1. © 2008 by Prentice Hall2-1 Human Resource Management 10 th Edition Chapter 2 Business Ethics and Corporate Social Responsibility

2. © 2008 by Prentice Hall2-2 Developing an Ethical Culture At Tyco International Changing Tyco’s corporate image has to rank as one of toughest jobs in recent history Framework for managing that accountability had to be established By 2006, scandal left by Tyco’s now- jailed former CEO, had been cleaned up

3. © 2008 by Prentice Hall2-3 Ethics Discipline of dealing with what is good and bad, or right and wrong, or with moral duty and obligation

4. © 2008 by Prentice Hall2-4 Unethical Examples Enron, Arthur Andersen, WorldCom, Global Crossing, Adelphia Communications, Tyco International, and others Ruthless self-interest that motivates the leaders of some large corporations has been revealed To have served on the Enron board literally has become a badge of shame

5. © 2008 by Prentice Hall2-5 Many Example of Unethical Corporate Behavior Headlines have exposed the far-from-ethical exploits of Enron, Arthur Andersen, WorldCom, Global Crossing, Adelphia Communications, Tyco International, and others Enron’s stated values, respect, integrity, communication, and excellence, were once proudly etched on Enron’s paperweights Ruthless self-interest that motivated the leaders of some large corporations has been revealed

6. © 2008 by Prentice Hall2-6 Not Just Corporations Virtually no occupation has not had its own painful ethical crises in recent years Even so, business ethics scandals continue to be headline news stories today. Lying on resumes, obstruction of justice, destruction of records, stock price manipulation, cutting corners to meet Wall Street’s expectations, fraud, waste, and abuse, unfortunately, are occurring all too often when those in business go ethically wrong

7. © 2008 by Prentice Hall2-7 Trends & Innovation: One Person’s Ethical Stand Everyone is not as ethical as Leonard Roberts Quit over promises made at Arby’s Another ethical problem at Shoney’s Said “You cannot fake it. You must stand up for what is right regardless. You cannot maintain your integrity 90 percent and be a leader. It’s got to be one hundred percent.”

8. © 2008 by Prentice Hall2-8 A MODEL OF ETHICS Type I EthicsType II Ethics Sources of ethical guidance Our beliefs about what is right or wrong Our actions Lead toDetermine

9. © 2008 by Prentice Hall2-9 Sources of Ethical Guidance Number of sources to determine what is right or wrong, good or bad, moral or immoral Bible and other holy books Conscience Significant others Codes of Ethics Sources of ethical guidance should lead to our beliefs or convictions about what is right or wrong

10. © 2008 by Prentice Hall2-10 Type I Ethics Strength of relationship between what individual or organization believes to be moral and correct and what available sources of guidance suggest is morally correct Example: HR manager believes it is acceptable not to hire minorities, despite fact that almost everyone condemns this practice

11. © 2008 by Prentice Hall2-11 Type II Ethics Strength of relationship between what one believes and how one behaves Example: Manager knows it is wrong to discriminate, but does so anyway

12. © 2008 by Prentice Hall2-12 Legislating Ethics Procurement Integrity Act Federal Sentencing Guidelines for Organizations (FSGO) Corporate and Auditing Accountability, Responsibility and Transparency Act

13. © 2008 by Prentice Hall2-13 Procurement Integrity Act of 1988 Prohibits release of source selection and contractor bid or proposal information Restrictions on former employees Passed after reports of military contracts for $500 toilet seats Also $5,000 hammer

14. © 2008 by Prentice Hall2-14 Federal Sentencing Guidelines for Organizations (FSGO) of 1992 Outlined effective ethics training program Promised softer punishments for wayward corporations that had ethics programs in place Executives needed to be proactive Organizations responded by creating ethics officer positions, installing ethics hotlines, and developing codes of conduct

15. © 2008 by Prentice Hall2-15 Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002 Known as Sarbanes Oxley Act, primary focus to redress accounting and financial reporting abuses in light of recent corporate scandals Criminalized many corporate acts Whistle-blower protections Prohibits loans to executives and directors

16. © 2008 by Prentice Hall2-16 HR and Sarbanes Oxley Act Nonretaliation provisions HR professional must understand where Act’s corporate mandates intersect with existing HR policies and practices so they can fit them together with corporate compliance efforts

17. © 2008 by Prentice Hall2-17 Human Resource Ethics Application of ethical principles to HR relationships and activities Code of Ethics – Many companies have a code of ethics

18. © 2008 by Prentice Hall2-18 Code of Ethics Statement of values adopted by company, its employees and directors and sets official tone of top management regarding expected behavior Code of ethics establishes rules by which organization lives and becomes part of organization’s corporate culture

19. © 2008 by Prentice Hall2-19 Ethics Officer Larger firms appoint ethics officer Keeps code on front burner for employees Ethics committee often established

20. © 2008 by Prentice Hall2-20 Baldrige National Quality Award Increased emphasis on ethics in leadership Criteria: Senior leaders should serve as role models to rest of organization

21. © 2008 by Prentice Hall2-21 Human Resource Ethics Application of ethical principles to HR relationships and activities Some ethical lapses of recent years occurred in HR management Some believe HR should have questioned salaries, stock options, and related perks received by some corporate executives

