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- 1. * * Chapter Four Demanding Ethical and Socially Responsible Behavior Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
- 2. * * Profile • Chipotle is dedicated to producing quality food which has led to current annual sales over $1 billion. STEVE ELLS Chipotle Mexican Grill • Ells’ mission is to serve “Food With Integrity.” • Chipotle is the leading restaurant buyer of humanely raised meats. 4-2
- 3. * * Ethics is More Than Legality • Scandals have shaken the real estate, mortgage and banking industries. • How do we restore trust in the free market system? - Punish those who have broken the law. - Make accounting records more transparent. - Consider what is ethical, not just what is legal. LIFE AFTER SCANDAL LG1 4-3
- 4. * * Ethical Standards are Fundamental • Ethics -- The standards of moral behavior. Behaviors that are accepted by society as right versus wrong. WHAT are ETHICS? LG1 4-4
- 5. * * Ethical Standards are Fundamental Right: • Integrity • Respect for human life • Self control • Honesty • Courage • Self-sacrifice Wrong: • Cheating • Cowardice • Cruelty BASIC MORAL VALUES LG1 4-5
- 6. * * • Enron: One executive is serving a 24 year sentence for accounting fraud while another will be released in October 2011. • Arthur Andersen: Convicted of tampering with witnesses, the company was dissolved and about 28,000 people lost their jobs. • Tyco International: Two executives stole $600 million from the company and are scheduled to be released from prison in 2030. • Adelphia Communication: Two executives were convicted of conspiracy, bank and securities fraud and given sentences of 15 and 20 years. • WorldCom: Former CEO was convicted of fraud, conspiracy and false filings and sentenced to 25 years. PAYING the PRICE (Legal Briefcase) 4-6
- 7. * * Ethics Begins with Each of Us • Plagiarizing from Internet materials is the most common form of cheating in schools today. ETHICS and YOU LG2 • Studies found a strong relationship between academic dishonesty and dishonesty at work. 4-7
- 8. * * Ethics Begins with Each of Us • Ask yourself these questions: - Is it legal? - Is it balanced? - How will it make me feel about myself? FACING ETHICAL DILEMMAS LG2 4-8
- 9. * * • Every minute, people upload 10 hours of video to YouTube – not all is user-generated content. • Viacom sued YouTube for $1 billion for allowing episodes of its popular shows on the site. • Viacom holds YouTube responsible for carrying the illegal content, rather than the individuals who uploaded it. • Who do you think should be accountable for the copyright violations -- the website or those who uploaded the videos? To TUBE or NOT to TUBE (Making Ethical Decisions) 4-9
- 10. * * Progress Assessment • What are ethics? • How do ethics differ from legality? • When faced with ethical dilemmas, what questions can you ask yourself that might help you make ethical decisions? PROGRESS ASSESSMENT 4-10
- 11. * *Managing Businesses Ethically and Responsibly • Trust between workers and managers must be based on fairness, honesty, openness and moral integrity. • Leadership can help instill corporate values in employees. ETHICS START at the TOP LG3 4-11
- 12. * *Managing Businesses Ethically and Responsibly FACTORS INFLUENCING MANAGERIAL ETHICS Individual Organizational Environmental • Values • Work Background • Family Status • Personality • Top Level Management Philosophy • Firm’s Reward System • Job Dimensions • Competition • Economic Conditions • Social/Cultural Institutions LG3 4-12
- 13. * *Setting Corporate Ethical Standards • An increasing number of companies have adopted written codes of ethics. • Compliance-Based Ethics Code -- Emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers. • Integrity-Based Ethics Code -- Define the organization’s guiding values, create an environment that supports ethically sound behavior and stress a shared accountability among employees. ETHICS CODES LG4 4-13
- 14. * *Setting Corporate Ethical Standards 1. Top management must adopt and unconditionally support an explicit corporate code of conduct. 2. Employees must understand that senior management expects all employees to act ethically. 3. Managers and others must be trained to consider the ethical implications of all business decisions. (continued) HOW to IMPROVE AMERICA’S BUSINESS ETHICS LG4 4-14
- 15. * *Setting Corporate Ethical Standards 4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers -- People who report illegal or unethical behavior. HOW to IMPROVE AMERICA’S BUSINESS ETHICS LG4 5. Involve outsiders such as suppliers, subcontractors, distributors and customers. 6. The ethics code must be enforced. 4-15
- 16. * * Source: James Gehrke, Magnify Leadership & Development, November 2008. 1. Managers must communicate the organization’s vision on ethical behavior. 2. Organizations must have a code of ethics. 3. Policies have to be enforced regarding ethical offences. 4. Ethical responsibility must be taught to all employees. (continued) HOW to PREVENT UNETHICAL BEHAVIORS LG4 Setting Corporate Ethical Standards 4-16
