social and ethical environment of business · duces the twin issues of social responsibility and...

SOCIAL AND ETHICALENVIRONMENT OF BUSINESS

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UNIT

1

2-1

2-2

2-3

2-4

2-5

Describe the changing nature of the population, thelabor force, and their impact on businesses.

Discuss how the values of Americans have changed andhow business has adapted to those changed values.

Debate the dilemma posed by the need for business togrow and the need to protect the natural environment.

Suggest ways in which businesses can be sociallyresponsible.

Predict how changes in society and business will affectemployment in the future.

Tyler Eastman picked up the file folder andwalked to his supervisor’s office. He had finallysaved enough money for the down paymentand closing costs for a small stone house onthe lake that he had long wanted. He nowneeded his supervisor’s signature on severaldocuments that the bank required in order toapprove the loan money.

The Quest Company, where Tyler worked, wasthe main employer in this small Ohio town. Be-cause the firm paid high wages, the town hadnice stores and good restaurants.Taxes paid bythe company supported the police and fire de-partments, the public school, and the recreationcenter.

Recently, however, Quest had fallen on hardtimes. Sales declined and unsold goods piled up.Some employees were let go.To survive, Questhad to cut costs. Rather than continue opera-tions in Ohio, Quest decided to relocate to Geor-

gia, where costs for taxes, wages, utilities, andraw materials were lower.

Only yesterday, Tyler’s supervisor, RayshawnClark, had been informed that the town’s fac-tory would shut down over the next 12 months.He was being promoted but would move to thenew Georgia plant. Many workers, like Tyler,would lose their jobs.

Therefore, when Tyler excitedly asked Ray-shawn to sign the bank papers for his newhome, Rayshawn was disturbed. Should he signthe loan papers when he knew Tyler’s job wouldbarely last a year? If he didn’t sign, everyonewould soon find out why. Morale among the em-ployees would drop, and they would look for jobselsewhere. It was important to keep the plant clo-sure decision a secret as long as possible.Thetown would be devastated when it learned thatits main employer would be relocating.Rayshawnpondered the dilemma he was in.

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SOCIAL AND ETHICAL ENVIRONMENT OF BUSINESS

Since its establishment more than 225 years ago, the United Stateshas become the world’s leading economic, technical, and politicalpower. The country has the world’s largest economy and relies

on highly sophisticated and modern means of production, transporta-tion, and communication. Americans enjoy a very high standard of liv-ing. All these achievements can be attributed to the enormous resourcesthat the country possesses, the ingenuity of its people, a democraticform of government, a social system that rewards individual initiative,and public policies that encourage innovation.

Despite the many successes, problems persist with regard to discrim-ination, crime and violence, environmental protection, ethical conduct,and social responsibility. Since businesses are a part of the total societyin which they operate, social changes affect how they operate. Simi-larly, businesses affect society in different ways, as Tyler Eastman willsoon discover. Thus, one cannot study business principles and man-agement without also having an understanding of the social forces thatshape business.

THE SUPERVISOR’S SECRET

ReinforcementThe opening scenario intro-duces the twin issues of socialresponsibility and ethics. Twoquestions can be raised. First,should a firm pull out of acommunity that is so depen-dent upon it? Second, howshould a manager choose be-tween the interests of the em-ployer and those of an em-ployee? The answer to neitherquestion is clear-cut. Opposingarguments can be developed,as students will learn as theyread on.

■HUMAN RESOURCE ISSUESPeople are a firm’s most important resource. A recent study of top man-agers found that finding and retaining qualified workers was more impor-tant than finance, technology, product innovation, or international busi-ness. The workers help businesses achieve their organizational goals.The challenges faced by businesses are closely interwoven with thoseexperienced by the workers. In particular, such issues as those causedby changes in population and lifestyles have a direct bearing on busi-ness operations and on the well being of the nation.

■ POPULATIONThe gross domestic product (GDP) of a country cannot increase unlessthere are enough people to provide the necessary labor and to pur-chase the goods and services produced. Population statistics enablebusinesses to plan how much and what kinds of goods and servicesto offer. However, the GDP of a country must grow at a faster rate thanits population in order to improve living standards. Both the size andthe characteristics of the population are important in business planning.Information about the size and characteristics of the American popula-tion can be found at the website of the U.S. Census Bureau at www.census.gov.

GROWING POPULATION The population of the United States has grownsteadily over the years, as shown in Figure 2-1. The growth rate islargely determined by the birth rate, the death rate, and the level ofimmigration into the country. Generally, as the standard of livingincreases, the birth rate falls, and this has been the case in the UnitedStates. At the same time, because of better health care and animproved public health system, people are living much longer.

Much of the population increase takes place through immigration.The United States annually accepts more legal immigrants than anyother country in the world, with large numbers coming from Asianand Latin American nations. Many immigrants also enter the countryillegally to seek a better life.

CHANGING POPULATION The nature of the population has been chang-ing, too. Currently, more than 80 percent of Americans can be raciallyclassified as white. Because of higher birth rates among non-whiteHispanics and African-Americans, and recent immigration, their pro-portions in the population have been growing. This growing diversityof the workforce increases the need for better cross-cultural communi-cation and sensitivity to the interests and concerns of various groups.

Changes in the birth rate have caused shifts in the number of peo-ple in different age groups. For example, because of the high birthrate during 1945-1965, there are more people in the 35–55 age group.Because of this baby boom, the number of people who are aged 55

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Background NoteStudents should be madeaware that the U.S. govern-ment has kept populationrecords since 1790, when thecountry was much smaller.Records are categorized byrace, age, gender, births,deaths, and by cities and re-gions of the country. Suchrecords are reported regularlyby the U.S. Department ofCommerce and are reportedevery two years in the Statisti-cal Abstract of the UnitedStates, which is found in mostlibraries.

