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Demonstrating Ethical Behavior and Social Responsibility

Nickels

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McHugh

McHugh
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McGraw-Hill/Irwin Understanding Business, 8e

2008 The McGraw-Hill Companies, Inc., All Rights

CHAPTER

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Top U.S. Ethical Issues

Improper Accounting Practices Deceptive Sales/Marketing Practices Conflicts of Interest Lying on Reports/Falsifying Records Dishonesty with Customers Lack of Public Trust in Corporate America Bribes and Kickbacks Unfair Treatment of Employees/Customers Securities and/or Bank Fraud Discrimination Producing Low-quality or Unsafe Products 0% 10% 20% 30% 40% 50% 60%

Source: CMO Magazine, October 2004

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Ethics of MBA Students

Percent of MBA Students Who Would: Buy Stock on Inside Information Reveal Corp. Secrets to Spouse/Family Let a Gift Sway Purchasing Decision Pay Someone Off to Close a Business Deal
Source: USA Today

52% 50% 26% 13%

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Increasing Penalties for Offenders Employee Education Programs Publicity About Those Being Punished A Code of Conduct Adding Ethics Classes to College Programs New Laws

Ways to Prevent Unethical Behavior

0%

10%

20%

30%

40%

50%

60%

70%

80%

Source: CMO Magazine, Oct. 2004

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Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY (CSR) is a businesss concern for welfare of society. It is based on a companys concern for the welfare of all its stakeholders, not just the owners. Some CRITICS of CSR believe that a managers sole role is to compete and win. I
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Codes of Ethics
Milton Friedman stated that the only social responsibility of business is to make money for stockholders. DEFENDERS argue that CSR makes more money for investors in the long run. One study showed a positive correlation between CORPORATE SOCIAL PERFORMANCE and CORPORATE FINANCIAL PERFORMANCE. I
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Ethics
I. ETHICS IS MORE THAN LEGALITY Learning Goal 1 Explain why legality is only the first step in behaving ethically. A. Ethical Standards Are Fundamental B. Ethics Begins with Each of Us Learning Goal 2 Ask the three questions one should answer when faced with a potentially unethical action.
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Is It Legal? Is It Balanced? Is it Fair ?

Ethics Check Questions:

How Will It Make Me Feel About Myself?

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Factors Influencing Managerial Ethics

Individual
Values Work Background Family Status Personality

Organizational
Top Level Mgmt. Philosophy The Firms Reward System Job Dimensions

Environmental
Competition Economic Conditions Social/Cultural Institutions

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Codes of Ethics
Compliance-Based Integrity-Based

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Codes of Ethics
COMPLIANCE-BASED ETHICS CODES are ethical standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers.

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Codes of Ethics
INTEGRITY-BASED ETHICS CODES are ethical standards that define the organizations guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees.

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Ethics
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II. MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY Learning Goal 3 Describe managements role in setting ethical standards. Setting Corporate Ethical Standards Learning Goal 4 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
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Ethics
III. CORPORATE SOCIAL RESPONSIBILITY Learning Goal 5 Define corporate social responsibility and examine corporate responsibility to various stake-holders. A. Responsibility to Customers B. Responsibility to Investors C. Responsibility to Employees D. Responsibility to Society and the Environment E. Social Auditing
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Codes of Ethics
CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY ACT (Sarbanes-Oxley, 2002)

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Steps to Improve U.S. Business Ethics

1. Top management support 2. Employees understanding 3. Managers training 4. Ethics Office 5. Outsiders must be informed 6. Enforcement of ethics code
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Social Audit
Company Outside Groups that serve as watchdogs:
Socially-Conscious Investors Environmentalists Union Officials Customers
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Ethics
IV. INTERNATIONAL ETHICS AND SOCIAL RESPONSIBILITY Learning Goal 6 Analyze the role of American businesses in influencing ethical behavior and social responsibility in global markets.

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International Ethics and Social Responsibility

Ethical problems are Not Unique to the U.S. managers Demand for Socially Responsible Behavior from Global Suppliers Joint Initiative on Corporate Accountability and Workers Rights Inter-American Convention Against Corruption
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Best Company Reputation

Johnson & Johnson (80.6) Coca-Cola (79.7) Google (79.5) UPS (79.4) 3M (78.8)

Source: USA Today

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Most Admired Global Companies

1. General Electric 2. Toyota 3. Procter & Gamble 4. FedEx 5. Johnson & Johnson
Source: Fortune, 2006

6. Microsoft 7. Dell 8. Berkshire Hathaway 9. Apple Computer 10. Wal-Mart

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Levels of Corporate Social Responsibility

Societal Responsibility Stakeholder Responsibility
Ecological General Public Customers Profit

Profit Responsibility
Owners/Stockholders Employees Suppliers/Distributors

Environment

Public Interest Groups

Source: Marketing, 5/E by Berkowitz, Kerin, Hartley, and Rudelius. Marketing,

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