Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Copyright © 2015 Pearson Education, Inc. 2-1 # Understanding Business Ethics and Social Responsibility 2

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-2 Copyright © 2015 Pearson Education, Inc. Introduction In this chapter, we’ll look at ethics and social responsibility— –what they mean –how they apply to environmental issues and to a firm’s relationships with its customers, employees, and investors. –approaches to social responsibility –steps businesses must take to implement social responsibility programs

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Copyright © 2015 Pearson Education, Inc Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 2.Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 3.Show how the concept of social responsibility applies both to environmental issues and to a firm’s relationships with customers, employees, and investors.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Copyright © 2015 Pearson Education, Inc Identify four general approaches to social responsibility and note the role of social responsibility in small business. 5.Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 6.Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-5 Copyright © 2015 Pearson Education, Inc. Ethics in the Workplace Ethics –beliefs about what is right and wrong or good and bad in actions that affect others Business ethics –refers to ethical or unethical behaviors by employees in the context of their jobs

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-6 Copyright © 2015 Pearson Education, Inc. Ethics in the Workplace (cont.) Ethical behavior –behavior that conforms to individual beliefs and social norms about what’s right and good Unethical behavior –behavior that conforms to individual beliefs and social norms about what is defined as wrong and bad

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-7 Copyright © 2015 Pearson Education, Inc. EXAMPLE

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-8 Copyright © 2015 Pearson Education, Inc. What is your opinion about the following behaviors from teachers toward their students?

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-9 Copyright © 2015 Pearson Education, Inc. - Lending money to students. - Selling goods (such as a car or books) to students. -Giving every student an A regardless of the quality of their work.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-10 Copyright © 2015 Pearson Education, Inc. Business and Managerial Ethics Managerial Ethics standards of behavior that guide individual managers in their work Behavior toward Employees Behavior toward the Organization Behavior toward Other Economic Agents

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-11 Copyright © 2015 Pearson Education, Inc. Assessing Ethical Behavior 1. Gather the relevant factual information 2. Analyze the facts to determine the most appropriate moral values 3. Make an ethical judgment based on how right or wrong the proposed activity or policy is.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-12 Copyright © 2015 Pearson Education, Inc. Ethical Norms 1.Utility –Does a particular act optimize the benefits to those who are affected by it? (That is, do all relevant parties receive “fair” benefits?) 2.Rights –Does it respect the rights of all individuals involved?

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-13 Copyright © 2015 Pearson Education, Inc. Ethical Norms (cont.) 4.Justice –Is it consistent with what’s fair? 5.Caring –Is it consistent with people’s responsibilities to each other?

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-14 Copyright © 2015 Pearson Education, Inc. Model of Ethical Judgment Making

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-15 Copyright © 2015 Pearson Education, Inc. Company Practices and Business Ethics Two of the most common approaches to formalizing top management commitment to ethical business practices: Adopting written codes Instituting ethics programs

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-16 Copyright © 2015 Pearson Education, Inc. Adopting Written Codes – The HP Way -We have trust and respect for individuals. -We focus on a high level of achievement and contribution. -We conduct our business with uncompromising integrity. -We achieve our common objectives through teamwork. -We encourage flexibility and innovation.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-17 Copyright © 2015 Pearson Education, Inc. Core Principles and Organizational Values

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-18 Copyright © 2015 Pearson Education, Inc. Social Responsibility Social responsibility –refers to the overall way in which a business attempts to balance its commitments to relevant groups and individuals in its social environment

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-19 Copyright © 2015 Pearson Education, Inc. Social Responsibility (cont.) Organizational Stakeholders –those groups, individuals, and organizations that are directly affected by the practices of an organization and who therefore have a stake in its performance

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-20 Copyright © 2015 Pearson Education, Inc. Major Corporate Stakeholders

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-21 Copyright © 2015 Pearson Education, Inc. The Stakeholder Model of Responsibility Most companies that strive to be responsible to their stakeholders concentrate first and foremost on five main groups: Customers Employees Investors Suppliers Local communities where they do business