EnrichmentAfter reviewing Figure 2-1, askstudents to explain why thepopulation growth in the last60 years has been relativelysimilar from decade to decade.Answer: As the standard of liv-ing increases, the birth ratefalls; however, people are liv-ing longer because of betterhealth care.

ExtensionIf the present population ratechange continues, the majorityof Americans will be com-posed of non-whites in about70 years. What changes mightbe visible, especially in termsof business practice by thattime? Answers will vary butpossible changes might in-clude a major shift in workclothing styles; an increasingnumber of non-whites in pro-fessional, technical, manage-rial, and government positions;and possibly an increase inthe number of languages spo-ken. Whites would become aminority segment of the work-ing population. The workforcewould be much more diversethan today.

and over today has increased substantially. The low birth rate periodthat followed the boomer period is called the baby bust period. Thebaby bust period has created a shortage of young workers, called“busters.” This shortage will continue to create serious problems,especially when the boomers retire in large numbers.

Businesses must be prepared to offer the kinds of goods and ser-vices needed by people of different age and racial groups. For instance,

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50

100

150

200

250

300

19001940

1950

1960

1970

1980

1990

1998

(Millions of People)

FIGURE 2-1

Size of Population in theUnited States

Source: U.S. Census Bureau

ILLUSTRATION 2-1

How has the “baby bust” pe-riod affected the supply ofyoung workers in business?

Teaching with VisualsAnswer to the question raisedin Illustration 2-1: The low birthrate of the baby bust periodhas created a shortage ofyoung workers.

because of the increase of Spanish-speaking people, some newspa-pers and magazines publish Spanish language editions. As people livelonger, food companies continue to develop special foods and prod-ucts for the elderly.

MOVING POPULATION Americans are people on the move. Every year,on average, one out of five Americans changes his or her address.People move short distances, often from cities to suburbs. They alsomove long distances, such as from the Frost Belt, the colder northernhalf of the country, to the Sun Belt, the warmer southern half of thenation. As businesses relocate to where customers are located, theyaffect where other people move to in order to find jobs. For example,factories have relocated to the southeastern states, where wage ratesare lower than in the Rust Belt—the north central and northeasternstates where the major manufacturing firms once dominated. As illus-trated at the beginning of this chapter, the Quest Company decided tomove from Ohio to Georgia to lower its labor and other costs.

The continuing movement of people from the city to the suburbs,and from the north to the south, has led to many unintended conse-quences. When families and businesses leave cities in large numbers,the cities lose the financial ability to provide high-quality services. Asa result, crime and poverty have increased in some large cities. Manysouthern states such as Georgia and Florida have experienced rapideconomic and industrial growth. When businesses move from the RustBelt, they leave behind unemployed workers, closed factories, decay-ing towns, and homeless people. However, in recent years, politicaland business leaders have taken bold steps to revitalize cities andcommunities in the northern states.

■ LABOR FORCEAs the population grows, so does the labor force. The labor forceincludes most people aged 16 or over who are available for work,whether employed or unemployed. Of course, many of the people inthe labor force may be available for work but are not actively seekingemployment, such as students and full-time homemakers. In a recentyear, the Bureau of Labor Statistics reported that the size of the Ameri-can labor force was almost 140 million. Figure 2-2 shows the growthof the labor force.

The labor participation rate is the percentage of the labor forcethat is either employed or actively seeking employment. In the last threedecades, the labor participation rate increased primarily because manymore women took jobs outside the home. In 1970, around 58 percent ofwomen worked outside the home. By 1999, the figure had risen to nearly80 percent. Some reasons for the increase are that women have beenchoosing not to marry, to delay marriage, or to marry and pursue careersbefore or while raising children. Figure 2-3 shows the trend in the labor

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In 1998, Hispanic purchas-ing power in the U.S. wasapproximately $348 billion;by 2010, it is estimated tobe $965 billion. By theyear 2050, the Hispanicpopulation will reachnearly 100 million, repre-senting almost 25 percentof the U.S. population.

Background NoteFewer than one Americanhousehold in eleven has keptthe same address since 1960.However, the rate at whichpeople move can decline be-cause of economic conditions.For example, the rate declinedin the late 1980s and early1990s because of the slow-down in the economy and thefear of losing jobs.

EnrichmentDetermine the cities or areas inthe U.S. where students wouldchoose to live if they wereseeking employment opportuni-ties. Then ask volunteers to ob-tain from the library a list of tenkey cities or regions in thecountry providing job opportu-nities. Compare voiced choiceswith the library list.

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19701980

19901995

19971999

(Millions of People)

Unemployed

Employed

0

30

60

90

120

150

FIGURE 2-2

Trends in the Labor Force(November of each year)

Source: Bureau of Labor Statistics

50

60

70

80

19801990

19951997

(Projec

ted) 2

006

Females

Males

Percent

FIGURE 2-3

Labor Participation Rate forMen and Women

Source: Statistical Abstract of the United States, 1998

ExtensionReview Figure 2-3 by asking: (a)Which group on average hasthe highest labor participationrate? (b) Which group has beengaining in their rate? (c) Duringwhich decade did women in-crease their rate substantially?Answers:(a) males; (b) females;(c) 1980s.

EnrichmentRequest students to select acountry of their choice andfind the labor participation ratefor men and women. Comparethe two rates with the rateshown in Figure 2-3.

ExtensionFrom Figure 2-2, ask students ifit would be correct to concludethat as employment rises, un-employment declines. Answer:Yes, the general trend is that asemployment rates rise, unem-ployment rates decrease.

participation rates for males and females. The expansion of the econ-omy through much of the 1990s coaxed many people, such as retirees,people with disabilities, and homemakers, to enter the labor force.

