Chapter4

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4
Business
Ethics and
Social
Responsibilit
y:Doing Well By Doing
Good
2
LO1 What is ethics? What are the
universal ethics standards?
LO2 What are business ethics? What is
an ethical dilemma?
LO3 How does ethics relate to the
individual and the organization?
LO4 What is social responsibility and
how does it impact stakeholder
groups?
LO5 What is the role of social
responsibility in the global arena?
LO6 How do companies evaluate their
efforts to be socially responsible?

Ethics & Social Responsibility:
A Close Relationship
3
ETHICS
Beliefs about
right and wrong
SOCIAL
RESPONSIBILITY
The obligation of a business
to contribute to society

Defining Ethics
4

Universal Ethical Standards
5

Business Ethics: Not an
Oxymoron
6
Ethical Dilemma
Negative consequences
Two unfavorable options
Ethical Lapse
Clear misconduct
Most challenging
business decisions seem
to arise when values are
in conflict.
Business Ethics is the
application of right and
wrong in the workplace.

Bad News for Business—Worse
News Tomorrow!
7
39% believe that a person has to lie or cheat
sometimes in order to succeed.
59% admitted that they cheated on a test at
school within the past 12 months.
72% agree that it’s sometimes OK to hit or threaten
a person who makes me very angry.
18% admitted that they stole something from
a friend within the past 12 months.
28% admitted that they stole something
from a store within the past 12 months.
A study of 43,000 high school students revealed:
High school attitudes are a clear predictor of adult behavior.
© DIGITAL VISION/GETTY IMAGES
Source: The Ethics of American Youth. What would Honest Abe say? Josephson Institute Press Release, February 10, 2011, Character Counts website
http://charactercounts.org/programs/reportcard/2010/installment02_report-card_honesty-integrity.html, accessed February 20, 2011

Ethics: Multiple Touchpoints
Individuals must make
their own
ethical choices
BUT
The organization can
have a significant
influence on decisions
8
© STOCKBYTE/GETTY IMAGES

Ethics and the Individual:
The Power of One
9
Key Principles of Decisions:
1. Do you fully understand each dimension 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 as a “gut feel” level?
5. Could you defend your decision on the nightly TV news?
6. Have you considered and reconsidered your response to each
question?

Ethics and the Organization:
It Takes a Village
• Ethical influence starts at the top, actions matter
more than words.
• The Big Three Automakers went to Washington to
request a $25 billion bailout package in corporate
jets
• After the government gave AIG $85 billion to avoid
bankruptcy; the company spent $440,000 on a sales
retreat
• Disney CEO hired his friend who was fired for
incompetence after 14 months; the 140 million
settlement and his expense account details caused
10
Source: Big Three auto CEOs flew private jets to ask for taxpayer money by Josh Levs, November 19, 2008, CNN website, http://www.cnn.com/2008/US/11/19/autos.ceo.jets/, accessed February 2, 2009.
Lawmakers, Questioning Fed Bailout, Seek AIG `Junket' Refund By Ryan J. Donmoyer - October 9, 2008 Bloomberg website http://www.bloomberg.com/apps/news?
pid=newsarchive&sid=aPlPYw6JXIBU&refer=us, accessed February 21, 2011

How Would you Judge the Actions of
these Business Leaders?
11
Stanley O’Neal began as Merrill Lynch began racking up losses
that led to its collapse, he announced his “retirement.”
Sanjay Kumar of Computer Associates was convicted of
massive accounting fraud in 2006.
Martha Stewart was convicted of obstructing justice in a $40,000
well timed stock sale.
Sherron Watkins, former vice president of Enron reported the accounting
Irregularities that led to the discovery of corporate fraud.
Pierre Omidyar, the founder of eBay has given away over
$100 million to Tufts University Micro Finance Fund.
Whole Foods CEO, John Mackey posted thousands of comments on Yahoo Finance,
hyping his company and attacking Wild Oats, which he was planning to purchase.

Creating and Maintaining and
Ethical Organization
12
Role of Top
Management
the tone from the top
must be reinforced by
behavior
Role of Top
Management
the tone from the top
must be reinforced by
behavior
Organizational
Culture
strongest variable on
ethical conduct
Organizational
Culture
strongest variable on
ethical conduct

Bringing Code of Ethics to Life
13
Code of Ethics is a
written document
providing
direction for
employees to
make ethical
decisions.
1. Executive Buy-in
2. Clear expectations
3. Integrated approach
4. Global and local
5. Whistleblower support
6. Reporting and
Enforcement
© Brian A Jackson / Shutterstock.com

Defining Social Responsibility
Core stakeholder groups include
employees, customers, investors, and
community.
14
Social Responsibility is the obligation of a
business to contribute to society.

