Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Human Resource Management 11th Edition Chapter 2 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

HRM in Action: Going Strategic with Corporate Social Responsibility HR professionals have helped their careers by doing work that impacts the bottom line and focusing their efforts on corporate social responsibility HR professionals that are leaders of CSR activities place themselves in spotlight for top management to see Approximately 2/3 of U.S. HR professionals are directly involved in CSR activities Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Ethics Discipline of dealing with what is good and bad, or right and wrong, or with moral duty and obligation Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall CEO Must Be Involved 67% of investors said they would move their account if they discovered the company was involved in unethical behavior Jeff Immelt GE’s CEO begins and ends each annual meeting of 220 officers and 600 senior managers by restating company’s fundamental integrity principles: “GE’s business success is built on our reputation with all stakeholders for lawful and ethical behavior. Commercial considerations never justify cutting corners. Upholding this standard is the specific responsibility of the leaders in the room.” Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Unethical Examples Enron, Arthur Andersen, WorldCom, Global Crossing, Adelphia Communications, Tyco International, and others Ruthless self-interest that motivates leaders of some large corporations has been revealed To have served on Enron board has become a badge of shame Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Not Just Corporations Virtually no occupation has not had its own painful ethical crisis in recent years. Even so, business ethics scandals continue to be headline news stories. Lying on resumes, obstruction of justice, destruction of records, stock price manipulation, cutting corners to meet Wall Street’s expectations, fraud, waste, and abuse are occurring all too often when those in business go ethically wrong. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Sources of ethical guidance Our beliefs about what is right or wrong A Model of Ethics Sources of ethical guidance Our beliefs about what is right or wrong Lead to Determine Our actions Type I Ethics Type II Ethics Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Sources of Ethical Guidance Number of sources to determine what is right or wrong, good or bad, moral or immoral Bible and other holy books Conscience Significant others Codes of Ethics Sources of ethical guidance should lead to our beliefs or convictions about what is right or wrong Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Type I Ethics Strength of relationship between what individual or organization believes to be moral and correct and what available sources of guidance suggest is morally correct Example: HR manager believes it is acceptable not to hire minorities, despite fact that almost everyone condemns this practice Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Type II Ethics Strength of relationship between what one believes and how one behaves Example: Manager knows it is wrong to discriminate, but does so anyway Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Legislating Ethics Procurement Integrity Act Federal Sentencing Guidelines for Organizations (FSGO) Corporate and Auditing Accountability, Responsibility and Transparency Act Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Procurement Integrity Act of 1988 Prohibits release of source selection and contractor bid or proposal information Restrictions on former employees Passed after reports of military contracts for $500 toilet seats Also $5,000 hammer Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Federal Sentencing Guidelines for Organizations (FSGO) of 1992 Outlined effective ethics training program Promised softer punishments for wayward corporations that had ethics programs in place Executives needed to be proactive Organizations responded by creating ethics officer positions, installing ethics hotlines, and developing codes of conduct Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002 Known as Sarbanes-Oxley Act, primary focus to redress accounting and financial reporting abuses in light of recent corporate scandals Criminalized many corporate acts Whistle-blower protections Prohibits loans to executives and directors Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002 (Cont.) Management may not discharge, demote, suspend, threaten, harass, or discriminate against an employee protected by the Act Protects any employee who lawfully provides information to governmental authorities concerning conduct he or she reasonably believes constitutes mail, wire, or securities fraud; violations of any rule or regulation issued by the SEC; or violations of any other federal law relating to fraud against shareholders Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

2003 - Bechtel v Competitive Technologies Inc. Supreme Court case involving wrongful termination under Sarbanes-Oxley’s whistle-blower-protection rule Court ruled that the company violated Act by firing two employees and ordered them reinstated Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Code of Ethics Statement of values adopted by company, its employees and directors; sets official tone of top management regarding expected behavior Code of ethics establishes rules by which organization lives and becomes part of organization’s corporate culture Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Ethics Officer Larger firms appoint ethics officer Keeps code on front burner for employees Ethics committee often established Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Baldrige National Quality Award Increased emphasis on ethics in leadership Criteria: Senior leaders should serve as role models to rest of organization Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Adolph Coors Company Example Developed one of the nation’s most comprehensive ethics programs Company offers its employees considerable resources including interactive online courses, ethics leadership training, decision map, highly detailed set of policies, and help line. Goal of program is to step beyond rules and guidelines and teach employees how to think, clarify, and analyze situations. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Human Resource Ethics Application of ethical principles to HR relationships and activities Code of Ethics – Many companies have a code of ethics Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Human Resource Ethics (Cont.) Throughout your text, there are many topics where HR professionals can have a major impact on ethics (examples below) Do you strive to create a diverse workforce? Do you strive to recruit and select the best qualified applicant for the job? Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Ethics Training Federal Sentencing Guidelines for Organizations Act outlined effective ethics training program Educate employees in company’s standards and procedures through publications and training Ethics training should be for everyone from top to bottom Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Professionalization of Human Resource Management Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Profession A vocation characterized by existence of: Common body of knowledge Procedure for certifying members of profession Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

