1. Chapter 3 THE FUTURE OF BUSINESS Gitman & McDaniel 5 th Edition THE FUTURE OF BUSINESS Gitman & McDaniel 5 th Edition Chapter 3 Making Ethical Decisions and Managing a Socially Responsible Business Prepared by Deborah Baker Texas Christian University Prepared by Deborah Baker Texas Christian University

2. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 2 1What philosophies and concepts shape personal ethical standards? 2How can organizations encourage ethical business behavior? 3What is social responsibility? 4How do businesses meet their social responsibilities to various stakeholders? 5What are the global and domestic trends in ethics and social responsibility? Learning Goals

3. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 3 Learning Goals Appendix: 6How does the legal system govern business transactions and settle business disputes? 7What are the required elements of a valid contract; and what are the key types of business law? 8What are the most common taxes paid by businesses?

4. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 4 Learning Goal 1 What philosophies and concepts shape personal ethical standards? 1

5. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 5 Ethics A set of moral standards for judging whether something is right or wrong. Ethics

6. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 6 Individual Business Ethics 1 Recognizing Unethical Business Activities Justice Individual Rights Utilitarianism Factors Influencing Individual Business Ethics Factors Influencing Individual Business Ethics

7. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 7 Recognizing Unethical Business Activities 1 1. Taking things that don’t belong to you. 2. Saying things you know are not true. 3. Giving or allowing false impressions. 4. Buying influence or engaging in a conflict of interest. 5. Hiding or divulging information. 6. Taking unfair advantage. 7. Committing improper personal behavior. 8. Abusing another person. 9. Permitting organizational abuse. 10. Violating rules. 11. Condoning unethical actions.

8. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 8 2 Learning Goal 2 How can organizations encourage ethical business behavior?

9. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 9 HOW ORGANIZATIONS INFLUENCE ETHICAL CONDUCT 2 Establish a Formal Code of Ethics Offer Ethics Training Programs Lead by Example

10. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 10 3 Learning Goal 3 What is social responsibility?

11. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 11 3 SOCIAL RESPONSIBILITY Ethical Legal Economic Philanthropic

12. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 12 3 Understanding Social Responsibility Legality Responsibility

13. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 13 3 Understanding Social Responsibility ResponsibleIrresponsible Legal Illegal Harms society, and breaks laws Follows laws, but harms society Follows laws, and benefits society Benefits society, but breaks laws

14. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 14 4 How do businesses meet their social responsibilities to various stakeholders? Learning Goal 4

15. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 15 RESPONSIBILITIES TO STAKEHOLDERS 4 Responsibilities of a Business Business Investors General Public Customers Employees

16. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 16 What are the global and domestic trends in ethics and social responsibility? 5 Learning Goal 5

17. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 17 5 Strategic giving in corporate philanthropy A new social contract between employer and employee Growth of global ethics and social responsibility TRENDS IN ETHICS & SOCIAL RESPONSIBILITY

18. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 18 5 Responsibilities of a Multinational Corporation  Respect local practices and customs  Ensure harmony between staff and host population  Provide management leadership  Develop local managers who will be a credit to the community  Implement ethical guidelines within the organization in the host country Trends in Global Ethics

19. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 19 6 How does the legal system govern business transactions and settle business disputes? APPENDIX: Learning Goal 6

20. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 20 6 The rules governing a society’s conduct that are created and enforced by a controlling authority Laws The Legal and Tax Environment

21. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 21 6 Common Law Statutory Law  Evolved out of judicial decisions  Case law  Written law, enacted by legislatures  Administrative law is passed by boards, commissions, and agencies The Main Sources of Law

22. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 22 6 Trial Courts Appellate Courts The Supreme Court Administrative Agencies Nonjudicial methods Arbitration Mediation The Court System

23. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 23 7 What are the required elements of a valid contract; and what are the key types of business law? APPENDIX: Learning Goal 7

24. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 24 7 Legal form Legal purpose Consideration Capacity Mutual assent Elements of a Valid Contract

25. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 25 7 Remedies for Breach of Contract Payment of Damages Specific Performance of the Contract Restitution Breach of Contract

26. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 26 7 Express Warranties Implied Warranties Neither written nor oral. These guarantees are imposed on sales transactions by statute or court decision. Specific statements of fact or promises about a product by the seller. Warranties

27. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 27 7 Patent Gives an inventor the exclusive right to manufacture, use, and sell an invention for 17 years. Copyright An exclusive right to use, produce, and sell creations, such as books, articles, movies, works of art. Trademark A design, name, or other distinctive mark used by a manufacturer to identify its goods. Patents, Copyrights, Trademarks

28. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 28 Key Consumer Protection Laws 7 Americans with Disabilities Act Children’s Television Act Cigarette Labeling Act Consumer Product Safety Act Pure Food & Drug Act Mail Fraud Act Protects the rights of people with disabilities Protects the rights of people with disabilities Limits advertising shown during children’s TV shows Requires health hazard labels on cigarettes Created the Consumer Product Safety Commission Created the FDA Federal crime to defraud consumers through mail

29. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 29 8 What are the most common taxes paid by businesses? APPENDIX: Learning Goal 8

30. Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 30 Taxation of Business Excise Taxes Sales Taxes Payroll Taxes Property Taxes Income Taxes 8