chpt 4 intro to business

© 2 0 1 3 C e n g a g e L e a r n i n g . A l l R i g h t s R e s e r v e d . M a y n o t b e s c a n n e d , c o p i e d o r d u p l i c a t e d , o r p o s t e d t o a p u b l i c l y a c c e s s i b l e w e b s i t e , i n w h o l e o r i n p a r t .

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Business Ethics and Social Responsibility:Doing Well By Doing Good

LO1 What is ethics? What are the universal ethics standards?

LO2 What are business ethics? What is an ethical dilemma?

LO3 How does ethics relate to the individual and the organization?

LO4 What is social responsibility and how does it impact stakeholder groups?

LO5 What is the role of social responsibility in the global arena?

LO6 How do companies evaluate their efforts to be socially responsible?


Ethics & Social Responsibility: A Close Relationship

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ETHICSBeliefs about

right and wrong

SOCIAL RESPONSIBILITYThe obligation of a business

to contribute to society


Defining Ethics

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Universal Ethical Standards

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Business Ethics: Not an Oxymoron

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Ethical DilemmaNegative consequencesTwo unfavorable options

Ethical Lapse

Clear misconduct

Most challenging business decisions seem to arise when values are

in conflict.

Business Ethics is the application of right and wrong in the workplace.


Bad News for Business—Worse News Tomorrow!

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39% believe that a person has to lie or cheat sometimes in order to succeed.

59% admitted that they cheated on a test at school within the past 12 months.

72% agree that it’s sometimes OK to hit or threaten a person who makes me very angry.

18% admitted that they stole something from a friend within the past 12 months.

28% admitted that they stole something from a store within the past 12 months.

A study of 43,000 high school students revealed:

High school attitudes are a clear predictor of adult behavior.

© DIGITAL VISION/GETTY IMAGES

Source: The Ethics of American Youth. What would Honest Abe say? Josephson Institute Press Release, February 10, 2011, Character Counts website http://charactercounts.org/programs/reportcard/2010/installment02_report-card_honesty-integrity.html, accessed February 20, 2011


Ethics: Multiple Touchpoints

Individuals must make their own

ethical choices

BUT

The organization can have a significant

influence on decisions8

© STOCKBYTE/GETTY IMAGES


Ethics and the Individual: The Power of One

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Key Principles of Decisions:1. Do you fully understand each dimension of the problem?2. Who would benefit? Who would suffer?3. Are the alternative solutions legal? Are they fair?4. Does your decision make you comfortable as a “gut feel”

level?5. Could you defend your decision on the nightly TV news?6. Have you considered and reconsidered your response to each

question?


Ethics and the Organization: It Takes a Village

• Ethical influence starts at the top, actions matter more than words.

• The Big Three Automakers went to Washington to request a $25 billion bailout package in corporate jets

• After the government gave AIG $85 billion to avoid bankruptcy; the company spent $440,000 on a sales retreat

• Disney CEO hired his friend who was fired for incompetence after 14 months; the 140 million settlement and his expense account details caused stockholders to sue

10Source: Big Three auto CEOs flew private jets to ask for taxpayer money by Josh Levs, November 19, 2008, CNN website, http://www.cnn.com/2008/US/11/19/autos.ceo.jets/, accessed February 2, 2009.Lawmakers, Questioning Fed Bailout, Seek AIG `Junket' Refund By Ryan J. Donmoyer - October 9, 2008 Bloomberg website http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aPlPYw6JXIBU&refer=us, accessed February 21, 2011


How Would you Judge the Actions of these Business Leaders?

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Stanley O’Neal began as Merrill Lynch began racking up losses that led to its collapse, he announced his “retirement.”

Sanjay Kumar of Computer Associates was convicted of massive accounting fraud in 2006.

Martha Stewart was convicted of obstructing justice in a $40,000 well timed stock sale.

Sherron Watkins, former vice president of Enron reported the accounting Irregularities that led to the discovery of corporate fraud.

Pierre Omidyar, the founder of eBay has given away over $100 million to Tufts University Micro Finance Fund.