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-22 Copyright © 2015 Pearson Education, Inc. The Stakeholder Model of Responsibility (cont.) Customers –Treat customers fairly and honestly. (For example : DELL COMPUTER & JOHNOSON & JOHNSON have excellent reputation in this area. Many small banks have increased their profits by offering much stronger customer services such as (free coffee- childcare while they are in the bank)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-23 Copyright © 2015 Pearson Education, Inc. The Stakeholder Model of Responsibility Employees –Treat employees fairly and respect their dignity and basic human needs. (for example: STARBUCKS, MICROSOFT, FedEx, have excellent reputation in this area Investors –Follow proper accounting procedures; provide information to shareholders about financial performance.( for example: Mobile scandal)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-24 Copyright © 2015 Pearson Education, Inc. The Stakeholder Model of Responsibility Suppliers –Create mutually beneficial partnership arrangements with suppliers Local and International Communities –Involvement in programs and charities. (for example: ExxonMobil has helped build hospitals and expand school in the African, where it has established growing oil business

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-25 Copyright © 2015 Pearson Education, Inc. History of Accountability The business practices of such entrepreneurs raised concern about abuses of power and led to the nation’s first law regulating basic business practices. In the 1930 many people blamed the (Great Depression) on a climate of business greed restraint. Out of this turmoil emerged new laws that dictated an expanded role of business and the concept of (ACCOUNTABILITY)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-26 Copyright © 2015 Pearson Education, Inc. Contemporary Social Consciousness The Concept of Accountability –The expectation of an expanded role for business in protecting and enhancing the general welfare of society

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-27 Copyright © 2015 Pearson Education, Inc. Areas of Social ResponsibilityEnvironment Customers Employees Investors

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-28 Copyright © 2015 Pearson Education, Inc. Responsibility toward Customers Consumer rights –Consumerism – social activism dedicated to protecting the rights of consumers in their dealings with businesses Unfair pricing –Collusion – two or more firms collaborate on such wrongful acts as price fixing –Price gouging

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-29 Copyright © 2015 Pearson Education, Inc. Consumerism –a form of social activism dedicated to protecting the rights of consumers in their dealings with businesses Collusion –illegal agreement between two or more companies to commit a wrongful act

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-30 Copyright © 2015 Pearson Education, Inc. The Elements of Green Marketing

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-31 Copyright © 2015 Pearson Education, Inc. HISTORY OF CONSUMER Bill of rights The first formal declaration of consumer rights protection came in the early of 1960 when president JONE KENNEDY identify (4) basic consumer rights. Then general agreement on (2) additional rights has emerged.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-32 Copyright © 2015 Pearson Education, Inc. Consumer Bill of Rights

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-33 Copyright © 2015 Pearson Education, Inc. Responsibility toward Employees Provide opportunities to balance work and life pressures and preferences Help employees maintain job skills Treat terminated or laid-off employees with respect and compassion

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-34 Copyright © 2015 Pearson Education, Inc. Responsibility toward Employees (cont.) A company that provides its employees with equal opportunities without regard to race, sex, or other irrelevant factors is meeting both its legal and its social responsibilities

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-35 Copyright © 2015 Pearson Education, Inc. Responsibility toward the Environment Air pollution Water pollution Land pollution –Toxic waste disposal –Recycling

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-36 Copyright © 2015 Pearson Education, Inc. Responsibility toward Investors Insider trading –using confidential information to gain from the purchase or sale of stocks. Misrepresentation of finances

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-37 Copyright © 2015 Pearson Education, Inc. Approaches to Social Responsibility

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-38 Copyright © 2015 Pearson Education, Inc. Approaches to Social Responsibility (cont.) Obstructionist Stance –involves doing as little as possible and may involve attempts to deny or cover up violations Defensive Stance –company meets only minimum legal requirements in its commitments to groups and individuals its social environment

