Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 2-1 Human Resource Management Chapter 2 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Ethics Discipline of dealing with what is good and bad, or right and wrong, or with moral duty and obligation 2-2

CEO Must Be Involved % 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.”

Unethical Examples 2-4 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

Not Just Corporations 2-5 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.

A Model of Ethics 2-6 Type I EthicsType II Ethics Sources of ethical guidance Our beliefs about what is right or wrong Our actions Lead toDetermine

Sources of Ethical Guidance 2-7 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

Type I Ethics 2-8 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

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 2-9

Legislating Ethics 2-10 Procurement Integrity Act Federal Sentencing Guidelines for Organizations (FSGO) Corporate and Auditing Accountability, Responsibility and Transparency Act

Procurement Integrity Act of 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

Federal Sentencing Guidelines for Organizations (FSGO) of 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

Corporate and Auditing Accountability, Responsibility and Transparency Act of 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

Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002 (Cont.) 2-14 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

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

Code of Ethics 2-16 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

Ethics Officer Larger firms appoint ethics officer Keeps code on front burner for employees Ethics committee often established 2-17

Professionalization of Human Resource Management Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 2-18

Profession A vocation characterized by existence of: Common body of knowledge Procedure for certifying members of profession 2-19

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 2-20

HR Professional Groups (Cont.) 2-21 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

Corporate Social Responsibility 2-22 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

Stakeholder Analysis and Social Contract Most organizations have large number of stakeholders 2-23

STAKEHOLDERS OF CROWN METAL PRODUCTS 2-24 Stanley Crow (Sole stockholder) Charitable Organizations Neighbors Customers Employees and Managers Unemployed Workers (Potential employees) Guaranty Bank (Lender) Suppliers Other Banks in Area (Prospective lenders) Local Businesses Local Government Agencies U.S. Government Competitors Crown Metal Products

Social Contract 2-25 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

The Social Contract 2-26 The Organization Individuals Other Organizations Government Society