1. Demanding Ethical and Socially Responsible Behavior*
Chapter Four *
Demanding Ethical and Socially Responsible Behavior
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

2. STEVE ELLS Chipotle Mexican Grill*
STEVE ELLS Chipotle Mexican Grill
Profile *
Chipotle is dedicated to producing quality food which has led to current annual sales over $1 billion.
Ells’ mission is to serve “Food With Integrity.”
Chipotle is the leading restaurant buyer of humanely raised meats.
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3. *
LIFE AFTER SCANDAL
Ethics is More Than Legality *
LG1
Scandals have shaken the real estate, mortgage and banking industries.
How do we restore trust in the free market system?
Punish those who have broken the law.
Make accounting records more transparent.
Consider what is ethical, not just what is legal.
See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
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4. *
WHAT are ETHICS?
Ethical Standards are Fundamental *
LG1
Ethics -- The standards of moral behavior. Behaviors that are accepted by society as right versus wrong.
See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
The reputation of American businesses have been under assault due to numerous scandals over the past twenty years. Use this slide to help students understand that a person can obey the law and still be behaving unethically. Following the law is only the first step in being ethical. Ethics are standards of moral behavior and are accepted by society as right versus wrong.
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5. * * BASIC MORAL VALUES Right: Wrong: Integrity Cheating Cowardice
Ethical Standards are Fundamental *
LG1
Right:
Integrity
Respect for human life
Self control
Honesty
Courage
Self-sacrifice
Wrong:
Cheating
Cowardice
Cruelty
See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
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6. PAYING the PRICE (Legal Briefcase)*
PAYING the PRICE (Legal Briefcase) *
Enron: One executive is serving a 24 year sentence for accounting fraud while another will be released in October
Arthur Andersen: Convicted of tampering with witnesses, the company was dissolved and about 28,000 people lost their jobs.
Tyco International: Two executives stole $600 million from the company and are scheduled to be released from prison in 2030.
Adelphia Communication: Two executives were convicted of conspiracy, bank and securities fraud and given sentences of 15 and 20 years.
WorldCom: Former CEO was convicted of fraud, conspiracy and false filings and sentenced to 25 years.
See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
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7. *
ETHICS and YOU
Ethics Begins with Each of Us *
LG2
Plagiarizing from Internet materials is the most common form of cheating in schools today.
Studies found a strong relationship between academic dishonesty and dishonesty at work.
See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
Studies have shown that dishonesty at school often leads to dishonesty at work.
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8. FACING ETHICAL DILEMMAS*
FACING ETHICAL DILEMMAS
Ethics Begins with Each of Us *
LG2
Ask yourself these questions:
Is it legal?
Is it balanced?
How will it make me feel about myself?
See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action.
When facing an ethical dilemma it is important that you ask these three basic questions: Is it legal? Is it balanced? How will it make me feel about myself? Asking and answering these three questions will prevent many people from making unethical decisions.
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9. To TUBE or NOT to TUBE (Making Ethical Decisions)*
To TUBE or NOT to TUBE (Making Ethical Decisions) *
Every minute, people upload 10 hours of video to YouTube – not all is user-generated content.
Viacom sued YouTube for $1 billion for allowing episodes of its popular shows on the site.
Viacom holds YouTube responsible for carrying the illegal content, rather than the individuals who uploaded it.
Who do you think should be accountable for the copyright violations -- the website or those who uploaded the videos?
See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action.
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10. * * PROGRESS ASSESSMENT What are ethics?
How do ethics differ from legality?
When faced with ethical dilemmas, what questions can you ask yourself that might help you make ethical decisions?
1) Ethics are society’s accepted standards of behavior. In other words behaviors accepted by society as right rather than wrong.
2) Ethics reflect people’s proper relationships with one another. Legality is narrower in that it refers to laws we have written to protect ourselves from fraud, theft, and violence.
