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Chap004
- 1. Chapter 04 Demanding Ethical and Socially Responsible Behavior McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
- 2. Chapter Four LEARNING GOALS 1. Explain why obeying the law is only the first step in behaving ethically. 2. Ask the three questions you need to answer when faced with a potentially unethical action. 3. Describe management’s role in setting ethical standards. 4-2
- 3. Chapter Four LEARNING GOALS 4. Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. 5. Define corporate social responsibility and compare corporations’ responsibilities to various stakeholders. 6. Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. 4-3
- 4. Profile BLAKE MYCOSKIE TOMS Shoes • While appearing on The Amazing Race, Mycoskie saw how badly local children in Argentina needed shoes. • He founded TOMS in 2006. • TOMS gives a pair of shoes to a child in need for every pair sold. 4-4
- 5. Chapter Four NAME that COMPANY This company has a program it calls Social Service Leave that allows employees to take up to a year off to work for a nonprofit organization while earning their full salary and benefits, including job security. Name that company! 4-5
- 6. Ethics is More Than Legality LIFE AFTER SCANDAL 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. 4-6
- 7. COST of CORRUPTION (Legal Briefcase) • Madoff Investment Securities : Bernie Madoff is serving 150 years behind bars after running his exclusive wealth management firm as a gigantic Ponzi scheme. • Enron : Jeffery Skilling is serving a 24 year sentence for accounting fraud while Richard Causey, who pled guilty, will be released in October 2011. Former CEO, Kenneth Lay, died before sentencing. • WorldCom : Former CEO, Bernie Ebbers, was convicted of fraud, conspiracy and false filings and sentenced to 25 years. 4-7
- 8. WHAT is a PONZI SCHEME? • A fraud by paying returns to existing investors from funds contributed by new investors. • New investors are promised opportunities claimed to generate high returns with little or no risk. • Fraudsters focus on attracting new money to make promised payments. Source: Securities and Exchange Commission, www.sec.gov, accessed June 2011. 4-8
- 9. Ethical Standards are Fundamental WHAT are ETHICS? LG1 • Ethics -- The standards of moral behavior. Behaviors that are accepted by society as right versus wrong. 4-9
- 10. Ethical Standards are Fundamental BASIC MORAL VALUES LG1 Right: Wrong: • Integrity •Cheating • Respect for human life •Cowardice •Cruelty • Self-control • Honesty • Courage • Self-sacrifice 4-10
- 11. Ethics Begins with Each of Us ETHICS and YOU 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. 4-11
- 12. FACEBOOK or FAKEBOOK? (Making Ethical Decisions) • Facebook scams are becoming more prevalent. • Some scammers pose as military servicemen and establish relationships with women, then request money for phone calls or trips home. • Surveys can generate money for scammers, but then some also teach others how to scam other users. • Do you think it’s ethical to create a fake account? Why? Why not? 4-12
- 13. Ethics Begins with Each of Us FACING ETHICAL DILEMMAS LG2 • Ask yourself these questions: - Is it legal? - Is it balanced? - How will it make me feel about myself? 4-13
- 14. Ethics Begins with Each of Us BRIBERY BAD BOYS Five Open FCPA Investigations LG2 Source: Forbes, May 24, 2010. 4-14
- 15. 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? 4-15
- 16. Managing Businesses Ethically and Responsibly ETHICS START at the TOP LG3 • Organizational ethics begin at the top. • Managers can help instill corporate values in employees. • Trust between workers and managers must be based on fairness, honesty, openness and moral integrity. 4-16
- 17. Managing Businesses Ethically and Responsibly FACTORS INFLUENCING LG3 MANAGERIAL ETHICS 4-17
- 18. Setting Corporate Ethical Standards ETHICS CODES 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. 4-18
- 19. Setting Corporate Ethical HOW to IMPROVE AMERICA’S Standards LG4 BUSINESS ETHICS 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. 4-19
- 20. Setting Corporate Ethical HOW to IMPROVE AMERICA’S Standards LG4 BUSINESS ETHICS 4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers -- Insiders who report illegal or unethical behavior. 5. Involve outsiders such as suppliers, subcontractors, distributors and customers. 6. The ethics code must be enforced. 4-20
