguments for or against social responsibility programs by businesses take four stances. Let’s examine them: Obstructionist stance: With this stance, the company does as little as possible and may attempt to deny or cover up violations. Defensive stance: In the defensive stance, a company does everything required of it legally, but no more. Accommodative stance: A company taking an accommodative stance meets its legal and ethical requirements and also goes further in certain cases. Proactive stance: With this stance, a company actively seeks to contribute to the well-being of groups and individuals in its social environment. Let’s take a look at this from a visual standpoint. © 2009 Pearson Education, Inc.

21 FIGURE 2.4: Spectrum of Approaches to Corporate Social Responsibility
In Figure 2.4 we can see the spectrum of approaches to corporate social responsibility more graphically. Those corporations or organizations with the lowest level of social responsibility fit the obstructionist and defensive stance, while those with higher levels of social responsibility take the accommodative and proactive stances. Teaching Tips: In your student teams, please choose one of the four stances toward corporate social responsibility. In your teams, provide an example of a company or a type of company and what their actions might be if they take the stance your team has chosen. We will share these with the class. Answers will vary, but should include specific evidence from the previous slide or examples from the text or current affairs. © 2009 Pearson Education, Inc.

22 Managing Social Responsibility Programs
Social responsibility must start at the top and be considered as a factor in strategic planning. A committee of top managers must develop a plan detailing the level of management support. One executive must be put in charge of the firm’s agenda. The organization must conduct occasional social audits—systematic analyses of its success in using funds earmarked for its social responsibility goals. Managing social responsibility programs involves a number of steps. Let’s review these: Social responsibility must start at the top of the corporation and be considered as a factor in strategic planning. A committee of top managers must develop a plan detailing the level of management support. One executive must be put in charge of the firm’s social responsibility agenda. The organization must conduct occasional social audits or systematic analyses of its success in using funds earmarked for its social responsibility goals. Teaching Tips: Please join with another class member. In your team, please develop an example of how you believe a company should initiate and manage a social responsibility program. Answers will vary. Each team should provide evidence from the four steps provided in this slide. © 2009 Pearson Education, Inc.

23 Social Responsibility and the Small Business
Large Business versus Small Business Responses to Ethical Issues Differences are primarily differences of scale More issues are questions of individual ethics Ethics and social responsibility are decisions faced by all managers in all organizations, regardless of rank or size Now we are going to discuss social responsibility and the small business. We take it for granted that large, multinational firms must be socially responsible in the 21st century. But how can a small business be socially responsible? The differences between how large and small businesses respond to ethical issues are primarily difference of scale. In general, more issues are questions related to individual ethics. Ethics and social responsibility are decisions faced by all managers in all organizations, regardless of rank or size. Teaching Tips: In your student teams, choose a small business that you know in your community. Then discuss together how this small business could or does address social responsibility based on the information you have learned today from Chapter 2. The answers will vary based on the small business chosen. However, as this slide states, ethical and social responsibility are decisions faced by all managers in all organizations, regardless of rank or size. Student answers should reflect back on the concepts from this chapter. © 2009 Pearson Education, Inc.

24 Key Terms accommodative stance business ethics collusion consumerism
defensive stance ethical behavior ethics insider trading managerial ethics obstructionist stance organizational stakeholders proactive stance social audit social responsibility unethical behavior whistleblower There are many key terms that we learned in this chapter. Teaching Tips: Please form teams of two students. Each team will be assigned a number of terms. Your team should write an appropriate sentence using the key terms assigned to your group, which we will share with the class. © 2009 Pearson Education, Inc.


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