- 17. * * Source: James Gehrke, Magnify Leadership & Development, November 2008. 5. Discussions of ethics must be included in the decision-making process. 6. Accountability must be taken seriously at all levels in the organization. 7. Organizations must act fast when a crisis occurs. 8. Employees must know they have to defend and maintain the company’s reputation. HOW to PREVENT UNETHICAL BEHAVIORS LG4 Setting Corporate Ethical Standards 4-17
- 18. * * Progress Assessment • What are compliance-based and integrity-based ethics codes? • What are the six steps to follow in establishing an effective ethics program in a business? PROGRESS ASSESSMENT 4-18
- 19. * *Corporate Social Responsibility • Corporate Social Responsibility (CSR) -- The concern businesses have for the welfare of society. • CSR is based on a commitment to integrity, fairness, and respect. • CSR proponents argue that businesses owe their existence to the societies they serve and cannot exist in societies that fail. CORPORATE SOCIAL RESPONSIBILITY LG5 4-19
- 20. * *Corporate Social Responsibility • Corporate Philanthropy -- Includes charitable donations. • Corporate Social Initiatives -- Includes enhanced forms of corporate philanthropy. CORPORATE PHILANTHROPY and SOCIAL INITIATIVES LG5 4-20
- 21. * *Corporate Social Responsibility • Corporate Responsibility -- Includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment. • Corporate Policy -- The position a firm takes on social and political issues. CORPORATE RESPONSIBILITY and POLICY LG5 4-21
- 22. * *Corporate Social Responsibility • Xerox offers a Social Service Leave program. • Citizen Corps encourages volunteers to help strengthen homeland security by helping in their community. • Two-thirds of MBA students surveyed reported they would take a lower salary to work for a socially responsible company. POSTIVE IMPACTS of COMPANIES LG5 4-22
- 23. * * Source: Wall Street Journal, www.online.wsj.com, June 23, 2008. Corporate Social Responsibility To WHOM MUCH HAS BEEN GIVEN… America’s Charitable Giving LG5 4-23
- 24. * * Source: Parade Magazine, www.parade.com, September 14, 2008. Corporate Social Responsibility HELPING HANDS Most Generous Celebrities* LG5 Who? How Much? Oprah Winfrey $50.2 Million Herb Alpert $13 Million Barbara Streisand $11 Million Paul Newman $10 Million Mel Gibson $9.9 Million Angelina Jolie & Brad Pitt $8.4 Million Michael Jordan $5 Million Eric Lindros $5 Million Lance Armstrong $5 Million *Donations made in 2007 4-24
- 25. * * Source: Conde Nast Portfolio, www.portfolio.com, January 2008. 1. California – 12.1% 2. New Jersey – 8.9% 3. Pennsylvania – 5.2% 4. Washington – 5% 5. New York – 5% Corporate Social Responsibility WHO GIVES? Five States Contribute More Than a Third of the Nation’s Donations LG5 4-25
- 26. * * Source: Fast Company, www.fastcompany.com, May 2008. Corporate Social Responsibility GENEROUS AMERICANS Americans Donated $295,020,000,000 in 2006 LG5 4-26
- 27. * * Responsibility to Customers • The Right to Safety • The Right to be Informed • The Right to Choose • The Right to be Heard PRESIDENT KENNEDY’S BASIC RIGHTS of CONSUMERS LG5 4-27
- 28. * * Responsibility to Investors • Insider Trading -- Insiders using private company information to further their own fortunes or those of their family and friends. • Unethical behavior does financial damage to a company and investors are cheated. INSIDER TRADING LG5 4-28
- 29. * * Responsibility to Employees • Create jobs and provide a chance for upward mobility. • Treat employees with respect. • Offer salaries and benefits that help employees reach their personal goals. RESPONSIBILITY to EMPLOYEES LG5 4-29
- 30. * * Source: Fortune, www.fortune.com, March, 2009. 1. Apple 2. Berkshire Hathaway 3. Toyota 4. Google 5. Johnson & Johnson 6. Proctor & Gamble 7. FedEx 8. Southwest Airlines 9. General Electric 10. Microsoft 11. Wal-Mart 12. Coca-Cola 13. Walt Disney 14. Wells Fargo 15. Goldman Sachs 16. McDonald’s 17. IBM 18. 3M 19. Target 20. J.P. Morgan Chase Responsibility to Employees AMERICA’S MOST ADMIRED COMPANIES LG5 4-30
- 31. * *Responsibility to Society and the Environment • Over one-third of working Americans receive their salaries from nonprofits – who are dependent on funding from others. • The green movement emerged as concern about global warming increased. • Many companies are trying to minimize their carbon footprints – the amount of carbon released during an item’s production, distribution, consumption and disposal. SOCIETY and the ENVIRONMENT LG5 4-31
- 32. * *Responsibility to Society and the Environment • Environmental efforts may increase costs but can offer good opportunities. • The emerging renewable-energy and energy- efficiency industries account for 8.5 million U.S. jobs. RESPONSIBILITY to the ENVIRONMENT LG5 • By 2030, as many as 40 million “Green” jobs will be created. 4-32
