Ethics and Social Responsibility Chapter 3 Ethics and Social Responsibility Ethics and Social Responsibility Chapter 3 Lamb, Hair, McDaniel 2014-2015 © Quayside/Shutterstock.com © Cengage Learning 2015. All Rights Reserved.

© 2015 by Cengage Learning Inc. All Rights Reserved. Chapter 3 Ethics and Social Responsibility Explain the determinants of a civil society Explain the concept of ethical behavior Describe ethical behavior in business Discuss corporate social responsibility Describe the arguments for and against society responsibility Explain cause-related marketing © 2015 by Cengage Learning Inc. All Rights Reserved. 2

Foundations of Ethical Behavior Individuals and companies must behave responsibly, based on certain ethical codes of conduct (what is right or wrong) Our moral reasoning guiding our decisions and actions can be…. Teleological-decisions are based on the consequences of the action Utilitarianism-an action is right if produces greatest amount of good Deontological-moral reasoning occurs per se, independently, consequence is not an issue

The Modes of Social Control in a Civil Society Chapter 3 Ethics and Social Responsibility The Modes of Social Control in a Civil Society Ethics comprise the moral principles or values that generally govern the conduct of an individual or a group. There is no law for “cutting in line,” however, cutting in line is not considered polite and may anger some people. Order is maintained by the following factors: Ethics Laws Formal and informal groups Self-regulation The media An active civil society Notes: 1. Ethics: These are the moral principles or values that generally govern the conduct of an individual or a group. 2. Laws: Often, ethical rules and guidelines are codified into law. Laws created by governments are then enforced by governmental authority. 3. Formal and Informal Groups: Businesses, professional organizations, clubs, and professional associations all have codes of conduct. 4. Self-regulation: Self-regulation involves the voluntary acceptance of standards established by nongovernmental entities. 5. The Media: In an open, democratic society, the media play a key role in informing the public about the actions of individuals and organizations—both good and bad. 6. An Active Civil Society: An informed and engaged society can help shape and mold individual and corporate behavior. 1 © 2015 by Cengage Learning Inc. All Rights Reserved. 4

Ethical Development Levels Chapter 3 Ethics and Social Responsibility Ethical Development Levels Preconventional Morality Conventional Postconventional More Mature Childlike Based on what will be punished or rewarded Self-centered, calculating, selfish Moves toward the expectations of society Concerned over legality and the opinion of others Concern about how they judge themselves Concern if it is right in the long run Notes: Ethical development can be thought of as having three levels. 3 © 2015 by Cengage Learning Inc. All Rights Reserved. 5

Reward Punishment Model of Ethical Behavior in Business (Un)ethical Behavior Economic Reward Quantum of Punishment Probability of Punishment ~ > * Source: Waheeduzzaman and Myers (2010), Influence of Economic Reward and Punishment on Unethical Behavior: An Empirical Study

Explanation of the Model The premise of the model is, ethical or unethical behavior depends on the relationship among three factors: economic reward or benefit that a businessman receives from the unethical practice the quantum (severity) of punishment the society imposes for such wrong-doing and the probability of receiving the punishment. Severity of punishment and its probability work as a deterrent for unethical behavior. A businessman will risk the practice of unethical behavior as long as the economic reward is significantly greater than the product of punishment and its probability.

Ethical Decision Making Chapter 3 Ethics and Social Responsibility Ethical Decision Making Influential Factors Extent of Problems Top Management Actions Potential Consequences Social Consensus Probability of Harm Time Until Consequences Number Affected Notes: There is no cut-and-dried formula for making ethical decisions, but these factors influence ethical decision making and judgments. 3 © 2015 by Cengage Learning Inc. All Rights Reserved. 8

Creating Ethical Guidelines Chapter 3 Ethics and Social Responsibility A Code of Ethics: Helps identify acceptable business practices Helps control behavior internally Avoids confusion in decision making Facilitates discussion about right and wrong Notes: Businesses must be careful not to make their code of ethics to vague or too detailed. 3 © 2015 by Cengage Learning Inc. All Rights Reserved. 9

