Making Ethical Decisions and Managing a Socially Responsible Business Chapter 3 1 1

Chapter 3 Learning Goals What philosophies and concepts shape personal ethical standards, and what are the stages of ethical development? How can managers influence organizational ethics? What are the techniques for creating employee ethical awareness? What is social responsibility?

Chapter 3 Learning Goals (cont’d.) How do businesses meet their social responsibilities to various stakeholders? What are the global and domestic trends in ethics and social responsibility?

Ethics: a set of moral standards for judging whether something is right or wrong

Learning Goal 1 What philosophies and concepts shape personal ethical standards, and what are the stages of ethical development? Utilitarianism approach Justice approach Three stages of ethical development Preconditional ethics Conventional ethics Postconventional ethics

Individual Business Ethics 1. Utilitarianism the consequences of an act determine whether it is right or wrong 2. Individual Rights human rights, legal rights 3. Justice what is fair according to societal standards 4. Stages of Ethical Development preconventional, conventional, postconventional 2 2

Types of Justice 2 ways that people judge fairness: Procedural justice Is the process fair? Distributive justice Is the result fair? 2 2

Learning Goal 2 How can managers influence organizational ethics? Recognize the categories of unethical business actions When faced with ethical dilemmas, teach employees to use The three-question test Front page of the newspaper test Management should lead by example

How Organizations Influence Ethical Conduct 1. Recognizing Unethical Business Actions 2. Resolving Ethical Problems in Business 3. Ethics Training 4. Establishing a Formal Code of Ethics 2 2

Types of Unethical Business Actions 1. Recognizing Unethical Business Actions Types of Unethical Business Actions 1. Taking things that don’t belong to you 2. Saying things you know aren’t true 3. Giving or allowing false impressions 4. Buying influence or engaging in a conflict of interest 5. Hiding or divulging information 6. Taking unfair advantage 7. Committing improper personal behavior 2 2

Types of Unethical Business Actions 1. Recognizing Unethical Business Actions Types of Unethical Business Actions 8. Abusing another person 9. Permitting organizational abuse 10. Violating the rules 11. Condoning unethical actions 2 2

“Cyberslacking” on the Job Personal use of the Internet at work is a concern for many employers Of the time employees spend online at work, 1/3 of it is spent ‘recreationally’ How employees slack on the Internet: Shopping Sports Entertainment Travel Pornography Other General news Investment Source: Surfwatch Checknet/Newsweek, Nov. 29, 1999, p. 63 2 2

Ways of Resolving Ethical Problems 2. Resolving Ethical Problems in Business Ways of Resolving Ethical Problems 1. Three-Questions Test Is it legal? Is is balanced? How does it make me feel? 2. Front Page of the Newspaper Test 3. Leading by Example 4. Ethics Training 2 2

Learning Goal 3 What are the techniques for creating employee ethical awareness? Ethics training Analyzing ethical dilemmas Discussing ethical dilemmas Companies can heighten ethical awareness by Creating codes of ethics Distributing codes of ethics

Learning Goal 4 What is social responsibility? Concern of businesses for the welfare of society as a whole Obligations go beyond Making a profit What is required by law or union contract Companies engage in Illegal and irresponsible behavior, Irresponsible but legal behavior, or Legal and responsible behavior (vast majority)

Social Responsibility: the concern of businesses for the welfare of society as a whole; includes concerns beyond legal and contractual obligations

Pyramid of Business Responsibility Be a good corporate citizen Philanthropic Responsibility Ethical Responsibility Do what is fair Obey law Legal Responsibility Pursue profit Economic Responsibility 2 2

Two Dimensions of Social Responsibility: 1. Legality Does the action break a law? 2. Responsibility Is the action responsible? Does the action benefit society? 2 2

Discussion: Think of an example of each combination Responsible Irresponsible Follows laws and benefits society Follows laws, but harms society Legal Benefits society, but breaks laws Harms society and breaks laws Illegal 2 2

Examples Responsible Irresponsible Legal Illegal Follows laws and benefits society charitable donation of profits Follows laws, but harms society cigarette advertisements targeted at teens Legal Benefits society, but breaks laws tax evasion by a charitable organization Harms society and breaks laws illegal disposal of waste material Illegal 2 2

Learning Goal 5 How do businesses meet their social responsibilities to various stakeholders? Employees Provide a clean, safe working environment Build employees’ self-worth through empowerment programs Customers Provide good, safe products and services General public Be good corporate citizens Protect the environment Provide a good place to work

Learning Goal 5 (cont’d.) How do businesses meet their social responsibilities to various stakeholders? Corporate philanthropy Contributing cash Donating goods and services Supporting volunteer efforts of employees Investors Companies should try to earn a reasonable profit for the owners

Responsibilities to Stakeholders 1. Responsibility to Employees 2. Responsibility to Customers 3. Responsibility to the General Public environmental protection corporate philanthropy 4. Responsibilities to Investors 2 2

Discussion: What do You Expect from Companies? When I am a(n): Employee Customer Member of Society Investor I expect: 2 2

Examples: When I am a(n): I expect: Employee Customer Member of Society Investor I expect: job security, benefits, flexibility, compensation safe products, response to complaints, honest advertising charitable contribution, minimal environmental harm profits, disclosure, ethical practices 2 2

Stopping Sweatshops The US Department of Labor has formed an organization, No Sweat, to put an end to sweatshops 3 things consumers can do: Ask retailers where and how garments are made Ask retailers if they purposefully don’t buy from sweatshops Ask retailers if they support “No Sweat” clothing Source: No Sweat, www.dol.gov 2 2

Learning Goal 6 What are the global and domestic trends in ethics and social responsibility? Corporate philanthropy focusing on strategic giving New social contract between employer and employee Each assumes part of the responsibility for maintaining jobs Employees find ways to add value to the business Multinational corporations must assume a global set of ethics and responsibility Understand local customs Involve local stakeholders in decision making Be sure suppliers are not involved in human rights violations

Trends in Business Ethics: 1. Strategic Giving ties philanthropy to corporate mission 2. Social Contracts with Employees 3. Carrying Ethical Conduct Overseas 2 2

Strategic Giving Example In 1999, Bill Gates, CEO of Microsoft, donated a total of $3.35 billion to The Gates Learning Foundation, which provides computers & software to libraries in low-income areas The William H. Gates Foundation, which grants money to aid world health & human services and to local Seattle causes Source: Fortune, Mar. 1, 1999, p. 35