Business Ethics and Social Responsibility

							    Chapter 4: BUSINESS ETHICS AND SOCIAL
                RESPONSIBILITY

              Doing Well by Doing Good




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    ETHICS AND SOCIAL RESPONSIBILITY




                               SOCIAL
      ETHICS
      Beliefs about         RESPONSIBILITY
    right and wrong.       The obligation of a business
                             to contribute to society.




    A close relationship, but not the same

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    ETHICS: MURKIER THAN YOU THINK




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        UNIVERSAL ETHICAL STANDARDS




Developed by Character Counts, a nonpartisan organization of educators,
community leaders, and ethicists.
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    BUSINESS ETHICS: NOT AN OXYMORON
     Ethical Dilemma
         – Two unfavorable options with Negative consequences.
         – most challenging business decisions seem to arise when
           values are in conflict
         – Business Ethics – the application of right and wrong in
           the workplace
         – Ethical Lapse Clear misconduct




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                ETHICS AND THE INDIVIDUAL

• Framework for Ethical Decisions
   1. Do you understand the dimensions of the problem?
     2. Who would benefit? Who would suffer?
     3. Are the alternative solutions legal? Are they fair?
     4. Does your decision make you comfortable?
     5. Could you defend your decision on the nightly news? Or to
        your mother? Or to God?




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     Creating and Maintaining an Ethical Organization

• Organizational Culture sets the ethical culture and is
  led by Top Management
• An effective Code of Ethics has:
     –   Executive buy-in
     –   Clear expectations
     –   Integrated approach
     –   Global and local
     –   Whistleblower support
     –   Reporting and enforcement


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                     ETHICS FAME AND SHAME


            Ethics Hall of Fame                           Ethics Hall of Shame
 Sheron Watkins, former vice president of         Dennis Kozlowski, former CEO of Tyco
Enron reported the accounting irregularities            was convicted of looting
that led to the discovery of corporate fraud.         millions from the company.
  Paul Newman’s food company donates                 Martha Stewart was convicted of
  100% of the profits to charity, totaling         obstructing justice in a $40,000 well-
     more than $150 million to date.                          timed stock sale.
                                                 Brian Mulroney, former Prime Minister of
 Pierre Omidyar, the founder of eBay has
                                                Canada, admitted he accepted $225,000 in
   given away over $100 million to help
                                                  cash, six years after doing so (and then
give economic power to the world’s poor.
                                                           paid tax on half of it.)




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              SOCIAL RESPONSIBILITY
a commitment to minimize business negative effects and
            maximize the positive ones.


     Responsibility to
         Whom?


                          Stakeholders are any
                     groups that have a stake –
                    or a personal interest - in the
                         performance and actions
                            of an organization.


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          RESPONSIBILITY TO……
      EMPLOYEES          Creating Jobs that Work



      CUSTOMERS    Value, Honesty, and Communication



      INVESTORS    Fair Stewardship and Full Disclosure



     COMMUNITY      Business and being good citizens



     ENVIRONMENT        Sustainable Development



     GOVERNMENT     Follow laws, regulations, pay taxes

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         RESPONSIBILITY TO EMPLOYEES: CREATING JOBS THAT WORK


•    Meet legal standards
•    Workplace safety
•    Minimum wage/Overtime requirements
•    Value employees
•    Provide work/life balance




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        RESPONSIBILITY TO CUSTOMERS
 CONSUMERISM:

 • The Right to Be Safe

 • The Right to Be Informed

 • The Right to Choose

 • The Right to be Heard




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                          ROTTEN APPLE?
Planned Obsolescence –
Deliberately designing products to fail in order to shorten the time
between consumer repurchases



APPLE COMPUTERS:
• iPods had irreplaceable battery.
• Batteries died after 18 months.
• Customers were encouraged to purchase new iPods
• Two customers posted high profile protest movies online.
• APPLE announced replacement program.



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                 RESPONSIBILITY TO INVESTORS
            FAIR STEWARDSHIP AND FULL DISCLOSURE

• Legal requirements
      – U.S. Sarbanes-Oxley Act
• Responsible use of corporate
  resources
• Is optimism or pessimism socially
  responsible?



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     RESPONSIBILITY TO COMMUNITY

Corporate Philanthropy - business
donations to nonprofit groups, including
both money and time.
Corporate Responsibility - The actions
of the business rather than donations of
money and time.


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          RESPONSIBILITY TO ENVIRONMENT


     Green Marketing –
     marketing environmental products and
     practicesto gain a competitive edge.
     Greenwashing – marketing environmental
     practices when there is no real green effort.




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         RESPONSIBILITY TO ENVIRONMENT
     • Responsibility to environment is a part of
       responsibility to community

     • Reducing the amount of trash is more important
       than recycling

     • Although consumers support green marketing, they
       may not be willing to sacrifice quality




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ETHICS AND SOCIAL RESPONSIBILITY IN THE GLOBAL ARENA

 • Corruption is part of the culture in many countries
      – Bribes or gifts

 • Labour issues in host countries can be complicated
      – Living wage
      – Child labour
      – Code of Conduct




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      MONITORING ETHICS AND SOCIAL RESPONSIBILITY


SOCIAL AUDIT
A systematic evaluation of how well
a firm is meeting its ethics and social
responsibility objectives



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