Ethics ©McGraw-Hill Education. Chapter Contents Ethics Is More than Legality Ethics Begins with Each of Us Managing Businesses Ethically and Responsibly Setting Corporate Ethical Standards Corporate Social Responsibility International Ethics and Social Responsibility ©McGraw-Hill Education. Learning Objectives 1 of 2 LO 4-1 Explain why obeying the law is only the first step in behaving ethically. LO 4-2 Ask the three questions you need to answer when faced with a potentially unethical action. LO 4-3 Describe management’s role in setting ethical standards. LO 4-4 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. ©McGraw-Hill Education. Learning Objectives 2 of 2 LO 4-5 Define corporate social responsibility and compare corporations’ responsibilities to various stakeholders. LO 4-6 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. ©McGraw-Hill Education. Ethics Is More than Legality 1 of 3 Life after Scandal • Scandals have shaken the real estate, mortgage, and banking industries. • How do we restore trust in the free market system? • Punish those who have broken the law. • Make accounting records more transparent. • Consider what is ethical, not just what is legal. LO 4-1 ©McGraw-Hill Education. Volkswagen and Ethics Volkswagen paid the U.S. Justice Department $4.3 billion to settle charges that the German auto giant cheated on emissions tests for its “clean diesel” vehicles. All together, Volkswagen’s attempt to bypass environmental regulations cost the company more than $23 billion. LO 4-1 ©McGraw-Hill Education. © Sean Gallup/Getty Images Ethics Is More than Legality 2 of 3 Ethical Standards are Fundamental • Ethics — Standards of moral behavior; that is, behavior accepted by society as right versus wrong. • Few Americans have moral absolutes. LO 4-1 ©McGraw-Hill Education. Ethics Is More than Legality 3 of 3 Basic Moral Values Right: Wrong: • Integrity • Cheating • Respect for human life • Cowardice • Self-control • Cruelty • Honesty • Courage • Self-sacrifice LO 4-1 ©McGraw-Hill Education. Ethics Begins with Each of Us Plagiarizing from online materials is the most common form of cheating in schools today. • Studies found a strong relationship between academic dishonesty and dishonesty at work. When facing ethical dilemmas, ask yourself these questions: 1. Is my proposed action legal? 2. Is it balanced? 3. How will it make me feel about myself? LO 4-2 ©McGraw-Hill Education. . 1. What is ethics? 2. How do ethics differ from legality? 3. When faced with ethical dilemmas, what questions can you ask yourself that might help you make ethical decisions? ©McGraw-Hill Education. Managing Businesses Ethically and Responsibly Ethics Start at the Top • Managers can help instill corporate values in employees. • Trust between workers and managers must be based on fairness, honesty, openness, and moral integrity. • Overly ambitious goals and incentives can create an environment in which unethical actions can occur LO 4-3 ©McGraw-Hill Education. Factors Influencing Managerial Ethics Individual • Values • Work background • Family status • Personality Organizational • Top level management philosophy • Firm’s reward system Environment • Competition • Economic conditions • Social/cultural institutions • Job dimensions LO 4-3 ©McGraw-Hill Education. Setting Corporate Ethical Standards 1 of 3 An increasing number of companies have adopted written codes of ethics. • 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. LO 4-4 ©McGraw-Hill Education. Figure 4.2 Overview of the Hershey Company’s Code of Ethics Jump to long description in appendix ©McGraw-Hill Education. LO 4-4 Hershey’s Kiss photo: © Richard Watkins/Alamy Figure 4.3 Strategies for Ethics Management Features of compliancebased ethics codes Features of integrity-based ethics codes Ideal Conform to outside standards (laws and regulations) Conform to outside standards (laws and regulations) and chosen internal standards Objective Avoid criminal misconduct Enable responsible employee conduct Leaders Lawyers Managers with aid of lawyers and others Methods Education, reduced employee discretion, controls, penalties Education, leadership, accountability, decision processes, controls, and penalties LO 4-4 ©McGraw-Hill Education. POLLING QUESTION ©McGraw-Hill Education. Would you rather work for a company with a compliance-based or an integritybased ethics code? A. compliance-based ethics code B. integrity-based ethics code Setting Corporate Ethical Standards 2 of 3 How to improve U.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. LO 4-4 ©McGraw-Hill Education. Setting Corporate Ethical Standards 3 of 3 How to improve U.S. business ethics continued 4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers -- Insiders who report illegal or unethical behavior. 5. Involve outsiders such as suppliers, subcontractors, distributors and customers. 6. The ethics code must be enforced. LO 4-4 ©McGraw-Hill Education. . 1. What are compliance-based and integrity-based ethics codes? 2. What are the six steps to follow in establishing an effective ethics program in a business? ©McGraw-Hill Education. Corporate Social Responsibility 1 of 10 Corporate social responsibility (CSR) — A business’s concern for the welfare of society. • CSR is based on a commitment to integrity, fairness, and respect. • CSR proponents argue that businesses owe their existence to the societies they serve and cannot exist in societies that fail. LO 4-5 ©McGraw-Hill Education. Corporate Social Responsibility 2 of 10 Corporate philanthropy — Includes charitable donations. Corporate social initiatives — Include enhanced forms of corporate philanthropy directly related to the company’s competencies. Corporate responsibility — Includes everything from hiring minority workers to making safe products. Corporate policy — The position a firm takes on social and political issues. LO 4-5 ©McGraw-Hill Education. Corporate Social Responsibility 4 of 10 Responsibility to Customers • President Kennedy’s basic rights of consumers 1. The right to safety 2. The right to be informed 3. The right to choose 4. The right to be heard LO 4-5 ©McGraw-Hill Education. Corporate Social Responsibility 5 of 10 Responsibility to Customers continued • How do customers know about companies’ social efforts? • The primary use of social media is to communicate CSR efforts. • Social media allows companies to reach a broad, diverse group and connect directly to them. • Now more than ever, it’s important for companies to live up to their expectations. LO 4-5 ©McGraw-Hill Education. Social Customer Contact Do’s and Don’ts of Using Twitter for Business DO DON’T Engage followers in discussion relevant to your industry. Start political rants. Think about your message before tweeting. Deleted tweets can still be found! Tweet impulsively. Frequently offer new content. Let your account lie dormant. Create separate accounts for business and personal use. Make personal announcements via your company’s Twitter account. LO 4-5 ©McGraw-Hill Education. Source: Entrepreneur, www.entrepreneur.com, accessed November 2017. Corporate Social Responsibility 7 of 10 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. LO 4-5 ©McGraw-Hill Education. Corporate Social Responsibility 10 of 10 Social Auditing • Social audit — A systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs. • Five types of watchdogs 1. Socially conscious investors 2. Socially conscious research organizations 3. Environmentalists 4. Union officials 5. Customers LO 4-5 ©McGraw-Hill Education. . 1. What is corporate social responsibility, and how does it relate to each of a business’s major stakeholders? 2. What is a social audit, and what kinds of activities does it monitor? ©McGraw-Hill Education.