HR Professional Groups Society for Human Resource Management - Largest national professional organization for HR management individuals Human Resource Certification Institute - Recognize HR professionals through certification program Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

HR Professional Groups (Cont.) American Society for Training and Development - Largest specialized professional organization in human resources WorldatWork - Managerial and HR professionals responsible for establishment, execution, administration or application of compensation practices and policies Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Corporate Social Responsibility Implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect interests of groups other than themselves. When corporation behaves as if it has a conscience How company as a whole behaves toward society Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Trends & Innovations Bayer Corporation: A Quality Example of Corporate Social Responsibility United States Bayer Corporation continues the tradition of social responsibility its parent company, Bayer AG, began many years ago Company has more than 300 corporate social responsibility programs worldwide Bayer’s core values involve “improving quality of life while harmonizing commercial efficiency, ecology and social commitment” Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Who Determines? Organization’s top executives usually determine corporation’s approach to corporate social responsibility Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Stakeholder Analysis and Social Contract Most organizations have large number of stakeholders Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Organizational Stakeholder Individual or group whose interests are affected by organizational activities Society is increasingly holding corporate boards of directors and management accountable for putting interest of stakeholders first Some of the stakeholders for Crown Metal Products, a fictitious manufacturer, are identified Only a few, identified by bold arrows, are viewed as constituencies Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

STAKEHOLDERS OF CROWN METAL PRODUCTS Stanley Crow (Sole stockholder) Employees and Managers Charitable Organizations Unemployed Workers (Potential employees) Neighbors Guaranty Bank (Lender) Customers Crown Metal Products Competitors Suppliers Other Banks in Area (Prospective lenders) Local Government Agencies Local Businesses U.S. Government Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Social Contract Set of written and unwritten rules and assumptions about acceptable interrelationships among various elements of society Embedded in customs of society Social contract often involves quid pro quo Concerns relationships with individuals, government, other organizations, and society Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall The Social Contract Individuals The Organization Other Organizations Government Society Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Obligations to Individuals Certain obligations to employees Expect fair day’s pay for fair day’s work, and perhaps much more Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Obligations to Other Organizations Must be concerned with relationships involving other organizations Commercial businesses are expected to compete with one another on honorable basis Charities such as United Way expect support from business Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Traditional View of Social Responsibility Businesses best meet obligations through pursuit of their own interests Some companies view social contract mainly in terms of the company’s interests Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Obligations to Government Under auspices of government, companies have license to do business, along with patent rights, and trademarks Expected to recognize need for order rather than anarchy Expected to work with guidelines of governmental organizations such as Equal Employment Opportunity Commission and Office of Federal Contract Compliance Programs Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Obligations to Society in General Traditional view of business responsibility has been that businesses should produce and distribute goods and services in return for profit Businesses operate by public consent with basic purpose of satisfying needs of society Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Sir Thomas More Said in 16th century, “If virtue were profitable, common sense would make us good and greed would make us saintly.” More knew virtue is not profitable, so people must make hard choices from time to time. Corporate strategists are being held to a higher standard than just pursuing their own interests, or even those of stockholders; they must consider the interests of other groups too. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Social Audit Systematic assessment of a company’s activities in terms of its social impact Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Possible Types of Social Audits Simple inventory of activities Compilation of socially relevant expenditures Determination of social impact Ideal social audit would involve determining the true benefits to society of any socially-oriented business activity Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Steps for Establishing and Implementing Corporate Social Responsibility (CSR) Program Person assigned responsibility for program; structure developed Review of what company is presently doing regarding CSR Shareholders’ expectations and perspectives determined Write policy statements covering CSR areas such as environmental, social, and community issues Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall CSR Steps (Cont.) 5. Develop set of corporate objectives and action plan to implement policies Create company quantitative and qualitative targets and performance indicators over 2-5 year period, along with measurement, monitoring and auditing mechanisms Communicate direction of CSR to stakeholders and fund managers Determine progress of CSR program Report progress of CSR program Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

A Global Perspective: Multinational Whistle-Blowing In East Asia, corporate members are viewed as family members, so it is wrong to report them In Japan, lifetime employment and strict seniority system discourage workers from questioning management decisions, dictating, instead, that employees show unbounded loyalty to coworkers In China, attempts to introduce corporate hotlines can remind employees of horrors of Cultural Revolution Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall