*
Chapter Four
*
Demanding
Ethical and
Socially
Responsible
Behavior
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
*
STEVE ELLS
Profile
Chipotle Mexican Grill
*
• Chipotle is dedicated to producing quality food
which has led to current annual sales over $1
billion.
• Ells’ mission is to serve
“Food With Integrity.”
• Chipotle is the leading
restaurant buyer of
humanely raised meats.
4-2
*
LIFE AFTER SCANDAL
Ethics is More
Than Legality
*
LG1
• 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.
4-3
*
WHAT are ETHICS?
Ethical Standards
are Fundamental
*
LG1
• Ethics -- The standards of moral behavior.
Behaviors that are accepted by society as right
versus wrong.
4-4
*
BASIC MORAL VALUES
Ethical Standards
are Fundamental
*
LG1
Right:
• Integrity
• Respect for human life
• Self control
Wrong:
• Cheating
• Cowardice
• Cruelty
• Honesty
• Courage
• Self-sacrifice
4-5
*
PAYING the PRICE
(Legal Briefcase)
• Enron: One executive is serving a 24 year sentence for
accounting fraud while another will be released in October
2011.
• Arthur Andersen: Convicted of tampering with witnesses,
the company was dissolved and about 28,000 people lost
their jobs.
• Tyco International: Two executives stole $600 million from
the company and are scheduled to be released from prison
in 2030.
• Adelphia Communication: Two executives were convicted
of conspiracy, bank and securities fraud and given
sentences of 15 and 20 years.
• WorldCom: Former CEO was convicted of fraud,
conspiracy and false filings and sentenced to 25 years.
4-6
*
*
ETHICS and YOU
Ethics Begins
with Each of Us
*
LG2
• Plagiarizing from Internet materials is the most
common form of cheating in schools today.
• Studies found a strong
relationship between
academic dishonesty
and dishonesty at work.
4-7
*
FACING ETHICAL DILEMMAS
Ethics Begins
with Each of Us
*
LG2
• Ask yourself these questions:
- Is it legal?
- Is it balanced?
- How will it make me feel about myself?
4-8
*
To TUBE or NOT to TUBE
(Making Ethical Decisions)
*
• Every minute, people upload 10 hours of video to
YouTube – not all is user-generated content.
• Viacom sued YouTube for $1 billion for allowing
episodes of its popular shows on the site.
• Viacom holds YouTube responsible for carrying the
illegal content, rather than the individuals who
uploaded it.
• Who do you think should be accountable for the
copyright violations -- the website or those who
uploaded the videos?
4-9
*
PROGRESS ASSESSMENT
Progress
Assessment
*
• What are ethics?
• How do ethics differ from legality?
• When faced with ethical dilemmas, what
questions can you ask yourself that might help
you make ethical decisions?
4-10
*
ETHICS START at the TOP
Managing
Businesses
Ethically and
Responsibly
LG3
*
• Trust between workers and
managers must be based on
fairness, honesty, openness
and moral integrity.
• Leadership can help instill
corporate values in
employees.
4-11
FACTORS INFLUENCING
MANAGERIAL ETHICS
Individual
•
•
•
•
Values
Work Background
Family Status
Personality
Organizational
• Top Level
Management
Philosophy
• Firm’s Reward
System
• Job Dimensions
*
Managing
Businesses
Ethically and
Responsibly
LG3
*
Environmental
• Competition
• Economic
Conditions
• Social/Cultural
Institutions
4-12
ETHICS CODES
* Setting
Corporate
Ethical
Standards
LG4
*
• 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.
4-13
HOW to IMPROVE AMERICA’S
BUSINESS ETHICS
* Setting
Corporate
Ethical
Standards
LG4
*
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)
4-14
HOW to IMPROVE AMERICA’S
BUSINESS ETHICS
* Setting
Corporate
Ethical
Standards
LG4
*
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.
4-15
HOW to PREVENT UNETHICAL
BEHAVIORS
* Setting
Corporate
Ethical
Standards
LG4
*
1. Managers must communicate the organization’s
vision on ethical behavior.
2. Organizations must have a code of ethics.
3. Policies have to be enforced regarding ethical
offences.
4. Ethical responsibility must be taught to all
employees.
Source: James Gehrke, Magnify Leadership & Development, November 2008.
(continued)
4-16
HOW to PREVENT UNETHICAL
BEHAVIORS
* Setting
Corporate
Ethical
Standards
LG4
*
5. Discussions of ethics must be included in the
decision-making process.
6. Accountability must be taken seriously at all
levels in the organization.
7. Organizations must act fast when a crisis occurs.
8. Employees must know they have to defend and
maintain the company’s reputation.
Source: James Gehrke, Magnify Leadership & Development, November 2008.
4-17
*
PROGRESS ASSESSMENT
Progress
Assessment
*
• What are compliance-based and integrity-based
ethics codes?
• What are the six steps to follow in establishing an
effective ethics program in a business?
4-18
CORPORATE SOCIAL
RESPONSIBILITY
*Corporate
Social
Responsibility
LG5
*
• Corporate Social Responsibility (CSR) -- The
concern businesses have 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.
4-19
CORPORATE PHILANTHROPY
and SOCIAL INITIATIVES
*Corporate
Social
Responsibility
*
LG5
• Corporate Philanthropy -- Includes charitable
donations.
• Corporate Social Initiatives -- Includes enhanced
forms of corporate philanthropy.
4-20
CORPORATE RESPONSIBILITY
and POLICY
*Corporate
Social
Responsibility
*
LG5
• 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.
