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Conducting Business Ethically and Responsibly
Chapter 4 Conducting Business Ethically and Responsibly
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Learning Objectives Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today Show how the concept of social responsibility applies to both environmental issues and to a firm’s relationships with customers, employees, and investors These learning objectives are based upon those at the beginning of the chapter. For a review of learning objectives, see the summary at the end of the chapter, as well as the list of key terms. Objectives: p.92 Summary: p
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Learning Objectives Identify four general approaches to social responsibility and describe the four steps a firm must take to implement a social responsibility program Explain how social responsibility and ethics affect small businesses These learning objectives are based upon those at the beginning of the chapter. For a review of learning objectives, see the summary at the end of the chapter, as well as the list of key terms. Objectives: p.92 Summary: p
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What Is Ethical Behaviour?
Ethics Standards or moral values that dictate what is right and wrong Culturally based Formed upon society’s expectations Vary by person, and by situation Everyone develops their own “code of ethics” Discussed on page 94. This introduction to ethics provides some basic definitions and stresses that what constitutes ethical behaviour is to a great extent open to discussion. Activities: Review Questions: #1,2
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Influences on Ethical Behaviour
Personal Code of Ethics Family Peer Group Experiences Discussed on page 94. Activities: Review Questions: #1,2
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Managerial Ethics Behaviour toward employees
Behaviour toward the organization Behaviour toward other economic agents Discussed on page Activities: Review Questions: #1,2
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Assessing Ethical Behaviour
Gather the relevant factual information Make an ethical judgment based on the rightness or wrongness of the proposed activity or policy Analyze the facts to determine the most appropriate moral values Concepts discussed on pages Activities: Review Questions: #1,2
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Company Practices & Business Ethics
Firms are creating ethical codes of conduct to guide employee decisions Top management support is essential Adopting written codes Instituting ethics programs Discussed on pages Activities: Review Questions: #1,2
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Written Codes of Ethics
Increase public confidence in a firm or its industry Help stem the tide of government regulation Improve internal operations by providing consistent standards of both ethical and legal conduct Help managers respond to problems that arise as a result of unethical or illegal behaviour Discussed on page Activities: Review Questions: #1,2
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Social Responsibility
A business’s collective code of ethics towards The environment Its customers Its employees Its investors Discussed on page 102 Care should be taken to clarify how every action taken by a business can be perceived as socially responsible or not. All stakeholders must be treated equally where ethical behaviour is concerned. Care to treat one sector responsibly is not effective if other stakeholders are suffering. Activities: Review Questions: #4,5,6,8
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Organizational Stakeholders
Groups, individuals, and organizations that are directly affected by the practices of an organization and that therefore have a stake in its performance Discussed on page 102 Activities: Review Questions: #4,5,6,8
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Areas of Social Responsibility
Responsibility Towards Environment Responsibility Towards Customers Responsibility Towards Employees Social Responsibility Discussed on page The ethical climate of a firm depends to a great extent on the ethics of individual employees. Activities: Review Questions: #4,5,6,8 Responsibility Towards Investors
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Environmental Responsibility Issues
Air pollution Water pollution Land pollution Toxic waste Acid rain Discussed on pages This is a list slide. Each topic is discussed separately on the slides which follow. Legislation has been introduced to force clean up in some industries. In other cases, special interest groups are working to protect the environment against exploitation. However, in some industries the cost of the technology to clean up emissions is so great that it would force businesses out of business. This in itself is an ethical quandary. Review Questions: #6.
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Customer Responsibility Issues
Rights of consumers Unfair pricing Ethics in advertising Discussed on page This is a list slide. Each of the items listed appear separately on slides which follow. Companies have two key areas which require interaction with customers. These areas are pricing and product. Responsibility to customers is concerned with the fair and ethical treatment of buyers in each of these areas. Activities: Review Questions: #6.
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Consumer Rights Issues
Consumerism Social movement that seeks to protect and expand the rights of consumers in their dealings with businesses Consumers rights Right to safe products Right to be informed Right to be heard Right to choose what they buy Discussed on page 107. Activities: Review Questions: #6.
