Business Ethics and Social Responsibility

Chapter 2

Business Ethics

The standards of conduct and moral values governing actions and decisions in the work environment.

• Businesses must take into account a wide range of

social issues, including how a decision will affect the

environment, employees, and customers.

• Primary objective of social responsibility is the

enhancement of society’s welfare through

philosophies, policies, procedures, and actions.

Concern for Ethical and Societal Issues

Business Ethics

Balance between what’s right and what’s profitable

Often no clear-cut choices

Often shaped by the organization’s ethical climate

Concern for Ethical and Societal Issues

The Contemporary Ethical Environment

Business ethics are now in the spotlight as

never before.

Companies realize that they have to work

harder to earn the trust of the general public.

The Contemporary Ethical Environment

Walmart’s corporate responsibility.

Individuals can make the difference in ethical

expectations and behavior.

• Ethical behavior can be difficult to track or define in

all circumstances. Evidence suggests that

unfortunately some individuals act unethically or

illegally on the job.

• The National Business Ethics Survey

Putting own interest ahead of the organization

Lying to employee

Misrepresenting hours

Internet abuse

Individuals Make a Difference

Individuals Make a Difference

Technology is expanding unethical behavior.

Anyone with computer access to data has the potential

to steal or manipulate the data or to shut down the

system, even from a remote location.

Internet’s unethical side: Cookies

Cookies are small text files deposited on a computer hard

drive when a user visits Web sites.

Cookies identify the visitor’s Web browser software and

track visits to the Web site.

When the visitor returns to a site that has stored a cookie,

the Web site software will search the visitor’s computer,

find the cookie, and know what that person has done in the

past.

Technology & Ethics

Internet’s unethical side: Google

How Google uses the data it collects

Technology & Ethics

Is it ethical…

Technology & Ethics

Is it ethical to track employees’ e-mails?

Technology & Ethics

Is it ethical to provide employees with free

SmartPhones and expect them to work 7/24!

Technology & Ethics

Development of Individual Ethics

Individuals typically

develop ethical

standards in the

three stages

• An individual’s stage in moral and ethical development is

determined by a number of factors.

– Experiences

– Family

– Educational background

– Cultural background

– Religious background

– Environment within the firm.

• There are some other factors involved in solving ethical

questions on the job.

Development of Individual Ethics

On-the-Job Ethical Dilemmas

Conflict of Interest

• occurs when a businessperson is faced with a

situation in which an action benefiting one person or

group has the potential to harm another.

• Lawyers, business consultants, or advertising

agencies would face a conflict of interest if they

represented two competing companies: a strategy that

would most benefit one of the client companies might

harm the other client.

• Most businesses and government agencies have

written policies prohibiting employees from accepting

gifts or specifying a maximum gift value.

On-the-Job Ethical Dilemmas

Honesty and Integrity

• An employee who is honest can be counted on to tell

the truth.

• An employee with integrity goes beyond truthfulness.

Having integrity means adhering to deeply felt ethical

principles in business situations.

• Behaving with honesty and integrity can help build

long-term relationships with customers, employers,

suppliers, and the public.

On-the-Job Ethical Dilemmas

Honesty and Integrity

• Some people misrepresent their academic credentials

and previous work experience on their résumés or job

applications.

• For example, a city worker in Ohio, who after years of

listing a bachelor’s degree on her résumé had to admit

that she only attended the school for six months and

never graduated. She stepped down from her position.

On-the-Job Ethical Dilemmas

Honesty and Integrity

• Others steal from their employers by taking home

supplies or products without permission or by carrying

out personal business during the time they are being

paid to work.

• For example, Internet misuse during the work day is

increasing. Employees use the Internet during work

hours for personal e-mail, shopping, gaming, and

visiting bulletin boards and blogs or social networking

sites such as Facebook and YouTube.

• The use of laptops, cell phones, and other wireless

devices makes all of this misconduct easier to hide.

On-the-Job Ethical Dilemmas

Honesty and Integrity

On-the-Job Ethical Dilemmas

Loyalty versus Truth

• Businesspeople expect their employees to be loyal

and to act in the best interests of the company.

• Individuals may have to decide between loyalty to the

company and truthfulness in business relationships.

• People may emphasize truthfulness and actively

disclose negative information, especially if the cost of

silence is high (e.g., operating a malfunctioning aircraft

or selling tainted food items).

On-the-Job Ethical Dilemmas

Yoghurt seller does not say that his yoghurt is sour!

Whistle-Blowing

• Whistle-blowing is an employee’s disclosure to

company officials, government authorities, or the

media of illegal, immoral, or unethical practices.

• Whistle-blowing and other ethical issues arise

relatively infrequently in firms with strong

organizational climates of ethical behavior.

On-the-Job Ethical Dilemmas

How Organizations Shape Ethical Conduct

Development of a

corporate culture to

support business ethics

happens on four levels

Ethical Awareness

• The foundation of an

ethical climate is ethical

awareness.

• Code of Conduct:

Formal statement that

defines how the

organization expects

and requires employees

to resolve ethical

questions.

Johnson & Johnson Credo

Ethical Education

Codes of conduct

cannot detail a solution

for every ethical

situation, so

corporations provide

training in ethical

reasoning.

Ethical Action

Helping employees

recognize and reason

through ethical

problems and turning

them into ethical

actions.

Ethical Action

Texas Instruments gives its employees a reference card to

help them make ethical decisions on the job.

Ethical Leadership

Executives must not only

talk about ethical behavior

but also demonstrate it in

their actions.

use clear, explicit language

rather than euphemisms for

corrupt behavior

encourage behavior that

generates and fosters ethical

values

insist on doing right even if it

proves financially costly

Acting Responsibly to Satisfy Society

Social Responsibility

Management’s acceptance of the obligation to consider profit,

consumer satisfaction, and societal well-being of equal value

in evaluating the firm’s performance.

A company’s social performance is measured by its

contribution to the overall economy, job opportunities, and

charitable contributions and service.

Although profits and employment remain important, today many factors contribute to an assessment of a firm’s social

performance, including providing equal employment

opportunities; respecting the cultural diversity of employees;

responding to environmental concerns; providing a safe,

healthy workplace; and producing high-quality products that are safe to use.

Areas of Responsibility

Responsibilities to the General Public

Public Health Issues. What to do about inherently

dangerous products such as alcohol, tobacco etc.

Protecting the Environment. Using resources efficiently,

minimizing pollution.

Green marketing

Sustainability

Federal Trade Commission guidelines for environmental claims

in green marketing;

Responsibilities to the General Public

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 Customers

CONSUMERISM

The Right to Be Safe. Safe operation and consumption of

products.

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.

Responsibilities to Employees

Workplace Safety.

Quality-of-Life Issues. Balancing work and family through

flexible work schedules, subsidized child care.

Ensuring Equal Opportunity on the Job. Providing equal

opportunities to all employees without discrimination.

Age Discrimination. Protecting older workers.

Sexual Harassment and Sexism. Avoiding unwelcome

actions of a sexual nature; equal pay for equal work without

regard to gender.

Responsibilities to Investors and the Financial Community

Obligation to make profits for shareholders.

Expectation of ethical and moral behavior.

Protection of investors