Chapter 04 Ethics

8/6/2019 Chapter 04 Ethics

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McGraw-Hill/IrwinUnderstanding Business, 8e 2008 The McGraw-Hill Companies, Inc., All Right

Nickels McHugh McHughNickels McHugh McHugh

**DemonstratingDemonstrating

EthicalEthicalBehaviorBehavior

and Socialand Social

ResponsibilityResponsibility4

CHA

PTE

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Top U.S. Ethical Issuesop U.S. Ethical Issues

0% 10% 20% 30% 40% 50% 60%

Producing Low-quality or Unsafe Products

Discrimination

Securities and/or Bank Fraud

Unfair Treatment of Employees/Customers

Bribes and Kickbacks

Lack of Public Trust in Corporate America

Dishonesty w ith Customers

Lying on Reports/Falsifying Records

Conflicts of Interest

Deceptive Sales/Marketing Practices

Improper Accounting Practices

Source: CMO Magazine, October 2004


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Ethics of MBAthics of MBAStudentstudentsPercent of MBA Students Who Would:Percent of MBA Students Who Would:

Buy Stock on Inside InformationBuy Stock on Inside Information 52%52%

Reveal Corp. Secrets to Spouse/FamilyReveal Corp. Secrets to Spouse/Family 50%50% Let a Gift Sway Purchasing DecisionLet a Gift Sway Purchasing Decision 26%26%

Pay Someone Off to Close aPay Someone Off to Close a 13%13%

Business DealBusiness Deal

Source: USA Today


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Ways to Preventays to PreventUnethical Behaviornethical Behavior

Source: CMO Magazine, Oct. 2004

0% 10% 20% 30% 40% 50% 60% 70% 80%

New Laws

Adding Ethics Classes

to College Programs

A Code of Conduct

Publicity About Those

Being Punished

Employee Education

Programs

Increasing Penalties

for Offenders


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Social Responsibilityocial ResponsibilityCORPORATE SOCIAL RESPONSIBILITYCORPORATE SOCIAL RESPONSIBILITY

(CSR)(CSR)

is a businesss concern for welfare ofis a businesss concern for welfare of

society.society.It is based on a companys concern for theIt is based on a companys concern for the

welfare of all its stakeholders, not just thewelfare of all its stakeholders, not just the

owners.owners.

Some CRITICS of CSR believe that aSome CRITICS of CSR believe that a

managers sole role is to compete and win.managers sole role is to compete and win.

II


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Codes of Ethicsodes of EthicsMilton FriedmanMilton Friedman

stated that the only social responsibility of businessstated that the only social responsibility of businessis to makeis to make

money for stockholders.money for stockholders.

DEFENDERS argue that CSR makes more money forDEFENDERS argue that CSR makes more money forinvestors in the long run.investors in the long run.

One study showed a positive correlation betweenOne study showed a positive correlation between

CORPORATE SOCIAL PERFORMANCECORPORATE SOCIAL PERFORMANCE

andand

CORPORATE FINANCIAL PERFORMANCE.CORPORATE FINANCIAL PERFORMANCE.

II


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Ethicsthics I. ETHICS IS MORE THAN LEGALITY

Learning Goal 1

Explain why legality is only the first step in behaving

ethically.

A. Ethical Standards Are Fundamental

B. Ethics Begins with Each of Us

Learning Goal 2

Ask the three questions one should answer when

faced with a potentially unethical action.


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Ethics Checkthics CheckQuestions:uestions: Is It Legal?Is It Legal?

Is It Balanced?Is It Balanced?

Is it Fair ?Is it Fair ?

How Will It Make Me Feel AboutHow Will It Make Me Feel About

Myself?Myself?


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Factors Influencingactors InfluencingManagerial Ethicsanagerial EthicsIndividualIndividual OrganizationalOrganizational EnvironmentalEnvironmental

ValuesValues

WorkWork

BackgroundBackground

Family StatusFamily Status

PersonalityPersonality

Top Level Mgmt.Top Level Mgmt.

PhilosophyPhilosophy

The FirmsThe Firms

Reward SystemReward System

Job DimensionsJob Dimensions

CompetitionCompetition

EconomicEconomic

ConditionsConditions

Social/CulturalSocial/Cultural

InstitutionsInstitutions


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Codes of Ethicsodes of Ethics Compliance-BasedCompliance-Based

Integrity-BasedIntegrity-Based


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Codes of Ethicsodes of EthicsCOMPLIANCE-BASED ETHICS CODESCOMPLIANCE-BASED ETHICS CODES

are ethical standards that emphasizeare ethical standards that emphasize

preventing unlawful behavior bypreventing unlawful behavior byincreasing control and by penalizingincreasing control and by penalizing

wrongdoers.wrongdoers.


