Doing Well by Doing Good

ETHICS
Beliefs about right and wrong.
SOCIAL
RESPONSIBILITY
The obligation of a business to contribute to society.
A Close Relationship, but Not the Same

A study of 36,000 high school students revealed:
82% admitted that they lied to parent within the past 12 months about something significant.
60% admitted that they cheated on a test at school within the past 12 months.
33% admitted that they copied an Internet document within the past 12 months.
19% admitted that they stole something from a friend within the past 12 months.
28% admitted that they stole something from a store within the past 12 months.
A 2006 Study conducted by Josephson Institute of Ethics

Legal and Unethical
Promoting R-rated movies to young teens
Producing products that you know will break before their time
Paying non-living wages to workers in developing countries
Illegal and Unethical
Embezzling money
Engaging in sexual harassment
Practicing Collusion with competitors
Encouraging fraudulent accounting
Legal and Ethical
Producing high quality products
Rewarding integrity
Leading by example
Treating employees fairly
Contributing to the community
Respecting the environment
Illegal and Ethical
Providing rock-bottom prices only to distributors in underserved areas
Collaborating with other medical clinics to guarantee low prices in low-income countries (collusion)

Developed by
Character
Counts, a nonpartisan organization of educators, community leaders, and ethicists.

Ethical Dilemma
Negative Consequences
Ethical Lapse
Clear misconduct most challenging business decisions seem to arise when values are in conflict
Business Ethics – the application of right and wrong in the workplace.


Framework for Ethical Decisions
Do you understand the dimensions of the problem?
2. Who would benefit? Who would suffer?
Are the alternative solutions legal?
Are they fair?
4. Does your decision make you comfortable?
5. Could you defend your decision on the nightly news?


Organizational Culture

Role of Top Management

Code of Ethics

Executive Buy-in

Clear expectations

Integrated approach

Global and local

Whistleblower support

Reporting and Enforcement

Sherron Watkins, former vice president of Enron reported the accounting
Irregularities that led to the discovery of corporate fraud.
Stanley O’Neal began as Merrill Lynch began racking up losses that led to its collapse, he announced his “retirement.”
Martha Stewart was convicted of obstructing justice in a $40,000 well timed stock sale.
Whole Foods CEO, John Mackey posted thousands of comments on Yahoo Finance, hyping his company and attacking Wild Oats, which he was planning to purchase.
Sanjay Kumar of Computer Associates was convicted of massive accounting fraud in 2006.
Pierre Omidyar, the founder of eBay has given away over
$100 million to Tufts University Micro Finance Fund.

LESS
LESS
Responsible
Responsible
No
Contribution
Businesses that do not recognize obligations to society and do only what’s legally required
Responsive
Contribution
Businesses that respond on a case-by-case basis to requests for contributions
MORE
Responsible
Proactive
Contribution
Businesses that integrate social responsibility into their strategic plans

Responsibility to
Whom?
Stakeholders are any groups that have a stake – or a personal interest - in the performance and actions of an organization.

EMPLOYEES
CUSTOMERS
INVESTORS
COMMUNITY
ENVIRONMENT
Creating Jobs that Work
Value, Honesty and Communication
Fair Stewardship and Full Disclosure
Business and the Greater Good
Sustainable Development


Meet Legal Standards

Workplace Safety

Minimum Wage/Overtime
Requirements

Value Employees

Provide Work/Life Balance

Average hourly wage
Annual health costs per worker
Covered by health plan
Employee turnover
Labor and overhead costs
Profits per employee
Costco Wal-Mart’s
Sam’s Club
$15.97
$5,735
82%
6%/yr
$11.52
$3,500
47%
21%/yr
9.8% of sales 17% of sales
$13,647 $11,039

CONSUMERISM:
• The Right to Be Safe
• The Right to Be Informed
• The Right to Choose
• The Right to be Heard

Planned Obsolescence –
Deliberately designing products to fail in order to shorten the time between consumer repurchases
APPLE COMPUTERS:
• iPods had irreplaceable battery.
• Batteries died after 18 months.
• Customers were encouraged to purchase new iPods
• Two customers posted high profile protest movies online.
• APPLE announced replacement program.

• Apple introduced the iPhone on June 9,
2007 to rave reviews despite $599 price tag
• Apple dropped the price to $200 to increase customers
• Customers were livid!
• CEO, Steve Jobs apologized and gave customers $100 store credit

FAIR STEWARDSHIP AND FULL DISCLOSURE

Legal Requirements
Legal Requirements

Sarbanes-Oxley


Honesty

Responsible?

Cause-related Marketing – partnerships between businesses and nonprofit organizations, designed to spike sales for the company and raise money for the nonprofit.
Corporate Responsibility -
The actions of the business rather than donations of money and time.
Corporate Philanthropy business donations to nonprofit groups, including both money and time.

Green Marketing – marketing environmental products and practices to gain a competitive edge .


Responsibility to environment is a part of responsibility to community


• Although consumers support green
Although consumers support green marketing, they may not be willing to sacrifice quality



The term was coined in 1983 by
American Express

Raise Funds for Statue of Liberty
Restoration
Campaign to donate $.01 for every dollar charged on credit card.



New Cardholders Grew 45%
Card Usage Grew 28%
Statue of Liberty Restored Early


Corruption is part of the culture in many countries

Bribes or Gifts

Labor issues in host countries can be complicated

Living Wage

Child Labor

Code of Conduct

SOCIAL AUDIT
A systematic evaluation of how well a firm is meeting its ethics and social responsibility objectives .