Responsibility, Ethics, & Social Responsibility

Learning ObjectivesExplain the development of personal codes of ethicsExplain why ethics are important in the workplaceDistinguish social responsibility from ethicsExplain how a firms ethics affects environmental policy and the relationships that a firm has with its customers, employees and investorsIdentify three general approaches to social responsibility

What is Ethical Behaviour?ethics: standards or moral values which dictate what is right and what is wrong, or good or badare culturally-based and formed based upon societys expectations vary by person, and by situationeveryone develops their own code of ethics

Influences on Ethical BehaviourFamilyExperiencesPersonal Code of EthicsPeer Group

Company Policies on Business EthicsCanadians are becoming suspect of businessesIn 1990, 45% felt that businesses are unprincipled, compared to 20% in 1980Companies are creating codes of ethics to guide employees in day-to-day business decisionsTop management must provide ethical guidelines, and set an example, for all employees

Are there any ETHICS in business?No! Class over! Ethics is for suckers If you believe in that bunk, theyll walk all over youWhere did you grow up -- on a farm?

Serious Green = ETHICSThats all you need to know!

WHY STUDY ETHICS?By giving reasons for its judgments and prohibitions, its central purpose is to secure valid principles of conduct and values that can be instrumental in guiding actions and producing good character.Looks very good on a resume!

Im a good personBeing good - thats ethicalLooking out for your fellow man, thats ethicsYou know, do one to others - or was it do others first?

The Environments of BusinessEnvironmentfactors that affect an organization, and the situations within which the organization functionsExternal Environmentall factors such as laws, competition, technology, social-cultural norms and trends, and ecology, that are outside the organization and that may affect it

Business Ethics Defined

Ethics: the study of right & wrong and the morality of choices that individuals make.An ethical decision or action is one that is right according to some standard of behaviour.Business Ethics: the application of moral standards to business.

Ethical Issues:these often arise out of a businesss relationship with: investors, customers, employees, creditors, competitorse..g. investors want financial decisions to boost sales, profits, and ROI (return on investment).customers expect expect products to be safe, reliable, reasonably pricesemployees expect fair treatment in hiring, promotion, compensationcreditors expect on time paymentscompetitors expect fair & honest business practices

How Do You Know if it is Ethical?Expense accounts padding?Sexual harassment or kidding?errors in work- tell supervisor or not ?personal calls on company phones?theft by fellow workers:tell supervisor, ignore, confront?

Doing the RIGHT thing:Choosing the ethical thing to do is a personal responsibility.For each situation: What are the ethical issues? How do YOU feel? What are the consequences of your decision?Other people: how will your actions affect others?Take Action: doing nothing is NOT an ethical choice! You MUST use your ethics!

Social ResponsibilityA businesss collective code of ethics towards:the environmentits customersits employeesits investors

Influences on Business Social ResponsibilityResponsibility Towards the EnvironmentResponsibility Towards ConsumersSocial ResponsibilityResponsibility Towards EmployeesResponsibility Towards Investors

Environment Responsibility IssuesAir PollutionWater PollutionLand PollutionToxic Waste Acid Rain

Air Pollutionunsuitable air quality which can affect the health of all people, with immediate effects on those who have pre-existing medical conditions or allergiescreated due to chemical emissions created in the manufacturing of products and the operation of motor vehicleslegislation has been directed to controlling or eliminating polluting practices

Acid Raincontaminated rainfall created by emissions of sulphur by power and manufacturing plants located in the midwestaffects eastern Canada and the United Statescan seriously damage forests and streamscan be controlled by existing technology but at tremendous cost to businesscosts could force a firm into losses, or outright bankruptcy

Water Pollutionwater contamination due to years of release of toxic chemicals into lakes, rivers and streamschief offenders are businesses such as pulp and paper plants, and municipalities who dump raw sewage is being curbed by legislation, education, and affordable new technology

Land Pollutioncontamination of grounds and soil due to dumping of toxic waste and mishandling of landfillskey issues today include curbing polluting practices and restoring contaminated landsnew developments include:emphasis on recyclingnew forms of solid waste disposalchanges in forestry practices

Toxic Wasterelease of toxic chemicals or radioactive byproducts of the manufacturing processcontaminates land, air and watersuch substances cannot be rendered harmless and must be carefully storedpressure on businesses to clean up can come from many sources (Greenpeace, banks refusing financing, consumer and social interest groups)

