its legal, ethical & global environment 6 th ed. its legal, ethical & global environment 6...

Its Legal, Ethical &Global Environment 6th Ed.

Its Legal, Ethical &Global Environment 6th Ed.

B U S I N E S SB U S I N E S S

MARIANNE M. JENNINGS

Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved.

Chapter 2Business Ethics andSocial Responsibility

Chapter 2Business Ethics andSocial Responsibility

2 Copyright ©2003 by West Legal Studies in Business, a division of Thomson Learning. All rights reserved.

Why Business Ethics?Why Business Ethics?

Importance of Values in Business SuccessEthics Resource Center Study

• Firms with written codes of ethics did substantially better as an investment than the general Dow Jones Composite over a 30-year period

• Executives feel ethical behavior strengthens a firm’s competitive edge

• Johnson & Johnson recall of Tylenol earned it high respect and higher earnings in spite of cost


Why Business Ethics?

Costs of Unethical BehaviorDefense contractors and current

reputation Beech-Nut and the loss in sales from

selling fake “apple” juice Boycotts over Nestlé’s infant formula

marketing programs in Third World nations



Costs of Unethical BehaviorSavings and loan industry and abuses

Exxon and the Valdez oil spill Barings Bank, Gibson Greetings, Procter &

Gamble, Orange County, Bankers Trust and derivatives

Staged gas tank explosion of GM trucks by Dateline NBC



Costs of Unethical Behavior To AllIncreased regulation for manufacturersDecreased profits to shareholdersLoss of consumer confidence



Ethics as a StrategyAffords opportunity for planning and

ability to answer social needs and cultural changes

Creates goodwill between business and the community• Absence of goodwill can be costly



Business Ethics for Personal ReasonsNot all ethical firms are profitable firmsNot all unethical firms are unprofitable

• Examples: Exxon and Johns-Manville

Being personally ethical is really a personal standard of behavior.• It is the correct thing to do



The Value of a Good Reputation“A reputation, good or bad, is tough to shake.” Richard Teerlink, former CEO, Harley-Davidson

“A bad reputation is like a hangover. It takes a while to get rid of, and it makes everything else hurt.” James Preston, former CEO, Avon


Leadership’s Role in Ethical ChoicesLeadership is the ability to see the

problem before it becomes a legal liability and fix it.

Enron, WorldCom scandals.

Leadership’s Role in Ethical ChoicesLeadership is the ability to see the

problem before it becomes a legal liability and fix it.

Enron, WorldCom scandals.



Ethics and LeadershipEthics and Leadership


What is Business Ethics?What is Business Ethics?

Applying Standards of Moral Reasoning to Business DilemmasMoral standard is establishedIndividual moral standards differDebate over sources of moral standardsEvaluate moral standards and conflicts as

new data appear



Sources of Moral StandardsActual or positive lawNatural lawMoral relativism or situational ethicsReligious beliefs or divine revelation

Conflicts Among BusinessShareholders want profitsEmployees want safe, secure jobs



Conflicts Among BusinessSocial Responsibility

• Wants plant’s economic base but does not want its environment destroyed

• Dilemma: Should a company shut down to install state-of-the-art scrubbers on its plant?

Friedman PerspectiveShould only undertake a project if it benefits the

business. Example: Firms should engage in pollution control to attract workers not to benefit the community


Ethical Postures, Social Responsibility

and Business Practice


and Business PracticeWHOM SHOULD SHAREHOLDERS SERVE?

Moral question:Whose interestshould corporationserve?

Policy question:Best way to serveinterest is if thecorporation isresponsive to:

Inherence Shareholders only Shareholders only

Enlightened self-interest

Shareholders only Larger society

Invisible hand Larger society Shareholders only

Social responsibility Larger society Larger society

Social Responsibilities of Corporations


Whose interest does a corporation serve and what is the best way to serve that interest?The inherence school

• Serve shareholders• Friedman view

The enlightened self-interest school • Manager is responsible first to shareholders but serves

them best by being responsible to larger society• Business value is enhanced if it is responsive to society

needs






The invisible hand schoolManagers believes larger society should be

served but manager does that best by serving shareholders first

Do not become involved in political or social responsibility issues - allow others to handle issues and they will comply

The social responsibility school Manager should serve larger society






Recognizing Ethical Dilemmas


The Language of Ethical Lapses“Everybody else does it”

• Example: Zoë Baird's employment of illegal immigrants and her failure to pay payroll taxes on their earnings

