What is Ethics? Our Text: The system of rules that governs the ordering of values. The Handout: the rules or standards which govern the conduct of a person or a group. Others: the principles and standards of moral behavior that are accepted by society as right or good (as apposed to wrong or bad).

What is Ethical Behavior (as applied to business)? Competing Fairly and Honestly Communicating Truthfully Not Causing Harm to Others

What is Social Responsibility The idea that business has certain obligations to society beyond the pursuit of profits—developed early in the 20th century.

Ch. 5 Outline (Not From Text) 1. Ethics in the Workplace 2. Social Responsibility in Business 3. Business’s Efforts to Increase Social Responsibility 4. Ethics and (Corporate) Social Responsibility Around the World

What is Ethical Behavior? Competing Fairly and Honestly Communicating Truthfully Not Harming Others In business, besides obeying all laws and regulations, practicing good ethics means competing fairly and honestly, communicating truthfully, and not causing harm to others. Businesses are expected to compete fairly and honestly and not knowingly deceive, intimidate, or misrepresent customers, competitors, clients, or employees. While most companies compete within the boundaries of the law, some do knowingly break laws or take questionable steps in their zeal to maximize profits and gain a competitive advantage. Placing one’s personal welfare above the welfare of the organization can cause harm to others. For instance, every year tens of thousands of people are the victims of investment scams. Insider trading is illegal and is closely checked by the Securities and Exchange Commission (SEC). Another way that businesspeople can harm others is by getting involved in a conflict of interest situation. A conflict of interest exists when choosing a course of action will benefit one person’s interests at the expense of another or when an individual chooses a course of action that advances his or her personal interests over those of his or her employer.

Factors Influencing Ethical Behavior Cultural Differences Knowledge Organizational Behavior Legislation Although a number of factors influence the ethical behavior of businesspeople, four in particular appear to have the most impact: cultural differences, knowledge, organizational behavior, and legislation. Globalization exposes businesspeople to a variety of different cultures and business practices. What does it mean for a business to do the right thing in Thailand? In Africa? In Norway? What may be considered unethical in the United States may be an accepted practice in another culture. In most cases, a well-informed person is in a position to make better decisions and avoid ethical problems. Making decisions without all the facts or a clear understanding of the consequences could harm employees, customers, the company, and other stakeholders. The foundation of an ethical business climate is ethical awareness. Organizations that strongly enforce company codes of conduct and provide ethics training help employees recognize and reason through ethical problems. Similarly, companies with strong ethical practices set a good example for employees to follow. On the other hand, companies that commit unethical acts in the course of doing business open the door for employees to follow suit. Recent government legislation is another factor. A 2002 corporate accountability bill signed by President Bush set new standards for prosecuting wrongdoers, gave corporate whistleblowers broad new protections, and created an independent regulatory board to oversee the accounting industry. It also required corporate executives to certify their companies’ financial statements and set new penalties for securities fraud and document shredding.

Ethical Dilemma vs. Ethical Lapse Ethical dilemma – a situation in which one must choose between two conflicting but arguably valid sides. Ethical lapse – a situation in which an individual makes a decision that is clearly wrong, such as divulging trade secrets to a competitor.

Social Responsibility in Business Early 20th Century Middle 20th Century Early 21st Century Social responsibility is a concept with decades-old roots. In the nineteenth and early twentieth centuries, the prevailing view among U.S. industrialists was that business had only one responsibility: to make a profit. Caveat emptor was the rule of the day—"Let the buyer beware." If you bought a product, you paid the price and took the consequences. No consumer groups or government agencies would help you if the product was defective or caused harm. In the mid-twentieth century, Milton Friedman’s view of a company’s responsibility toward society was representative and remained influential for many years: “There is only one social responsibility of business,” said Friedman. “To use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” As he saw it, the only social responsibility of business was to provide jobs and pay taxes. Many investors and managers now support a broader view of social responsibility. They argue that a company has an obligation to society beyond the pursuit of profits and that becoming more socially responsible can actually improve a company’s profits. Maximize Profits Provide Jobs and Pay Taxes Balance Profits and Social Issues

Balancing Business and Stakeholders’ Rights Investors Consumers Employees Society Profits Fair Disclosure Informed Purchase Equity Health & Safety Clean Environment Exactly how much can businesses contribute to social concerns? This is a difficult decision for most companies because they have limited resources. They must allocate their resources to a number of goals, such as upgrading facilities and equipment, developing new products, marketing existing products, and rewarding employee efforts, in addition to contributing to social causes. This juggling act is a challenge that every business faces. For example, if a company consistently ignores its stakeholders, its business will suffer and eventually fold. If the company disregards society's needs (such as environmental concerns), voters will clamor for laws to limit the offensive business activities, consumers who feel their needs and values are being ignored will spend their money on a competitor's products, investors who are unhappy with the company's performance will invest elsewhere, and employees whose needs are not met will become unproductive or will quit and find other jobs. As this slide shows, stakeholders' needs sometimes conflict. In such cases, which stakeholders should be served first—society, consumers, investors, or employees? Safe Products Product Choice

Responsibility Toward Consumers The Right to Safe Products The Right to Be Informed The 1960s activism that awakened business to its environmental responsibilities also gave rise to consumerism, a movement that put pressure on businesses to consider consumer needs and interests. Consumerism prompted many businesses to create consumer-affairs departments to handle customer complaints. It also prompted state and local agencies to set up bureaus to offer consumer information and assistance. At the federal level, President John F. Kennedy announced a "bill of rights" for consumers, laying the foundation for a wave of consumer-oriented legislation. These rights include the right to safe products, the right to be informed, the right to choose, and the right to be heard. The Right to Choice The Right to Be Heard

Responsibility Toward Employees Equal Employment Opportunity Affirmative Action Americans with Disabilities Act Occupational Health and Safety For some companies, the past 30 years have brought dramatic changes in the attitudes and composition of the workforce. These changes have forced businesses to modify their recruiting, training, and promotion practices, as well as their overall corporate values and behaviors. The Civil Rights Act of 1964 established the Equal Employment Opportunity Commission (EEOC)—the regulatory agency that battles job discrimination. The Civil Rights Act of 1991 extended the original act by allowing workers to sue companies for discrimination and by granting women powerful legal tools against job bias. In the 1960s, affirmative action programs were developed to encourage organizations to recruit and promote members of minority groups. In addition to affirmative action programs, about 75 percent of U.S. companies have established diversity initiatives. In 1990 people with a wide range of physical and mental difficulties got a boost from the passage of the federal Americans with Disabilities Act (ADA), which guarantees equal opportunities for an estimated 50 million to 75 million people who have or have had a condition that might handicap them. During the activist 1960s, mounting concern about workplace hazards resulted in passage of the Occupational Safety and Health Act of 1970, which set mandatory standards for safety and health and which established the Occupational Safety and Health Administration (OSHA) to enforce them.

Equality in Employment and The Elimination of Discrimination Civil Rights Act of 1964 Civil Rights Act of 1991 Affirmative Action Diversity Initiatives American Disabilities Act of 1990