Bus 100

1. Bus 100 Chapter 2 BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

2. L E A R N I N G O B J E C T I V E S After reading this chapter, you should be able to: • 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 both to environmental issues and to a firm’s relationships with customers, employees, and investors.

3. L E A R N I N G O B J E C T I V E S (cont’d) After reading this chapter, you should be able to: • Identify four general approaches to social responsibility and describe the four steps that a firm must take to implement a social responsibility program. • Explain how issues of social responsibility and ethics affect small business.

4. What’s in It for Me? • By understanding the material in this chapter, you’ll be better able to: • Assess ethical and socially responsible issues facing you as an employee and as a boss or business owner. • Understand the ethical and socially responsible actions of businesses you deal with as a consumer and as an investor.

5. Ethics in the Workplace • Ethics • Beliefs about what’s right and wrong or good and bad • Ethical Behavior • Behavior conforming to individual beliefs and social norms about what’s right and good • Unethical Behavior • Behavior conforming to individual beliefs and social norms about what is defined as wrong and bad • Business Ethics • The ethical or unethical behaviors by employees in the context of their jobs

6. Individual Values and Codes • Sources of Personal Codes of Ethics • Childhood responses to adult behavior • Influence of peers • Experiences in adulthood • Developed morals and values

7. Business and Managerial Ethics • Managerial Ethics • The standards of behavior that guide individual managers in their work • Ethics affect a manager’s behavior toward: • employees • the organization • other economic agents—customers, competitors, stockholders, suppliers, dealers, and unions • Ethical Concerns • Ambiguity (e.g., financial disclosure) • Global variation in business practices (e.g., bribes)

8. Assessing Ethical Behavior • Simple Steps in Applying Ethical Judgments • Gather therelevant factual information • Analyze the facts to determine the most appropriate moral values • Make an ethical judgment based on the rightness or wrongness of the proposed activity or policy

9. Assessing Ethical Behavior • Ethical Norms and the Issues They Entail • Utility: Does a particular act optimize the benefits to those who are affected by it? Do all relevant parties receive “fair” benefits? • Rights: Does the act respect the rights of all individuals involved? • Justice: Is the act consistent with what’s fair? • Caring: Is the act consistent with people’s responsibilities to each other?

10. Company Practices and Business Ethics • Encouraging Ethical Behavior Involves: • Adopting written codes of conduct and establishing clear ethical positions for the conduct of business • Having top management demonstrate its support of ethical standards • Instituting programs to provide periodic ethics training • Establishing ethical hotlines for reporting and discussion of unethical behavior and activities

11. Core Principles and Organizational Values

12. Social Responsibility • Social Responsibility • The overall way in which a business attempts to balance its commitments to relevant groups and individuals (stakeholders) in its social environment • Organizational Stakeholders • Groups, individuals, and organizations that are directly affected by the practices of an organization and, therefore, have a stake in its performance

13. Major Corporate Stakeholders

14. The Stakeholder Model of Responsibility • Customers • Businesses strive to treat customers fairly and honestly • Employees • Businesses treat employees fairly, make them a part of the team, and respect their dignity and basic human needs • Investors • Businesses follow proper accounting procedures, provide information to shareholders about financial performance, and protect shareholder rights and investments • Suppliers • Businesses emphasize mutually beneficial partnership arrangements with suppliers • Local and International Communities • Businesses try to be socially responsible

15. Contemporary Social Consciousness • The Concept of Accountability • The expectation of an expanded role for business in protecting and enhancing the general welfare of society

16. Areas of Social Responsibility • Responsibility Toward the Environment • Controlling air, water, and land pollution • Properly disposing of toxic waste • Engaging in recycling

17. Areas of Social Responsibility (cont’d) • Responsibility Toward Customers • Involves providing quality products and pricing products fairly • Consumerism • Social activism dedicated to protecting the rights of consumers in their dealings with businesses • Basic Consumer Rights • To possess safe products • To be informed about all relevant aspects of a product • To be heard • To choose what to buy • To be educated about purchases • To courteous service

18. Consumer Rights (cont’d) • Unfair Pricing • Collusion: When two or more firms agree to collaborate on such wrongful acts as price fixing • Price gouging: Responding to increased demand with overly steep (and often unwarranted) price increases • Ethics in Advertising • Truth in advertising • Morally objectionable advertising

19. Areas of Social Responsibility (cont’d) • Responsibility Toward Employees • Legal and social commitments to: • not practice illegal discrimination • provide a physically and socially safe workplace • provide opportunities to balance work and life • provide protection for whistleblowers (an employee who discovers and tries to put an end to a company’s unethical, illegal, or socially irresponsible actions by publicizing them) • Responsibility Toward Investors • Proper financial management (no insider trading) • Proper representation of finances

20. Implementing Social Responsibility (SR) Programs • Arguments Against SR • The cost of SR threatens profits. • Business have too much control over which and how SR issues would be addressed. • Business lacks expertise in SR matters. • Arguments for SR • SR should take precedence over profits. • Corporations as citizens should help others. • Corporations have the resources to help. • Corporations should solve problems they create.

21. Approaches to Social Responsibility • Obstructionist Stance • A company does as little as possible and may attempt to deny or cover up violations • Defensive Stance • A company does everything required of it legally but no more • Accommodative Stance • A company meets its legal and ethical requirements and also goes further in certain cases • Proactive Stance • A company actively seeks to contribute to the well-being of groups and individuals in its social environment

22. Spectrum of Approaches to Corporate Social Responsibility

23. Managing Social Responsibility Programs • Social responsibility must start at the top and be considered as a factor in strategic planning. • A committee of top managers must develop a plan detailing the level of management support. • One executive must be put in charge of the firm’s agenda. • The organization must conduct occasional social audits—systematic analyses of its success in using funds earmarked for its social responsibility goals.

24. Social Responsibility and the Small Business • Large Business versus Small Business Responses to Ethical Issues • Differences are primarily differences of scale. • More issues are questions of individual ethics. • Ethics and social responsibility are decisions faced by all managers in all organizations, regardless of rank or size.