3) It helps to ask the following questions when faced with an ethical dilemma: Is the proposed action legal? Is it balanced? Would I want to be treated this way? How will it make me feel about myself?
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11. * * ETHICS START at the TOP
Managing Businesses Ethically and Responsibly *
LG3
Trust between workers and managers must be based on fairness, honesty, openness and moral integrity.
Leadership can help instill corporate values in employees.
See Learning Goal 3: Describe management’s role in setting ethical standards.
Organizational ethics begins at the top. Leadership helps to instill corporate values in employees, so like many aspects of business ethical behavior practiced and modeled by managers and executives will often trickle down to the employees at large.
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12. FACTORS INFLUENCING MANAGERIAL ETHICS*
FACTORS INFLUENCING MANAGERIAL ETHICS
Managing Businesses Ethically and Responsibly *
LG3
Individual
Organizational
Environmental
Values
Work Background
Family Status
Personality
Top Level Management Philosophy
Firm’s Reward System
Job Dimensions
Competition
Economic Conditions
Social/Cultural Institutions
See Learning Goal 3: Describe management’s role in setting ethical standards.
Factors Influencing Managerial Ethics
Before you put this slide up, you may want to ask the students: What factors influence managerial ethics?
Ethics begins with the individual but is influenced by the organization and the environment in which the business operates.
To bring the discussion to the present, you may ask: How can the firm’s reward system impact ethical behavior? How did these reward systems at large banks and other financial institutions exacerbate the financial crisis in this country? (Students should be able to discuss this point. Excessive risk taking imperiled all of the stakeholders of various financial institutions as well as the world economy.)
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13. *
ETHICS CODES
Setting Corporate Ethical Standards *
LG4
An increasing number of companies have adopted written codes of ethics.
Compliance-Based Ethics Code -- Emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers.
Integrity-Based Ethics Code -- Define the organization’s guiding values, create an environment that supports ethically sound behavior and stress a shared accountability among employees.
See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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14. HOW to IMPROVE AMERICA’S BUSINESS ETHICS*
HOW to IMPROVE AMERICA’S BUSINESS ETHICS
Setting Corporate Ethical Standards *
LG4
Top management must adopt and unconditionally support an explicit corporate code of conduct.
Employees must understand that senior management expects all employees to act ethically.
Managers and others must be trained to consider the ethical implications of all business decisions.
(continued)
See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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15. HOW to IMPROVE AMERICA’S BUSINESS ETHICS*
HOW to IMPROVE AMERICA’S BUSINESS ETHICS
Setting Corporate Ethical Standards *
LG4
An ethics office must be set up with which employees can communicate anonymously. Whistleblowers -- People who report illegal or unethical behavior.
Involve outsiders such as suppliers, subcontractors, distributors and customers.
The ethics code must be enforced.
See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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16. HOW to PREVENT UNETHICAL BEHAVIORS*
Setting Corporate Ethical Standards
HOW to PREVENT UNETHICAL BEHAVIORS *
LG4
Managers must communicate the organization’s vision on ethical behavior.
Organizations must have a code of ethics.
Policies have to be enforced regarding ethical offences.
Ethical responsibility must be taught to all employees.
(continued)
See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action.
Ways to Prevent Unethical Behavior
Before you put this slide up, you may want to ask the students: What is management’s role in preventing unethical behaviors? What can be done to deter unethical behaviors on the part of employees?
Increasing the penalty and educating employees are among the top methods for deterring unethical behaviors, according to the CMO Ethics Poll. (Source: CMO Magazine, October 2004)
Thirty percent of the respondents in a poll suggested adding new laws to deter unethical behaviors. Ask the students: If ethics is more than legality, would new laws help? (Students should be able to argue this point. Although ethics is more than legality, if something is against the law, people may deter from such behavior. However, it should be pointed out that ethics should be the way of life, i.e., it needs to be ingrained in the employees through culture and role modeling by managers and executives.)
Source: James Gehrke, Magnify Leadership & Development, November 2008.