Customer Responsibility IssuesRights of ConsumersUnfair Pricing

Consumer Rights Issuesinfluenced by consumerism: a social movement that seeks to protect and expand the rights of consumers in their dealings with businessesconsumers have the:right to safe productsright to be informedright to be heardright to choose what they want to buy with free competition

Unfair Pricing Issuesillegal pricing practices may occur due to the intentional (and also illegal) limiting of competitioncollusion is the practice of a group of companies conspiring to fix prices collusion results in inflated prices and a lack of competition which negatively affects consumers

Employee Responsibility IssuesHuman resource management issuesSocial responsibility issuesPrivacy issuesEncouraging ethical behaviour

Human Resource Management IssuesRecruitingHiringTrainingPromotingCompensatingFair treatment of all employees without discrimination based upon sex, race or other factors

Social Responsibility Towards Employeessafe workplacessocially and emotionally- not abuse or harassmentphysically - safe work environment

Privacy of Employeesdetermining how much control is acceptable in the workplacedrug testingvideo monitoringemployees may not be aware that they are being monitored, or they may not know when they will be monitored, which increases job stress

Encouraging Ethical Employee Behaviourtop management support for ethical behaviour is criticalwhistle-blowers are employees who report unethical behaviourthe company should support its whistle blowers rather than threatening them with dismissal or other form of penalty

Responsibility Towards InvestorsImproper Financial ManagementKiting ChequesInsider TradingMisrepresentation of Finances

Improper Financial Managementdoing a poor job of managing the financial resources of a companymay involve payment of high salaries, lavish expense accounts and similar practices which results in perks for management with little or no control over how money is spentmay be legally unpunishable because no law has been brokenit may be difficult to replace management because unrest in the firm may devalue its stock

Cheque Kitingan illegal practice of writing cheques against money which 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 upthe assumption is that the money will arrive before the cheque needs to clearbecoming difficult to do with modern-day computerized banking

Insider Tradingusing confidential (non-public) information to gain from the sale of stockinvolves gaining knowledge of inside information about the company to prior to making the purchase may also involve the collusion of various investors buying and selling stock at the appropriate time in order to make huge profits

Misrepresenting Financial Informationcompanies 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

Social Responsibility Goals Varythere is no one way for firms to approach social responsibilitysome feel that the investors needs should be met before the needs of society, employees or customersmany feel that because large corporations are so powerful they have an obligation to serve society first

Approaches to Social Responsibilitysocial-obligation approachsocial-reaction approachsocial-response approach

Social-Obligation Approacha company simply meets the requirements of the law and standard business practicesis consistent with the argument that profits should not be spent on social programsexample:tobacco companies did not include health warnings on cigarette packs until required to by law

Social-Responsibility Approacha company will go beyond basic legal and business requirements if called upon to do so, but not of their own accordexample:matching employee contributions to social programs or charities

Social-Response Approachin addition to meeting basic legal and business requirements, companies proactively seek opportunities to contribute in a meaningful way to societyexamples:McDonalds support of childrens hospitalsTim Hortons camps for underpriveleged children

Managing Social Responsibility ProgramsSocial ResponsibilitySocial AuditAppointment of a DirectorStrategic PlanningTop Management Support

Step 1: Top Management SupportSupport of top management is essential to move the workplace towards adopting a social responsibility programTop managers must develop a policy statement outlining their commitment to more ethical behaviour

Step 2:Strategic PlanningA committee of top managers must develop a plan which describes the level of company support which will be given to meeting goals of social responsibilityExamples:percent of sales revenues to go to social causespromise to train chronically unemployed people

Step 3: Appoint a Directoran executive-level administrator must be appointed to oversee the social program that the firm has createdthis may be achieved through a partial time work commitment on the part of existing top managers

Step 4: The Social Audita systematic analysis of how the firm is using funds designated specifically to fund its social initiativesalso addresses the effectiveness of the monies that have been spent

Small Business Ethicsa small business does not have the same impact on society if it acts in an irresponsible waymany entrepreneurs decide to conduct themselves in a socially responsible manner because they feel it is important to contribute to societyindividual entrepreneurs make independent decisions

How Your Employer Can Help:A company should establish clear standards of conduct.A system must be in place to investigate alleged violations and to ensure that all employees/managers comply with company policies.Ethical compliance is a problem.63% in a survey felt pressured to compromise their standards to achieve business goals. 42% witnessed ethics violations.

