The Future of BusinessThe Essentials 4th EditionGitman & McDaniel

Making EthicalDecisions and

Managing aSocially

ResponsibleBusiness

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Chapter 2Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved

Prepared byDeborah Baker

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Learning Goals

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R 21 What philosophies and concepts shape personal

ethical standards?

2 How can organizations encourage ethical business behavior?

3 What is social responsibility?

4 How do businesses met their social responsibilities to various stakeholders?

5 What are the trends in ethics and social responsibility?

3

Learning Goals Appendix

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6 How does the legal system govern business transactions and settle business disputes?

7 What are the required elements of a valid contract; and what are the key types of business law?

8 What are the most common taxes paid by businesses?

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Understanding Business Ethics

1

What philosophies and concepts shape personal ethical standards?

1

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ethics

A set of moral standards for judging whether something is right or wrong.

1

Understanding Business Ethics

61

Individual RightsIndividual Rights

DeontologyDeontology

UtilitarianismUtilitarianism

JusticeJustice

Factors Influencing Business Ethics

7

deontology

The philosophy that says people should meet their obligations and duties when analyzing an ethical dilemma.

1

Factors Influencing Business Ethics

8

CONCEPT check

How are individuals’ business ethics formed?

What is utilitarianism?

How can you recognize unethical activities?

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9

How Organizations Influence Ethical Conduct

2

How can organizations encourage ethical business behavior?

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Lead by example

Offer ethics training programs

Establish a formal code of ethics

Conduct informal and formal programs

2

How Organizations Influence Ethical Conduct

11

code of ethics

A set of guidelines prepared by a firmto provide its employees with the knowledge of what the firm expects in terms of their responsibilities and behavior toward fellow employees, customers, and suppliers.

Establishing a Formal Code of Ethics

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12

Top Best Corporate Citizens

Business Ethics Magazine 2007

1. Green Mountain Coffee Roasters, Inc.

2. Advanced Micro Devices, Inc.

3. NIKE, Inc.

4. Motorola, Inc.

5. Intel Corporation

6. International Business Machines Corporation

7. Agilent Technologies, Inc,

8. Timberland Company (The)

9. Starbucks Corporation

10. General Mills Incorporated

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CONCEPT check

What is the role of top management in organizational ethics?

What is a code of ethics?

2

14

Managing a Socially Responsible Business

3

What is social responsibility?3

15

social responsibility

The concern of businesses for the welfare of society as a whole. It consists of obligations beyond those required by law or contracts.

Managing a Socially Responsible Business

3

1. Social responsibility is voluntary2. Obligations of social responsibility are broad

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Social Responsibility

3

Ethical

Legal

Economic

Philanthropic

Exhibit 2.3

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Social Responsibility

Illegal and Irresponsible Behavior

Irresponsible but Legal Behavior

Legal and Responsible Behavior

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CONCEPT check

What are the four components of social responsibility?

Give an example of legal but irresponsible behavior.

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19

Responsibilities to Stakeholders

4

How do businesses met their social responsibilities to various stakeholders?

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Stakeholders

stakeholders

Individuals or groups to whom a business has a responsibility.

InvestorsInvestors

General PublicGeneral Public

CustomersCustomers

EmployeesEmployees

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America’s Top Ten Best Places to Work1. Google

2. Quicken Loans

3. Wegmans Food Markets

4. Edward Jones

5. Genentech

6. Cisco Systems

7. Starbucks

8. Qualcomm

9. Goldman Sachs

10. Methodist Hospital SystemExhibit 2.4

Source: Robert Levering and Milton Moskowitz, “The 100 Best Companies to Work For,”

Fortune (February 4, 2008), p.75.

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corporate philanthropy

The practice of charitable giving by corporations; includes contributing cash, donating equipment and products, and supporting the volunteer efforts of company employees.

4

Responsibility to Society

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social investing

The practice of limiting investments to securities of companies that behave in accordance with the investor’s beliefs about ethical and social responsibility.

4

Responsibilities to Investors

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CONCEPT check

How do businesses carry out their social responsibilities to consumers?

What is corporate philanthropy?

