Part 1: Conducting Business in the Global Economy
Chapter 2
Ethics and Social Responsibility
I.
Ethics and Social Responsibility in the Workplace
A.
What is Ethical Behavior?
1.
Competing Fairly and Honestly
2.
Communicating Truthfully
3.
Not Causing Harm to Others
B.
Factors Influencing Ethical Behavior
1.
Cultural Differences
2.
Knowledge
3.
Organizational Behavior
C.
How do You Make Ethical Decisions?
D.
Perspectives on Corporate Social Responsibility
1.
The Traditional Perspective: The Business of Business is Making Money
2.
The Contemporary Perspective: Ethics Pays
3.
An Emerging Perspective: Balancing Ethics and Profits
II.
Business’s Efforts to Increase Social Responsibility
A.
Businesses are more frequently taking active steps to be more socially
responsible, including:
1.
Social audit
2.
Cause-related marketing
3.
Philanthropy
B.
Responsibility Toward Society and the Environment
1.
The Persuasiveness of Pollution
2.
Government Efforts to Reduce Pollution
3.
Business Efforts to Reduce Pollution
C.
Responsibility Toward Consumers
1.
Consumerism – a movement that puts pressure on businesses to consider
consumer needs and interests
a.
The right to safe products
b.
The right to be informed
c.
The right to choose which products to buy
d.
The right to be heard
D.
Responsibility Toward Investors
E.
Responsibility Toward Employees
1.
The push for equality in employment
a.
Affirmative Action
b.
People with Disabilities
2.
Occupational Safety and Health
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Chapter 2: Business Done Right: Ethics and Social Responsibility
III.
Ethics and Social Responsibility Around The World
Issues of social responsibility grow even more complex when cultural influences are
applied in the global business environment.
Detailed Chapter Outline:
Lecture Notes & Teaching Suggestions
I.
Ethics and Social Responsibility in the Workplace
A.
What is Ethical Behavior?
1.
Competing Fairly and Honestly
a.
Companies are expected to not knowingly deceive, intimidate, or
misrepresent customers, competitors, clients, or employees
b.
Some companies knowingly break laws or take questionable steps in
their zeal to maximize profits and gain a competitive advantage:

Engage in corporate spying

Stealing patents

Hiring employees from competitors to gain trade
Secrets

Electronically eavesdropping
2.
Communicating Truthfully
a.
Companies that practice good ethical behavior refrain from issuing
false or misleading communications.
b.
Companies communicate with a variety of audiences, including
employees, customers and investors
c.
Companies need to consider whether or not the customer is aware
of who promoted the communications to take place
d.
Companies need to consider the decisions that will be made by the
audience communicated with
3.
Not Causing Harm to Others
a.
Potential harm can take place when managers make decisions
that put their own interests above those of other stakeholders

underestimate the risks of failure

neglect to consider potential affects on others
b.
Harms can take place even with individual have acted ethically
c.
As technologies become more complex, the potential of harm
increases
d.
The manner in which information is handled is key to avoiding
harm to others

insider trading – buying or selling stock based upon
information that outside investors lack

conflict of interest, which includes insider deals or relatedparty deals

this condition exists when choosing a course of
action will benefit one person’s interests at the
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Part 1: Conducting Business in the Global Economy
B.
expense of another, or when an individual chooses
a course of action that advances his or her personal
interests over those of his or her employer
Factors Influencing Ethical Behavior
1.
Cultural Differences
a.
What may be considered unethical in one country may be an
accepted practice in another culture
b.
Managers need to consider a wide range of issues, including:

acceptable working conditions

minimum wage levels

product safety issues

environment protection
2.
Knowledge
a.
A business leader must not only pay attention, but must actively
seek information regarding potential ethical issues
b.
The next responsibility is to act in a timely and effective manner
3.
Organizational Behavior
a.
Ethical awareness as the foundation
b.
Strongly enforced company codes of conduct and ethics training
help employees recognize and reason through ethical problems.
c.
Strong ethical practices (ethics training, newsletters on ethics) set a
good example for employees to follow.
d.
Implementation of programs designed to improve ethical conduct
e.
Code of ethics: defines the values and principles that should be
used to guide decisions. To be effective, a code must be supported
by:

employee communications efforts

a formal training program

employee commitment to follow it

a system through which employees can get help with
ethically difficult situations
f.
The top executives must set the tone
g.
Companies can establish a system for reporting unethical or illegal
actions at work. Example: ethics hotline
h.
Whistle-blowing


An employee’s disclosure to the media or government
authorities of illegal, unethical, or harmful practices by the
company.
High costs associated with whistle blowing – a public
accusation of wrongdoing hurts the business’s reputation,
requires attention from managers who must investigate the
accusations, and damages employee morale.
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Chapter 2: Business Done Right: Ethics and Social Responsibility