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17. HOW to PREVENT UNETHICAL BEHAVIORS*
Setting Corporate Ethical Standards
HOW to PREVENT UNETHICAL BEHAVIORS *
LG4
Discussions of ethics must be included in the decision-making process.
Accountability must be taken seriously at all levels in the organization.
Organizations must act fast when a crisis occurs.
Employees must know they have to defend and maintain the company’s reputation.
Source: James Gehrke, Magnify Leadership & Development, November 2008.
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18. * * PROGRESS ASSESSMENT
What are compliance-based and integrity-based ethics codes?
What are the six steps to follow in establishing an effective ethics program in a business?
1) Compliance-based ethics codes emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers. Integrity-based ethics codes define the organization’s guiding values, create an environment that support ethically sound behavior, and stress shared accountability.
2) The six steps many believe will improve U.S. business ethics are: (1) Top management must adopt and unconditionally support an explicit corporate code of conduct: (2) Employees must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly; (3) Managers and others must be trained to consider the ethical implications of all business decisions; (4) An ethics office must be set up with which employees can communicate anonymously; (5) Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program; (6) The ethics code must be enforced with timely action if any rules are broken.
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19. CORPORATE SOCIAL RESPONSIBILITY*
CORPORATE SOCIAL RESPONSIBILITY
Corporate
Social Responsibility *
LG5
Corporate Social Responsibility (CSR) -- The concern businesses have for the welfare of society.
CSR is based on a commitment to integrity, fairness, and respect.
CSR proponents argue that businesses owe their existence to the societies they serve and cannot exist in societies that fail.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
CSR is based on a commitment to such basic principles as integrity, fairness and respect. Many for-profit companies have philanthropic endeavors as a part of their mission. Communities often depend on companies to help with social programs that make the lives of people in the community better. It stands to reason that businesses that strengthen their communities, as proponents of CSR argue, will grow stronger as their communities improve.
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20. CORPORATE PHILANTHROPY and SOCIAL INITIATIVES*
CORPORATE PHILANTHROPY and SOCIAL INITIATIVES
Corporate
Social Responsibility *
LG5
Corporate Philanthropy -- Includes charitable donations.
Corporate Social Initiatives -- Includes enhanced forms of corporate philanthropy.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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21. CORPORATE RESPONSIBILITY and POLICY*
CORPORATE RESPONSIBILITY and POLICY
Corporate
Social Responsibility *
LG5
Corporate Responsibility -- Includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment.
Corporate Policy -- The position a firm takes on social and political issues.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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22. POSTIVE IMPACTS of COMPANIES*
POSTIVE IMPACTS of COMPANIES
Corporate
Social Responsibility *
LG5
Xerox offers a Social Service Leave program.
Citizen Corps encourages volunteers to help strengthen homeland security by helping in their community.
Two-thirds of MBA students surveyed reported they would take a lower salary to work for a socially responsible company.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
An ultimate example of a company helping the community is Xerox’s program, Social Service Leave, which allows employees to leave for up to a year and work for a nonprofit while still earning full salary, including benefits and job security.
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23. To WHOM MUCH HAS BEEN GIVEN… America’s Charitable Giving*
To WHOM MUCH HAS BEEN GIVEN… America’s Charitable Giving
Corporate
Social Responsibility *
LG5
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
America’s Charitable Giving
For the first time charitable giving exceed $300 billion in this country.
What percentage of the $300 billion was contributed by individuals, businesses and foundations? (Individuals contributed 82.3%, businesses 5.1% and foundations 12.6%)
(Source:
Religious organizations continue to receive the biggest share of donations accounting for 33.4% of the total giving. Here is the breakdown for what types of organizations receive these donations:
Religion, $ billion, 33.4%
Education, $43.32 billion, 12.1%
Human services, $29.64 billion, 9.7%
Health, $23.15 billion, 7.6%
Public-Society benefit (United Way etc), $22.65 billion, 7.4%
Arts, culture and humanities, $13.67 billion, 4.5%
International affairs, $13.22 billion, 4.3%
Environment and animals, $6.96 billion, 2.3%
Foundations, $27.73 billion, 9.1%
Unallocated giving, $23.67, 7.7%
Source: Wall Street Journal, June 23, 2008.