Whole Foods CEO, John Mackey posted thousands of comments on Yahoo Finance, hyping his company and attacking Wild Oats, which he was planning to purchase.


Creating and Maintaining and Ethical Organization

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Role of Top Management

the tone from the top must be reinforced

by behavior

Organizational Culture

strongest variable on ethical conduct


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Bringing Code of Ethics to Life

Code of Ethics is a written document

providing direction for

employees to make ethical

decisions.

1. Executive Buy-in

2. Clear expectations

3. Integrated approach

4. Global and local

5. Whistleblower support

6. Reporting and Enforcement

© Brian A Jackson / Shutterstock.com


Defining Social Responsibility

Core stakeholder groups include employees, customers, investors, and

community.

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Social Responsibility is the obligation of a business to contribute to society.


The Stakeholder Approach

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EMPLOYEES

INVESTORS

COMMUNITY

ENVIRONMENT

CUSTOMERS

Creating Jobs that Work

Sustainable Development

Value, Honesty and Communication

Fair Stewardship and Full Disclosure

Business and the Greater Good


The Spectrum of Social Responsibility

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Stakeholders

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Stakeholders are any groups that have a stake

or a personal interest in the performance and

actions of an organization.


• Meet Legal Standards• Workplace Safety• Minimum Wage/Overtime

Requirements• Protection from Sexual Harassment• Provide Work/Life Balance

Family and Medical Leave

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Responsibility to Employees: Creating Jobs that Work

© Purestock/ Jupiterimages


How Would You Judge the Actions of These Firms?

1. Clorox introduced a line of “99% natural cleaning” products called Green Works. The Sierra Club endorsed the product line. Clorox makes annual contributions to the Sierra Club

2. Tyson has been accused of unfair business practices and unsavory labor/environmental practices. In 2009, the farmer gave 11% of its profits to charity.

3. As obesity among kids grows, Kraft Foods pledged to stop advertising unhealthy yet profitable foods to young children.

4. After receiving $45 billion in taxpayer bailout funds, Bank of America sponsored a five-day carnival-like event outside the 2009 Super Bowl.

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The Right to Be Safe

The Right to Be Informed

The Right to Choose

The Right to be Heard

Planned Obsolescence – Deliberately designing products to fail in order to shorten

the time between consumer repurchases20

Responsibility to Customers: Value, Honesty, and Communication

Consumerism: a social movement suggests that consumer rights should be the starting point.

President Kennedy defined these rights.


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Amazon: Who Owns the Books

• In 2009, Amazon remotely and abruptly deleted digital editions of books from customers’ Kindle devices

• Customers were furious at the privacy violation

• Amazon refunded the purchases and issued an apology

• Amazon recovered; the Kindle remains Amazon’s best selling product and sales of digital books has hit 48%

© David Robertson / Alamy

The year in technology industry apologies By Bob Brown, Network World, 12/01/2009, Network World website http://www.networkworld.com/slideshows/2009/120109-apologies.html#slide2, accessed February 22, 2011; Amazon Erases Orwell Books From Kindle by Brad Stone July 17, 2009, New York Times website, http://www.nytimes.com/2009/07/18/technology/companies/18amazon.html, accessed February 22, 2011; The Customer Is Always Right by Daniel Lyons, December 21, 2009, NewsWeek website, http://www.newsweek.com/2009/12/20/the-customer-is-always-right.html, accessed February 22, 2011.


Apple Angst

• Apple introduced the iPhone on June 9th, 2007 to rave reviews despite $599 price tag

• Apple dropped the price to $200 to increase customers

• Customers were livid!

• Steve Jobs (former Apple CEO) apologized and gave customers $100 store credit

22Source: http://www.apple.com/hotnews/openiphoneletter/, accessed February 3, 2009; Apple’s customer satisfaction up despite struggling industry by Jeff Smykil, August 19, 2008, Ars Technica website, http://arstechnica.com/apple/news/2008/08/apples-customer-satisfaction-up-despite-struggling-industry.ars, accessed February 3, 2009.


