Business in a Changing World McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved. Chapter 2 Business Ethics and Social Responsibility

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Ethisphere links ethics to profits Publication that illuminates the relationship between ethics and profits. 2-4

Business Ethics & Social Responsibility Exec who allegedly made $270M off Enron to pay SEC $31.5M Business Ethics – principles and standards that determine acceptable conduct in business 2-5

Business Ethics & Social Responsibility A Timeline of Ethical and Socially Responsible Concerns 2-6

Business Ethics & Social Responsibility Social responsibility– business’s obligation to maximize its positive impact and minimize its negative impact on society 2-7

Business Ethics & Social Responsibility Laws and regulations encourage businesses to conform to society’s standards, values, and attitudes. Sarbanes-Oxley Act Sarbanes-Oxley Act

The Role of Ethics in Business Concern about unethical business practices continue – HealthSouth’sHealthSouth’s accounting improprieties and securities fraud 2-9

The Role of Ethics in Business Unethical and/or Illegal Accounting fraud Deceptive advertising Unfair competitive practices Internet theft 2-10

The Role of Ethics in Business Ethical Conduct Builds trust Promotes confidence Validates relationships Learn how to recognize and resolve ethical issues 2-11

Recognizing Ethical Issues in Business Ethical issue – an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical. 2-12

Recognizing Ethical Issues in Business How to judge the ethics of a situation – examine the situation from your stakeholders’ position, including customers and competitors 2-13

Types and Incidences of Observed Misconduct Many business issues may seem straightforward and easy to resolve on the surface, but are in reality very complex. Recognizing Ethical Issues in Business 2-14

1.Overly aggressive financial or business objectives 2.Abusive & intimidating behavior 3.Conflict of interest 4.Fairness & honesty 5.Communications 6.Business relationships Sources of Unethical Behavior in Organizations 2-15

Sources of Unethical Behavior Abusive and intimidating behavior “Bullies” behavior: 2-16

Conflict of interest – – the most common ethical issue identified by employees. – Advance personal interests over others’ interests – Benefit self at the expense of the company Sources of Unethical Behavior in Organizations 2-17

Least Corrupt Countries 2-18

Business Ethics Fairness & honesty – the heart of business ethics How employees use resources No harm to customers Accurate representations Disclosure 2-19

Business Ethics Most Popular Office Supplies Employees Pilfer “More Employees Taking Supplies,” The News JournalMore Employees Taking Supplies 2-20

Personal Ethics 25,000 high school students: 62% cheated on exams at least once 35% copied documents from Internet 27% shoplifted 23% cheated to win at sports Honesty? 2-21

Ethical Concerns False/misleading advertising Deceptive personal selling tactics Product safety and quality Unsubstantiated claims Product labeling Communications 2-22

Ethical Concerns Relationships with customers Relationships with suppliers Relationships with co-workers Business Relationships 2-23

Ethical Concerns The act of taking someone else’s work and presenting it as your own without mentioning the source Plagiarism 2-24

Making Decisions About Ethical Issues Questions to Consider in Determining Whether an Action Is Ethical Open discussion of ethical issues does not eliminate ethical problems; it does promote trust and learning in an organization. 2-25

Improving Ethical Behavior in Business Ethical decisions in an organizations are influenced by three key factors 2-26

Improving Ethical Behavior in Business Codes of Ethics – Formalized rules and standards that describe what a company expects of its employees. 2-27

Improving Ethical Behavior in Business Key Things to Consider in Developing a Code of Ethics 2-28

Codes of Ethics According to the NBES, employees in organizations with written standards of conduct are more likely to report misconduct when they observe it. National Business Ethics Survey (NBES) 2-29

Codes of Ethics The act of an employee exposing an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies. Whistleblowing 2-30

Business Ethics – Taking Responsibility 2-31

Nature of Social Responsibility 1.Economic 2.Legal 3.Ethical 4.Voluntary (philanthropic) 4 Dimensions 2-32

Pyramid of Social Responsibility 2-33

Nature of Social Responsibility The extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders. Corporate Citizenship 2-34

Nature of Social Responsibility 1.Intel CorporationIntel Corporation 2.Eaton CorporationEaton Corporation 3.Nike Inc.Nike Inc 4.Deere and Co.Deere and Co. Best Corporate Citizens 2-35

Nature of Social Responsibility Arguments For and Against Social Responsibility 2-36

Social Responsibility Issues Primary concern with profit or ROI Financial community at large Proper accounting procedures Protecting owner’s rights and investments Owners & Stockholders 2-37

Social Responsibility Issues Provide a safe workplace Adequate compensation Listen to grievances Fair treatment Employee Relations 2-38

Social Responsibility Issues Consumerism – the activities that independent individuals, groups, and organizations undertake to protect their rights as consumers. Consumer Relations 2-39

Social Responsibility Issues Animal rights Pollution Going Green Environmental Issues 2-40

Social Responsibility Issues General community and global welfare Hardcore unemployed Charitable contributions (United Way) Avon’s Breast Cancer Awareness Crusade Community Relations 2-41