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24. HELPING HANDS Most Generous Celebrities*
Corporate
Social Responsibility *
LG5
Who?
How Much?
Oprah Winfrey
$50.2 Million
Herb Alpert
$13 Million
Barbara Streisand
$11 Million
Paul Newman
$10 Million
Mel Gibson
$9.9 Million
Angelina Jolie & Brad Pitt
$8.4 Million
Michael Jordan
$5 Million
Eric Lindros
Lance Armstrong
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
Most Generous Celebrities
Students will find it interesting to see on this slide what some of their favorite celebrities have donated.
Oprah Winfrey earns well over $200 million per year.
The talk-show host and entertainment mogul is the founder of the Angel Network, a charity that raises money for poverty-stricken children and she has raised money to open schools for girls in South Africa.
*Donations made in 2007
Source: Parade Magazine, September 14, 2008.
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25. *
WHO GIVES? Five States Contribute More Than a Third of the Nation’s Donations
Corporate
Social Responsibility *
LG5
California – 12.1%
New Jersey – 8.9%
Pennsylvania – 5.2%
Washington – 5%
New York – 5%
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
Who Gives
California has the largest population and it’s residents make the most donations.
Source: Conde Nast Portfolio, January 2008.
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26. GENEROUS AMERICANS Americans Donated $295,020,000,000 in 2006*
GENEROUS AMERICANS Americans Donated $295,020,000,000 in 2006
Corporate
Social Responsibility *
LG5
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
Generous Americans
Before you put this slide up, you may want to ask the students: What income group donates more -- people earning over or under $100,000? (Sixty-five percent of money donated by Americans comes from people earning less than $100,000.)
How does this information impact the fund raising of nonprofit organizations seeking charitable contributions? (Small donations add up and require nonprofit organizations to alter their fund raising efforts to reach these donors.)
Source: Fast Company, May 2008.
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27. PRESIDENT KENNEDY’S BASIC RIGHTS of CONSUMERS*
PRESIDENT KENNEDY’S BASIC RIGHTS of CONSUMERS
Responsibility
to Customers *
LG5
The Right to Safety
The Right to be Informed
The Right to Choose
The Right to be Heard
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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28. *
INSIDER TRADING
Responsibility
to Investors *
LG5
Insider Trading -- Insiders using private company information to further their own fortunes or those of their family and friends.
Unethical behavior does financial damage to a company and investors are cheated.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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29. RESPONSIBILITY to EMPLOYEES*
RESPONSIBILITY to EMPLOYEES
Responsibility
to Employees *
LG5
Create jobs and provide a chance for upward mobility.
Treat employees with respect.
Offer salaries and benefits that help employees reach their personal goals.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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30. AMERICA’S MOST ADMIRED COMPANIES*
AMERICA’S MOST ADMIRED COMPANIES
Responsibility
to Employees *
LG5
Apple
Berkshire Hathaway
Toyota
Google
Johnson & Johnson
Proctor & Gamble
FedEx
Southwest Airlines
General Electric
Microsoft
Wal-Mart
Coca-Cola
Walt Disney
Wells Fargo
Goldman Sachs
McDonald’s
IBM 3M
Target
J.P. Morgan Chase
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
America’s Most Admired Companies 1. Before you put this slide up, you may want to ask the students: Are the ideals of maximization of profit and social responsibility in conflict?
Corporate social responsibility is the concern businesses have for the welfare of society, not just for their owners.
3. The vast majority of the companies listed in this slide are not only admired but also financially successful.
Source: Fortune, March, 2009.
