Ferrell Hirt Ferrell M: Business 2

nd

Edition

FHF

Business Ethics and Social Responsibility

McGraw-Hill/Irwin

FHF

Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Business Ethics

[

Principles and standards that determine acceptable conduct in business

]

FHF 2-3

Ethical Decisions in Organizations • Most unethical activities are supported by a culture encouraging employees to bend the rules •

Enron

• • Fraud and deception in financial reporting

Stanford Financial

• • Failure to protect consumers’ CDs Lying about interest rates FHF 2-4

Social Responsibility

• Business’s obligation to maximize its positive impact and minimize its negative impact on society • • • •

Greyston Bakery

Located in Yonkers, NY Provides jobs for the “unemployable” Donates 100% of its $6 million annual profits to the Greyston Foundation, which supports local community development causes FHF 2-5

A Timeline of Ethical and Social Responsibility Concerns FHF 2-6

Laws and Regulations

• • • Laws and regulations encourage businesses to conform to society’s standards, values, and attitudes.

Sarbanes-Oxley Act, 2002 Troubled Assets Relief Program FHF 2-7

Unethical and/or Illegal Conduct

• • • • Accounting fraud Deceptive advertising Unfair competitive practices Internet theft FHF 2-8

Ethical Conduct Helps To:

• • • Build Trust Promote confidence Validate relationships FHF 2-9

Concerns about unethical business practices continue

• Anheuser Busch released a series of college team-colored Budweiser and Bud Light beer cans • protests that the cans might encourage underage students to drink FHF 2-10

Highly Ethical Companies

• • • • Recognized as highly ethical Awarded ‘Corporation of the Year’ by Michigan Minority Business Development Council Perfect score three years in a row in a Competitive Enterprise Institute ranking History of environmental advocacy and stakeholder awareness

Are generally more profitable

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Ethical Issue

[

An identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical

]

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How to Judge the Ethics of a Situation

• • • Examine the situation from your stakeholders’ position, including customers and competitors People often need years of experience to accurately recognize and react to ethical situations Ethical situations vary by culture FHF 2-13

Recognizing Ethical Issues in Business

Many business issues may seem straightforward and easy to resolve on the surface, but are really very complex

FHF 2-14

Sources of Unethical Behavior in Business

• • • • • • Overly aggressive financial or business objectives Abusive & intimidating behavior Conflict of interest Fairness & honesty Communications Business relationships FHF 2-15

Sources of Unethical Behavior

FHF 2-16

Sources of Unethical Behavior in Organizations

Conflict of interest

• The most common ethical issue identified by employees ‣ Advance personal interest over others’ interests ‣ Benefit self at the expense of the company FHF 2-17

Corruption Perceptions Index

Least Corrupt Countries

FHF 2-18

Fairness & Honesty

At the heart of business ethics

• • • • How employees use resources No harm to customers Accurate representations Disclosure FHF 2-19

Ethical Concerns in Communications

FHF • • • • • False/misleading advertising Deceptive personal selling tactics Product safety and quality Unsubstantiated claims Product labeling 2-20

Plagiarism • The act of taking someone else’s work and presenting it as your own without mentioning the source ‣ A major problem in schools and business • • • Students copying others’ work A manager taking credit for a subordinate’s work Employees copying reports and passing the work off as their own FHF 2-21

Personal Ethics • • Is honesty important to students?

In a survey of 25,000 high school students: • • • • 62% cheated on exams at least once 35% copied documents from the internet 27% shoplifted 23% cheated to win at sports (Source: “The Biennial Report Card: The Ethics of American Youth,” Josephson Institute of Ethics, www.josephsoninstitute.org/survey 2004) FHF 2-22

Ethical Concerns in Business Relationships • • • Relationships with customers Relationships with suppliers Relationships with co-workers FHF 2-23

Questions to Consider in Determining Whether an Action is Ethical

Open discussion of ethical issues does not eliminate ethical problems; it does promote trust and learning in an organization

FHF 2-24

Ethical Decisions in an Organization are Influenced by Three Key Factors FHF 2-25

Code of Ethics

[

Formalized rules and standards that describe what a company expects of its employees

]

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Four Dimensions to Social Responsibility 1.

2.

3.

4.

Economic Legal Ethical Voluntary FHF 2-27

The Pyramid of Social Responsibility FHF 2-28

Corporate Social Responsibility

[

The extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders

]

FHF 2-29

Best Corporate Citizens (Source: CRO’s 100 Best Corporate Citizens ) FHF 2-30

Formal Ethics and Compliance Programs Arguments for and against these programs FHF 2-31

Stakeholder Relationships: Shareholders • • • • Primarily concerned with profit or ROI Financial community at large Proper accounting procedures Protecting owner’s rights and investments FHF 2-32

Stakeholder Relationships: Employees • • • • Provide a safe workplace Adequate compensation Listen to grievances Fair treatment FHF 2-33

Stakeholder Relationships: Consumers

Consumerism

• Activities that independent individuals, groups and organizations undertake to protect their rights as consumers FHF 2-34

Stakeholder Relationships: The Environment • • • Animal rights Pollution Going GREEN FHF 2-35

Stakeholder Relationships: The Community

General community and global welfare

• • The Avon Foundation • Breast Cancer Awareness Crusade Target’s Take Charge of Education program • 1% of Target Red Card purchases donated to educational causes

Hardcore unemployed

• • National Alliance of Business funds training to help hard-core unemployed to find work and gain self-sufficiency Enhanced self-esteem; help people become productive members of society FHF 2-36

Source: USA Today Snapshot, March 4, 2009, A1

FHF What American Adults Worry “a Great Deal” About 2-37

FHF 2-38