- 33. * * • With public concern over the environment, companies are finding greener ways of doing business. • Some companies are claiming they are more environmentally responsible than they actually are, a practice called “greenwashing”. • Web sites such as Greener Choices and Greenwashing Index screen ads for greenwashing. GREEN GREED (Thinking Green) 4-33
- 34. * * Social Auditing • Social Audit -- A systematic evaluation of an organization’s progress toward implementing programs that are socially responsible and responsive. • Four Types of Social Audit Watchdogs - Socially conscious investors - Environmentalists - Union officials - Customers SOCIAL AUDITING LG5 4-34
- 35. * * Progress Assessment • What’s corporate social responsibility, and how does it relate to each of a business’s major stakeholders? • What’s a social audit, and what kinds of activities does it monitor? PROGRESS ASSESSMENT 4-35
- 36. * *International Ethics and Social Responsibility • Many businesses want socially responsible behavior from their international suppliers. • The Joint Initiative on Corporate Accountability and Workers’ Rights was designed to make creating a single set of labor standards and inspecting factories easier. • In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business. INTERNATIONAL ETHICS LG6 4-36
- 37. * * Source: Forbes, www.forbes.com, March 24, 2008. International Ethics and Social Responsibility GIVERS AROUND the WORLD Share of GDP LG6 4-37
- 38. * * • Almost half of Motorola’s employees live outside the U.S. • A Motorola employee returns to his home country to work and the company reimburses living expenses so he can live in a safe area. The employee is trying to do the honorable thing for his family and the company is trying to keep the employee safe. • If the employee uses the money to help his family instead, is it right for the company to stop payment? ETHICAL CULTURE CLASH (Reaching Beyond Our Borders) 4-38
- 39. * * Progress Assessment • How are U.S. businesses demanding socially responsible behavior from their international suppliers? • Why is it unlikely that there will be a single set of international rules governing multinational companies soon? PROGRESS ASSESSMENT 4-39
Editor's Notes
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.The reputation of American businesses have been under assault due to numerous scandals over the past twenty years. Use this slide to help students understand that a person can obey the law and still be behaving unethically. Following the law is only the first step in being ethical. Ethics are standards of moral behavior and are accepted by society as right versus wrong.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.Studies have shown that dishonesty at school often leads to dishonesty at work.
- See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action.When facing an ethical dilemma it is important that you ask these three basic questions: Is it legal? Is it balanced? How will it make me feel about myself? Asking and answering these three questions will prevent many people from making unethical decisions.
- See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action.
- 1) Ethics are society’s accepted standards of behavior. In other words behaviors accepted by society as right rather than wrong.2) Ethics reflect people’s proper relationships with one another. Legality is narrower in that it refers to laws we have written to protect ourselves from fraud, theft, and violence.3) It helps to ask the following questions when faced with an ethical dilemma: Is the proposed action legal? Is it balanced? Would I want to be treated this way? How will it make me feel about myself?
- See Learning Goal 3: Describe management’s role in setting ethical standards.Organizational ethics begins at the top. Leadership helps to instill corporate values in employees, so like many aspects of business ethical behavior practiced and modeled by managers and executives will often trickle down to the employees at large.
- See Learning Goal 3: Describe management’s role in setting ethical standards.Factors Influencing Managerial Ethics Before you put this slide up, you may want to ask the students: What factors influence managerial ethics? Ethics begins with the individual but is influenced by the organization and the environment in which the business operates. To bring the discussion to the present, you may ask: How can the firm’s reward system impact ethical behavior? How did these reward systems at large banks and other financial institutions exacerbate the financial crisis in this country? (Students should be able to discuss this point. Excessive risk taking imperiled all of the stakeholders of various financial institutions as well as the world economy.)
