Business in a

Changing World

Chapter 2
Business Ethics and Social
Responsibility

McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
Ethisphere links ethics to profits
Publication that illuminates the
relationship between ethics and
profits.
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Business Ethics & Social Responsibility

Exec who allegedly made $270M off Enron to pay SEC $31.5M

Business Ethics – principles and

standards that determine acceptable
conduct in business

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Business Ethics & Social Responsibility

A Timeline of Ethical and Socially Responsible Concerns

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Business Ethics & Social Responsibility

Social responsibility– business’s obligation to

maximize its positive impact and minimize its
negative impact on society

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Business Ethics & Social Responsibility

Laws and regulations encourage businesses to

conform to society’s standards, values, and
attitudes. Sarbanes-Oxley Act - 2002

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The Role of Ethics in Business
Concern about unethical business
practices continue –

HealthSouth’s accounting
improprieties and securities fraud

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The Role of Ethics in Business

Unethical and/or Illegal

• Accounting fraud
• Deceptive advertising
• Unfair competitive practices
• Internet theft

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The Role of Ethics in Business
Ethical Conduct
• Builds trust
• Promotes confidence
• Validates relationships

Learn how to recognize and resolve

ethical issues

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Recognizing Ethical Issues in Business

Ethical issue –
an identifiable problem,
situation, or opportunity that requires
a person to choose from among
several actions that may be evaluated
as right or wrong, ethical or unethical.

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Recognizing Ethical Issues in Business

How to judge the ethics of a

situation –

examine the situation from your

stakeholders’ position, including
customers and competitors

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Recognizing Ethical Issues in Business

Types and Incidences of Observed Misconduct

Many business issues may seem straightforward and easy to resolve on the
surface, but are in reality very complex.

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Sources of Unethical Behavior in Organizations

1. Overly aggressive financial or business

objectives
2. Abusive & intimidating behavior
3. Conflict of interest
4. Fairness & honesty
5. Communications
6. Business relationships

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 Sources of Unethical Behavior

Abusive and intimidating behavior

“Bullies” behavior:

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Sources of Unethical Behavior in Organizations

Conflict of interest –
– the most common ethical issue identified
by employees.
– Advance personal interests over others’
interests
– Benefit self at the expense of the company

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Least Corrupt Countries

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Business Ethics

Fairness & honesty – the heart of

business ethics
• How employees use resources
• No harm to customers
• Accurate representations
• Disclosure

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Business Ethics

Most Popular Office Supplies Employees Pilfer

“More Employees Taking Supplies,” The News

Journal
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Personal Ethics

Honesty?

25,000 high school students:

• 62% cheated on exams at least once
• 35% copied documents from Internet
• 27% shoplifted
• 23% cheated to win at sports

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Ethical Concerns

Communications

• False/misleading advertising
• Deceptive personal selling tactics
• Product safety and quality
• Unsubstantiated claims
• Product labeling

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Ethical Concerns

Business Relationships

• Relationships with customers

• Relationships with suppliers
• Relationships with co-workers

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Ethical Concerns

Plagiarism

The act of taking someone else’s work

and presenting it as your own without
mentioning the source

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Making Decisions About Ethical Issues
Questions to Consider in Determining Whether an
Action Is Ethical

Open discussion of ethical issues does not eliminate ethical

problems; it does promote trust and learning in an
organization.

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Improving Ethical Behavior in Business

Ethical decisions in an organizations are

influenced by three key factors

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Improving Ethical Behavior in Business

Codes of Ethics –
Formalized rules and standards that describe
what a company expects of its employees.

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Improving Ethical Behavior in Business

Key Things to Consider in Developing a Code of Ethics

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Codes of Ethics

National Business Ethics Survey

(NBES)

According to the NBES, employees in

organizations with written standards of conduct
are more likely to report misconduct when they
observe it.

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Codes of Ethics

Whistleblowing

The act of an employee exposing an employer’s

wrongdoing to outsiders, such as the media or
government regulatory agencies.

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Nature of Social Responsibility

4 Dimensions

1. Economic
2. Legal
3. Ethical
4. Voluntary (philanthropic)

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Pyramid of Social Responsibility

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Nature of Social Responsibility

Corporate Citizenship

The extent to which businesses meet the legal,

ethical, economic, and voluntary responsibilities
placed on them by their stakeholders.

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Nature of Social Responsibility

Best Corporate Citizens

1. Intel Corporation
2. Eaton Corporation
3. Nike Inc.
4. Deere and Co.

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Nature of Social Responsibility

Arguments For and

Against Social
Responsibility

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Social Responsibility Issues

Owners & Stockholders

• Primary concern with profit or ROI

• Financial community at large
• Proper accounting procedures
• Protecting owner’s rights and investments

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Social Responsibility Issues

Employee Relations

• Provide a safe workplace

• Adequate compensation
• Listen to grievances
• Fair treatment

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Social Responsibility Issues

Consumer Relations

Consumerism – the activities that independent

individuals, groups, and organizations
undertake to protect their rights as
consumers.

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Social Responsibility Issues

Environmental Issues

• Animal rights
• Pollution
• Going Green

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Social Responsibility Issues

Community Relations

• General community and global welfare

• Hardcore unemployed
• Charitable contributions (United Way)
• Avon’s Breast Cancer Awareness Crusade

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