The growth of the economy, changes in the population and wherepeople live, and technological advances have created a variety of newjobs. One of the great strengths of the American economy has beenits ability to create new jobs. Most new jobs are in the service indus-tries, such as computer programming, banking and insurance, leisure,food services, and health care. The growing use of computers has cre-ated a large number of technical jobs in areas such as computer appli-cations and programming. The Internet has influenced how firms con-duct business, and e-commerce is rapidly emerging as a new way tosell and buy goods and services. The rapid growth in the computerindustry has led to a shortage of qualified workers and, in turn, hasled to high wages for those with the necessary education and skills.To meet the demand for such high-tech workers, the government allowsfirms to hire workers from foreign countries.

Many of the new jobs require more skills, which means workershave to be educated. As a result, more people are going to college oracquiring training in new skills. As technology changes and old jobsdisappear, many workers need retraining. At the same time, technol-ogy has simplified jobs, such as short-order cooks or bank tellers.These jobs now require little training and therefore pay low wages.Some jobs, such as telephone operators, have been eliminated sincethe work has been automated. A large number of workers are indead-end jobs and are not earning an adequate income to maintain areasonable standard of living.

For various reasons, including lack of financial resources, publicschools in many areas are failing to provide the quality of educationhistorically expected of high school graduates. High school graduatesare particularly deficient in math, computer, social, and communica-tion skills. Businesses are sometimes forced to provide remedial edu-cation in basic skills for newly hired workers.

■ POVERTYThe prosperity of Americans is not equally distributed among the pop-ulation. According to the U.S. Bureau of the Census, between 12 and15 percent of the population in any given year live in poverty. Thismeans that these people are poorly housed, clothed, and fed. Many ofthese people live in inner-city slums or in rural areas. Statistics suggestthat the richest 20 percent of American families have continued to earnmore over the past 30 years, while the income of the lowest fifth hasremained about the same. Thus, the gap between the rich and poorwidens.

Due to such programs as Social Security, poverty among elderlypeople is much lower today than previously. However, many children

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ExtensionAsk why women might haveincreased their rate of partici-pation in the labor force. An-swer: Families needed moremoney to maintain or improvetheir standards of living.Women have also decided topursue careers, raise familiesas single parents, marry andhave no children or delay hav-ing them, and remain in or re-turn to the workforce after rais-ing children.

Background NoteMotorola is an excellent exam-ple of a business that directsmaximum attention to training.On average, 15 classes perweek are held during workinghours for employees who maybe nearly illiterate. Each ofthese employees has an indi-vidualized learning plan.

EnrichmentDivide the class into threegroups: 15-20% in the Richgroup; 15-20% in the Poorgroup; and the 60-70% in theMiddle group. Each group de-velops and presents reasonswhy they are rich, middleclass, or poor. With every posi-tive point made by the Rich, 1person from the Middle groupjoins the Rich group. For everypositive point made by thePoor group, 2 persons fromthe Middle group join the Poorgroup. Ask students to gener-alize from the experience. An-swers might include that theMiddle group attempts to holdon to its members. Unrest andextensive inequalities mightdevelop in a country that hasmainly rich and poor people.

live in poverty because they reside in households where one or moreparents do not have the education and skills to hold high-paying jobs.Many parents cannot participate fully in the labor force because theydon’t have access to good-quality, affordable child care.

The government has several programs to reduce poverty. Minimumwage rates, unemployment benefits, financial or food aid, and subsi-dized medical care provide a basic safety net to the economically dis-advantaged. Businesses increasingly offer training programs to provideskills that enable people to find and hold jobs.

■ EQUAL EMPLOYMENTEquality for all is one of the basic principles on which the United Stateswas founded. Yet, some groups of Americans have found it difficult toobtain jobs or be promoted on an equal basis. Several laws have beenpassed to outlaw discrimination on the basis of race, gender, nationalorigin, color, religion, age, handicap, and other characteristics.

In many occupations, the numbers of women and racial minori-ties are few. Even when they find jobs, people in these groups mayencounter difficulties in being promoted above a certain level. This hascome to be known as the glass ceiling—an invisible barrier to jobadvancement. The barriers are often difficult to detect. For example, awhite male’s discomfort with having a female or black supervisor maymake promotion of women and blacks less likely. Employers are nowlegally obligated to provide equal employment opportunities for all.

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ILLUSTRATION 2-2

Women and minorities may hitthe “glass ceiling” as they at-tempt to move to higher-leveljobs. What obligations do em-ployers have in such situa-tions?

Background NoteStudies by the Institute forWomen’s Policy Researchshow that a female’s pay in-creases seven cents an hourwhile a male’s pay increasestwenty-four cents an hour foreach year of work experience.

ExtensionAsk students if they believe arelationship exists betweenpoverty and unemploymentrates.Answer: Yes; they move in tan-dem.

Teaching with VisualsAnswers will vary to the ques-tion raised in Illustration 2-2.At the heart of the issue is thepoint that employers have alegal obligation to provideequal employment opportuni-ties for all.

Many women and members of racial minority groups are employedin entry-level positions with little hope for career advancement. Theseare low-paying jobs requiring little skill and education, such as restau-rant servers, salesclerks, or nurse’s aides. The inability of these work-ers to move up from these jobs is referred to as the sticky floor syn-drome. Higher education and redesigning the jobs offer the bestopportunities for workers to escape from this predicament.

■ COMPARABLE WORTHStudies show that men tend to earn more than women do. It is not clearif this difference is due to discrimination against women or is becauseof the nature of jobs women do. There are a few professions in whichwomen predominate. Wages tend to be lower in jobs that employ lotsof women than in jobs held primarily by men. For instance, most dentalhygienists are women, whereas most airline pilots are men. However,pilots tend to earn more money than dental hygienists.