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-39 Copyright © 2015 Pearson Education, Inc. Accommodative Stance –a company, if specifically asked to do so, exceeds legal minimums in its commitments to groups Proactive Stance –a company actively seeks opportunities to contribute to the well-being of groups and individuals in its social environment Approaches to Social Responsibility (cont.)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-40 Copyright © 2015 Pearson Education, Inc. Example

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-41 Copyright © 2015 Pearson Education, Inc. IBM will match contributions made by their employees to selected charitable causes. Accommodative Stance

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-42 Copyright © 2015 Pearson Education, Inc. In 2009 a Georgia peanut processing plane owned by Peanut Corporation of America shipped product contaminated with Salmonella. The firm's top manager knew that but shipped them anyway in order to avoid losing money. Obstructionist Stance

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-43 Copyright © 2015 Pearson Education, Inc. When organizations install pollution-control equipment dictated by law but not higher- quality to further limit pollution. Defensive Stance

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-44 Copyright © 2015 Pearson Education, Inc. McDonald House program, these houses located close to major medical center, can be used for minimal cost by families while their sick children are receiving medical treatment nearby. Proactive Stance

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-45 Copyright © 2015 Pearson Education, Inc. Social Responsibility and the Small Business For small businesses, ethical issues are questions of individual ethics But in questions of social responsibility, they must ask themselves if they can afford a social agenda

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-46 Copyright © 2015 Pearson Education, Inc. Top 25 Corporate Foundations

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-47 Copyright © 2015 Pearson Education, Inc. How Governments Influence Organization? 1- Direct Regulation. 2- Indirect Regulation. ( Taxation policies).

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-48 Copyright © 2015 Pearson Education, Inc. The Government and Social Responsibility Regulation –the establishment of laws and rules that dictate what organizations can and cannot do –Direct –Indirect

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-49 Copyright © 2015 Pearson Education, Inc. How Organization Influence Governments? 1- Personal Contact. 2- Lobbying. 3- Political Action Committees. ( PAC) 4- Favors.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-50 Copyright © 2015 Pearson Education, Inc. How Organizations Influence Government Political Action Committees (PACs) –special organizations created to solicit money and then distribute it to political candidates Lobbying –the use of persons or groups to formally represent an organization or group of organizations before political bodies

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-51 Copyright © 2015 Pearson Education, Inc. Formal Organizational Dimensions Legal Compliance –the extent to which the organization conforms to local, state, federal, and international laws Ethical Compliance –the extent to which the members of the organization follow basic ethical (and legal) standards of behavior

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-52 Copyright © 2015 Pearson Education, Inc. Philanthropic giving –the awarding of funds or gifts to charities or other worthy causes Formal Organizational Dimensions (cont.)

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-53 Copyright © 2015 Pearson Education, Inc. Informal Organizational Dimensions (cont.) 1- Organization Leadership and Culture. 2- Whistle-Blowing.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-54 Copyright © 2015 Pearson Education, Inc. Managing Social Responsibility Programs 1.Social responsibility must start at the top and be considered a factor in strategic planning 2.A committee of top managers must develop a plan detailing the level of management support 3.One executive must be put in charge of the firm’s agenda 4.The organization must conduct occasional social audits

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-55 Copyright © 2015 Pearson Education, Inc. Evaluating Social Responsibility Corporate Social Audit –systematic analysis of a firm’s success in using funds earmarked for meeting its social responsibility goals

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-56 Copyright © 2015 Pearson Education, Inc. Applying What You’ve Learned 1.Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 2.Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 3.Show how the concept of social responsibility applies both to environmental issues and to a firm’s relationships with customers, employees, and investors.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-57 Copyright © 2015 Pearson Education, Inc. Applying What You’ve Learned (cont.) 4.Identify four general approaches to social responsibility and note the role of social responsibility in small business. 5.Explain the role of government in social responsibility in terms of how governments and businesses influence each other.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 2-58 Copyright © 2015 Pearson Education, Inc.