1. WEEK 7 ETHICS & SOCIAL RESPONSIBILITY Özge Can – 07.11.2012

2. Article on Ethics:  In China, Human Costs Are Built Into an iPad  http://www.nytimes.com/2012/01/26/business/iec onomy-apples-ipad-and-the-human-costs-for- workers-in-china.html?pagewanted=all http://www.nytimes.com/2012/01/26/business/iec onomy-apples-ipad-and-the-human-costs-for- workers-in-china.html?pagewanted=all

3. Stakeholders  Stakeholders  The people and groups affected by how a company and its managers behave.  They supply a company with its productive resources and so have a claim on and stake in the company

4. Stakeholders

5. Stockholders  They have a claim on company as they buy its stock or shares and become its owners. They;  Want to maximize their return on investment  Want to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation

6. Managers  Responsible for using a company’s financial, capital and human resources to increase its performance  Bear the responsibility to decide which goals an organization should pursue  Frequently try to balance multiple interests  These interest may be in conflict; some decisions that benefit certain stakeholder groups can harm others

7. Employees  They expect to receive rewards consistent with their performance  Fair treatment expected from managers: Recruitment and training Performance appraisal Reward system

8. Suppliers and Distributors  Suppliers expect to be paid fairly and promptly for their inputs  Distributors expect to receive quality products at agreed- upon prices  How companies contract and interact with them?  How and when payments are made  Product quality and safety specifications

9. Customers  Most critical stakeholder  Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones

10. Community and Society  Community:  Refers to locations like towns or cities or to social milieus in which companies are located  Provides a company with the physical and social infrastructure that allows it to operate

11. Ethics  Ethics  Inner guiding moral principles, values that people use to analyze and interpret a situation and then decide what is the right or appropriate way to behave  Ethical dilemma  Business Ethics  The moral principles and standards that guide behavior in the world of business

12. Rules of Ethical Decision Making

13. Why Should Managers Behave Ethically?  The relentless pursuit of self-interest can lead to a collective “disaster” when a few people start to profit from being unethical because this encourages other people to act in the same way  Pursuing of self interest with no consideration of societal interests harm both the individual and the society => Scarce resources are destroyed

14. Some Effects of Ethical/ Unethical Behavior:

15. The Business Costs of Ethical Failure

16. Sources of Business Ethics: Business Ethics Societal Ethics Individual Ethics Organizational Ethics Occupational Ethics

17. Sources of Business Ethics:  Societal Ethics  Standards that govern how members of a society should deal with each other on issues such as fairness, justice, poverty, and the rights of the individual  Occupational (Professional) Ethics  Standards that govern how members of a profession, trade or craft should conduct themselves when performing work-related activities

18. Sources of Business Ethics:  Individual Ethics  Personal standards and values that determine how people view their responsibilities to others and how they should act in ethical situations  Organizational Ethics  Guiding practices and beliefs through which a particular company and its managers view their responsibility towards their stakeholders

19. Major Issues of Business Ethics  Unfair wages and violation of employee rights  Safety and health violations and poor working conditions  Discriminatory practices  Failure of providing safe products  Dishonest commonication, lack of transparency  Damaging community, society and the environment  Financial frauds, bribery

20. Organizational Ethics  Code of Ethics: A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow.  Organizational characteristics, mechanisms and culture guide and influence ethics:  Organiational structural design  Organization culture  Ethics programs and training

21. Becoming an Ethical Leader 1. Hire individuals with high ethical standards 2. Establish codes of ethics, decision rules and shared values in the organization 3. Lead by example: Be a good role model by being ethical and honest yourself 4. Include ethics in performance appraisals and the reward system 5. Provide ethics training 6. Conduct independent social audits 7. Provide support for individuals facing ethical dilemmas

22. Workforce Diversity & Ethics  Workforce Diversity  The ways in which people in an organization are different from and similar to one another.  Unethical treatment (discrimination) towards diverse employees:  Prejudice (false schemas, perceptions)  Stereotyping  Biases  Overt discrimination, glass ceiling

23. Social Responsibility  Social Responsibility  The way a company’s managers and employees view their duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of society as a whole  Corporate Social Responsibility (CSR): The idea that businesses have obligations to society beyond the pursuit of profits

24. I. The Classical View  Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).  Expending the firm’s resources on doing “social good” is not preferable

25. II. The Socioeconomic View  Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.  Corporations are not independent entities responsible only to stockholders. Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.

26. Why Be Socially Responsible?  Building good image and reputation  Responsibility for bearing the costs of protecting stakeholders, providing health care and income, paying taxes and etc  Promoting a climate of caring in general  Better environment and better society  Superiority of prevention over cures

27. Practice: Take The Test  Assessing your ethical decision-making skills:  http://www.mhhe.com/business/management/buildyour managementskills/updated_flash/topic2a/quiz.html http://www.mhhe.com/business/management/buildyour managementskills/updated_flash/topic2a/quiz.html  Corporate social responsibility:  http://www.mhhe.com/business/management/buildyour managementskills/updatedexercises/quiz_1b.html http://www.mhhe.com/business/management/buildyour managementskills/updatedexercises/quiz_1b.html

28. Next Week:  Read from your textbook:  Chapter 6 – Managing the Global Environment  Submit your written assignment (2)  2-pages at most  Individual or up to 3 persons

29. Assignment -2 (Due 14.11.2012):  You are an entrepreneuer who has decided to go into business and open an Egean cuisine restaurant. Your business plan requires that you hire people as chefs, waiters and so on.  As the manager, you are drawing up a list of ethical principles that all of you must agree to. These principles outline your view of what is right or acceptable behavior in your business and will be expected both from you and your employees.

30. Assignment -2: 1. Create a list of the five main ethical rules or principles you will use to govern how the business operates (Please identify them in relation with your restaurant business) 2. Give three specific examples how these principles might relate to your stakeholders. How will you follow them in dealing with particular stakeholders? What will be the benefits for following these rules? 3. Give an example of one ethical dilemma that you might face with while running your business.