Topic 6 Ethics

Ethics, Corporate
Responsibility,
and Sustainability
Chapter Five
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education
1
.
Quote
“It is truly enough said that a corporation has no

conscience; but a corporation of conscientious
men is a corporation with a conscience.”
Henry David Thoreau
2
Learning Objectives
LO1 Describe how different ethical perspectives
guide decision making.
LO2 Explain how companies influence their
ethics environment.
LO3 Outline a process for making ethical
decisions.
LO4 Summarize the important issues
surrounding corporate social responsibility.
3
Learning Objectives
LO5 Discuss reasons for businesses’ growing
interest in the natural environment.
LO6 Identify actions managers can take to
manage with the environment in mind.
4
Ethics
• Ethics
– The system of rules that governs the ordering of
values.
5
Telling the Truth and Lying:
Possible Outcomes
Exhibit 5.1
6
It’s a Personal Issue
• Most of us think we are Managers often:
good decision makers, • Hire people who are like
ethical, and unbiased. them.
• Most people have • Think they are immune
unconscious biases that to conflicts of interest.
favor themselves and • Take more credit than
their own group. they deserve.
• Blame others when
they deserve some
blame themselves.
7
It’s a Personal Issue
If the employer pays
for the computer and
the time you spend
sitting in front of it, is it
ethical for you to use
the computer to do
tasks unrelated to your
work?
8
Ethics
• Ethical issue
– Situation, problem, or opportunity in which an
individual must choose among several actions that
must be evaluated as morally right or wrong.
• Business ethics
– The moral principles and standards that guide
behavior in the world of business.
9
Ethical Systems
• Moral philosophy
– Principles, rules, and values people use in deciding
what is right or wrong.
• Universalism
– The ethical system stating that all people should
uphold certain values that society needs to
function.
10
Caux Principles
• Caux Principles
– Ethical principles
established by
international
executives based in
Caux, Switzerland, in
collaboration with
business leaders
from Japan, Europe,
and the United
States.
11
Caux Principles
Kyosei
• Living and working together for the common
good, allowing cooperation to coexist with
healthy and fair competition.
Human dignity
• Concerns the value of each person as an end,
not a means to the fulfillment of others’
purposes.
12
Question
Which ethical system bases ethical behavior on
the opinions and behaviors of relevant other
people?
A. Egoism
B. Utilitarianism
C. Relativism
D. Virtue ethics
13
Ethical Systems
• Egoism • Utilitarianism
– An ethical system – An ethical system
defining acceptable stating that the
behavior as that greatest good for the
which maximizes greatest number
consequences for the should be the
individual. overriding concern.
14
Ethical Systems
• Relativism
– Philosophy that bases ethical behavior on the
opinions and behaviors of relevant other people.
• Virtue ethics
– Classification of people based on their level of
moral judgment.
15
Ethical Systems
• Kohlberg’s model of cognitive moral
development
– Perspective that what is moral comes from what a
mature person with “good” moral character would
deem right.
16
Current Ethical Issues in
Business
Exhibit 5.3
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Question
What act passed into law by Congress in 2002
established strict accounting and reporting
rules?
A. Wagner Act
B. Sarbanes-Oxley Act
C. Chapin Act
D. GAAP Act
18
The Ethics Environment
• Sarbanes-Oxley Act
– An act passed into law by Congress in 2002 to
establish strict accounting and reporting rules in
order to make senior managers more accountable
and to improve and maintain investor confidence.
19
Business Ethics
• Ethical climate • Ethical leader
– In an organization, – One who is both a
the processes by moral person and a
which decisions are moral manager
evaluated and made influencing others to
on the basis of right behave ethically.
and wrong.
20
Danger Signs
Excessive emphasis on short-term revenues over longer-term
considerations.
Failure to establish a written code of ethics.
A desire for simple, “quick fix” solutions to ethical problems.

