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Chapter 2Business Ethics & Social Responsibility

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Business Ethics The standards of conduct and moral

values governing actions and decisions in the work environment. Social responsibility Balance between what’s right and what’s profitable Often no clear-cut choices Often shaped by the organization’s ethical climate

Codes of conduct Ethical Standards Vision Statements Mission Statements

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Are we ethically obligated to our shareholders, boards, employees, communities, and subsidiaries?

Sarbanes-Oxley Act A 2002 law that added oversight for the nation’s

major companies and a special oversight board to regulate public accounting firms that audit the financial records of these corporations.

New Rules & Regulations for Securities Trading and Accounting

Do the Right Thing

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Sarbanes-Oxley is an act that is the result of corporate corruption. https://www.youtube.com/watch?v=FKhmgZqjx5Q

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Compliance Standards and procedures

Establish Standards & Procedures High-Level Personal Responsibility Due Care In Assignments Communication of Standards & Procedures Establishment of monitoring and auditing systems and

reporting systems Enforcement of standards through appropriate

mechanisms Appropriate Responses To The Offense Self-Reporting Applicable Industry Practice / Standards

Minimum Requirements for Ethics Compliance Programs

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How has technology expanded the range and impact unethical behavior?

Organizational Gray Area? Does this exist and can we operate within this space?

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Individuals can make the difference in ethical expectations and behavior.

Putting own interest ahead of the organization

Lying to employee Misrepresenting hours Safety violations Internet abuse

Technology is expanding unethical behavior.

Individuals Make a Difference

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Stage 1 - PreconventionalIndividual looks out for their own interests.

Rules are followed only out of fear of punishment or hope of rewards

Stage 2 - ConventionalIndividual considers the interests and expectations of others in making decisions.

Rules are followed because it is a part of belonging to the group.

Stage 3 - Post conventionalIndividual follows personal principles for resolving ethical dilemmas. He or she considers personal,

group and societal interests.

Development of Individual Ethics

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Conflict of Interest – situation in which an employee must make a decision about a business’s welfare versus personal gain.

What do you do when your personal ethics conflict with those of your corporation or

creates a conflict of interest?

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On-the-Job Ethical Dilemmas

Situation in which a business decision may be influenced for personal gain.

(avoid these / disclose them)

Employee’s disclosure of illegal, immoral, or unethical practices in the organization.

Telling the truth and adhering to deeply felt ethical principles in business decisions.

Businesspeople expect employees to be loyal and truthful, but ethical conflicts may arise.

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Ethical standards and choices are strongly influenced by the standards of conduct established within the organizations where people work.

Most ethical lapses in business reflect the values of the firms’ corporate climate.

The development of a corporate culture to support business ethics happens on four levels:

*ethical awareness, ethical reasoning, ethical action, and ethical leadership.

Shaping Ethical Conduct

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Ethical Awareness – being able to identify ethical problems when they occur. Workers also need guidance about how the firm expects them to respond.

Code of Conduct: Formal statement that defines how the organization expects and requires employees to resolve ethical questions.

Helps employees know the expectations of employees ethical behavior.

This code of conduct can outline everything from co-worker interactions to shareholder relations.

This code helps define values and sets the tone for organizational standards.

Level 1 – The foundation

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2. Reasoning/Education – Some ethical questions have black and white answers, but others do not. Businesses must provide the tools employees need to evaluate the options and arrive at suitable behaviors.

3. Ethical Action- Firms must provide structures and approaches that allow decisions to be turned into ethical actions.

◦ Helping employees recognize and reason through ethical problems and turning them into ethical actions.

◦ ◦ I.e... Ethics lines

Level 2 & 3 Ethical Reasoning & Action

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Executives must not only advocate ethical behavior but they must also exemplify it.

Damage can affect a firm’s stakeholders.

Everyone should be held accountable for their actions regardless of their ranking and tenure. use clear, explicit language rather than euphemisms

for corrupt behavior encourage behavior that generates and fosters ethical

values practice moral absolutism, insisting on doing right even

if it proves financially costly

Ethical Leadership #4

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Social Responsibility – businesses consideration of society’s well-being and consumer satisfaction, in addition to profits.◦ General Public – help local economy or

environment◦ Employees – develop your human capital, hr◦ Customers – treat your customers fairly and do

not cause harm to your customers◦ Investors & Financial Community

◦ Organizations Measure Through Social Audits

Responsibility?

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Public Health Issues. What to do about inherently dangerous products such as alcohol, tobacco, vaccines, and steroids.

Protecting the Environment. Using resources efficiently, minimizing pollution.

Green marketing Sustainability

Developing the Quality of the Workforce. Enhancing quality of the overall workforce through education and diversity initiatives.

Corporate Philanthropy. Cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees.

Responsibilities to the General Public

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CONSUMERISM The Right to Be Safe. Safe operation of products, avoiding product

liability.

The Right to Be Informed. Avoiding false or misleading advertising and providing effective customer service.

The Right to Choose. Ability of consumers to choose the products and services they want.

The Right to Be Heard. Ability of consumers to express legitimate complaints to the appropriate parties.

Can you think of any examples of products which have portrayed or distorted their food products or beverages as “healthy" when, in fact, they are not?

Responsibilities to Customers

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Responsibilities to Employees Workplace Safety. Monitored by

Occupational Safety and Health Administration. Quality-of-Life Issues. Balancing work and family

through flexible work schedules, subsidized child care, and regulation such as the Family and Medical Leave Act of 1993.

Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees without discrimination; many aspects regulated by the Equal Employment Opportunity Commission.

Age Discrimination. Age Discrimination in Employment Act of 1968 protects workers age 40 or older.

Sexual Harassment and Sexism. Avoiding unwelcome actions of a sexual nature; equal pay for equal work without regard to gender.

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Responsibilities to Investors

Obligation to make profits for shareholders.

Expectation of ethical and moral behavior.

Protection of investors by the Securities and Exchange Commission and state regulations.