part 1 business in a changing world © 2015 mcgraw-hill education
TRANSCRIPT
Part 1
Business in a Changing
World
© 2015 McGraw-Hill Education.
CHAPTER 1 The Dynamics of Business and Economics
CHAPTER 2 Business Ethics and Social Responsibility
CHAPTER 2 APPENDIX
The Legal and Regulatory Environment
CHAPTER 3 Business in a Borderless World
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Learning Objectives
LO 2-1 Define business ethics and social responsibility and examine their importance.
LO 2-2 Detect some of the ethical issues that may arise in business.
LO 2-3 Specify how businesses can promote ethical behavior.
LO 2-4 Explain the four dimensions of social responsibility.
LO 2-5 Debate an organization’s social responsibilities to owners, employees, consumers, the environment and the community.
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Business Ethics
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Acceptable behavior is determined by:
The organization
The individual’s personal principles
Customers and interest groups
Competitors
Government regulators
Business Ethics• Principles and standards that determine
acceptable conduct in business
Business Ethics
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In business, trust is the glue that holds the customer relationship together
The recent global financial crisis took a toll on consumer trust of financial services companies
American Trust in Different Institutions
Social Responsibility
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Social Responsibility
• A business’s obligation to maximize its positive impact and minimize its negative impact on society
Ethics refers to
individual’s or work group’s
decisions
Social responsibili
ty is the impact of the entire
organization’s
activities on society
Social responsibility and ethics are not
the same
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Laws and Regulations
• Criminalized securities fraud and stiffened penalties for corporate fraud
• Enacted after the accounting scandals in the early 2000’s
Sarbanes-Oxley Act
• Passed to reform the financial industry and offer consumers protection against complex and/or deceptive financial products
• Enacted after the most recent recession
Dodd-Frank Act
The Role of Ethics in Business
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Growing concerns about legal and ethical issues in business strengthen the public’s perceptions that ethical standards and
the level of trust in business need to be raised
Recent Legal and Ethical Issues
• Subprime loans and foreclosures• Accounting fraud• Cybercrimes• Deceptive advertising• Unfair competitive practices
Learning to recognize and resolve ethical issues is a key
step in evaluating
ethical decisions
Recognizing Ethical Issues
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Many issues seem straightforward but in reality are very complex
One of the principal causes of unethical behavior is overly aggressive financial or business objectives
Ethical Issue• An identifiable problem, situation, or opportunity that
requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical
Recognizing Ethical Issues
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► Retired NFL player Tiki Barber was one of 2,000 players who sued the NFL for knowledge about head injuries
► The ethical issue here is whether the NFL hid information that linked head injuries to subsequent damages such as memory loss, permanent head trauma and dementia
Percentage of U.S. Workforce ObservingSpecific Forms of Misconduct, 2009–2011
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Actions Associated with Bullies
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Recognizing Ethical Issues
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Misuse of Company Time
• Estimated to cost hundreds of billions a year in lost productivity
Misuse of Company Resources
• Company policies help prevent company resource abuse
Conflict of Interest
• Exists when a person must choose whether to advance their own interests or those of others
• Bribery is a form of conflict of interest
Bribery • Payments, gifts or special favors intended to influence
the outcome of a decision
Fairness and Honesty
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Companies Must
Use fair competition practices
Give full disclosure of potential harm by a
product
Be truthful in
advertising
Keep company secrets
Meet obligations
Avoid undue
pressure forcing
others to act
unethically
Fairness and Honesty
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Employees Must
Abide by the laws
Cause no harm
through dishonesty
Use company resources fairly and honestly
Be aware of
company policies
Recognize ethical
behavior
Fairness and Honesty
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Many people felt Toyota was not honest with consumers about its vehicles’ accelerator problem – a problem leading to a massive recall and a public-relations nightmare
A later investigation by the National Highway Traffic Safety Administration blamed most of the crashes on driver error
Greenwashing
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There are two levels of greenwashing:
When a company claims they are green because they have a few green practices such as recycling but not water or energy conservation
Hotel chains: Encouraging visitors on an extended stay to not have their towels or bedclothes washed every day in order to help the hotel save water, while at the same time serving breakfast with Styrofoam cups and plastic utensils
When a company puts a façade on their products/services that looks and claims to be green, when in fact there is nothing green about it
Beauty products: A lot of beauty products have misleading words in their names such as “natural”, “herbal”, “pure”, etc., when they actually contain chemicals and harsh components that are not derived from nature
SOURCE: Candice Marie. “Misleading Marketing: Beware the Greenwash!”. www.eluxemagazine.com. February 12, 2013. http://eluxemagazine.com/magazine/green-or-greenwashed-how-to-tell-the-difference-2/. (accessed September 24, 2013).