4-21
POSTIVE IMPACTS
of COMPANIES
*Corporate
Social
Responsibility
LG5
*
• Xerox offers a Social Service Leave program.
• Citizen Corps encourages volunteers to help
strengthen homeland security by helping in their
community.
• Two-thirds of MBA students surveyed reported
they would take a lower salary to work for a
socially responsible company.
4-22
To WHOM MUCH HAS
BEEN GIVEN…
America’s Charitable Giving
* Corporate
Social
Responsibility
LG5
*
Source: Wall Street Journal, www.wsj.com, June 23, 2008.
4-23
* Corporate
HELPING HANDS
Most Generous Celebrities*
Social
Responsibility
LG5
Who?
How Much?
Oprah Winfrey
$50.2 Million
Herb Alpert
$13 Million
Barbara Streisand
$11 Million
Paul Newman
$10 Million
Mel Gibson
$9.9 Million
Angelina Jolie & Brad Pitt
$8.4 Million
Michael Jordan
$5 Million
Eric Lindros
$5 Million
Lance Armstrong
$5 Million
*
*Donations made in 2007
Source: Parade Magazine, www.parade.com, September 14, 2008.
4-24
WHO GIVES?
Five States Contribute More Than
a Third of the Nation’s Donations
* Corporate
Social
Responsibility
LG5
*
1. California – 12.1%
2. New Jersey – 8.9%
3. Pennsylvania – 5.2%
4. Washington – 5%
5. New York – 5%
Source: Conde Nast Portfolio, www.portfolio.com, January 2008.
4-25
* Corporate
GENEROUS AMERICANS
Americans Donated $295,020,000,000 in 2006
Social
Responsibility
LG5
*
Source: Fast Company, www.fastcompany.com, May 2008.
4-26
PRESIDENT KENNEDY’S BASIC
RIGHTS of CONSUMERS
*
Responsibility
to Customers
LG5
*
• The Right to Safety
• The Right to be Informed
• The Right to Choose
• The Right to be Heard
4-27
*
INSIDER TRADING
Responsibility
to Investors
LG5
*
• 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.
4-28
RESPONSIBILITY to
EMPLOYEES
*
Responsibility
to Employees
*
LG5
• Create jobs and provide a chance for upward
mobility.
• Treat employees with respect.
• Offer salaries and benefits that help employees
reach their personal goals.
4-29
AMERICA’S MOST ADMIRED
COMPANIES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Apple
Berkshire Hathaway
Toyota
Google
Johnson & Johnson
Proctor & Gamble
FedEx
Southwest Airlines
General Electric
Microsoft
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
*
Responsibility
to Employees
LG5
*
Wal-Mart
Coca-Cola
Walt Disney
Wells Fargo
Goldman Sachs
McDonald’s
IBM
3M
Target
J.P. Morgan Chase
Source: Fortune, www.fortune.com, March, 2009.
4-30
SOCIETY and
the ENVIRONMENT
*
Responsibility
to Society and
the Environment
*
LG5
• Over one-third of working Americans receive
their salaries from nonprofits – who are
dependent on funding from others.
• The green movement emerged as concern about
global warming increased.
• Many companies are trying to minimize their
carbon footprints – the amount of carbon
released during an item’s production, distribution,
consumption and disposal.
4-31
*
RESPONSIBILITY to the
ENVIRONMENT
Responsibility
to Society and
the Environment
LG5
*
• 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.
4-32
*
GREEN GREED
(Thinking Green)
*
• With public concern over the environment,
companies are finding greener ways of doing
business.
• Some companies are claiming they are more
environmentally responsible than they actually
are, a practice called “greenwashing”.
• Web sites such as Greener Choices and
Greenwashing Index screen ads for
greenwashing.
4-33
*
SOCIAL AUDITING
Social Auditing
LG5
*
• Social Audit -- A systematic evaluation of an
organization’s progress toward implementing
programs that are socially responsible and
responsive.
• Four Types of Social Audit Watchdogs
-
Socially conscious investors
-
Environmentalists
-
Union officials
-
Customers
4-34
*
PROGRESS ASSESSMENT
Progress
Assessment
*
• What’s corporate social responsibility, and how
does it relate to each of a business’s major
stakeholders?
• What’s a social audit, and what kinds of activities
does it monitor?
4-35
*
INTERNATIONAL ETHICS
International
Ethics and
Social
Responsibility
LG6
*
• Many businesses want socially responsible
behavior from their international suppliers.
• The Joint Initiative on Corporate Accountability
and Workers’ Rights was designed to make
creating a single set of labor standards and
inspecting factories easier.
• In the 1970s, the Foreign Corrupt Practices Act
criminalized the act of paying foreign
businesses or government leaders in order to
get business.
4-36
*
GIVERS AROUND the WORLD
Share of GDP
International
Ethics and
Social
Responsibility
LG6
*
Source: Forbes, www.forbes.com, March 24, 2008.
4-37
ETHICAL CULTURE CLASH
*
(Reaching Beyond Our Borders)
• Almost half of Motorola’s employees live
outside the U.S.
*
• A Motorola employee returns to his home
country to work and the company reimburses
living expenses so he can live in a safe area.
The employee is trying to do the honorable thing
for his family and the company is trying to keep
the employee safe.
• If the employee uses the money to help his
family instead, is it right for the company to stop
payment?
4-38
*
PROGRESS ASSESSMENT
Progress
Assessment
*
• How are U.S. businesses demanding socially
responsible behavior from their international
suppliers?
• Why is it unlikely that there will be a single set of
international rules governing multinational
companies soon?
4-39