But what happens when the jobs are not the same but requiresimilar levels of training and responsibility? Comparable worthmeans paying workers equally for jobs with similar but not identicaljob requirements. The concept is also called “equal pay for compara-ble work.” Jobs compared may be distinctly different, such as compar-ing legal secretaries and carpenters. However, if it can be determinedthat the two jobs require about the same level of training and respon-sibility, the pay scale for the two jobs should be the same. That is, legalsecretaries should be paid more than what they currently earn to bringtheir pay up to that of carpenters. To determine whether work is ofequal value, analysts compare factors such as special skills, physicalstrength, job dangers, responsibility, and education.

However, it is not easy to determine the specific factors that mea-sure the worth of jobs. Should physical strength, for instance, be usedto compare the worth of a legal secretary to a carpenter? And if fewapplicants are available for the carpenter’s position and many are avail-able for legal secretaries, is it fair to pay legal secretaries more thancarpenters? These and other factors make it difficult for employers todesign and implement comparable worth plans. But businesses aretrying. Many states have passed laws that promote using comparableworth for determining wages in government jobs.

■ SOCIETAL VALUESChange is constant in our society. We produce a steady stream ofnew products, new ideas, new ways of doing things, and new atti-tudes. In recent decades, societal values have been undergoingchange at a fast pace.

An especially striking development has been the transformation ofthe family. The number of children living with both parents continuesto fall, because of rising divorce rates and children born to single

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In 1966, women earned 58cents for every dollarearned by men. That gaphas closed by an averageof half a penny each yearsince then. In 1996, womenearned 74 cents for everydollar earned by men.Nearly every year the dif-ference in earnings nar-rows somewhat.

ReinforcementRefer to the text exampleabout airline pilots and dentalhygienists. Why might this dis-crepancy exist? Answer: Dis-crimination by men who hirewomen, and career choicespreferred by men and women.Although changes are under-way, women tend not to preferemployment in fields primarilyheld by men, and men tend notto prefer jobs in fields primarilyheld by women. Notable ex-ceptions can be found, how-ever, in more and more fields.

ExtensionThroughout the 1980s the pre-vailing philosophy was one ofextensive spending and showylifestyles. As a result of a slow-moving economy, layoffs,higher unemployment levels,and lower pay hikes, the early1990s emphasis was on fru-gality and practicality. The re-verse situation occurred laterin the decade. Ask studentswhat philosophy might developin the new millennium.

mothers. The birth rate, too, has declined, as women delay marriageand pursue careers outside the home. The traditional definition of “fam-ily” consisting of a working husband, a homemaker wife, two chil-dren, and a dog is now the exception. Less than one fourth of Amer-ica’s families fit this picture. Often, both parents work to support thefamily, as must single parents. Businesses have responded to the needsof today’s fast-paced family life with a whole array of time-saving prod-ucts and services from fast food of every description to dry cleaningdelivery services to day care.

Because of increased competition in the economy, businesses arestriving to produce more while keeping costs low. Employers haveincreased their demands on employees. Many employees find thepace and demands of work stressful. For dual-career couples andespecially those with children, the quality of home life often suffers.Job insecurity discourages workers fromtaking vacations or time off, and insteadthey work longer hours to meet their jobrequirements. Factors such as these havestrained the employer/employee relation-ship. Workers from the post-baby-boomgeneration, called Generation X, feelless loyal to a particular employer thandid earlier generations. They expect tochange jobs many times during theircareers, as does the Net Generation—those born between 1977 and 1997. Also,competent women, stopped by the glassceiling, often quit their jobs to start theirown businesses. Women now operate amajority of new small businesses.

With so many men and women work-ing side by side, workplace romance hasblossomed, but so have incidents of sex-ual harassment. As the number of singleadults and working couples has grown,dining at home is being replaced bydining out. American consumers spendmore on restaurant meals than on gro-ceries. People are placing more empha-sis on safety and active lifestyles. This isreflected in airbags in cars, larger cars,and sporty vehicles.

A disturbing aspect of contemporaryAmerican society is the incidence ofunpredictable and unprovoked violencethrough the use of guns, often by youngpeople. Workplaces, schools, churches,

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Electronic mail—or e-mail—is the basic Inter-net tool for sending messages to other users.It’s a method to create and send messages

electronically to one or more individuals. Themessages are stored in the destination mailboxuntil the receiver can read them. E-mail usersdon’t have to be on the same network or usingthe same type of computer.

As more and more computers appear inschools, homes, and businesses, e-mail is be-coming ingrained in our culture. It’s fast, easy,and often free of charge for millions of Internetusers. E-mail combines the low cost and effi-ciency of memos with the speed and conversa-tional nature of phone calls. You can send andreceive messages any time of the day or night,any day of the year. You can send one messageto several people, and they can easily reply to,print, edit, file, or forward your message.

Activity Think about these forms of communi-cation: e-mail, the telephone, and the regular mailsystem. What are the differences? Are there anysimilarities? What do you think the future holdsfor each of these communication modes? Writea one-page report about your ideas. If you havee-mail access, send the report to a friend orclassmate.

Background NoteThe typical family today con-sists of two children, two em-ployed parents, a grandparentwho helps take care of thechildren, or a day-care centerwhere pre-school children areleft during the work day. Atleast one child is likely to ar-rive home from school to anempty home to start dinnerunless the family decides ontake-out meals.

and transportation systems are all susceptible to random gunfire killingand injuring of innocent people. This concern over violent crime hasled to an expanding personal security business in the form of per-sonal and home protective gadgets, guns, guards, gated communities,and prison construction.

