Chapter

6
Ethical, Social and Legal
Responsibilities of
Management
 The Importance of Ethics

• Ethics
– A set of moral principles or values that govern
behavior.

• Code of ethics
– A document that outlines the principles of
conduct to be used in making decisions within
the organization.

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 Content of Ethical Codes

• Honesty.
• Adherence to the law.
• Product safety and quality.
• Health and safety in the workplace.
• Conflicts of interest.
• Employment practices.
• Selling and marketing practices.
• Financial reporting.
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 Content of Ethical Codes
(cont’d)

• Pricing, billing, and contracting.

• Trading in securities / using confidential information.
• Acquiring and using information about competitors.
• Security.
• Payments to obtain business.
• Political activities.
• Protection of the environment.

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 Behaving Ethically -
Honesty
• Employee theft
– Embezzlement of money, supplies or inventory from employers.
– Accepting bribes from people desiring to conduct business with the
company.
– Submission of false expense accounts.

• Lying about hours worked

– Honest employees report the correct number of work hours clocked
while working from home
– They do not pretend to be sick, to stay home when they should be at
work.

• Falsifying records
– Can cause grave damage to a company’s reputation. 4
Ethical Problems in the
Business World

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 Ethical Standards and
Culture
• Corporate gift giving
– The culture differs around the world.

• Intellectual property
– Refers to ownership of ideas; gives creators of
the intellectual property the exclusive right to
market and sell their work.
– Cracking down on piracy and counterfeiting in the
software industry etc.

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 Social Responsibility
The obligation that individuals or businesses have
to help solve social problems.

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 Social Audit Steps
Social Audit: A method used by management to
evaluate the success or lack of success of
programs designed to improve the social
performance of the organization.

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 Business Laws
• Regulations are rules that government agencies
issue to implement laws. Government affairs
managers are often hired by companies.

Areas of law that affect business operations:

• Corporate law
• Tax law
• Intellectual property
• Consumer law
• Commercial law
• Licensing and Zoning law
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 Dealing with ethical dilemmas
1) Your boss inform you confidentially that one of your friends is
going to be fired. Your friend is about to buy a house. Should
you warn your friend that he is about to be fired, even though
you promised your boss that you would not?

2) Your colleague has been violating your company’s code of

ethics by accepting expensive gifts from a salesperson who
does business with your company. Should you notify your
boss?

3) One of your employees has not been performing her job

properly. You know that she has been having serious personal
problems, and you have tried to be understanding. However,
your entire staff is suffering because of poor performance by
this key team member. What should do?
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