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Codes of Ethicsodes of EthicsINTEGRITY-BASED ETHICS CODESINTEGRITY-BASED ETHICS CODES

are ethical standards that define theare ethical standards that define the

organizations guiding values, create anorganizations guiding values, create anenvironment that supports ethicallyenvironment that supports ethically

sound behavior, and stress a sharedsound behavior, and stress a shared

accountability among employees.accountability among employees.


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Ethicsthics

.

II. MANAGING BUSINESSES ETHICALLYAND RESPONSIBLY

Learning Goal 3

Describe managements role in setting ethicalstandards.

Setting Corporate Ethical Standards

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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Ethicsthics

III. CORPORATE SOCIAL RESPONSIBILITY

Learning Goal 5Define corporate social responsibility and examine corporate

responsibility to various stake-holders.

A. Responsibility to Customers

B. Responsibility to Investors

C. Responsibility to Employees

D. Responsibility to Society and the Environment

E. Social Auditing


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Codes of Ethicsodes of EthicsCORPORATE AND CRIMINAL FRAUDCORPORATE AND CRIMINAL FRAUD

ACCOUNTABILITY ACTACCOUNTABILITY ACT

(Sarbanes-Oxley, 2002)(Sarbanes-Oxley, 2002)


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Steps to Improveteps to ImproveU.S. Business Ethics.S. Business Ethics1.1. Top management supportTop management support

2.2. Employees understandingEmployees understanding

3.3. Managers trainingManagers training

4.4. Ethics OfficeEthics Office

5.5. Outsiders must be informedOutsiders must be informed6.6. Enforcement of ethics codeEnforcement of ethics code


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Social Auditocial Audit CompanyCompany

Outside Groups that serveOutside Groups that serve

as watchdogs:as watchdogs: Socially-ConsciousSocially-Conscious

InvestorsInvestors

EnvironmentalistsEnvironmentalists Union OfficialsUnion Officials

CustomersCustomers


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EthicsthicsIV. INTERNATIONAL ETHICS AND SOCIAL

RESPONSIBILITY

Learning Goal 6Analyze the role of American businesses in

influencing ethical behavior and social

responsibility in global markets.


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International Ethicsnternational Ethicsand Social Responsibilitynd Social Responsibility Ethical problems areEthical problems are NotNot Unique toUnique to

the U.S. managersthe U.S. managers

Demand for Socially ResponsibleDemand for Socially Responsible

Behavior from Global SuppliersBehavior from Global Suppliers

Joint Initiative on CorporateJoint Initiative on Corporate

Accountability and Workers RightsAccountability and Workers Rights

Inter-American Convention AgainstInter-American Convention AgainstCorruptionCorruption


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Best Company Reputationest Company Reputation Johnson & Johnson (80.6)Johnson & Johnson (80.6)

Coca-Cola (79.7)Coca-Cola (79.7)

Google (79.5)Google (79.5)

UPS (79.4)UPS (79.4)

3M (78.8)3M (78.8)

Source: USA Today

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Most Admiredost AdmiredGlobal Companieslobal Companies

1.1. General ElectricGeneral Electric

2.2. ToyotaToyota

3.3. Procter & GambleProcter & Gamble

4.4. FedExFedEx

5.5. Johnson & JohnsonJohnson & Johnson

6.6. MicrosoftMicrosoft

7.7. DellDell

8.8. Berkshire HathawayBerkshire Hathaway

9.9. Apple ComputerApple Computer

10.10. Wal-MartWal-Mart

Source: Fortune, 2006

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Levels of Corporateevels of CorporateSocial Responsibilityocial ResponsibilitySocietal ResponsibilitySocietal Responsibility

Stakeholder ResponsibilityStakeholder Responsibility

Profit ResponsibilityProfit Responsibility

Owners/StockholdersOwners/StockholdersGeneralGeneral

PublicPublic

CustomersCustomers

EmployeesEmployees

Suppliers/DistributorsSuppliers/Distributors

EcologicalEcological

EnvironmentEnvironment

Public Interest GroupsPublic Interest Groups

Source:Source: MarketingMarketing, 5/E by Berkowitz, Kerin, Hartley, and Rudelius., 5/E by Berkowitz, Kerin, Hartley, and Rudelius.

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Chapter 04 Ethics

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