The U.S. also has the dubious distinction of being lawsuit-happy.Individuals, groups, and organizations are quick to file lawsuits. Dam-age awards can run into millions of dollars. To avoid such expensivelegal liabilities, businesses try to be very careful with respect to thesafety of their products and the impact of their operations on employ-ees, customers, and the overall society.

■ EMPLOYER PRACTICESA changing society affects individuals as well as organizations. Manysocial issues transfer to work settings. Employees leave home eachworkday thinking about personal problems. Responsibilities may beenormous for workers with preschool children, aging parents, familyillnesses, and financial burdens. Concerns such as these follow employ-ees to their work sites and affect their job performance. To attract andretain competent workers, employers have responded to these socialchanges by taking action to improve the way work is done, to assurehealthier and safer working conditions, and to help workers deal withsome personal problems.

REDESIGNING JOBS As you will learn in other chapters, when jobs con-sist of mainly repetitive tasks, workers get bored, productivity drops,and morale declines. Many workers come late to work, call in sick, oreven quit their jobs to find more interesting jobs elsewhere. Thus, toretain workers, employers redesign jobs to make them varied and chal-lenging. In some cases, employees learn a variety of jobs and regularlyswitch jobs within the same organization. Such job rotation increasesworkers’ interest in their jobs and enables employees to fill in for co-workers who may be absent.

Workers now often participate in job decisions, provide suggestions,and serve on committees that look for ways to improve work quality.Today’s employees often work in teams. Work teams can improve moraleas well as the quality of work. Businesses also try to improve job satis-faction through empowering workers to make important decisions.

IMPROVING HEALTH AND SAFETY In response to concerns over healthand safety, businesses operate wellness and fitness programs. A physi-cally unfit employee is absent more and is less productive than a fitemployee. Many businesses encourage a healthy lifestyle by providingincentives to smokers to quit, membership to health clubs, counselingservices where workers can receive support for stress or emotionalproblems, and payment for treatment of drug, alcohol, and other formsof addiction. Employers thereby reduce medical and insurance costs.

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ReteachingUse Transparency Master 2-1to summarize selected socialproblems that affect business.

Background NoteInform students that Volvo’sauto plant at Kalmar, Sweden,put employees into workgroups to make cars ratherthan having them work individ-ually on boring assembly lines.The change led to higher-quality output, reduced absen-teeism, fewer job quitters, andenthusiastic employees. Otherfirms have adopted similarpractices.

Background NoteAlthough manufacturing, min-ing, and transportation indus-tries are more dangerousplaces to work, offices arealso sometimes unsafe or un-healthy. Illnesses and ailmentscaused by electronic equip-ment and polluted air oftentake a long time to detect.

Background NoteAsk students if they know ofany unusual lawsuits recentlyfiled against a business. Ex-amples could include lawsuitsagainst tobacco firms, doctors,or hospitals; businesses ac-cused of racial or sexual dis-crimination; and firms thathave polluted the environment.

FAMILY-FRIENDLY PRACTICES Given the changes in the family structure,employers are making efforts to address this aspect of their employees’lives. By law, employers provide unpaid leave to employees to takecare of their sick children or parents, or to give birth to, adopt, or takecare of newborn children. Many progressive businesses provide day-care facilities for the young children of employees. Some employersprovide flexible scheduling so that workers can avoid commuting toand from work during hectic rush hour traffic as well as accommodatetheir family needs and lifestyle. Advances in communication technol-ogy in the form of the Internet, e-mail, mobile phones, and fax haveled many businesses to allow workers to telecommute. Telecom-muters work from home or on the road, staying in contact with theiremployers electronically.

■NATURAL RESOURCE ISSUESA growing population means more people to buy more things. Morepurchases mean more packaging, boxes, and worn-out products tothrow away. Discarded plastic, chemical, and metal products take manyyears to break down in landfills. Moreover, some products (such asmedical waste) may be harmful if not disposed of properly. The increas-ing demand for products places great pressure on natural resources,such as land, water, air, minerals, and forests. It also affects the habi-tats of wild animals and the lives of native peoples. Both business andsociety have to address these resource issues.

■ MANAGING THE ENVIRONMENTPreserving the natural environment and properly disposing of consumerand industrial waste have become major concerns in our society. Aslandfills become full, we have shifted our focus to reducing the growthof waste and to recycling—reusing products and packaging when-ever possible. We are trying to conserve non-renewable resources, suchas oil, natural gas, and iron ore. At the same time, we are using morerenewable resources, such as electricity generated from the sun (solarpower), from water, and from wind.

At times, pollution-control goals, such as improvement of air qual-ity, may be at odds with energy conservation goals. For example, theuse of coal, which is currently in great supply, generally pollutes airmore than natural gas, which is in short supply. A business changingfrom coal to natural gas meets environmental goals but violates con-servation goals. In contrast, a business changing from natural gas tocoal conserves natural gas but creates pollution. In time, scientists may discover ways to use coal without creating a great deal of pollu-tion. Until then, people have to decide how best to conserve naturalresources and protect the environment.

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In 1999, more than 19.6million Americans reportedworking as telecommuters.Increasing numbers of em-ployees are conditioningtheir acceptance of newjobs on approval from theemployer to telework.

ExtensionAsk students to name wasteproducts from their homes thatgive their communities themost disposal difficulties. An-swers will vary but may includealuminum, metal, and plasticbecause they are notbiodegradable, although theseitems are usually reusable inan altered form.

ReinforcementFlexible work hours often allowfull-time workers to start anytime between 6 and 9 a.m. andleave between 3 and 6 p.m.Numerous employers haveadopted flexible schedules,which are especially appealingto working parents and peoplewho are early or late starters.Why might parents prefer flexi-ble work schedules?Answer: Parents can be certainchildren leave home on time forschool or day-care centers.Couples can arrange workschedules so that one parent isat home when children leavefor and arrive from school.

