Chapter 4: BUSINESS ETHICS AND SOCIAL
Doing Well by Doing Good
ETHICS AND SOCIAL RESPONSIBILITY
Beliefs about RESPONSIBILITY
right and wrong. The obligation of a business
to contribute to society.
A close relationship, but not the same
ETHICS: MURKIER THAN YOU THINK
UNIVERSAL ETHICAL STANDARDS
Developed by Character Counts, a nonpartisan organization of educators,
community leaders, and ethicists.
BUSINESS ETHICS: NOT AN OXYMORON
– 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
– Ethical Lapse Clear misconduct
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?
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
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.)
a commitment to minimize business negative effects and
maximize the positive ones.
Stakeholders are any
groups that have a stake –
or a personal interest - in the
performance and actions
of an organization.
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
RESPONSIBILITY TO EMPLOYEES: CREATING JOBS THAT WORK
• Meet legal standards
• Workplace safety
• Minimum wage/Overtime requirements
• Value employees
• Provide work/life balance
RESPONSIBILITY TO CUSTOMERS
• The Right to Be Safe
• The Right to Be Informed
• The Right to Choose
• The Right to be Heard
Planned Obsolescence –
Deliberately designing products to fail in order to shorten the time
between consumer repurchases
• 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.
RESPONSIBILITY TO INVESTORS
FAIR STEWARDSHIP AND FULL DISCLOSURE
• Legal requirements
– U.S. Sarbanes-Oxley Act
• Responsible use of corporate
• Is optimism or pessimism socially
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.
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.
RESPONSIBILITY TO ENVIRONMENT
• Responsibility to environment is a part of
responsibility to community
• Reducing the amount of trash is more important
• Although consumers support green marketing, they
may not be willing to sacrifice quality
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
MONITORING ETHICS AND SOCIAL RESPONSIBILITY
A systematic evaluation of how well
a firm is meeting its ethics and social