Ferrell Hirt Ferrell
M: Business
nd
2 Edition
FHF
Business Ethics
and
Social Responsibility
FHF
McGraw-Hill/Irwin
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
Business Ethics
[
Principles and standards that determine
acceptable conduct in business
]
FHF
2-3
Ethical Decisions in Organizations
• Most unethical activities are supported by a culture
encouraging employees to bend the rules
• Enron
• Fraud and deception in financial reporting
• Stanford Financial
• Failure to protect consumers’ CDs
• Lying about interest rates
FHF
2-4
Social Responsibility
• Business’s obligation to maximize its positive
impact and minimize its negative impact on
society
• Greyston Bakery
• Located in Yonkers, NY
• Provides jobs for the “unemployable”
• Donates 100% of its $6 million annual profits
to the Greyston Foundation, which supports
local community development causes
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2-5
A Timeline of Ethical and Social Responsibility Concerns
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2-6
Laws and Regulations
• Laws and regulations encourage businesses to
conform to society’s standards, values, and
attitudes.
• Sarbanes-Oxley Act, 2002
• Troubled Assets Relief Program
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2-7
Unethical and/or Illegal Conduct
• Accounting fraud
• Deceptive advertising
• Unfair competitive practices
• Internet theft
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2-8
Ethical Conduct Helps To:
• Build Trust
• Promote confidence
• Validate relationships
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2-9
Concerns about unethical business
practices continue
• Anheuser Busch released a series of
college team-colored Budweiser and
Bud Light beer cans
• protests that the cans might
encourage underage students to
drink
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2-10
Highly Ethical Companies
• Recognized as highly ethical
• Awarded ‘Corporation of the Year’ by Michigan Minority
Business Development Council
• Perfect score three years in a row in a Competitive
Enterprise Institute ranking
• History of environmental advocacy and stakeholder
awareness
Are generally more profitable
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2-11
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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2-12
How to Judge the Ethics of a Situation
• Examine the situation from your stakeholders’ position,
including customers and competitors
• People often need years of experience to accurately
recognize and react to ethical situations
• Ethical situations vary by culture
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2-13
Recognizing Ethical Issues in Business
Many business issues may seem straightforward and easy to
resolve on the surface, but are really very complex
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2-14
Sources of Unethical Behavior in Business
• Overly aggressive financial or business objectives
• Abusive & intimidating behavior
• Conflict of interest
• Fairness & honesty
• Communications
• Business relationships
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2-15
Sources of Unethical Behavior
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2-16
Sources of Unethical Behavior in Organizations
Conflict of interest
• The most common ethical issue identified by employees
‣ Advance personal interest over others’ interests
‣ Benefit self at the expense of the company
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2-17
Corruption Perceptions Index
Least Corrupt Countries
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2-18
Fairness & Honesty
At the heart of business ethics
• How employees use resources
• No harm to customers
• Accurate representations
• Disclosure
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2-19
Ethical Concerns in Communications
• False/misleading advertising
• Deceptive personal selling tactics
• Product safety and quality
• Unsubstantiated claims
• Product labeling
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2-20
Plagiarism
• The act of taking someone else’s work and presenting
it as your own without mentioning the source
‣ A major problem in schools and business
• Students copying others’ work
• A manager taking credit for a subordinate’s work
• Employees copying reports and passing the work
off as their own
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2-21
Personal Ethics
• Is honesty important to students?
• In a survey of 25,000 high school students:
• 62% cheated on exams at least once
• 35% copied documents from the internet
• 27% shoplifted
• 23% cheated to win at sports
(Source: “The Biennial Report Card: The Ethics of American Youth,” Josephson Institute of Ethics,
www.josephsoninstitute.org/survey 2004)
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2-22
Ethical Concerns in Business Relationships
• Relationships with customers
• Relationships with suppliers
• Relationships with co-workers
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2-23
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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2-24
Ethical Decisions in an Organization are Influenced by
FHF
Three Key Factors
2-25
Code of Ethics
[
Formalized rules and standards that
describe what a company expects
of its employees
]
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2-26
Four Dimensions to Social Responsibility
1. Economic
2. Legal
3. Ethical
4. Voluntary
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2-27
The Pyramid of Social Responsibility
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2-28
Corporate Social Responsibility
[
The extent to which businesses meet
the legal, ethical, economic, and
voluntary responsibilities placed on
them by their stakeholders
]
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2-29
Best Corporate Citizens
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(Source: CRO’s 100 Best Corporate Citizens)
2-30
Formal Ethics and Compliance Programs
Arguments for and against these programs
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2-31
Stakeholder Relationships: Shareholders
• Primarily concerned with profit or ROI
• Financial community at large
• Proper accounting procedures
• Protecting owner’s rights and investments
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2-32
Stakeholder Relationships: Employees
• Provide a safe workplace
• Adequate compensation
• Listen to grievances
• Fair treatment
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2-33
Stakeholder Relationships: Consumers
Consumerism
• Activities that independent individuals, groups and
organizations undertake to protect their rights as
consumers
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2-34
Stakeholder Relationships: The Environment
• Animal rights
• Pollution
• Going GREEN
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2-35
Stakeholder Relationships: The Community
General community and global welfare
• The Avon Foundation
• Breast Cancer Awareness Crusade
• Target’s Take Charge of Education program
• 1% of Target Red Card purchases donated to educational causes
Hardcore unemployed
• National Alliance of Business funds training to help hard-core unemployed
to find work and gain self-sufficiency
• Enhanced self-esteem; help people become productive members of society
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2-36
Source: USA Today Snapshot, March 4, 2009, A1
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What American Adults Worry “a Great Deal” About
2-37
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