ReteachingUse Transparency Master 2-2to review ways in which em-ployers help meet employees’needs.

Pollution dangershave become more andmore apparent. Largecities are often coveredby smog that containspollutants from motorvehicles. As a result,many residents sufferfrom breathing prob-lems. In numerousrivers and lakes, pollu-tants have killed fishand other marine life.Chemical products usedto destroy insects andplant life have espe-cially endangered water-ways and farmlands,and in some placesentered the food chain.

■ CONTROLLING ENVIRONMENTAL POLLUTIONMany groups have pressured governments and employers to tightenpollution standards and to conserve natural resources. The federalgovernment created the Environmental Protection Agency (EPA) in 1974to help control and reduce pollution in the basic areas of air, water,solid waste, pesticides, noise, and radiation. The EPA enforces such lawsas the Clean Air Act, Clean Water Act, Resource Recovery Act, FederalWater Pollution Control Act, Federal Environmental Pesticide ControlAct, Noise Control Act, and Resource Conservation and Recovery Act.For instance, laws have been passed that require engines in cars to beboth fuel-efficient and less polluting.

New waste disposal rules, especially for hazardous materials likemedical and nuclear waste, are very strictly enforced and often costlyto carry out. These high costs also encourage illegal dumping in bod-ies of water or on remote land areas. To conserve resources and toprotect the environment, more and more companies are using recy-cled materials in their production processes.

In the aftermath of the Exxon Valdez accident, which spilled oil alongcoastal Alaska in 1989 and killed large numbers of marine life, environ-mentalists and socially minded groups formed the Coalition of Environ-mentally Responsible Economies to encourage companies to behaveresponsibly. The Coalition developed a list of ten environmental guide-lines, named the CERES Principles. The Coalition asks organizations tofollow the principles voluntarily; they are not legally required to do so.

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ILLUSTRATION 2-3

How can pollution-controlgoals be at odds with energyconservation goals?

Teaching with VisualsAnswers will vary to the ques-tion raised in Illustration 2-3.

ExtensionAsk students what their com-munity is doing to reducewaste, recycle products, anddispose of trash. Some an-swers will include dispositionmethods employed such ascomposting, incinerating (burn-ing), and creating landfills.Most community solutionsgenerate heated debates. Forexample, residents do notwant such activities going onnear their homes because ofthe threat of declining propertyvalues and possible healthhazards.

ExtensionAsk students how pollutionlaws can be enforced whenlimited funds are given tolocal, state, and federal agen-cies for doing so. Answers willvary. An effective methodevolved when firms wereasked voluntarily to controlharmful substances that es-caped into the air and waterand to set goals that are re-ported to government. How-ever, firms that are found guiltyof gross misconduct are publi-cized by the press. Embarrass-ment as well as heavy finesprompt early compliance withthe laws.

Sun Oil Company (Sunoco) was the first major company that promisedto follow the CERES Principles listed in Figure 2-4.

Laws against pollution and demands for conserving natural resourcesare costly to businesses. An issue arises when foreign countries haveweaker laws, law enforcement is lax, or public concern over pollutionand conservation is not as strong as in the U.S. As a result, companiesin these foreign countries can make goods more cheaply than prod-ucts made in America. One of the objections to increasing trade withMexico, for example, is that pollution laws in Mexico are much weakerthan in the U.S.

■ETHICAL ISSUESLaws provide a minimum standard of behavior for people and busi-nesses to follow. However, many behaviors are neither allowed nordisallowed by law. The guide that then comes into play is ethics. Ethics

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1. Protect the environment from the release of pollutants, especially hazardous substances that may damage the environment. 2. Conserve nonrenewable natural resources through efficient use and careful planning. 3. Minimize the creation of waste, especially hazardous waste, and dispose of such materials in a safe, responsible manner. 4. Make every effort to use environmentally safe and sustainable energy sources to meet organizational needs. 5. Reduce environmental, health, and safety risks to employees and surrounding communities. 6. Sell products that cause as little damage to the environment as possible and are safe to use. 7. Accept responsibility for any harm the company causes to the environment; correct damages made to the environment, and compensate injured parties. 8. Keep the public informed of incidents relating to operations that harm the environment or pose health or safety hazards. 9. Appoint one person to represent environmental interests to serve on the highest-level decision-making committee that represents owner interests.10. Produce and publicize a yearly self-evaluation of progress toward implementing these principles and meeting all applicable laws worldwide.

FIGURE 2-4

The CERES Principles

Source: www.ceres.org. Adapted from CERES: 1990. The 1990 CERES Guide to the ValdezPrinciples, The Social Investment Forum, Boston, MA.

EnrichmentBased on Figure 2-4, invite aspeaker from an area corpora-tion to talk about the environ-ment in relation to the business.Ask the speaker to addresseach of the Valdez Principleson an important company proj-ect that may affect the environ-ment. In its place, students maybe asked to find, read, and re-port on a story related to amajor local or well-known envi-ronmental incident such asChernobyl, Three Mile Island, orExxon’s Valdez oil spill.

ReinforcementAsk students to identify federallaws that apply to the ValdezPrinciples. Examples of theselaws include the Clean Air Act,Clean Water Act, and FederalPesticide Control Act. Alsopoint out that even some majorcities have passed laws follow-ing the Valdez Principles.

EnrichmentEvidence exists that many stu-dents cheat on tests and termpapers. Ask if this practice isethical because it is generallyaccepted among students, andask why it is accepted. Thenask if it is right or wrong for anemployee to occasionally stealoffice supplies from an em-ployer.

refers to standards of moral conduct that individuals and groups setfor themselves, defining what behavior they value as right or wrong.

