CHAPTER 2
© Workbook Stock / Jupiterimages
Making Ethical
Decisions and
Managing a
Socially
Responsible
Business
The Future of Business
The Essentials 4th Edition
Gitman & McDaniel
Chapter 2
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
Prepared by
Deborah Baker
1
What philosophies and concepts shape
personal ethical standards?
2
How can organizations encourage ethical
business behavior?
CHAPTER 2
Learning Goals
3 What is social responsibility?
4
How do businesses met their social
responsibilities to various stakeholders?
5
What are the trends in ethics and social
responsibility?
2
CHAPTER 2
Learning Goals Appendix
6 How does the legal system govern business
transactions and settle business disputes?
7 What are the required elements of a valid
contract; and what are the key types of
business law?
8 What are the most common taxes paid by
businesses?
3
Understanding Business Ethics
1
1
What philosophies and concepts shape
personal ethical standards?
4
Understanding Business Ethics
ethics
A set of moral standards for judging whether
something is right or wrong.
1
5
Factors Influencing Business Ethics
Justice
Utilitarianism
Deontology
Individual Rights
1
6
Factors Influencing Business Ethics
deontology
The philosophy that says people should meet
their obligations and duties when analyzing an
ethical dilemma.
1
7
CONCEPT check
How are individuals’ business ethics formed?
What is utilitarianism?
How can you recognize unethical activities?
1
8
How Organizations Influence Ethical Conduct
2
2
How can organizations encourage
ethical business behavior?
9
How Organizations Influence Ethical Conduct
 Lead by example
 Offer ethics training programs
 Establish a formal code of ethics
 Conduct informal and formal programs
2
10
Establishing a Formal Code of Ethics
code of ethics
A set of guidelines prepared by a firm
to provide its employees with the knowledge of what
the firm expects in terms of their responsibilities and
behavior toward fellow employees, customers, and
suppliers.
2
11
Top Best Corporate Citizens
1. Green Mountain Coffee Roasters, Inc.
2. Advanced Micro Devices, Inc.
3. NIKE, Inc.
4. Motorola, Inc.
5. Intel Corporation
6. International Business Machines Corporation
7. Agilent Technologies, Inc,
8. Timberland Company (The)
9. Starbucks Corporation
10. General Mills Incorporated
2
Business Ethics Magazine 2007
12
CONCEPT check
What is the role of top management
in organizational ethics?
What is a code of ethics?
2
13
Managing a Socially Responsible Business
3
3
What is social responsibility?
14
Managing a Socially Responsible Business
social responsibility
The concern of businesses for the welfare of
society as a whole. It consists of obligations
beyond those required by law or contracts.
1. Social responsibility is voluntary
2. Obligations of social responsibility are broad
3
15
Social Responsibility
Philanthropic
Ethical
Legal
Economic
3
Exhibit 2.3
16
Social Responsibility
Legal and Responsible Behavior
Irresponsible but Legal Behavior
Illegal and Irresponsible Behavior
3
17
CONCEPT check
What are the four components of
social responsibility?
Give an example of legal but
irresponsible behavior.
3
18
Responsibilities to Stakeholders
4
4
How do businesses met their social
responsibilities to various stakeholders?
19
Stakeholders
stakeholders
Employees
Individuals or groups to whom a
business has a responsibility.
Customers
General Public
Investors
4
20
America’s Top Ten Best Places to Work
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
4
Google
Quicken Loans
Wegmans Food Markets
Edward Jones
Genentech
Cisco Systems
Starbucks
Qualcomm
Goldman Sachs
Methodist Hospital System
Exhibit 2.4
Source: Robert Levering and Milton Moskowitz,
“The 100 Best Companies to Work For,”
Fortune (February 4, 2008), p.75.
21
Responsibility to Society
corporate philanthropy
The practice of charitable giving by corporations;
includes contributing cash, donating equipment
and products, and supporting the volunteer
efforts of company employees.
4
22
Responsibilities to Investors
social investing
The practice of limiting investments to securities
of companies that behave in accordance with the
investor’s beliefs about ethical and social
responsibility.
4
23
CONCEPT check
How do businesses carry out their social
responsibilities to consumers?