Ethics: Fairness and Honesty:Business persons are expected to refrain from knowingly:deceiving, misrepresenting, or intimidating others. Oil companies seem to have an image problem in regard to pricing.Banks too seem to be perceived as being fee hungry with some hidden charges.

Organizational RelationshipsA business employee is expected to keep the firms business confidential and to honour obligations.unethical behaviour may involve:taking credit for the work of othersnot meeting obligationspressuring others to behave unethically

Conflict of InterestIn business: taking advantage of a business situation to place ones personal interests ahead of the firm.e.g. acceptance of Business Giftsacceptance may prejudice the decision making process in favour of a supplier who provided giftsCommunications: false or misleading advertising- especially those aimed at children or those involving health-related products.

Factors Affecting Ethical BehaviourCan a person with strong moral values make ethically questionable decisions in a business setting?what affects a persons decision-making process in a business setting?3 general sets of factors appear to influence behaviour:individual & social factors and opportunity

Factors Affecting Workplace BehaviourWorkplace behaviour to some extent determined by the norms of ones culture.e.g. in some countries the standard practice for customs agents to receive gifts for doing their job- in other countries the same actions would be viewed as unacceptable and unethicalpersonal phone calls on company time &expense- is it OK because everyone does it? A persons moral values can affect ones perception of what is moral and ethical in the workplace.

Opportunity:is the amount of freedom an employee has to behave unethically if he/she makes that choice.Company Policies & Procedures reduce the opportunities for unethical behaviour.e.g. Fast food restaurant- one person takes order/receives payment while another person fills the orderwhen violations are dealt with consistently and firmly, opportunities for unethical behaviour are reduced

Encouraging Ethical Behaviour:Can BUSINESS be made more ethical?clearly the answer is YES.individual firms, trade associations , and governments can establish written guidelines.trade associations exist for the benefit of their members- can they be self-regulating/Code of Ethics:written guide to what constitutes proper behaviouremployees MUST recognize why the code exists and top-management MUST support and follow the code themselves. An Ethics Officer may be considered.

Whistle Blowing:Informing government or the press about ethics violations by employees who want to act ethically but unethical practices are so ingrained in an organization that the employee feels they have no choice but to blow the whistlee.g. Canadian Red Cross and the Tainted Blood Scandal of recent years.what of whistle-blowing employees?loss of their jobs?anonymous organizational hot lines to report ethics violations?

Guidelines for Making Ethical Decisions:1. Listen & Learn:recognize the problem and listen until you are sure you understand others in the group.2. Identify the ethical issues:how are co-workers and consumers affected?why do others hold the views they do?3. Create and Analyze Options:ask everyone involved for ideas & opinions:which option is best and why?which options may address the issues you feel are potential ethics problems?

Guidelines for Making Ethical Decisions (cont):4. Best Option from YOUR point-of-viewtest against established criteriarespect, understanding, caring, fairness, honesty, openness.5. Explain your decision/resolve differences:may require neutral arbitration from a trusted manager.or: take time out to reconsider, consult, exchange written proposals before a decision is reached.

The Workplace of TomorrowExternal environment will become a greater consideration Media inquiry, government regulation, and public expectations become more importantorganizational behaviour under closer scrutiny than ever beforeminor decisions may build or destroy reputationAs companies expand globally, ethics are tested by local environments

11Title slide. No notes.22These 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.125

Summary: p 147-148

Key Terms: p. 14944Discussed on page 126.

This introduction to ethics provides some basic definitions and stresses that what constitutes ethical behaviour is to a great extent open to discussion.

Activities:Analysis Questions: #2, page 149.

55Discussed on pages 126-127.

The discussion in the text demonstrates the key determinants of individual ethics. Care must be taken to put the lesson in the context of the situation facing the individual making ethical decisions.

Activities:

Concluding Case 5-1: Problems at the Better Business Bureau,p. 151.

66Discussed on pages 127-129.

Additional Notes:In Canada, 66% of large firms have written ethics policiesIn the USA, 90% of large firms have written ethics policies

Activities:Application Exercises: #9, p. 149.Concluding Case #5-1: Problems at the Better Business Bureau, p. 151.Exploring the Net, p. 150.

77Discussed on page 129

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: #2, p.149

88Discussed on page 129-130. This is a reproduction of Figure 5-3 on page 130.

The ethical climate of a firm depends to a great extent on the ethics of individual employees.

Activities:Review Questions: #2, p.14999Discussed on pages 130-132. This is a list slide. Each topic is discussed separately on the slides which follow.

