Chapter 4
Demanding Ethical and
Socially Responsible
Behavior
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
Ethics
&
Social Responsibility
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Ethics
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WHAT are ETHICS?
• Ethics -- The standards of moral behavior.
Behaviors that are accepted by society as right
versus wrong.
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Ethics
Doing What Is Right…
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Ethics
As You Know It To Be Right.
BASIC MORAL VALUES
Right:
• Integrity
• Respect for human life
• Self control
Wrong:
• Cheating
• Cowardice
• Cruelty
• Honesty
• Courage
• Self-sacrifice
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Ethics
Ethics Begins With Each
of Us
Stem From Individual
More Than Legality
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Ethical Dilemma
a situation requiring a choice between
equally undesirable alternatives.
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Ethics Begins
with Each of Us
FACING ETHICAL DILEMMAS
LG2
• Ask yourself these
questions:
- Is it legal?
- Is it balanced?
- How will it make
me feel about
myself?
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Texas Instruments
The TI Ethics Quick Test
- Is the action legal?
- Does it comply with our values?
- If you do it, will you feel bad?
- How will it look in the newspaper?
- If you know it's wrong, don't do it!
- If you're not sure, ask.
- Keep asking until you get an
answer.
For copies of the card or further
information, contact the TI Ethics
Office at 1-800-33-ETHIC.
(This information is provided to TI
employees on a business-card size
mini-pamphlet to carry with them.)
ETHICS CODES
• An increasing number of companies have
adopted written codes of ethics.
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ETHICS CODES
• 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.
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ETHICS START at the TOP
• Trust between workers and
managers must be based on
fairness, honesty, openness
and moral integrity.
• Leadership can help instill
corporate values in
employees.
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HOW to IMPROVE AMERICA’S
BUSINESS ETHICS
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)
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HOW to IMPROVE AMERICA’S
BUSINESS ETHICS, cont.
4. An ethics office must be set up with which
employees can communicate anonymously.
Whistleblowers -- People who report illegal or
unethical behavior.
5. Involve outsiders such as
suppliers, subcontractors,
distributors and customers.
6. The ethics code must be
enforced.
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Social Responsibility
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Social Responsibility
Social responsibility is
management’s obligation to
make choices and take actions
that contribute to the welfare
and interests of society as well
as to those of the
organization.
CORPORATE SOCIAL
RESPONSIBILITY
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CORPORATE RESPONSIBILITY
and POLICY
• 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 Philanthropy -- Includes charitable
donations.
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HELPING HANDS
Most Generous Celebrities
Who?
For?
George Clooney
United Way;
UN Messenger of Peace
Angelina Jolie & Brad Pitt
Make it Right Foundation; UN
Ben Affleck
UN
Madonna
Raising Malawi
Michael J. Fox
Michael J. Fox Foundation for
Parkinson’s Research
Alicia Keys
Keep a Child Alive;
Frum Tha Ground Up
Sir Elton John
Elton John AIDS Foundation
Matt Damon
GreenDimes; H2O Africa;
Running the Sahara
Oprah Winfrey
Angel Network
Source: Parade Magazine, www.parade.com, July 8, 2010.
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GENEROUS GUYS
World’s Biggest Givers
Who?
How Much?
What For?
Bill Gates
$28B
Malaria, public health, education
Warren Buffett
$8.3B
Gates Foundation
George Soros
$8B
Human rights, democracy
Gordon Moore
$6.8B
Environment
Carlos Slim
$4B
Education, healthcare
Eli Broad
$2.6B
Education, arts
Azim Premji
$2.1B
Education
James Stowers
$2B
Genetic research
Michael Bloomberg
$1.8B
Antismoking, transportation
Li Ka-Shing
$1.6B
Education, healthcare
Source: Forbes, June 6, 2011.
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RESPONSIBILITY to CONSUMERS
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PRESIDENT KENNEDY’S BASIC
RIGHTS of CONSUMERS
• The Right to Safety
• The Right to be Informed
• The Right to Choose
• The Right to be Heard
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Responsibilities to Customers




The Right to Be Safe. Safe operation of products,
avoiding product liability.
The Right to Be Informed. Avoiding false or misleading
advertising and providing effective customer service.
The Right to Choose. Ability of consumers to choose
the products and services they want.
The Right to Be Heard. Ability of consumers to
express legitimate complaints to the appropriate parties.
 Consumer Product Safety Commission
 www.cpsc.gov
RESPONSIBILITY TO INVESTORS
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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.
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RESPONSIBILITY to
EMPLOYEES
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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.
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AMERICA’S MOST ADMIRED
COMPANIES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Apple
Google
Berkshire Hathaway
Southwest Airlines
Procter & Gamble
Coca-Cola
Amazon
FedEx
Microsoft
McDonald’s
Source: Fortune, www.fortune.com, March 21, 2011.
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RESPONSIBILITY to the
ENVIRONMENT
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RESPONSIBILITY to the
ENVIRONMENT
• Environmental efforts may increase costs but
can offer good opportunities.
• The emerging renewable-energy and energyefficiency industries account for 8.5 million U.S.
jobs.
• By 2030, as many as 40
million “Green” jobs will
be created.
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SOCIAL AUDITING
• Social Audit -- A systematic evaluation of an
organization’s progress toward implementing
socially responsible and responsive programs.
• Five Types of Social Audit Watchdogs
1)
2)
3)
4)
5)
Socially conscious investors
Socially conscious research organizations
Environmentalists
Union officials
Customers
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INTERNATIONAL ETHICS
• Many businesses want socially responsible
behavior from their international suppliers.
• In the 1970s, the Foreign Corrupt Practices Act
criminalized the act of paying foreign
businesses or government leaders in order to
get business.
• Partners in the Organization of American States
signed the Inter-American Convention Against
Corruption.
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Social Responsibility
Bottom Line:
Should Companies Have?
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The Majority View
Companies are citizens in the
communities in which they reside,
therefore,
They do have a Social Responsibility
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An Economist’s View
Milton Friedman
– Argues that firms need to focus on making a
profit, not on social responsibility
– Claims that firms that focus on social
responsibility get distracted from their real
purpose
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Social Responsibility
To Sum It Up:
Doing Good vs. Doing Well
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