What is corporate philanthropy?
Is a company’s only responsibility to its
investors to make a profit? Why or why not?
4
24
Trends in Ethics and Social Responsibility
5
5
What are the trends in ethics and
social responsibility?
25
Trends in Ethics and Social Responsibility
Corporate philanthropy
New social contract between
employers and employees
Growth of global ethics
and social responsibility
© Digital Vision / Getty Images
5
26
Changes in Corporate Philanthropy
strategic giving
The practice of tying philanthropy closely to the
corporate mission or goals and targeting
donations to regions where a company operates.
5
27
Changes in Corporate Philanthropy
cause-related marketing
The cooperative efforts of a “for-profit” firm and a
“nonprofit organization” for mutual benefit. Used
as any marketing effort for social or other
charitable causes.
5
28
Global Ethics and Social Responsibility
Responsibilities of a Multinational Corporation
 Respect local practices and customs
 Ensure harmony between staff and host population
 Provide management leadership
 Develop local managers who will be a
credit to the community
 Commit to a long-term relationship by involving
stakeholders
 Implement ethical guidelines within the organization
in the host country
 Balance conflicting interests, such as human rights
5
29
CONCEPT check
Describe strategic giving.
What role do employees have in improving
their job security?
How do multinational corporations
demonstrate social responsibility in a
foreign country?
5
30
Appendix:
Understanding the Legal and Tax Environment
6
6
How does the legal system govern
business transactions and settle
business disputes?
31
The Legal System
laws
The rules governing a society’s conduct that are
created and enforced by a controlling authority,
usually the government.
6
32
Business Law
business law
The body of law that governs commercial dealings.
6
33
Business Law
Uniform Commercial Code (UCC)
A model set of rules that apply to commercial
transactions between businesses and between
businesses and individuals.
It covers the sale of goods, bank deposits and
collections, letters of credit, documents of title,
and investment securities.
6
34
The Court System
Federal and State Courts
Trial courts
Appellate courts
Supreme Court
Nonjudicial methods
Arbitration
6
Mediation
35
Nonjudicial Methods
arbitration
A method of settling disputes in which the parties
agree to present their case to an impartial third party
and are required to accept the arbitrator’s decision.
mediation
A method of settling disputes in which the parties
submit their case to an impartial third party but are not
required to accept the mediator’s decision.
6
36
Appendix:
Contracts and Business Law
7
7
What are the required elements of a valid
contract; and what are the key types of
business law?
37
Contracts
express contract
Specifies the terms of the agreement in either
written or spoken words
implied contract
Depends on the acts and conduct of the parties to
show agreement
7
38
The Elements of a Contract
Mutual assent
Capacity
Consideration
Legal purpose
Legal form
7
39
Remedies for Breach of Contract
Payment of Damages
Specific Performance
Restitution
7
40
Warranties
express warranties
Specific statements of fact or promises about a
product by the seller.
implied warranties
Guarantees that are imposed on sales
transactions by statute or court decision.
Neither written nor oral.
7
41
Patents, Copyrights, and Trademarks
patent
A form of protection established for inventors; gives an
inventor the exclusive right to manufacture, use, and
sell an invention for 17 years.
copyright
A form of protection for creators of works of art, music,
literature, or intellectual property; gives the creator the
exclusive right to use, produce, and sell the creation
during the creator’s lifetime and for 50 years thereafter.
7
42
Patents, Copyrights, and Trademarks
trademark
A design, name, or other distinctive mark that a
manufacturer uses to identify its goods in the
marketplace.
servicemark
A symbol, name, or design that identifies a service
rather than a tangible object.
7
43
Tort Law
tort law
Settles disputes involving civil acts that harm
people or their property.
Torts include physical injury, mental anguish, and
defamation.
7
44
Other Laws
 Product liability law
 Bankruptcy law
 Fair competition laws
 Consumer protection laws
 Deregulation of industries
 Regulation of the Internet
7
45
Appendix:
Taxation of Business
8
8
What are the most common taxes
paid by businesses?
46
Common Taxes
Income Taxes
Property Taxes
Payroll Taxes
Sales Taxes
Excise Taxes
8
47