Making Decisions about Ethical Issues
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o It can be difficult to recognize specific ethical issues and people often need years of experience to accurately recognize and react to ethical situations
Improving Ethical Behavior in Business
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Three factors that influence business ethics
Many employees
use different ethical
standards at work than they
do at home
The activities and examples
set by managers and co-workers
are critical in gaining
consistent ethical compliance
If a company fails to provide
good examples and
direction, confusion and
conflict will develop
Leading to unethical choices in business
Improving Ethical Behavior in Business
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Employees must have established ethics policies if employees are to determine what conduct is acceptable
Code of Ethics
• Formalized rules and standards that describe what a company expects of its employees
Whistleblowing
• The act of an employee exposing an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies
Improving Ethical Behavior in Business
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» The current trend is to move away from legally based ethical programs to cultural or integrity-based programs that make ethics a core organizational value
» Effective business ethics programs are good for business performance
» Firms that develop higher levels of trust function more efficiently and effectively and avoid damaged company reputations and product images
The Nature of Social Responsibility
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The Nature of Social Responsibility
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Involves action and measurement of how deeply the firm embraces the corporate citizenship philosophy
Then follows through by implementing citizenship initiatives
Corporate Citizenship
• The extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders
The Nature of Social Responsibility
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Social Responsibility
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Social responsibility is a voluntary action taken on by companies to varying degrees and it characterized by actions showing concern for all stakeholders such as employees, consumers, the environment and the community
Supply chains and all the people that compose it are also considered stakeholders
The Rana Plaza factory in Bangladesh, which collapsed in 2012, is part of the supply chain for many global companies In September of 2013, 29 companies associated with the factory
were invited to a meeting in Geneva to discuss contributing to a fund for the victims of the disaster that caused over 1,000 deaths and twice as many injuries
Only nine of the companies attended the meeting and only one made a contribution to the fund--this lack of action on the part of the companies indicates a lack of concern to all of their stakeholders
SOURCE: Jian Ghomeshi and Q staff. “Clothing Corporations Need to Step Up for Bangladesh Factory Collapse Victims”. www.theguardian.com. September 18, 2013. http://www.theguardian.com/commentisfree/2013/sep/18/bangladesh-factory-victims-corporations. (accessed September 24, 2013).
Social Responsibility Issues
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The company’s responsibilities to owners and stockholders
Maintaining proper accounting
procedures
Providing investors with all relevant
information
Protecting owner’s rights
and investments
Social Responsibility Issues
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Company’s responsibilities to employees
Provide a safe workplace and
pay them adequately
Provide equal opportunities for all employees
Keep them informed of what is happening in the company
Listen to their grievances and treat them fairly
Social Responsibility Issues
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Company’s responsibility to consumers
Provide them with satisfying, safe products
Respect their rights as
consumers
Social Responsibility Issues
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* The right to safety
* The right to be informed
* The right to choose
* The right to be heard
John F. Kennedy’s 1962 Consumer Bill of Rights
Social Responsibility Issues
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Write letters
Lobby government agencies
Make public service announcements
Boycott irresponsible companies
Consumerism
• The activities individuals, groups and organizations undertake to protect their rights as consumer
Social Responsibility Issues
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Sustainability
• Conducting activities in a way that allows for the long-term well-being of the natural environment, including all biological entities
• Involves the assessment and improvement of business strategies, economic sectors, work practices, technologies and lifestyles so they maintain the health of the natural environment
Social Responsibility Issues
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Home Depot has adopted eight core values as the foundation for its ethical culture, including a strong emphasis on sustainability
The Home Depot’s Values1. Taking care of our people2. Giving back to our
communities3. Doing the right thing4. Excellent customer service5. Creating shareholder value6. Building strong relationships 7. Entrepreneurial spirit8. Respect for all people
Social Responsibility Issues
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Sustainability issues
Pollution Water –
society is
demanding clean water
Air – acid rain and
global warmi
ng
Land –
garbage, strip mining and poor forest conservatio
n
Alternative energy
Reducing carbon emissions forces alternative energy
sources
Social Responsibility Issues
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Company’s Responses to Sustainability Issues
Making processes more eco-friendly is
called “green” business
Recycling aluminum, paper and
glass
Using green power
sources when available
Larger companies may have a
Vice President of
Environmental Affairs
Greenwashing is creating a positive green
association for non-green
products
Social Responsibility Issues
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Company’s responsibility to the general welfare of their communities
Donations to local and national charities
Volunteer support of local causes
Social Responsibility Issues
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Volunteers at Habitat for Humanity construct a house on Detroit’s east side
Many companies encourage their employees to volunteer for charitable organizations such as Habitat for Humanity
Social Responsibility Issues
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Unemployment, while an economic issue, carries ethical implications
Some companies refuse to hire unemployed workers due to lack of experience rather than hiring and then training them
Factory closures are seen as unethical because it contributes to unemployment
Protesters say unemployment leads to the growing gap between rich and poor
Discussion
? Do you think that business should regulate its own activities or that the federal government should establish and enforce ethical standards?
? Discuss the arguments for and against social responsibility by business?
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