All of the environmental issues listed above occur due to emissions from automobiles and/or manufacturing plants. Much of Canadas pollution is a result of Americas businesses.

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: #2, p. 149.1010Discussed on page 130-131.

Trends were discussed on the list slide, slide 5-9.

Activities:Review Questions: #2, p.149.1111Discussed on page130-131.

See the list slide (Slide 5-9) for comments.

Activities:Review Questions: #2, p. 149.1212Discussed on page 131.

See the list slide (Slide 5-9) for comments.

Activities:Review Questions: #2, p. 149.1313Discussed on page131-132.

See the list slide (Slide 5-9) for comments.

Activities:Review Questions: #2, p. 149.1414Discussed on page 132.

See the list slide (Slide 5-9) for comments.

Activities:Review Questions: #2, p. 149.1515Discussed on page 132.

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: #3, p. 149.1616Discussed on page 132.

See the list slide (#5-15) for notes.

Activities:Review Questions: #3, p. 149.1717Discussed on page 132.

See the list slide (#5-15) for notes.

Activities:Review Questions: #3, p. 149.Concluding Case #5-2: Industrial Espionage, p.152.1818Discussed on page 135-136. This is a list slide. Each of these topics is discussed on a later slide.

Activities:Analysis Questions: #6, p. 149.1919Discussed on page 135.

See the list slide (#5-18) for notes.

Activities:Analysis Questions: #3, p. 149.2020Discussed on page 135.

See the list slide (#5-18) for notes.

Activities:Analysis Questions: #6, p. 149.2121Discussed on page 135.

See the list slide (#5-18) for notes.

Activities:Analysis Questions: #6, p. 149.2222Discussed on page 135.

See the list slide (#5-18) for notes.

Activities:Analysis Questions: #6, p. 149.2323Discussed on pages 136 to 137. This is a list slide. Each topic is discussed separately on the slides which follow.

Ownership and management of a corporation are separate from each other. Usually this is a good thing, allowing businesses to hire the expertise needed to provide a handsome return on investment to the owners. However, when the managers are unethical they can do more harm than good to the organization and those who own it.

Activities:

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. 2424Discussed on page 136.

See list slide for comments and activities (Slide #5-23).

2525

Discussed on page 136.

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.

See list slide for activities (Slide #5-23).

2626Discussed on page 137.

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.

See list slide for activities (Slide #5-23).

2727Discussed on page 137.

See list slide for activities (Slide #5-23).2828

Discussed on pages 137-138.

Research has demonstrated that firms with strong ethical goals are more profitable than firms without such goals.

Activities:Building Your Business , p. 149.2929Discussed on pages 138-139.

Social responsible behaviour is as hard to classify as ethical behaviour. The material in the text does an excellent job of demonstrating various degrees of social responsibility and the effects that the degrees have on the social mandate of an organization.

Activities:Review Questions: #4, p.149.Analysis Questions: #8, p.149.3030Discussed on pages 138-139.

See the list slide for comments (Slide 5-29).

Activities:Review Questions: #4, p. 149.Analysis Questions: #8, p.149.3131Discussed on pages 138-139.

See the list slide for comments (Slide 5-29).

Activities:Review Questions: #4, p. 149.Analysis Questions: #8, p.149.3232Discussed on pages 138-139.

See the list slide for comments (Slide 5-29).

Activities:Review Questions: #4, p. 149.Analysis Questions: #8, p.149.3333Discussed on pages 140-141. This is list slide. Each item is discussed separately on the slides which follow.

This slide duplicates the diagram in Figure 5-4.

The model in the diagram makes an excellent point of demonstrating that without top management support a firm cannot aspire to a social responsibility program.

Activities:Application Exercises: #9, p.149.3434Discussed on pages 140.

See the list slide for comments (Slide #5-33).

Activities:Application Exercises: #9, p.149.3535Discussed on pages 140.

See the list slide for comments (Slide #5-33).

Activities:Application Exercises: #9, p.149.3636Discussed on pages 140.

See the list slide for comments (Slide #5-33).

Activities:Application Exercises: #9, p.149.3737Discussed on pages 141.

See the list slide for comments (Slide #5-33).

Activities:Application Exercises: #9, p.149.3838Discussed on page 141.

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 businesss ethical and social orientations.

Activities:Assign the students to a major non-profit, charitable organization. Ask the students to identify major sponsors. Then, have the students identify which of the benefactors are small businesses and not large corporations. Based on this analysis, do the students feel that small businesses are socially responsible?