Business Ethics and Social Responsibility

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Chapter

2

Explain the concepts of business ethics and social responsibility

Describe the factors that influence business ethics.

List the stages in the development of ethical standards and discuss how organizations shape ethical behavior.

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Learning Goals

Describe how businesses’ social responsibility is measured and summarize the responsibilities of business to the general public, customers, and employees.

Explain why investors and the financial community are concerned with business ethics and social responsibility.

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Business Ethics The standards of conduct and moral values

governing actions and decisions in the work environment. Social responsibility Balance between what’s right and what’s profitable Often no clear-cut choices Often shaped by the organization’s ethical climate

Sarbanes-Oxley Act A 2002 law that added oversight for the

nation’s major companies and a special oversight board to regulate public accounting firms that audit the financial records of these corporations.

Concern for Ethical and Societal Issues

The Contemporary Ethical Environment

High-profile investigations and arrests in headlines.

Vast majority of businesses are ethical.

New corporate officers charged with deterring wrongdoing and ensuring ethical standards.

Engage in traditional corporate philanthropy, which involves giving to worthy causes.

Anticipate and manage risks. Identify opportunities to create value by

doing the right thing.

See how Walmart highlights corporate responsibility on its website.

Business Approach to Ethics and Social Responsibility

Individuals can make the difference in ethical expectations and behavior. Putting own interest

ahead of the organization

Lying to employee Misrepresenting hours Safety violations Internet abuse

Technology is expanding unethical behavior.

Individuals Make a Difference

Development of Individual Ethics

On-the-Job Ethical Dilemmas

Situation in which a

business decision

may be influenced

for personal gain.

Employee’s

disclosure of

illegal, immoral,

or unethical

practices in the

organization.

Telling the truth and

adhering to deeply

felt ethical principles

in business

decisions.

Businesspeople

expect employees

to be loyal and

truthful, but

ethical conflicts

may arise.

How Organizations Shape Ethical Conduct

Ethical Awareness

Code of Conduct:

Formal statement that

defines how the

organization expects

and requires employees

to resolve ethical

questions.

Ethical Education

Codes of conduct cannot

detail a solution for

every ethical situation,

so corporations provide

training in ethical

reasoning.

Ethical Action

Helping employees

recognize and reason

through ethical

problems and turning

them into ethical

actions.

TI Ethics Quick Test

Ethical Leadership

Executives must

demonstrate ethical

behavior in their actions.

use clear, explicit language

rather than euphemisms for

corrupt behavior

encourage behavior that

generates and fosters ethical

values

practice moral absolutism,

insisting on doing right even if

it proves financially costly

Acting Responsibly to Satisfy Society

Social Responsibility

Management’s consideration of profit,

consumer satisfaction, and societal well-being

of equal value in evaluating the firm’s

performance.

Contributions to the overall economy, job

opportunities, and charitable contributions and

service.

Organizations measure through social audits.

Areas of Responsibility

Responsibilities to the General Public Public Health Issues. What to do about

inherently dangerous products such as alcohol, tobacco, vaccines, and steroids.

Protecting the Environment. Using resources efficiently, minimizing pollution.

Green marketing Sustainability

Developing the Quality of the Workforce. Enhancing quality of the overall workforce through education and diversity initiatives.

Corporate Philanthropy. Cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees.

Responsibilities to Customers

CONSUMERISM The Right to Be Safe. Safe operation of products,

avoiding product liability.

The Right to Be Informed. Avoiding false or misleading advertising and providing effective customer service.

The Right to Choose. Ability of consumers to choose the products and services they want.

The Right to Be Heard. Ability of consumers to express legitimate complaints to the appropriate parties.

Responsibilities to Employees Workplace Safety. Monitored by Occupational Safety

and Health Administration. Quality-of-Life Issues. Balancing work and family

through flexible work schedules, subsidized child care, and regulation such as the Family and Medical Leave Act of 1993.

Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees without discrimination; many aspects regulated by the Equal Employment Opportunity Commission.

Age Discrimination. Age Discrimination in Employment Act of 1968 protects workers age 40 or older.

Sexual Harassment and Sexism. Avoiding unwelcome actions of a sexual nature; equal pay for equal work without regard to gender.

Responsibilities to Investors

Obligation to make profits for shareholders.

Expectation of ethical and moral behavior.

Protection of investors by the Securities and Exchange Commission and state regulations.