An unwillingness to take an ethical stand that may impose
financial costs.
Consideration of ethics solely as a legal issue or a public
relations tool.
Lack of clear procedures for handling ethical problems.
Responding to the demands of shareholders at the expense of
other constituencies.
21
Ethics Programs
• Compliance-based ethics programs
– Company mechanisms typically designed by
corporate counsel to prevent, detect, and punish
legal violations.
• Integrity-based ethics programs
– Company mechanisms designed to instill in people
a personal responsibility for ethical behavior.
22
A Process for Ethical Decision Making
Exhibit 5.7
23
Ethical Decision Making
Making ethical decisions takes:
• Moral awareness
– realizing the issue has ethical implications.
• Moral judgment
– knowing what actions are morally defensible .
• Moral character
– the strength and persistence to act in accordance
with your ethics despite the challenges.
24
Courage
Behaving ethically requires not

just moral awareness and moral
judgment but also moral
character, including the courage
to take actions consistent with
your ethical decisions.
25
Corporate Social Responsibility
• Corporate social
responsibility (CSR)
– Obligation toward
society assumed by
business.
– Triple bottom line.
26
Economic responsibilities
• To produce goods and services that society wants at a
price that perpetuates the business and satisfies its
obligations to investors.
Legal responsibilities
• To obey local, state, federal, and relevant
international laws.
Ethical responsibilities
• Meeting other social expectations, not written as law.
27
• Philanthropic
responsibilities
– Additional behaviors
and activities that
society finds
desirable and that
the values of the
business support.
28
Pyramid of Global Corporate Social
Responsibility and Performance
Exhibit 5.8
29
Social Enterprise
Can a Former Yoga Instructor Clean Up the
Trucking Business?
• As a teen, Caitlin Welby saw her family’s trucking
business as destroying the environment.
• Rather than joining the business, she became a
yoga instructor and spent time traveling.
• With no one else to step in, she became CEO of
the business at age 32.
• Welby has set out to transform an industry that
she sees as convoluted, overly complicated and
inefficient.
30
Social Enterprise Questions
Can a Former Yoga Instructor Clean Up the
Trucking Business?
• How might Welby pivot her company so that it
can become more environmentally sustainable
while remaining profitable?
• Will Welby’s background help or hinder her
efforts to transform the trucking enterprise?
31
• Transcendent education
– An education with five higher goals that balance
self-interest with responsibility to others.
– Empathy, generativity, mutuality, civil aspiration,
intolerance of ineffective humanity.
32
Contrasting Views
• First - holds that managers act as agents for
shareholders and, as such, are obligated to
maximize the present value of the firm.
• Second - managers should be motivated by
principled moral reasoning.
33
Reconciliation
• Profit maximization and corporate social
responsibility used to be regarded as
antagonistic (aggressive), leading to opposing
policies. But the two views can converge.
• Recent attention has also been centered on
the possible competitive advantage of socially
responsible actions.
34
Ecocentric Management
• Ecocentric management
– Goal is the creation of sustainable economic
development and improvement of quality of life
worldwide for all organizational stakeholders.
35
Sustainable growth
• Economic growth and development that

meet present needs without harming the
needs of future generations.
36
• Life-cycle analysis
(LCA)
– A process of analyzing all
inputs and outputs,
though the entire
“cradle-to-grave” life of a
product, to determine
total environmental
impact.
37
Management in Action- Onward
IBM Takes Responsibility
• IBM understands that corporate citizenship
includes practices related to the natural
environment.
• IBM has had policies for protecting the
environment and conserving resources since
1967.
• Currently, their product recycling programs are
designed to resell, refurbish, or recycle at least 97
percent of its end-of-life products.
38
Management in Action - Questions
IBM Takes Responsibility
• How is IBM’s commitment to corporate social
responsibility good for IBM as a business?
• Improving energy efficiency saves IBM millions
of dollars, but recycling its used electronics
requires hiring hundreds of people. Is the
recycling program justifiable?
39

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Ethics, Corporate

“It is truly enough said that a corporation has no

Henry David Thoreau

A desire for simple, “quick fix” solutions to ethical problems.

Behaving ethically requires not

• Economic growth and development that

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