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31. SOCIETY and the ENVIRONMENT*
SOCIETY and the ENVIRONMENT
Responsibility
to Society and
the Environment *
LG5
Over one-third of working Americans receive their salaries from nonprofits – who are dependent on funding from others.
The green movement emerged as concern about global warming increased.
Many companies are trying to minimize their carbon footprints – the amount of carbon released during an item’s production, distribution, consumption and disposal.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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32. RESPONSIBILITY to the ENVIRONMENT*
RESPONSIBILITY to the ENVIRONMENT
Responsibility
to Society and
the Environment *
LG5
Environmental efforts may increase costs but can offer good opportunities.
The emerging renewable-energy and energy- efficiency industries account for 8.5 million U.S. jobs.
By 2030, as many as 40 million “Green” jobs will be created.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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33. GREEN GREED (Thinking Green)*
GREEN GREED (Thinking Green) *
With public concern over the environment, companies are finding greener ways of doing business.
Some companies are claiming they are more environmentally responsible than they actually are, a practice called “greenwashing”.
Web sites such as Greener Choices and Greenwashing Index screen ads for greenwashing.
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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34. *
SOCIAL AUDITING
Social Auditing *
LG5
Social Audit -- A systematic evaluation of an organization’s progress toward implementing programs that are socially responsible and responsive.
Four Types of Social Audit Watchdogs
Socially conscious investors
Environmentalists
Union officials
Customers
See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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35. * * PROGRESS ASSESSMENT
What’s corporate social responsibility, and how does it relate to each of a business’s major stakeholders?
What’s a social audit, and what kinds of activities does it monitor?
1) Corporate social responsibility (CSR) is the concern businesses have for the welfare of society not just for their owners. CSR defenders believe that businesses owe their existence to the societies they serve and cannot succeed in societies that fail. CSR must be responsible to all stakeholders not just investors in the company.
2) A social audit is a systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs. Many feel a social audit should measure workplace issues, the environment, product safety, community relations, military weapons contracting, international operations and human rights, and respect for the rights of local people.
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36. * * INTERNATIONAL ETHICS
International Ethics and
Social Responsibility *
LG6
Many businesses want socially responsible behavior from their international suppliers.
The Joint Initiative on Corporate Accountability and Workers’ Rights was designed to make creating a single set of labor standards and inspecting factories easier.
In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business.
See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets.
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37. GIVERS AROUND the WORLD Share of GDP*
GIVERS AROUND the WORLD Share of GDP
International Ethics and
Social Responsibility *
LG6
See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets.
Givers Around the World
To get a discussion moving ask students: Are Americans Cheap? Or Charitable?
This slide shows the world’s top givers based on a share of GDP. Based on this slide Americans appear to be the most charitable in the world based on share of GDP.
Source: Forbes, March 24, 2008.
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38. ETHICAL CULTURE CLASH (Reaching Beyond Our Borders)*
ETHICAL CULTURE CLASH (Reaching Beyond Our Borders) *
Almost half of Motorola’s employees live outside the U.S.
A Motorola employee returns to his home country to work and the company reimburses living expenses so he can live in a safe area. The employee is trying to do the honorable thing for his family and the company is trying to keep the employee safe.
If the employee uses the money to help his family instead, is it right for the company to stop payment?
See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets.
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39. * * PROGRESS ASSESSMENT
How are U.S. businesses demanding socially responsible behavior from their international suppliers?
Why is it unlikely that there will be a single set of international rules governing multinational companies soon?
1) Many U.S. businesses now demand that international suppliers do not violate U.S. human rights and environmental standards.
2) It’s unlikely there will be a single set of international rules governing multinational companies because of the widespread disparity among global nations as to what constitutes ethical behavior. For example, a gift in one culture can be a bribe in another. In some nations child labor is expected and an important part of a family’s standard of living. The fairness of adhering to U.S. standards of ethical behavior is not as easy as you may think.
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