- 21. Setting Corporate Ethical HOW to PREVENT UNETHICAL Standards LG4 BEHAVIORS 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. 4-21
- 22. Setting Corporate Ethical HOW to PREVENT UNETHICAL Standards LG4 BEHAVIORS 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. 4-22
- 23. 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? 4-23
- 24. Corporate Social Responsibility CORPORATE SOCIAL LG5 RESPONSIBILITY • 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. 4-24
- 25. Corporate Social Responsibility CORPORATE PHILANTHROPY LG5 and SOCIAL INITIATIVES • Corporate Philanthropy -- Includes charitable donations. • Corporate Social Initiatives -- Include enhanced forms of corporate philanthropy. 4-25
- 26. Corporate Social CORPORATE RESPONSIBILITY Responsibility LG5 and POLICY • 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. 4-26
- 27. Corporate Social Responsibility POSTIVE IMPACTS LG5 of COMPANIES • Xerox offers a Social Service Leave program. • The recent recession caused 60% of companies to cut their philanthropic donations. However, now they’re more likely to give time and goods. • Two-thirds of MBA students surveyed reported they would take a lower salary to work for a socially responsible company. 4-27
- 28. Corporate Social Responsibility HELPING HANDS LG5 Most Generous Celebrities Source: Parade Magazine, www.parade.com, July 8, 2010. 4-28
- 29. Corporate Social Responsibility GENEROUS GUYS LG5 World’s Biggest Givers Source: Forbes, June 6, 2011. 4-29
- 30. Corporate Social Responsibility LIFE AFTER TRAGEDY LG5 Japan’s Post-Tsunami Big Givers Source: Forbes, April 11, 2011. 4-30
- 31. Responsibility to Customers PRESIDENT KENNEDY’S BASIC LG5 RIGHTS of CONSUMERS • The Right to Safety • The Right to be Informed • The Right to Choose • The Right to be Heard 4-31
- 32. Responsibility to Customers HOW DO CUSTOMERS KNOW? LG5 • Over 70% of executives say their primary use of social media is to communicate CSR efforts. • Social media allows companies to reach a broad, diverse group and connect directly to them. • Now more than ever, it’s important for companies to live up to their expectations. 4-32
- 33. Responsibility to Customers SOCIAL CUSTOMER CONTACT LG5 Do’s and Don’ts of Using Twitter for Business Source: Entrepreneur, September 2010. 4-33
- 34. Responsibility to Investors INSIDER TRADING 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. 4-34
- 35. Responsibility to Employees RESPONSIBILITY to LG5 EMPLOYEES • Create jobs and provide a chance for upward mobility. • Treat employees with respect. • Offer salaries and benefits that help employees reach their personal goals. 4-35
- 36. Responsibility to Employees AMERICA’S MOST ADMIRED LG5 COMPANIES 1. Apple 2. Google 3. Berkshire Hathaway 4. Southwest Airlines 5. Procter & Gamble 6. Coca-Cola 7. Amazon 8. FedEx 9. Microsoft 10. McDonald’s Source: Fortune, www.fortune.com, March 21, 2011. 4-36
- 37. Responsibility to Employees WHEN EMPLOYEES LG5 are UPSET… • Employee fraud costs U.S. businesses about 5% of annual revenue and causes 30% of all business failures. • Disgruntled workers relieve frustration by: - Blaming mistakes on others. - Manipulating budgets and expenses. - Making commitments they intend to ignore. - Hoarding resources. - Doing the minimum. 4-37
- 38. Responsibility to Society and the Environment SOCIETY and LG5 the ENVIRONMENT • 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. 4-38
- 39. Responsibility to Society and the Environment RESPONSIBILITY to the LG5 ENVIRONMENT • Environmental efforts may increase costs, but can offer good opportunities. • The emerging renewable-energy and energy- efficiency industries account for 9 million U.S. jobs. • By 2030, as many as 40 million “Green” jobs will be created. 4-39
- 40. SUSTAINABLE or SUSPECT: GREENWASHING (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.” • Websites such as Greener Choices and Greenwashing Index screen ads for greenwashing. 4-40
- 41. Responsibility to Society and the Environment WORTHY CAUSES What $1,000 and $10,000 Can Buy LG5 Source: Money, November 2010. 4-41
- 42. Social Auditing SOCIAL AUDITING LG5 • Social Audit -- A systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs. • Five Types of Social Audit Watchdogs 1) Socially conscious investors 2) Socially conscious research organizations 3) Environmentalists 4) Union officials 5) Customers 4-42
- 43. 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? 4-43