C.
How do You Make Ethical Decisions?
1.
Measure each act against certain absolute standards that are aimed at
assuring justice
2.
Look for ethical guidance in the law
3.
Rely on your own judgment and principles
4.
Ask yourself a series of questions:
a.
Is the decision legal? (Does it break any laws?)
b.
Is it balanced? (Is it fair to all concerned?)
c.
Can you live with it? (Does it make you feel good about yourself?)
d.
Is it feasible? (Will it actually work in the real world?)
5.
6.
7.
D.
Risks associated with whistle-blowing – risk of being fired or
demotes, career setbacks, financial strain, and emotional
stress
Does the decision’s outcome respect stakeholders?
a.
utilitarianism – an approach that seeks the greatest good for the
greatest number of people involved
Does it follow a philosophical perspective?
Most ethical situations can be classified into two general types:
a.
ethical dilemmas – a situation in which one must choose between
two conflicting but arguably valid sides
b.
ethical lapse – a situation in which an individual makes a decision
that is clearly wrong
Perspectives on Corporate Social Responsibility
1.
The Traditional Perspective: The Business of Business is Making Money
a.
supporting by Milton Friedman
b.
supported by the notion that socially healthy economies cannot
exist without financially healthy companies because business is
the primary generator of wealth in the community
c.
this notion is now rejected by as much as 95% of the population
2.
The Contemporary Perspective: Ethics Pays
a.
prevalent in the last few decades
b.
states that not only do businesses have a broader responsibility to
society, but that doing good for society helps companies do well
for themselves
c.
companies supporting this line of thinking link the pursuit of socially
responsible goals with their overall strategic plan
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Part 1: Conducting Business in the Global Economy
II.
the balance between social responsibility and managing the financial
needs to the company is challenging
3.
An Emerging Perspective: Balancing Ethics and Profits
a.
recognizes that ethics needs to be a cornerstone of business,
but also recognizes that profits and ethics are often at odds
b.
the decision about what do to needs to be evaluated within
the context of the organization’s “moral philosophy”
Business’s Efforts to Increase Social Responsibility
A.
B.
d.
Businesses are more frequently taking active steps to be more socially
responsible, including:
1.
Social audit – a systematic evaluation and reporting of the company’s
social performance
2.
Cause-related marketing – donating a portion of product sales to support
worthy causes
3.
Philanthropy – donating money, time, goods, or services to charitable,
humanitarian, or educational institutions
Responsibility Toward Society and the Environment
1.
The Persuasiveness of Pollution
a.
2.
Pollution – the contamination of the natural environment by the
discharge of harmful substances

Air, water, and land can easily be tainted by industrial
discharges, aircraft and motor vehicle emissions, and a
number of chemicals that spill out into the environment as
industrial waste products

Pollution in any one element can easily taint the other.
Example: acid rain which is caused when emissions from
coal and electric energy react with air)
Government Efforts to Reduce Pollution
a.
Ecology – the study of the balance of nature
b.
Environmental Protection Agency (EPA)

Established 1970 to regulate air and water pollution by
manufacturers and utilities
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Chapter 2: Business Done Right: Ethics and Social Responsibility

c.
3.
C.
Supervises the control of automobile pollution, license
pesticides, control toxic substances, and safeguard the
purity of drinking water.
Individual states have passed clean air acts

California requires 10% of all new vehicles sold to be
pollution free

Government and private businesses treat and reuse water
and upgrade sewage systems; however, groundwater may
never recover in some places
Business Efforts to Reduce Pollution
a.
Considering environmental issues a part of everyday business and
operating decisions
b.
Accepting environmental staff members as full-fledged partners in
improving the company's competitiveness
c.
Measuring environmental performance
d.
Tying compensation to environmental performance
e.
Determining the long-term environmental costs before such costs
occur
f.
Considering environmental impact in the product-development
process
g.
Challenging suppliers to improve environmental performance
h.
Conducting environmental training and awareness programs
i.
Green marketing – companies distinguish themselves from
competitors by using more environmentally friendly practices,
such as less packaging, recycling and developing pro-environment
products
Responsibility Toward Consumers
1.
Consumerism
a.
A movement that puts pressure on businesses to consider
consumer needs and interests
b.
Prompted businesses to create consumer-affairs departments to
handle customer complaints, state and local agencies to set up
bureaus to offer consumer information and assistance
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Part 1: Conducting Business in the Global Economy
c.
D.
E.
J.F.K. created a “consumer bill of rights”, which include:

The right to safe products – government enforces safety of
products by the C.P.S.C. (Consumer Product Safety
Commission)

The right to be informed – consumers have a right to
know the sales price of goods or services, and the details
any purchase contracts. Agencies responsible include:
Food and Drug Administration (FDA), Federal Trade
Commission (FTC), Department of Agriculture