- See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action.Ways to Prevent Unethical Behavior Before you put this slide up, you may want to ask the students: What is management’s role in preventing unethical behaviors? What can be done to deter unethical behaviors on the part of employees? Increasing the penalty and educating employees are among the top methods for deterring unethical behaviors, according to the CMO Ethics Poll. (Source: CMO Magazine, October 2004) Thirty percent of the respondents in a poll suggested adding new laws to deter unethical behaviors. Ask the students: If ethics is more than legality, would new laws help? (Students should be able to argue this point. Although ethics is more than legality, if something is against the law, people may deter from such behavior. However, it should be pointed out that ethics should be the way of life, i.e., it needs to be ingrained in the employees through culture and role modeling by managers and executives.)
- 1) Compliance-based ethics codes emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers. Integrity-based ethics codes define the organization’s guiding values, create an environment that support ethically sound behavior, and stress shared accountability.2) The six steps many believe will improve U.S. business ethics are: (1) Top management must adopt and unconditionally support an explicit corporate code of conduct: (2) Employees must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly; (3) Managers and others must be trained to consider the ethical implications of all business decisions; (4) An ethics office must be set up with which employees can communicate anonymously; (5) Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program; (6) The ethics code must be enforced with timely action if any rules are broken.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.CSR is based on a commitment to such basic principles as integrity, fairness and respect. Many for-profit companies have philanthropic endeavors as a part of their mission. Communities often depend on companies to help with social programs that make the lives of people in the community better. It stands to reason that businesses that strengthen their communities, as proponents of CSR argue, will grow stronger as their communities improve.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.An ultimate example of a company helping the community is Xerox’s program, Social Service Leave, which allows employees to leave for up to a year and work for a nonprofit while still earning full salary, including benefits and job security.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.America’s Charitable Giving For the first time charitable giving exceed $300 billion in this country. What percentage of the $300 billion was contributed by individuals, businesses and foundations? (Individuals contributed 82.3%, businesses 5.1% and foundations 12.6%)(Source: http://nonprofit.about.com/od/trendsissuesstatistics/a/giving2008.htm) Religious organizations continue to receive the biggest share of donations accounting for 33.4% of the total giving. Here is the breakdown for what types of organizations receive these donations: Religion, $102.32 billion, 33.4% Education, $43.32 billion, 12.1% Human services, $29.64 billion, 9.7% Health, $23.15 billion, 7.6% Public-Society benefit (United Way etc), $22.65 billion, 7.4% Arts, culture and humanities, $13.67 billion, 4.5% International affairs, $13.22 billion, 4.3% Environment and animals, $6.96 billion, 2.3% Foundations, $27.73 billion, 9.1% Unallocated giving, $23.67, 7.7%
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.Most Generous Celebrities Students will find it interesting to see on this slide what some of their favorite celebrities have donated. Oprah Winfrey earns well over $200 million per year. The talk-show host and entertainment mogul is the founder of the Angel Network, a charity that raises money for poverty-stricken children and she has raised money to open schools for girls in South Africa.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.Who GivesCalifornia has the largest population and it’s residents make the most donations.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.Generous Americans Before you put this slide up, you may want to ask the students: What income group donates more -- people earning over or under $100,000? (Sixty-five percent of money donated by Americans comes from people earning less than $100,000.) How does this information impact the fund raising of nonprofit organizations seeking charitable contributions? (Small donations add up and require nonprofit organizations to alter their fund raising efforts to reach these donors.)
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.America’s Most Admired Companies1. Before you put this slide up, you may want to ask the students: Are the ideals of maximization of profit and social responsibility in conflict? Corporate social responsibility is the concern businesses have for the welfare of society, not just for their owners. 3. The vast majority of the companies listed in this slide are not only admired but also financially successful.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 5: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- 1) Corporate social responsibility (CSR) is the concern businesses have for the welfare of society not just for their owners. CSR defenders believe that businesses owe their existence to the societies they serve and cannot succeed in societies that fail. CSR must be responsible to all stakeholders not just investors in the company.2) A social audit is a systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs. Many feel a social audit should measure workplace issues, the environment, product safety, community relations, military weapons contracting, international operations and human rights, and respect for the rights of local people.
- See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets.
- See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Givers Around the World To get a discussion moving ask students: Are Americans Cheap? Or Charitable? This slide shows the world’s top givers based on a share of GDP. Based on this slide Americans appear to be the most charitable in the world based on share of GDP.
- See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets.
- 1) Many U.S. businesses now demand that international suppliers do not violate U.S. human rights and environmental standards.2) It’s unlikely there will be a single set of international rules governing multinational companies because of the widespread disparity among global nations as to what constitutes ethical behavior. For example, a gift in one culture can be a bribe in another. In some nations child labor is expected and an important part of a family’s standard of living. The fairness of adhering to U.S. standards of ethical behavior is not as easy as you may think.