- 44. International Ethics and Social Responsibility INTERNATIONAL ETHICS LG6 • Many businesses want socially responsible behavior from their international suppliers. • In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business. • Partners in the Organization of American States signed the Inter-American Convention Against Corruption. 4-44
- 45. 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? 4-45
- 46. 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? 4-46
Notes de l'éditeur
- Company: Xerox
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically. The reputations of American businesses have been under assault due to numerous scandals over the past twenty years. Following the law is only the first step in being ethical. Ethics are standards of moral behavior and are accepted by society as right versus wrong.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 1: Explain why obeying the law is only the first step in behaving ethically.
- See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action.
- See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action. When facing an ethical dilemma it is important that you ask these three basic questions: Is it legal? Is it balanced? How will it make me feel about myself? Asking and answering these three questions will prevent many people from making unethical decisions.
- See Learning Goal 2: Ask the three questions to answer when faced with a potentially unethical action. Bribery Bad Boys The Justice Department has 150 open Foreign Corrupt Practices Act (FCPA) cases. This slide highlights five of the current cases and the amount that these companies have reserved to cover any settlements. To promote discussion, you can discuss how these companies are first extorted by the officials in foreign nations and then punished for their actions back at home. It is illegal for U.S. companies to participate in bribery, yet it is common practice in some countries. How are Americans supposed to deal with these issues? What is the ethical dilemma here?
- 1) Ethics are society ’s accepted standards of behavior, in other words behaviors accepted by society as right rather than wrong. 2) Ethics reflect people ’s proper relationships with one another. Legality is narrower in that it refers to laws we have written to protect ourselves from fraud, theft, and violence. 3) It helps to ask the following questions when faced with an ethical dilemma: Is the proposed action legal? Is it balanced? Would I want to be treated this way? How will it make me feel about myself?
- See Learning Goal 3: Describe management ’s role in setting ethical standards. Leadership helps to instill corporate values in employees. So, like many aspects of business, ethical behavior practiced and modeled by managers and executives will often trickle down to the employees at large.
- See Learning Goal 3: Describe management ’s role in setting ethical standards. Factors Influencing Managerial Ethics Before you put this slide up, you may want to ask the students: What factors influence managerial ethics? Ethics begins with the individual, but are influenced by the organization and the environment in which the business operates. To bring the discussion to the present, you may ask: How can the firm ’s reward system impact ethical behavior? How did these reward systems at large banks and other financial institutions exacerbate the financial crisis in this country? (Students should be able to discuss this point. Excessive risk taking imperiled all of the stakeholders of various financial institutions as well as the world economy.)
- See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code.
- See Learning Goal 4: Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Ways to Prevent Unethical Behavior Before you put this slide up, you may want to ask the students: What is management ’s role in preventing unethical behaviors? What can be done to deter unethical behaviors on the part of employees? Increasing the penalty and educating employees are among the top methods for deterring unethical behaviors. Thirty percent of the respondents in a poll suggested adding new laws to deter unethical behaviors. Ask the students: If ethics is more than legality, would new laws help? (Students should be able to argue this point. Although ethics is more than legality, if something is against the law, people may refrain from such behavior. However, it should be pointed out that ethics should be the way of life, i.e., it needs to be ingrained in the employees through culture and role modeling by managers and executives.)