Ethics in Other Countries Chapter 3 Ethics and Social Responsibility Foreign Corrupt Practices Act (FCPA) Prohibits U.S. corporations from making illegal payments to foreign officials. Has been criticized for putting U.S. businesses at a disadvantage. Has encouraged some countries to implement their own anti-bribery laws. Notes: In order to maintain ethical practices overseas, companies must comply with the Foreign Corrupt Practices Act (FCPA). Foreign U.S. ethical standards on to foreign cultures has been said to put U.S. corporations at a disadvantage by not allowing them to participate in foreign cultural norms (such as giving gifts). However, the pressure to work with U.S. corporations and avoid law suits has encouraged some countries to implement anti-bribery laws. 3 © 2015 by Cengage Learning Inc. All Rights Reserved. 10

Corporate Social Responsibility Chapter 3 Ethics and Social Responsibility Corporate social responsibility is a business’s concern for society’s welfare. Stakeholder theory says that social responsibility is paying attention to the interest of every affected stakeholder in every aspect of a firm’s operation. Notes: In order to maintain ethical practices overseas, companies must comply with the Foreign Corrupt Practices Act (FCPA). Foreign U.S. ethical standards on to foreign cultures has been said to put U.S. corporations at a disadvantage by not allowing them to participate in foreign cultural norms (such as giving gifts). However, the pressure to work with U.S. corporations and avoid law suits has encouraged some countries to implement anti-bribery laws. 4 © 2015 by Cengage Learning Inc. All Rights Reserved. 11

Corporate Social Responsibility For Against It is the right thing to do Businesses have the resources to devote to fixing social problems Prevents government regulation and potential fines It can be profitable Takes focus away from making profits Business executives spend shareholder money on environmental initiatives 5 © 2015 by Cengage Learning Inc. All Rights Reserved.

The Pyramid of Corporate Social Responsibility Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/Aug. 1991. Copyright © 1991 by the Foundation for the School of Business at Indiana University. Reprinted with permission. 13

© 2015 by Cengage Learning Inc. All Rights Reserved. Chapter 3 Ethics and Social Responsibility Sustainability Socially responsible companies will outperform their peers. It is in business’s best interest to find ways to attack society’s ills. Notes: Corporate social responsibility (CSR) is a business’s concern for society’s welfare. 5 © 2015 by Cengage Learning Inc. All Rights Reserved.

© 2015 by Cengage Learning Inc. All Rights Reserved. Chapter 3 Ethics and Social Responsibility Green Marketing The development and marketing of products designed to minimize negative effects on the environment or improve the environment. Environmentally aware customers pay more for products Companies must try to educate customers of environmental benefits Discussion Questions/Team Activities: Have students come up with examples of products using green marketing, then have them research the legitimacy of those claims. 5 © 2015 by Cengage Learning Inc. All Rights Reserved.

Cause-Related Marketing Chapter 3 Ethics and Social Responsibility Cause-Related Marketing For-profit and non-profit organizations cooperate to generate funds. Generates about $7 billion annually Too many causes lead to customer cause fatigue Notes: Cause-related marketing is the cooperative efforts of a for-profit firm and a non-profit organization for mutual benefit. It creates good public relations for the firm and often stimulates brand sales. Marketing done by a social or charitable cause is also referred to cause-related marketing. Philanthropy or charitable donations are different from cause-related marketing. 6 © 2015 by Cengage Learning Inc. All Rights Reserved.

Ch 3 Discussion Questions Explain the reward punishment model of ethical behavior in business. Explain the foundations of ethical behavior. What is Corporate Social Responsibility? Explain the Pyramid of Corporate Social Responsibility. Explain its arguments for and against. 17

© 2015 by Cengage Learning Inc. All Rights Reserved. Chapter 3 Ethics and Social Responsibility Chapter 3 Video Zappos Zappos, the world’s largest online shoe retailer, discusses its commitment to social responsibility and to ethical behavior. Developing employee activities and long-term relationships with charitable organizations allows Zappos to ingrain the importance of helping the greater good into its organizational culture. Zappos culture also guides its employees to make ethical decisions. CLICK TO PLAY VIDEO © 2015 by Cengage Learning Inc. All Rights Reserved. 18