22. © 2008 by Prentice Hall2-22 Ethics and HR Management 2 areas where HR can have a major impact on ethics *Corporate Governance *Executive Compensation

23. © 2008 by Prentice Hall2-23 Professionalization Of Human Resource Management

24. © 2008 by Prentice Hall2-24 Profession A vocation characterized by existence of: Common body of knowledge Procedure for certifying members of profession

25. © 2008 by Prentice Hall2-25 HR Professional Groups Society for Human Resource Management - Largest national professional organization for HR management individuals American Society for Training and Development - Largest specialized professional organization in human resources

26. © 2008 by Prentice Hall2-26 HR Professional Groups (Cont.) WorldatWork - Managerial and HR professionals responsible for establishment, execution, administration or application of compensation practices and policies Human Resource Certification Institute - Recognize HR professionals through certification program

27. © 2008 by Prentice Hall2-27 Corporate Social Responsibility Implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect interests of groups other than themselves. When corporation behaves as if it has a conscience How company as a whole behaves toward society

28. © 2008 by Prentice Hall2-28 Who Determines? Organization’s top executives usually determine corporation’s approach to social responsibility

29. © 2008 by Prentice Hall2-29 Stakeholder Analysis and Social Contract Most organizations have large number of stakeholders

30. © 2008 by Prentice Hall2-30 Organizational Stakeholder Individual or group whose interests are affected by organizational activities Society is increasingly holding corporate boards of directors and management accountable for putting the interest of stakeholders first Some of the stakeholders for Crown Metal Products, a fictitious manufacturer, are identified Only a few, identified by bold arrows, are viewed as constituencies

31. © 2008 by Prentice Hall2-31 STAKEHOLDERS OF CROWN METAL PRODUCTS Stanley Crow (Sole stockholder) Charitable Organizations Neighbors Customers Employees and Managers Unemployed Workers (Potential employees) Guaranty Bank (Lender) Suppliers Other Banks in Area (Prospective lenders) Local Businesses Local Government Agencies U.S. Government Competitors Crown Metal Products

32. © 2008 by Prentice Hall2-32 Social Contract Set of written and unwritten rules and assumptions about acceptable interrelationships among various elements of society Embedded in customs of society Social contract often involves quid pro quo Concerns relationships with individuals, government, other organizations, and society

33. © 2008 by Prentice Hall2-33 The Social Contract The Organization Individuals Other Organizations Government Society

34. © 2008 by Prentice Hall2-34 Obligations to Individuals Certain obligations to employees Expect fair day’s pay for fair day’s work, and perhaps much more

35. © 2008 by Prentice Hall2-35 Obligations to Other Organizations Must be concerned with relationships involving other organizations Commercial businesses are expected to compete with one another on honorable basis Charities such as United Way expect support from business

36. © 2008 by Prentice Hall2-36 Traditional View of Social Responsibility Businesses best meets obligations through pursuit of their own interests Some companies view social contract mainly in terms of the company’s interests

37. © 2008 by Prentice Hall2-37 Obligations to Government Under auspices of government, companies have license to do business, along with patent rights, and trademarks Expected to recognize need for order rather than anarchy Expected to work with guidelines of governmental organizations such as Equal Employment Opportunity Commission and Office of Federal Contract Compliance Programs

38. © 2008 by Prentice Hall2-38 Obligations to Society in General Traditional view of business responsibility has been businesses should produce and distribute goods and services in return for profit Businesses operate by public consent with basic purpose of satisfying needs of society

39. © 2008 by Prentice Hall2-39 Sir Thomas More Said in the 16th century, “If virtue were profitable, common sense would make us good and greed would make us saintly.” Moore knew virtue is not profitable, so people must make hard choices from time to time. Corporate strategists are being held to a higher standard than just pursuing their own interests, or even those of stockholders; they must consider the interests of other groups too.

40. © 2008 by Prentice Hall2-40 Social Audit Systematic assessment of a company’s activities in terms of its social impact

41. © 2008 by Prentice Hall2-41 Possible Types of Social Audits Simple inventory of activities Compilation of socially relevant expenditures Determination of social impact The ideal social audit would involve determining the true benefits to society of any socially-oriented business activity

42. © 2008 by Prentice Hall2-42 Steps for Establishing and Implementing Corporate Social Responsibility (CSR) Program 1.Person assigned responsibility for program; structure developed 2.Review of what company is present doing regarding CSR determined 3.Shareholders expectations and perspectives determined 4.Write policy statements covering CSR areas such as environmental, social and community issues

43. © 2008 by Prentice Hall2-43 CSR Steps (Continued) 5. Develop set of corporate objectives and action plan to implement policies 6.Create company quantitative and qualitative targets and performance indicators over a 2-5 year period, along with measurement, monitoring and auditing mechanisms 7.Communicate direction of CSR to stakeholders and fund managers 8.Determine progress of CSR program 9.Report progress of CSR program

44. © 2008 by Prentice Hall2-44 A Global Perspective: When In Rome, Do As the Romans Does Not Work Today The old adage once accepted in many quarters,” When in Rome, do as the Romans do,” has become unacceptable. New CEO challenge is to act like an ethical leader for society as a whole

45. © 2008 by Prentice Hall2-45