The Stakeholder Approach
15
EMPLOYEES
INVESTORS
COMMUNITY
ENVIRONMENT
CUSTOMERS
Creating Jobs that Work
Sustainable Development
Value, Honesty and Communication
Fair Stewardship and Full Disclosure
Business and the Greater Good

The Spectrum of Social Responsibility
16

Stakeholders
17
Stakeholders are any groups that have a stake
or a personal interest in the performance and
actions of an organization.

• Meet Legal Standards
• Workplace Safety
• Minimum Wage/Overtime
Requirements
• Protection from Sexual
Harassment
• Provide Work/Life Balance
 Family and Medical Leave
18
Responsibility to Employees:
Creating Jobs that Work
© Purestock/ Jupiterimages

How Would You Judge the
Actions of These Firms?
1. Clorox introduced a line of “99% natural cleaning”
products called Green Works. The Sierra Club
endorsed the product line. Clorox makes annual
contributions to the Sierra Club
2. Tyson has been accused of unfair business practices
and unsavory labor/environmental practices. In
2009, the farmer gave 11% of its profits to charity.
3. As obesity among kids grows, Kraft Foods pledged
to stop advertising unhealthy yet profitable foods to
young children.
4. After receiving $45 billion in taxpayer bailout funds,
Bank of America sponsored a five-day carnival-like
event outside the 2009 Super Bowl.
19
©TheStudioDog/Photodisc/GettyImages

 The Right to Be Safe
 The Right to Be Informed
 The Right to Choose
 The Right to be Heard
 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
20
Responsibility to Customers: Value,
Honesty, and Communication
Consumerism: a social
movement suggests that
consumer rights should
be the starting point.
President Kennedy
defined these rights.

Amazon: Who Owns the Books
• In 2009, Amazon remotely and
abruptly deleted digital editions of
books from customers’ Kindle
devices
• Customers were furious at the
privacy violation
• Amazon refunded the purchases
and issued an apology
• Amazon recovered; the Kindle
remains Amazon’s best selling
product and sales of digital books
has hit 48%
21
© David Robertson / Alamy
The year in technology industry apologies By Bob Brown, Network World, 12/01/2009, Network World website http://www.networkworld.com/slideshows/2009/120109-apologies.html#slide2, accessed February 22, 2011; Amazon Erases Orwell
Books From Kindle by Brad Stone July 17, 2009, New York Times website, http://www.nytimes.com/2009/07/18/technology/companies/18amazon.html, accessed February 22, 2011; The Customer Is Always Right by Daniel Lyons, December 21, 2009,
NewsWeek website, http://www.newsweek.com/2009/12/20/the-customer-is-always-right.html, accessed February 22, 2011.

Apple Angst
• Apple introduced the iPhone on June 9th
,
2007 to rave reviews despite $599 price
tag
• Apple dropped the price to $200 to
increase customers
• Customers were livid!
• Steve Jobs (former Apple CEO) apologized
and gave customers $100 store credit
22
Source: http://www.apple.com/hotnews/openiphoneletter/, accessed February 3, 2009; Apple’s customer satisfaction up despite struggling industry by Jeff Smykil, August 19, 2008, Ars Technica website,
http://arstechnica.com/apple/news/2008/08/apples-customer-satisfaction-up-despite-struggling-industry.ars, accessed February 3, 2009.

• Legal Requirements
Sarbanes-Oxley
• Responsible use of
Corporate Dollars
Honesty
• Is Optimism or
Pessimism Socially
Responsible?
23
Responsibility to Investors: Fair
Stewardship and Full Disclosure

Corporate Philanthropy -
business donations to
nonprofit groups, including
both money and time.
Corporate
Responsibility -
actions of the business rather
than donations of money and
time
Cause-related Marketing –
partnerships between businesses
and nonprofit organizations,
designed to spike sales for the
company and raise money
for the nonprofit
24
Responsibility to the Community:
Business and the Greater Good

Scholfield Honda
Video HereVideo Here
25

Gather Around the Water Cooler:
Let’s Talk
•
26
©iStockphoto.com/DNY59
• How is Scholfield Honda practicing social
responsibility?
• What are the benefits of this hybrid
technology to stakeholders?
• How is the economic environment
influencing car buyers to go green?