“If we don’t do it, someone else will.”• Example: Selling O.J. Simpson masks and

bloody knives



The Language of Ethical Lapses“That’s the way it has always been

done.”• Examples: Audit committees, independence,

and eventual SEC rules“We’ll wait until the lawyers tell us it’s

wrong”• Example: Derivatives—legality does not

determine morality




The Language of Ethical Lapses“It doesn’t really hurt anyone”

• Examples: Freeway rubberneckers, health insurance claims and rising premiums

“The system is unfair”• Example: Cheating does not improve the system

“I was just following orders”• Example: German border guards, sometimes

morality requires disobedience




Categories of Ethical DilemmasTaking things that don’t belong to you

• Example: Pens to postage to embezzlementSaying things you know are not true

• Example: Blaming others for your slip-upsGiving or allowing false impressions

• Example: Movie ads quoting reviews selectively to give the false impression that the reviewer likes the movie




Categories of Ethical DilemmasBuying influence or engaging in conflict

of interest• Example: Those who award contracts accept

perks from biddersHiding or divulging information

• Example: In contract negotiations, failure to reveal important/material information; with employees, revealing private information




Categories of Ethical DilemmasTaking unfair advantage

• Example: Capitalizing on another’s inexperience

Committing acts of personal decadence• Example: Office parties that result in drunken

behavior that harms others

Perpetrating interpersonal abuse• Example: Harassment




Categories of Ethical DilemmasPermitting organizational abuse

• Examples: Child labor issues, low wagesViolating rules

• Example: Follow procedures for finances because of internal control issues; work to change rules, don’t violate them

Condoning unethical actions• Examples: Disclosing problems and confronting

violators


Blanchard and PealeIs it legalIs it balancedHow does it make me feel

The Front-Page-of-the-Newspaper TestHow would the story be reportedUse an objective and informed reporter’s view

Resolution of Business Ethical Dilemmas





Laura Nash and PerspectiveHow would I view the problem if I sat on

the other side of the fenceAm I able to discuss my decision with

my family, friends, and those closest to me

What am I trying to accomplish




The Wall Street Journal ModelCompliance

• Are you violating any lawsContribution

• What does this action contribute to my customers, shareholders, bondholders, employees, community, and suppliers

Consequences• How will this action affect me, my company, my

family, our employees, and our shareholders


Creating an Ethical Atmosphere


The Tone at the TopClear signals are necessary for good business ethics

• Sears and its auto repair issues with pay incentives• Hotlines for reporting violations• Du Pont and its ethics bulletins

Developing an Ethics StanceSetting parameters for personal and business

behaviorSetting tone of tolerance or intolerance for behavior


RELATIVISM

ABSOLULTISM

PRAGMATIC IDEALISTIC

Did she understand that embezzlementis wrong

How long was she embezzling

Why did she take the money

Termination




Watch for Dangers of Unethical EnvironmentIntense competition and issues of

survivalManagers making poor judgmentsEmployees with no personal values




Ethical Issues in International Business


Businesses Must Decide Whether to Operate Under One Uniform Set of Standards

Cultures, Laws, and Standards VaryCreates issues of bribes, grease payments, and culture-related

giftsProblems of economic development where bribery is common

• Additional costs and Lack of Trust• Basic assumptions underlying economic model of capitalism do not

exist and make investment more difficult




Least Corrupt Countries Most Corrupt Countries Denmark 9.94 India 2.75 Finland 9.48 Indonesia 2.72 Sweden 9.35 Mexico 2.66 New Zealand 9.23 Pakistan 2.53 Canada 9.10 Russia 2.27 Netherlands 9.03 Columbia 2.23 Norway 8.92 Bolivia 2.05

Australia 8.86 Nigeria 1.76

Least Corrupt Countries Most Corrupt Countries Denmark 9.94 India 2.75 Finland 9.48 Indonesia 2.72 Sweden 9.35 Mexico 2.66 New Zealand 9.23 Pakistan 2.53 Canada 9.10 Russia 2.27 Netherlands 9.03 Columbia 2.23 Norway 8.92 Bolivia 2.05

Australia 8.86 Nigeria 1.76

its legal, ethical & global environment 6 th ed. its legal, ethical & global environment 6...

Documents

business ethics

west legal studies

costly ethics

division of thomson

written codes of ethics

jennings copyright

dateline nbc slide

spite of cost slide