Chapter 4

Ethics and Social Responsibility

Section 1

Ethics in Business

ETHICS IN BUSINESS

Ethics are a set of moral principles or valuesthat govern behavior.

This section discusses:– The Importance of Ethics– Codes of Ethics– Behaving Ethically– Laws Relating to Ethics and Business– Ethical Standards and Culture

The Importance of Ethics

• Businesses develop ethics to help them determine how to behave

• These ethics reflect a company’s belief about what actions are appropriate and fair among people

Code of Ethics

• Code of ethics is a document that outlines the principles of conduct to be used in making decisions within the organization

• Some of the areas they cover are:Honesty Adherence to the law

Health and safety in the workplace Conflicts of interest

Selling and marketing practices Security

Political Activities Protection of the environment

Product safety and quality Employment practices

Code of Ethics (cont)

• Does merely having a code of ethics prevent unethical behavior?– NO! To be effective, it must be enforced!

• It is very important that companies discipline employees who violate their codes of ethics

• Nike Example: Find on the M:drive if link does not open!

ACTIVITY

• Open the Professional Code of Ethics Activity in

Chapter 4 on the (M) drive• Using the Internet, research the code of ethics for a

profession you are interested in• Read the code and choose four important policies to

share with the class• Create a flyer in Publisher to display the information • The flyer should include the name of the professional

organization, four policies, at least one image, and a professional design

• Example: Find on the M:drive if link does not open!

Behaving Ethically

• Helps employees gain the trust of the people with whom they work

• Helps businesses gain the trust of customers, suppliers, and others

Behaving Honestly

• Ethical employees – never steal from their employers– never lie about the hours they work– never falsify documents

• Sarbanes-Oxley Act of 2002 – contains important rules affecting the reporting and corporate governance of public companies and their directors and officers

• Resulted from Enron and WorldCom scandals

Dealing with Ethical Dilemmas

• Ethical dilemmas are situations in which the ethical course of action is not clear

• Having a code of ethics and a personal sense of what is right and wrong can help business managers choose the right course of action.

Solving Ethical Dilemmas1. Have you defined the problem accurately?2. How would you define the problem if you stood

on the other side of the fence?3. Whom could your decision or action injure?

Can you discuss the problem with the affected parties before you make your decision?

4. Are you confident that your position will be as valid over a long period of time as it seems now?

5. Could you disclose without qualm your decision or action to your boss, your CEO, the board of directors, your family, and society as a whole?

Identifying Acceptable Business Interactions

• Interactions between business acquaintances…– Normal?

• Taking clients to lunch; inviting clients to play golf

– Questionable?• Sending a client a very expensive gift

– Illegal?• Taking or paying bribes

ACTIVITY

• Complete the Workplace Ethics Activity: Making Informed Ethical Decisions– Link: Workplace Ethics Activity

• Be prepared to discuss your resolutions with the class!!

Laws Relating to Ethics in Business

• Competitive Behavior

• Consumer Protection

• Environmental Protection

Competitive Behavior

• The Sherman Act – illegal for companies to monopolize trade

• The Clayton Act – illegal to charge different prices to different wholesale customers

• The Wheeler-Lea Act – bans unfair or deceptive acts or practices, including false advertisement; must inform customers of possible negative consequences of using their products

Consumer Protection

• Food and Drugs• Federal Food, Drug, and Cosmetic Act – bans sale of

impure, improperly labeled, falsely guaranteed, and unhealthful foods, drugs & cosmetics

• Consumer Products• Consumer Product Safety Commission – establishes

minimum product safety standards on consumer products

• Loans• Truth in Lending Act – requires creditors to let lenders

know how much they are paying in finance charges and interest

• Equal Credit Opportunity Act – prohibits discriminatory practices

Environmental Protection

• National Environmental Policy Act of 1969– protect human health and safeguard the air, water, and land

• Clean Air Act – regulates air emissions• Toxic Substances Control Act – tracks

industrial chemicals• Clean Water Act – sets standards on the

type and quantity of pollutants industries can put into bodies of water

Ethical Standards and Culture

• Corporate Gift Giving

• Intellectual Property– Intellectual property refers to ownership of

ideas, such as inventions, books, movies, and computer programs

• Creators have exclusive rights to market and sell their work

• Patent, trademark, copyright laws• No laws enforced in China or India

Section 2

Social Responsibility

SOCIAL RESPONSIBILITY

• Social responsibility refers to the obligation that individuals or businesses have to help solve social problems.

• This section discusses:– Changing Views of Social Responsibility– Measuring Social Responsibility

Changing Views of Social Responsibility

• Profit Maximization

• Trustee Management

• Social Involvement

Profit Maximization

• 19th – early 20th century

• US business owners believed their role was to maximize profits

• Dealing with social problems was not considered a legitimate business activity

Trustee Management

• 1920s – 1930s

• Trustee management became popular– Owners of businesses had obligations to do

more than just earn profits– Obligations to employees, customers, and

creditors

• View held until 1960s

Social Involvement• 1960s – Present • Corporations use their influence and

financial resources to address social problems– i.e. poverty, crime, environmental destruction,

illiteracy

• Businesses are responsible to all people affected by their actions– Stakeholders include a company’s

employees, customers, suppliers, and the community

Measuring Social Responsibility

• A social audit is a review of a business’s social responsiveness. – Measures the company’s performance in the

following areas:• Philanthropy and Volunteerism• Environmental Awareness• Sensitivity to Diversity and Quality of Work Life

Philanthropy and Volunteerism

• Contributions of time and money to charitable, cultural, and civic organizations.

• Granting employees paid time off to participate in charitable activities.

• Matching charitable donations made by employees.

Environmental Awareness

• Limiting the damage their operations cause the environment

• Create production processes that are as environmentally friendly as possible

• Establish policies that reduce pollution

• Encourage carpooling

• Use biodegradable products

Sensitivity to Diversity & Quality of Work Life

• Maintain ethnically diverse workforces that reflect the societies in which they operate

• Adopt policies that contribute to the quality of life of their workers– Flexible hours– On-site day care centers

– 100 Best Corporate Citizens 2012

Watch the Video:McDonald's Corporate Social Responsibility - Making

Progress

ACTIVITY 1

• Find a current article that deals with social responsibility

• Write a one-page article summary– Be sure to include:

• Source information (URL, date, etc.)• Company information/background• Which area of social responsibility are they

fulfilling?• How are they socially responsible?• Who is benefiting?

Activity 2Corporate Social Responsibility Brochure

In Publisher, create a promotional brochure describing a company’s corporate social responsibility initiatives.

Use the company’s website as your source.

Make sure to include the company name, logo, website, mission statement, guiding principles, pictures, and at least 3 initiatives.

• Starbucks Motorola

• Disney General Mills

• General Motors Texas Instruments

• Kellogg’s Dell, Inc.

• Nike Johnson & Johnson

• Procter & Gamble The Gap

• Target Google

• McDonalds 3M Company

• IKEA Southwest Airlines

• Toyota Coca-Cola

• Timberland Microsoft

• Levi Strauss Xerox Corporation

• Ben & Jerry’s R.E.I.

• Build A Bear American Express

Possible Companies to Research