Ethical behavior is closely linked to personal values—underlyingbeliefs and attitudes that individuals or groups possess. To decidewhether a particular action is ethical or not, we have to ask questionssuch as: Is the action right or is it wrong, regardless of what the lawsstate? Therefore, ethical conduct goes beyond state and federal laws.

■ BUSINESS ETHICSA collection of principles and rules that define right and wrong con-duct for an organization is called business ethics. Any action thatdoes not conform to these moral principles is unethical behavior. Allfirms do not have the same rules of ethical conduct, however. Notionsof right and wrong vary from manager to manager, business to busi-ness, and country to country. Generally, moral conduct that is favor-able to the largest number of people is considered ethically desirable.

Many businesses have created codes of ethics to guide managersand workers in their behavior. A code of ethics is a formal, publishedcollection of values and rules that reflect the firm’s philosophy andgoals. Having such a code removes or reduces opportunities for uneth-ical conduct. These codes deal with such issues as accepting businessgifts, respecting employee privacy, using company property for per-sonal use, and maintaining confidentiality. Business confidentialitymeans keeping sensitive company information secret.

Ethical codes are communicated to employees through memos, news-letters, posters, and employee manuals. Organizations establish proce-dures to handle situations that arise when employees violate the codes.To be effective, codes of ethics must have the full support of the organi-zation’s top-level managers. Codes are ineffective if they are not enforced.

■ ETHICAL DILEMMASThe issue of ethics often arises when it is not clear whether a particu-lar action is legal or illegal. As the opening story illustrated, the super-visor, Rayshawn Clark, is caught in the dilemma of revealing the futureplans of the company versus ensuring business as usual. Philosophershave debated the issue of right and wrong for centuries. One well-known approach is to ask the question: What is the value or worth ofa specific behavior for society as a whole? The best behavior is thatwhich does the most good for the most people. For example, assumea company employed 200 people and it eliminated 50 people so thatit could continue to operate. While 50 people were left jobless, 150benefited by retaining their jobs.

Businesses are constantly faced with ethical dilemmas of variouskinds. Should a lumber company cut down a forest if doing so wouldendanger a rare species of bird that nests there? Should oil drilling bepermitted off a coast, thus destroying its natural beauty? Should a

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ReinforcementIt is not illegal to knowinglymake and sell a product that isnot guaranteed, wears outquickly, works poorly, oftenbreaks, but is not harmful.Many customers may buy theproduct and soon learn theymade a mistake. No law pre-vents this practice. Is it unethi-cal? No clear-cut answer ex-ists, but an ethical businesswould not make the producteven though it may be prof-itable in the short run. Its repu-tation is likely to be damagedand might influence the sale ofits other products.

ExtensionWhat is the purpose behind thefollowing rule that an organiza-tion announced and placed onits bulletin boards: “Employeescannot give or seek a gift fromanother employee who is aboss. Neither can a manageraccept a gift from a lower-levelemployee except under specialcircumstances.” Answer: Ac-ceptable answers will vary. Oneanswer is that employees maytry to influence their bosseswith gifts, which may be classi-fied as bribes that will enablethem to get favored treatmentfor such things as raises andpromotions.

ReinforcementAsk students to share ethicaldilemmas they have faced andask how they resolved eachdilemma.

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ON A WAGE OF A DOLLAR A DAY

N ike, Inc., based in Beaverton, Oregon, isone of the most famous names in sportsshoes. Sports shoes of all kinds carrying

the famous swoosh logo are sold throughoutthe world, often at prices above $100. Buthow much does it cost to make these shoes?

Nike does not manufacture any of itsshoes. Instead, it has them made by privatecontractors in countries such as Indonesiaand Vietnam. Nike provides design and qual-ity specifications and places orders for mil-lions of pairs of shoes. Indonesia and Vietnamare poor countries where there are lots of un-employed people, and government laws andregulations are weak and unenforced.

Various non-governmental organizationshave alleged that Nike’s shoes are madeunder unacceptable working conditions. Work-ers as young as 14 working over 60 hours aweek receive wages of about $1 a day. Safetyand health standards are minimal. The cost oflabor was estimated at less than 4 percent ofthe price that the consumer paid for a pair ofshoes. Thus, shoes sold for $100 have a laborcost of less than $4. Even after paying themanufacturers and the distributors, Nikemakes a profit of $15 on the pair.

Nike argued that its profits are comparableto those made by Reebok, Adidas, and oth-

ers in the industry. It also claimed that thecompany had little control over the manufac-turers, though Nike tried to ensure that thesecompanies followed the employment laws ofthe respective countries with regard to mini-mum wages, hours of work, and the like.

Labor unions and human rights groups inthe U.S. began a campaign to draw attentionto the harsh conditions in which Nike’s shoeswere made. Pressure mounted on Nike’sshareholders, bankers, retailers, and otherstakeholders to force Nike to make changes inthe working conditions at the foreign factories.

Nike reacted to the demand for change byestablishing an office to monitor working condi-tions in the foreign factories. The critics de-manded that independent monitoring groups inwhich they would be represented must be al-lowed to visit and inspect the factories abroad.

All this negative publicity led to sharp de-clines in sales and profits. Nike argued that itwas incorrect to compare working conditionsin the U.S. with those in less prosperouscountries. The company pointed out that nottoo long ago, working conditions in the U.S.were also harsh, and only economic growthhad led to the enlightened work conditionsprevalent today.

THINK CRITICALLY1. Suggest how Nike can successfully deal with the protests against it.2. What is the motivation of the protestors against Nike? Why can’t Nike ignore them?3. Are Nike and its suppliers reacting in socially responsible ways? Why or why not?4. Should one society force its work standards and wage rates on another? Why or why not?