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Unfair Pricing Issues Illegal pricing practices may occur due to the intentional (illegal) limiting of competition Collusion A group of companies conspiring to fix prices Results in inflated prices and a lack of competition Discussed on page 108 Activities: Review Questions: #6.
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Ethics in Advertising Issues
Increased attention to ethics in advertising and product information Words and phrases such as “light”, “diet”, “low fat” Concerns about advertising that is considered morally objectionable Ad campaigns by tobacco and alcohol companies Discussed on page 108 Activities: Review Questions: #6.
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Employee Responsibility Issues
Human resource management issues Social responsibility issues Privacy issues Encouraging ethical behaviour Whistle-blowers Discussed on page This is a list slide. Each of these topics is discussed on a later slide. Activities: Review Questions: #3,6,7
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Human Resource Management Issues
Fair and equitable treatment of all employees without discrimination based upon sex, race, or other factors Recruiting Hiring Training Promoting Compensating Discussed on page 109. Activities: Review Questions: #3,6,7
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Social Responsibility Towards Employees
Safe workplaces Socially and emotionally - no abuse or harassment Physically - safe work environment Discussed on page 109. Activities: Review Questions: #3,6,7
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Privacy of Employees How much control is acceptable in the workplace?
Drug testing Video monitoring Internet/ Monitoring Employees may not be aware or may not know when they are being monitored Results in increased job stress Discussed on page 109. Activities: Review Questions: #3,6,7
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Encouraging Ethical Employee Behaviour
Top management support for ethical behaviour is critical “Whistle-blowers” are employees who report unethical, illegal, and/or socially irresponsible behaviour The company should support its “whistle blowers” rather than threatening them with dismissal or other penalties Discussed on page 109. Activities:Review Questions: #3,6,7
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Responsibility Towards Investors
Improper financial management Cheque kiting Insider trading Misrepresentation of finances Discussed on pages This is a list slide. Each topic is discussed separately on the slides which follow. Activities: Review Questions: #6 Assign a student, or a group of students, to monitor the local newspaper for one month. Ask them to clip out articles describing financial misrepresentation. After the one-month monitoring period is over, have students select one of the stories to present to the class. Following the presentation, have the students in the class do a post-mortem of the situation to determine what ethical violations occurred and what could have been done to prevent them.
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Improper Financial Management
Doing a poor job of managing the financial resources of a company Payment of high salaries, lavish expense accounts, & other perks with little control over how money is spent May be legally unpunishable because no law has been broken It may be difficult to replace management because unrest in the firm may devalue its stock Discussed on page 110. Activities: Review Questions: #6
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Cheque Kiting Illegal practice of writing cheques against money that has not yet arrived in the bank account A creative “cheque kiter” can write cheques from account to account with very little money to back it up Discussed on page 110. Cheque kiting s not the same as post-dating a cheque, whereby the cheque is dated for the day the money will actually arrive in the account (post-dating is not illegal as the bank will hold the cheque until the processing date). It is important that students understand the difference. Activities: Review Questions: #6
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Insider Trading Using confidential (non-public) information to gain from the purchase or sale of stock Martha Stewart (ImClone shares) Involves gaining knowledge of inside information about the company prior to making the purchase Discussed on page 110 . The only way the perpetrators know when the time is right for purchase or sale is through information they are not allowed to have, which other investors have no legal access to. Activities: Review Questions: #6
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Misrepresenting Financial Information
Companies must conform to accounting guidelines called “generally accepted accounting principles” (GAAP) Failure to follow GAAP in order to inflate expected profit figures can mislead investors Discussed on page 110. Activities: Review Questions: #6
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Small Business Ethics A small business does not have the same impact on society if it acts in an irresponsible way Many entrepreneurs decide to conduct themselves in a socially responsible manner because they feel it is important to contribute to society Individual entrepreneurs make independent decisions Discussed on page 115. The structure and focus of a small business make it difficult to follow the social responsibility model. Many times, the small business consists of too few employees. Their personal codes of ethics will likely be the basis of the small business’s ethical and social orientations.
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