Is a company’s only responsibility to its investors to make a profit? Why or why not?

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Trends in Ethics and Social Responsibility

5

What are the trends in ethics and social responsibility?

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Trends in Ethics and Social Responsibility

Corporate philanthropyCorporate philanthropy

New social contract between employers and employeesNew social contract between employers and employees

Growth of global ethics and social responsibilityGrowth of global ethics and social responsibility

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strategic giving

The practice of tying philanthropy closely to the corporate mission or goals and targeting donations to regions where a company operates.

Changes in Corporate Philanthropy

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cause-related marketing

The cooperative efforts of a “for-profit” firm and a “nonprofit organization” for mutual benefit. Used as any marketing effort for social or other charitable causes.

Changes in Corporate Philanthropy

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Responsibilities of a Multinational Corporation

Respect local practices and customs

Ensure harmony between staff and host population

Provide management leadership

Develop local managers who will be a credit to the community

Commit to a long-term relationship by involving stakeholders

Implement ethical guidelines within the organization in the host country

Balance conflicting interests, such as human rights

Global Ethics and Social Responsibility

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CONCEPT check

Describe strategic giving.

What role do employees have in improving their job security?

How do multinational corporations demonstrate social responsibility in a foreign country?

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Appendix: Understanding the Legal and Tax Environment

6

How does the legal system govern business transactions and settle business disputes?

6

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The Legal System

laws

The rules governing a society’s conduct that are created and enforced by a controlling authority, usually the government.

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Business Law

business law

The body of law that governs commercial dealings.

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Business Law

Uniform Commercial Code (UCC)

A model set of rules that apply to commercial transactions between businesses and between businesses and individuals.

It covers the sale of goods, bank deposits and collections, letters of credit, documents of title, and investment securities.

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Nonjudicial methodsNonjudicial methods

ArbitrationArbitration MediationMediation

Federal and State CourtsFederal and State Courts

Trial courtsTrial courts Appellate courtsAppellate courts Supreme CourtSupreme Court

The Court System

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Nonjudicial Methods

arbitration

A method of settling disputes in which the parties agree to present their case to an impartial third party and are required to accept the arbitrator’s decision.

mediation

A method of settling disputes in which the parties submit their case to an impartial third party but are not required to accept the mediator’s decision.

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What are the required elements of a valid contract; and what are the key types ofbusiness law?

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Appendix: Contracts and Business Law

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express contractSpecifies the terms of the agreement in either written or spoken words

implied contractDepends on the acts and conduct of the parties to show agreement

Contracts

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The Elements of a Contract

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Legal formLegal form

Legal purposeLegal purpose

ConsiderationConsideration

CapacityCapacity

Mutual assentMutual assent

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Payment of DamagesPayment of Damages

Specific PerformanceSpecific Performance

RestitutionRestitution

Remedies for Breach of Contract

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express warrantiesSpecific statements of fact or promises about a product by the seller.

implied warrantiesGuarantees that are imposed on sales transactions by statute or court decision. Neither written nor oral.

Warranties

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patentA form of protection established for inventors; gives an inventor the exclusive right to manufacture, use, and sell an invention for 17 years.

copyrightA form of protection for creators of works of art, music, literature, or intellectual property; gives the creator the exclusive right to use, produce, and sell the creation during the creator’s lifetime and for 50 years thereafter.

Patents, Copyrights, and Trademarks

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trademarkA design, name, or other distinctive mark that a manufacturer uses to identify its goods in the marketplace.

servicemarkA symbol, name, or design that identifies a service rather than a tangible object.

Patents, Copyrights, and Trademarks

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tort law

Settles disputes involving civil acts that harm people or their property.

Torts include physical injury, mental anguish, and defamation.

Tort Law

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Other Laws

Product liability law

Bankruptcy law

Fair competition laws

Consumer protection laws

Deregulation of industries

Regulation of the Internet

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What are the most common taxes paid by businesses?

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Appendix: Taxation of Business

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Common Taxes

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Excise TaxesExcise Taxes

Sales TaxesSales Taxes

Payroll TaxesPayroll Taxes

Property TaxesProperty Taxes

Income TaxesIncome Taxes