• Legal RequirementsSarbanes-Oxley

• Responsible use of Corporate DollarsHonesty

• Is Optimism or Pessimism Socially Responsible?

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Responsibility to Investors: Fair Stewardship and Full Disclosure


Corporate Philanthropy - business donations to

nonprofit groups, including both money and time.

Corporate Responsibility -

actions of the business rather than donations of money and

time

Cause-related Marketing – partnerships between businesses

and nonprofit organizations, designed to spike sales for the

company and raise money for the nonprofit

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Responsibility to the Community: Business and the Greater Good©

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Greenwashing

• Greenwashing is when an organization spends time/money claiming to be “green” through marketing

• An energy company advertises “green” technology they’re working on — but the technology is only a small part of a “not-so green” business.

• A hotel chain calls itself “green” because it asks guests to sleep on the same sheets and reuse towels but does very little to save water and energy

• Can “doing good” be unethical?

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Source: http://www.greenwashingindex.com/what.php, accessed August 4, 2011.

http://www.greenwashingindex.com/


Sustainable DevelopmentDoing business to meet the needs of

this generation without harming the ability of future generations

Carbon FootprintAmount of harmful greenhouse

gases a firm emits

Green MarketingMarketing environmental products

and practices for competitive advantage

Responsibility to the Environment

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Corporations Tracking Emissions

• The goal is for companies to become carbon neutral; emit zero gasses or to counteract impact of emissions

• Dell Inc. became carbon neutral in 2008

• Corporations track three types of emissions:

Scope 1: direct emissions from operations Scope 2: emissions from electricity, heat and steam Scope 3: outside the company boundary that it has

some controlSource: U.S. Corporations Size Up Their Carbon Footprints by Rachel King, June 1, 2009, Bloomberg Businessweek, Businessweek website, http://www.businessweek.com/technology/content/jun2009/tc2009061_692661.htm, accessed February 24, 2011


Ethics and Social Responsibility in the Global Arena: A House of Mirrors?

Corruption is part of the culture in many countries

Bribes or Gifts

Labor issues in host countries can be complicated

Living Wage Child Labor

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Going Green: It’s Not Just Governments

• Bank of America reduced paper use by 32% from 2000 TO 2005 despite 24% customer growth.

• Arrowhead bottled water introduced smaller “Eco Shape” bottles that helped save 245 million pounds of plastic resin.

• DuPont reduced greenhouse gas emissions during the 1990s by 63%.• Telsa Motors is developing environmentally friendly sports cars with virtually no

emissions• Hewlett-Packard owns gigantic e-waste recycling plants that reclaim steel, plastic

and toxic chemicals.Sources: BusinessPundit, “25 Big Companies That Are Going Green,” July 29, 2008, <http://www.businesspundit.com/25-big-companies-that-are-going-green/>,(accessed May 17, 2010); CNNMoney, “Ten Green Giants,” <http://money.cnn.com/galleries/2007/fortune/0703/gallery.green_giants.fortune/8.html> (accessed May 17, 2010) Arrowhead website, http://www.arrowheadwater.com/KnowH2O/Be-Green.aspx, accessed February 25, 2011.

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A Loaf of Bread and a Packet of Shampoo?

C.K. Prahalad believes companies could add to the global

economy by providing small luxuries to those at “the

bottom of the pyramid”

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Critics suggest that the strategy is exploitation of the “aspirational poor”

What do you think?

© imagebroker / Alamy


Ethics and Social Responsibility: Who is Minding the Store?

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SOCIAL AUDITA systematic evaluation of

how well a firm is meeting its ethics and social

responsibility objectives


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Looking Back

• What is ethics? What are the universal ethics standards?

• What are business ethics? What is an ethical dilemma?

• How does ethics relate to the individual and the organization?

• What is social responsibility and how does it impact stakeholder groups?

• What is the role of social responsibility in the global arena?

• How do companies evaluate their efforts to be socially responsible?

chpt 4 intro to business

Education

e w e b s i t e

n n e d

c e n g

e o r i n p

c c e s s i b

r i g h t s r e s e

o rp o s t e d t o

y n o t b e s c