- 1) Compliance-based ethics codes emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers. Integrity-based ethics codes define the organization ’s guiding values, create an environment that supports ethically sound behavior, and stress shared accountability. 2) The six steps many believe will improve U.S. business ethics are: (1) Top management must adopt and unconditionally support an explicit corporate code of conduct; (2) Employees must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly; (3) Managers and others must be trained to consider the ethical implications of all business decisions; (4) An ethics office must be set up with which employees can communicate anonymously; (5) Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program; (6) The ethics code must be enforced with timely action if any rules are broken.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders. CSR is based on a commitment to such basic principles as integrity, fairness and respect. Many for-profit companies have philanthropic endeavors as a part of their mission. Communities often depend on companies to help with social programs that make the lives of people in the community better. It stands to reason that businesses that strengthen their communities, as proponents of CSR argue, will grow stronger as their communities improve.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders. An ultimate example of a company helping the community is Xerox ’s program, Social Service Leave, which allows employees to leave for up to a year and work for a nonprofit while still earning full salary, including benefits and job security.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders. Most Generous Celebrities Students will find it interesting to see what some of their favorite celebrities have donated. Oprah Winfrey earns well over $200 million per year and donates nearly $50 million. The talk-show host and entertainment mogul is the founder of the Angel Network, a charity that raises money for poverty-stricken children and she has raised money to open schools for girls in South Africa.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders. World ’s Biggest Givers Students may be surprised how much billionaires donate and the causes they support. You could prompt discussion by asking students why they believe billionaires give so much to education while celebrities choose more social causes. Bill Gates ’ net worth is over $56B and he’s donated $28 billion!
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders. Life After Tragedy Japan was left devastated after an earthquake and tsunami destroyed cities and ports. Japanese tycoons and their companies quickly did their part in aiding those affected by the disaster. Some of their companies were even shut down. Tadashi Yanai ’s stock dip cut his worth from $6.3 billion to $1.3 billion.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders. America ’s Most Admired Companies 1. Before you put this slide up, you may want to ask the students: Are the ideals of maximization of profit and social responsibility in conflict? Corporate social responsibility is the concern businesses have for the welfare of society, not just for their owners. 3. The vast majority of the companies listed in this slide are not only admired, but also financially successful.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders. Worthy Causes Sometimes it ’s difficult to imagine just how far our donation money can go. This slide can give students insight into what some American families are able to give. It ’s not uncommon to think that donations under $1,000 will not go far. But when students see how much good $1,000 can do, they see smaller donations are still worth it. To promote discussion, navigate through the websites linked to the slide and check out what smaller and bigger donations provide for these groups.
- See Learning Goal 5: Define corporate social responsibility and compare corporations ’ responsibilities to various stakeholders.
- 1) Corporate social responsibility (CSR) is the concern businesses have for the welfare of society, not just for their owners. CSR defenders believe that businesses owe their existence to the societies they serve and cannot succeed in societies that fail. CSR must be responsible to all stakeholders, not just investors in the company. 2) A social audit is a systematic evaluation of an organization ’s progress toward implementing socially responsible and responsive programs. Many feel a social audit should measure workplace issues, the environment, product safety, community relations, military weapons contracting, international operations and human rights, and respect for the rights of local people.
- See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets.
- See Learning Goal 6: Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets.
- 1) Many U.S. businesses now demand that international suppliers do not violate U.S. human rights and environmental standards. 2) It ’s unlikely there will be a single set of international rules governing multinational companies because of the widespread disparity among global nations as to what constitutes ethical behavior. For example, a gift in one culture can be a bribe in another. In some nations child labor is expected and an important part of a family’s standard of living. The fairness of adhering to U.S. standards of ethical behavior is not as easy as you may think.