The right to choose which products to buy – government
ensures fair competition and variety among products
businesses offer

The right to be heard – many companies offer toll-free
numbers and websites so consumers can give and receive
information about products
Responsibility Toward Investors
1.
Need to balance investor’s interest in profits and their right to appropriate
and ethical management
2.
The Board of Directors has the responsibility to maintaining responsibility
to the investors
Responsibility Toward Employees
1.
Changes in the attitudes and composition of the workforce during the
past 30 years have prompted changes.
2.
The push for equality in employment and elimination of discrimination
a.
Civil Rights Act of 1964 – established Equal Employment
b.
Civil Rights Act of 1991 – extended original act by allowing
c.
Affirmative action – activities undertaken by businesses to recruit
d.
Diversity initiatives – company policies designed to enhance
Opportunity Commission (EEOC) which is the regulatory agency
that battles job discrimination
workers to sue companies for discrimination
and promote women and minorities based on an analysis of the
workforce and the available labor pool
opportunities for minorities and promote understanding of diverse
cultures, customs, and talents
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Chapter 2: Business Done Right: Ethics and Social Responsibility
e.
3.
III.
People with disabilities – in 1990 American Disabilities Act (ADA)
was passed

Disability: a broad term that protects those with obvious
handicaps and also those with less visible conditions

Example: AIDS patients, cancer patients, diabetics, drug
addicts, emotionally or mentally ill
Occupational Safety and Health
a.
During 1960s concern over workplace hazards grew, resulting in
the Occupational Safety and Health act in 1970, which set
mandatory standards for health and safety and established OSHA
to enforce them
b.
OSHA’s ergonomic safety regulations protect millions of workers
form repetitive stress injuries (carpel tunnel syndrome) and back
injuries.
c.
Concern over violation of standards while operating abroad has
brought criticism to companies such as Guess, the Gap, and Body
Shop
Ethics and Social Responsibility Around The World
Issues of social responsibility grow even more complex when cultural influences are
applied in the global business environment.
A.
Issues of social responsibility grow even more complex when cultural influences
are applied in the global business environment.
B.
Utilization of gifts and legitimate payments to expedite business
C.
Bribery
D.
Environmental Abuse
E.
Unscrupulous business practices
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Part 1: Conducting Business in the Global Economy
End-Of-Chapter Questions
Test Your Knowledge
Questions for Review
1.
Who shapes a company’s ethics?
Guided by written policies, unwritten standards, and examples set by top managers,
every individual in an organization makes choices that have moral implications. Some
companies have created an official position—the ethics officer—to guard morality.
Ethical behavior starts at the top, however; the CEO and other senior managers must
set the tone for people throughout the company.
2.
What is a conflict of interest situation?
A conflict of interest exists when choosing a course of action will benefit one person’s
interests at the expense of another or when an individual chooses a course of action
that advances his or her personal interests over those of his or her employer. For
example, a lawyer would find himself in a conflict of interest situation if he represented
both the plaintiff and defendant in a lawsuit. Similarly, independent auditors could be in
a conflict of interest if their firm also served as the client’s consultants.
3.
How can do companies to support ethical behavior?
Most companies are concerned about ethical issues, and many are trying to develop
approaches for improving their ethics. Written codes of ethics have been adopted to
define the values and principles that should be used to guide decisions. Ethics officers
have been hired to guard morality. Established ethics hot lines that encourage whistleblowing—an employee’s disclosure of illegal, unethical, wasteful, or harmful practices by
the company—is another way to support ethical behavior.
Additionally, companies may;

implement programs designed to improve ethical conduct

provide formal training

create a system through which employees can get help with
ethically difficult situations

ensure that top executives set the tone
4.
How are businesses responding to the environmental issues facing society?
Environmental issues exemplify the difficulty that businesses encounter when they try to
reconcile conflicting interests: Society needs as little pollution as possible from
businesses. But producing quality products to satisfy customers’ wants can cause
pollution to some degree. Business executives try to strike a balance by making
environmental management a formal part of their business strategy—along with quality,
profits, safety, and other daily business operations
5.
What can a company do to assure customers that its products are safe?
If a product is sufficiently dangerous, law, as in the case of cigarettes, requires a
warning label. However, warning labels can be a mixed blessing for consumers. To some
extent, the presence of a warning protects the manufacturer from product-liability suits,
but the label may not deter people from using the product or from using it incorrectly.
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Chapter 2: Business Done Right: Ethics and Social Responsibility
Many companies have established toll-free numbers for consumer information and
feedback, and these numbers are often printed on product packages. In addition, more
and more companies are establishing web sites that provide product information and
access for customer feedback. Of course, businesses benefit from gathering as much
information about their customers as possible. Customer information allows companies
to make informed decisions about changing current products and offering new ones.
41