Greenwashing
• Greenwashing is when an organization spends
time/money claiming to be “green” through
marketing
• An energy company advertises “green” technology
they’re working on — but the technology is only a
small part of a “not-so green” business.
• A hotel chain calls itself “green” because it asks
guests to sleep on the same sheets and reuse towels
but does very little to save water and energy
• Can “doing good” be unethical?
27
Source: http://www.greenwashingindex.com/what.php, accessed August 4, 2011.

Sustainable Development
Doing business to meet the
needs of this generation
without harming the ability of
future generations
Carbon Footprint
Amount of harmful greenhouse
gases a firm emits
Green Marketing
Marketing environmental
products and practices for
competitive advantage
Responsibility to the Environment
28

Corporations Tracking Emissions
• The goal is for companies to become
carbon neutral; emit zero gasses or to
counteract impact of emissions
• Dell Inc. became carbon neutral in 2008
• Corporations track three types of
emissions:
 Scope 1: direct emissions from operations
 Scope 2: emissions from electricity, heat and
steam
 Scope 3: outside the company boundary that29Source: U.S. Corporations Size Up Their Carbon Footprints by Rachel King, June 1, 2009, Bloomberg Businessweek, Businessweek website,
http://www.businessweek.com/technology/content/jun2009/tc2009061_692661.htm, accessed February 24, 2011

Ethics and Social Responsibility in
the Global Arena: A House of
Mirrors?
Corruption is part of the culture
in many countries
 Bribes or Gifts
Labor issues in host countries
can be complicated
 Living Wage
 Child Labor
30

Going Green: It’s Not Just
Governments
• Bank of America reduced paper use by 32% from 2000 TO 2005
despite 24% customer growth.
• Arrowhead bottled water introduced smaller “Eco Shape” bottles
that helped save 245 million pounds of plastic resin.
• DuPont reduced greenhouse gas emissions during the 1990s by
63%.
• Telsa Motors is developing environmentally friendly sports cars
with virtually no emissions
• Hewlett-Packard owns gigantic e-waste recycling plants that
reclaim steel, plastic and toxic chemicals.Sources: BusinessPundit, “25 Big Companies That Are Going Green,” July 29, 2008, <http://www.businesspundit.com/25-big-companies-that-are-going-green/>,(accessed May 17,
2010); CNNMoney, “Ten Green Giants,” <http://money.cnn.com/galleries/2007/fortune/0703/gallery.green_giants.fortune/8.html> (accessed May 17, 2010) Arrowhead website,
http://www.arrowheadwater.com/KnowH2O/Be-Green.aspx, accessed February 25, 2011.
©JameyEkins/Shutterstock.com

A Loaf of Bread and a Packet of
Shampoo?
C.K. Prahalad believes
companies could add to the
global economy by providing
small luxuries to those at
“the bottom of the
pyramid”
32
Critics suggest that the strategy is exploitation
of the “aspirational poor”
What do you think?
© imagebroker / Alamy

Ethics and Social Responsibility:
Who is Minding the Store?
33
SOCIAL AUDIT
A systematic evaluation of
how well a firm is meeting its
ethics and social
responsibility objectives

Ethical Behavior in The Office
34

Let’s Talk
•
35
• If ethical behavior depend on individuals
in an organization, how do managers
promote ethical behavior?
• Why are all the actions of managers
important to model ethical behavior?
• Do small favors count in modeling ethical
behavior?

Reality TV: Bobby G. Venture
Capitalist
36

Let’s Talk
•
37
• Use the spectrum of social responsibility (i.e.,
Figure 4.4 in the text) to evaluate the actions of
the Vancouver, British Columbia company,
Clearly Canadian, and adventure capitalist
Bobby G, who is an investor in Clearly Canadian.
• Is the Nicaraguan clean water project better
described as corporate philanthropy or
corporate responsibility?

4
Looking Back
• What is ethics? What are the universal ethics standards?
• What are business ethics? What is an ethical dilemma?
• How does ethics relate to the individual and the organization?
• What is social responsibility and how does it impact
stakeholder groups?
• What is the role of social responsibility in the global arena?
• How do companies evaluate their efforts to be socially
responsible? 38

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