FHF
McGraw-Hill/Irwin part
1
Ferrell Hirt Ferrell
A CHANGING WORLD
EIGHTH EDITION
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

FHF part
1
Business in a
Changing World
CHAPTER 1 The Dynamics of Business and Economics
CHAPTER 2 Business Ethics and Social Responsibility
CHAPTER 3 Business in a Borderless World

[ 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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Ethical Decisions in
Organizations
Most unethical activities are supported by a culture encouraging employees to bend the rules
 Countrywide Financial
 ‘Liar loans’
 Culture that encouraged cutting corners in order to make profits
 American International Group
 Manipulation of accounting
 Overstatement of earnings– forced to restate earnings $3.9 billion lower
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Business’s obligation is to maximize its positive impact and minimize its negative impact on society
 Known for high-end luxury shoes and accessories
 Launched a lower-cost brand Ferragamo WORLD
 Aimed at socially conscious consumers
 Eco-friendly materials
 Proceeds go to help the Acumen Fund, which provides funding for businesses in East Africa, India and Pakistan
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A Timeline of Ethical and
Social Responsibility Concerns
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 Laws and regulations encourage businesses to conform to society’s basic standards, values, and attitudes.
 Sarbanes-Oxley Act, 2002
 Troubled Assets Relief Program
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The Role of Ethics in
Business
Growing concerns about legal and ethical issues in business
 Antitrust violations
 Accounting fraud
 Cybercrimes
 Unfair competitive practices
 Tax fraud
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[ 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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 Involve all organizational activities
• For profit businesses
• Non-profits
• Government
• Schools and universities
 Learning to recognize and resolve ethical issues are important in maintaining an ethical business climate
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 Build Trust
 Promote confidence
 Validate relationships
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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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Are generally more profitable!
 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
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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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Unethical Behavior in
Business
 Misuse of company resources
 Abusive & intimidating behavior
 Conflict of interest
 Fairness & honesty
 Communications
 Business relationships
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Sources of Unethical
Behavior
Misuse of Company Resources
 The most commonly observed misconduct
 Time theft
 Use of personal email and social networking sites at work is a growing problem
 Stealing office supplies
 Unauthorized use of equipment and software
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Sources of Unethical
Behavior
Abusive and Intimidating Behavior / Bullying
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Sources of Unethical Behavior in Organizations
Conflict of interest
 Advance personal interest over others’ interests
 Benefit self at the expense of the company
Bribes represent a conflict of interest because they benefit an individual at the expense of an organization or society
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Corruption Perceptions
Index
Least Corrupt Countries…
1. New Zealand
2. Denmark
3. Singapore/ Sweden (tied)
12. Hong King/Luxembourg (tied)
14. Australia
16. Germany/ Ireland (tied)
5. Switzerland
6. Finland/Netherlands (tied)
17. Japan/ United Kingdom
19. United States
8. Australia/Canada/Iceland (3-way tie) 20. Barbados
11. Norway
Source: “Corruption Perceptions Index 2009,” Transparency International, http://www.transparency.org/policy_research/ surveys_indices/cpi/2009/cpi_2009_table (accessed January 22, 2010).
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Are at the heart of business ethics
 How employees use resources
 No deceit, coercion, or misrepresentations
 Fair competition
 Disclosure of potential harm caused by products
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Ethical Concerns in
Communications
 False/misleading advertising
 Deceptive personal selling tactics
 Truthfulness in product safety and quality
 Unsubstantiated claims
 Product labeling
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Ethical Concerns in
Business Relationships
Relationships with customers, suppliers and co-workers
 Ethical behavior within a business is important
 Keeping company secrets
 Meeting obligations and responsibilities
 Avoiding undue pressure
 Managers’ responsibility to create ethical work environment and provide a positive example
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 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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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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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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Ethical Decisions in an Organization are
Influenced by Three Key Factors
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[ Formalized rules and standards that describe what a company expects of its employees
]
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Occurs when an employee exposes an employer’s wrongdoing to outsiders
 Many companies have internal reporting mechanisms in place
• Avoid legal action
• Negative publicity
 Whistleblowers often treated negatively and have a difficult time finding other work
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1.
2.
3.
4.
Economic
Legal
Ethical
Voluntary
Four Dimensions to
Social Responsibility
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The Pyramid of
Social Responsibility
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[ The extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders
]
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1.
Bristol Myers-Squibb
2.
General Mills, Inc.
3.
IBM Corp.
4.
Merck & Co., Inc.
5.
HP Co, LP
6.
Cisco Systems, Inc.
7.
Mattel, Inc.
8.
Abbott Laboratories
9.
Kimberly-Clark Corp.
10. Entergy Corp.
11. ExxonMobil Corp.
12. Wisconsin Energy Corp.
13. Intel Corp.
14. Proctor & Gamble Co.
15. Hess Corp.
16. Xerox Corp.
17. 3M Co.
18. Avon Products, Inc.
19. Baxter International Inc.
20. Monsanto Co.
“CRO’s 100 Best Corporate Citizens 2009.”
CRO, http://www.thecro.com/files/
CRO100BestCorporateCitizensList2009.pdf (accessed January 22, 2010).
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Formal Ethics and
Compliance Programs
Arguments for and against these programs
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Stakeholder Relationships:
 Primarily concerned with profit or ROI
 Financial community at large
 Proper accounting procedures
 Protecting owner’s rights and investments
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Stakeholder Relationships:
 Provide a safe workplace
 Adequate compensation
 Listen to grievances
 Fair treatment
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Stakeholder Relationships:
Consumerism
 Activities that independent individuals, groups and organizations undertake to protect their rights as consumers
 Critical issue is business’s responsibility to customers to provide satisfying, safe products and to protect their rights as consumers.
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Kennedy’s Consumer
Bill of Rights
 The right to safety
 The right to be informed
 The right to choose
 The right to be heard
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Stakeholder Relationships:
The Environment & Sustainability Issues
Sustainability means conducting activities with the long-term well-being of the natural environment in mind.
 Involves interaction between
 Nature
 Individuals
 Organizations
 Business strategies
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Stakeholder Relationships:
The Environment & Sustainability Issues
 Pollution
• Land
• Water
• Air
 Waste disposal
 Future of energy
• Alternative energy
Copyright 2009 Utopian Empire Creativeworks | Biomass Energy Plant in Cadillac Michigan
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Response to
Environmental Issues
 Many companies have a President of Environmental
Affairs Position
 Most Fortune 500 companies have in place:
 Written environmental policy
 Recycling programs
 Waste-reduction initiatives
 Environmental consciousness can save money through reducing waste
 Greenwashing, or creating a positive association with environmental issues for an unsuitable product, service or practice
• Is a growing problem
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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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