Corporate Social Responsibility and Ethics Chapter 4 Corporate Social Responsibility and Ethics You treat people the way you want to be treated. If you treat everyone with respect, somehow it comes back to you. If you are honest and aboveboard, somehow it comes back to you. —Dick Parsons, CEO, Time Warner McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives Define corporate social responsibility and the tenets of the Davis model. Define ethics, and explain how organizations specify standards for ethical behavior. Identify benefits of ethical behavior and challenges that make ethical behavior more difficult I the modern workplace. Discuss the impact of cultural differences on ethical issues.

Learning Objectives (cont.) Describe major types of ethical behavior that supervisors should practice. Outline ways to make ethical decisions. Provide guidelines for supervising unethical employees. Define whistle-blowers, and describe how the supervisor should treat such employees.

Fundamentals of Corporate Social Responsibility the managerial obligation to take action that protects and improves both the welfare of society as a whole and the interests of the organization. Producing high-quality products not only helps to increase the marketability of company products but simultaneously benefits society by providing reliable products

The Davis Model of Corporate Social Responsibility Social responsibility arises from social power Business shall operate as a two-way open system, with open receipt of inputs from society and open disclosure of its operations to the public. The social costs and benefits of an activity, product, or service shall be thoroughly calculated and considered in deciding whether to proceed with it.

The Davis Model of Corporate Social Responsibility (cont.) The social costs related to each activity, product, or service shall be passed on to the consumer. Business institutions, as citizens, have the responsibility to become involved in certain social problems that are outside their normal areas of operation

Ethics in the Workplace the principles by which people distinguish what is morally right. See Learning Objective 1: Define ethics and explain how organizations specify standards for ethical behavior. See text pages: 95-96

Ethics in the Workplace Some believe that profitability should be the overriding concern of business. Others believe that organizations and their employees have an obligation to behave ethically, even if doing so cuts into short-term economic advantages.

Highlights of the National Business Ethics Survey

Benefits of Ethical Behavior A reputation as an ethical vendor makes customers want to do business with you. Some investors go out of their way to select companies with a good track record of ethical behavior. Ethical behavior can improve the organization’s relation with the community, which tends to attract customers and top-notch employees. Ethical behavior tends to reduce public pressure for government regulation. See Learning Objective 2: Identify benefits of ethical behavior and challenges that make ethical behavior more difficult in the modern workplace. See text pages: 96-97

Costs of Ethical Behavior Organizations whose employees are unethical may lose respect, customers, and qualified employees. Unethical behavior can cause the downfall of a company. Unethical behavior can have personal consequences such as suspension, demotion, job loss, or jail time. See Learning Objective 2: Identify benefits of ethical behavior and challenges that make ethical behavior more difficult in the modern workplace. See text page: 97

Challenges to Ethical Behavior With greater responsibilities, supervisors and other managers in restructured or downsized organizations cannot monitor employee’s day-to-day behavior. Some employees are afraid of being ethical when doing so conflicts with other goals. See Learning Objective 2: Identify benefits of ethical behavior and challenges that make ethical behavior more difficult in the modern workplace. See text pages: 97-98

Challenges to Ethical Behavior Companies that single-mindedly focus on sales or profits can create an environment in which employees feel as if they have to bend the rules. Some organizations create a climate in which employees fear they need to be unethical to save the company’s future or to be treated as a team player. See Learning Objective 2: Identify benefits of ethical behavior and challenges that make ethical behavior more difficult in the modern workplace. See text pages: 97-98

Top Five Sources of Pressure to Compromise Ethical Standards

Differing Measures of Ethical Behavior Code of ethics An organization’s written statement of its values and rules for ethical behavior Meeting high ethical standards is especially challenging for those who work with people from more than one culture, because ethical standards can vary from culture to culture.

Code of Ethics: Coca-Cola Ensure that the people you supervise understand their responsibilities under the Code and other Company policies Take opportunities to discuss the Code and reinforce the importance of ethics and compliance with employees Create an environment where employees feel comfortable raising concerns Consider conduct in relation to the Code and other Company policies when evaluating employees Never encourage or direct employees to achieve business results at the expense of ethical conduct or compliance with the Code of the law Always act to stop violations of the Code or the law by those you supervise

Important Dimensions of Ethical Behavior by Supervisors

Ethical Behavior of Supervisors Loyalty Expected loyalty to the organization, managers, and subordinates can result in conflict and ethical dilemmas Fairness Employees expect to be treated evenhandedly Supervisors should avoid nepotism See Learning Objective 4: Describe the major types of ethical behavior that supervisors should practice. See text page: 102

Ethical Behavior of Supervisors Honesty Give credit where credit is due Your dishonest behavior encourages employee dishonesty Be honest about what the organization can offer employees See Learning Objective 4: Describe the major types of ethical behavior that supervisors should practice. See text pages: 102-103

Making Ethical Decisions Involve others in the process Discussing the ethical implications can expose additional consequences and provide additional options Employees respond when supervisors and higher-level managers: Model ethical behavior Include ethical standards in performance discussions and rewards See Learning Objective 5: Outline ways to make ethical decisions. See text page: 103

Steps to Take When an Employee is Suspected of Unethical Behavior Gather and record evidence. Confront the employee with the evidence. Follow the organization’s disciplinary procedure. Look for and correct the conditions that led to the problem. See Learning Objective 6: Provide guidelines for supervising unethical employees. See text page: 104

Treatment of Whistleblowers Someone who exposes a violation of ethics or law The whistle-blower’s hope is that the negative publicity will spur the organization to do the right thing Typically, a whistle-blower brings the problem first to a manager in the organization. If management seems unresponsive, he or she then contacts a government agency, the media, or a private organization. The whistle-blower’s hope is that the negative publicity will spur the organization to do the right thing

The Law and Whistle-Blowers Federal laws protect employees who make complaints pertaining to violations of anti-discrimination laws, environmental laws, and occupational health and safety standards. The Sarbanes-Oxley act forbids employers from retaliating against an employee who reports possible accounting, auditing, or reporting misdeeds that deceive investors. See Learning Objective 7: Define whistle-blowers and describe how the supervisor should treat such employees. See text page: 105

The Law and Whistle-Blowers Under a Civil War-era law, whistle-blowers who report on companies that are cheating the government can receive up to 30 percent of whatever money the company ultimately pays as a penalty for the fraud. See Learning Objective 7: Define whistle-blowers and describe how the supervisor should treat such employees. See text page: 105

Treatment of Whistle-Blowers Whistle-blowers often suffer from going public with their complaints. Today many organizations are protecting ethics-minded employees and themselves with hotlines that make it easier to report and resolve ethical disputes within the organization. See Learning Objective 7: Define whistle-blowers and describe how the supervisor should treat such employees. See text pages: 105-107

Treatment of Whistle-Blowers Supervisors should: Discourage reports of wrongdoing when they are motivated by pettiness or retaliation. Investigate complaints quickly and report what will be done. See Learning Objective 7: Define whistle-blowers and describe how the supervisor should treat such employees. See text pages: 105-107