See the Teacher’s Resource Manual for suggested answers.

manager accept a re-quest of a foreign offi-cial to arrange for hisdaughter’s admission toan American universityif the company wantsto land a contract?Should a business hirea woman to win sup-port from women’sgroups? How businesseshandle these issues de-termine whether theyare acting in an ethicalmanner. Notions ofwhat is right or wrongchange over time. An-swers often are notclear-cut.

Because values alsodiffer among nations,problems sometimesarise for firms involvedin international busi-

ness. Firms have to choose between the ethical practices of the for-eign country or of their home country. For instance, it is an acceptedbusiness practice in Japan for employees to give expensive gifts totheir bosses. Such behavior in the U.S. is generally discouraged. Shouldan American company behave in Japan as it does in the U.S., or shouldit follow the Japanese practice? Answers to such questions are notreadily apparent, and managers have to find ways to reconcile con-flicting goals.

■SOCIAL RESPONSIBILITY OF BUSINESSA question often raised is: What is business’s responsibility to helpsolve society’s problems? The answer is not simple, because the profitmotive of the business often collides with what is good for society.Should businesses accept lower profit, for instance, in order to keepjobs in a declining community? In such cases, businesses must decidefor themselves what is right and wrong.

The primary goal of business is to make a profit for the owners.Businesses cannot survive for long if their owners are not rewardedfor their investment. Although profit plays a key role in our businesssystem, businesses today also emphasize another business goal—socialresponsibility. Social responsibility refers to the duty of a businessto contribute to the well being of society. Because businesses depend

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ILLUSTRATION 2-4

Answers to ethical dilemmasare not clear-cut. How canmanagers reconcile conflict-ing goals?

Teaching with VisualsAnswers to the question raisedin Illustration 2-4 will vary.

Background NoteSome businesses go to greatlengths to prepare policy state-ments on ethics for inclusion inemployee manuals only to findthat managers sometimes vio-late the policies without penalty.Other employees soon learn tobelieve that what is said andwhat is done are not the same.Highly ethical firms create poli-cies, train managers in how toapply the policies, and providepenalties for employees who vi-olate the policies.

ReteachingUse Transparency Master 2-3to summarize key points aboutethics.

Background NoteU.S. laws forbid giving bribesto officials abroad to influencepolicy or obtain business.Other countries do not havesuch laws and this hurtsAmerican businesses. SomeAmerican companies alsohave rules that forbid gift giv-ing among employees.

ReinforcementAsk students to compare theterm “ethics” with “code ofethics.” The key difference isthat one is written and pub-lished (code of ethics) and oneis not.

on society for resources, opportunities, and rights, they have an obli-gation to the communities in which they operate.

Stakeholders are any individuals or groups that are affected by thefirm’s actions, such as owners, customers, suppliers, employees, credi-tors, government, and the public. Stakeholders expect a business to beresponsible and responsive to their interests. Such responsibility maymean a variety of things. Examples include donating money to floodvictims, sponsoring an exhibition on Hindu art at a local museum, pro-viding scholarships to colleges for needy students, training gang mem-bers in job-related skills, and setting up day-care centers for employ-ees’ children.

Thus, a business’s social responsibility means accepting a duty to con-tribute to the well being of its stakeholders. Stakeholders usually believethat a business has the resources to contribute to a community’s wellbeing. Also, good deeds translate into favorable publicity for the busi-ness, which, in turn, means more sales and profits. The founders ofBen and Jerry’s, the ice cream makers, for example, commit themselvesto buying expensive milk from hormone-free Vermont dairy farms andgiving 7 percent of pre-tax profits to charity. Such actions endearthem to the residents of Vermont, where their operations are based.

Milton Friedman, a renowned economist, once said that “the busi-ness of business is business.” People who follow his view believe thatif a business uses some of its profits for social causes rather than usingall profits to grow the business, the company will not remain very prof-itable. Thus, workers will get lower wages, customers will pay higherprices, and the owners will make less profit. Questions are also raised

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ILLUSTRATION 2-5

The primary goal of a busi-ness is to make a profit. Butdoes a business have a dutyto contribute to society’s wellbeing?

Teaching with VisualsAnswers will vary to the ques-tion raised in Illustration 2-5.However, because businessesdepend on society, they in turnhave an obligation to the com-munities in which they operate.

ExtensionAsk students to list the stake-holders of their school. An-swers might include taxpayers,local government officials, par-ents, students, board of educa-tion, administrators, teachersand other employees, em-ployee unions, and suppliers.

EnrichmentAsk students to debatewhether it is a good idea toturn over the role of your localgovernment to the commu-nity’s private businesses. An-swers will vary but studentsshould keep in mind that sincethe actions by business arevoluntary, not all businesseswould participate. Even suc-cessful businesses would with-draw or reduce support duringpoor economic times. Firmswould probably not want to runthe government because ofpolitical troubles that mightarise, which would affect busi-ness operations.

about the ability of a business to solve social problems. Does a man-ager know how to solve drug abuse? Should a business be responsiblefor promoting sporting events in the community? Are these not rolesfor the government or others to perform?

Despite these serious concerns, it is now widely recognized thatbusiness has an important responsibility to its stakeholders. Businesshas also realized that by getting involved socially, it advances its owninterests. Enhancing goodwill in the community reduces government’sdesire to regulate the business.

Some businesses review their social programs regularly. The reviewsshow what the business is doing to fulfill its social responsibilities, itssuccess in accomplishing its goals, and its plans for pursuing futureactivities.

The conduct of businesses is being increasingly and closely exam-ined by various independent groups known as non-governmentalorganizations (NGOs). Examples of such organizations are the Ameri-can Civil Liberties Union and the Sierra Club. They specialize in partic-ular issues, such as workplace discrimination or environmental protec-tion. NGOs influence businesses through lobbying, publicity, andpressure tactics to alter their activities.

■THE FUTUREGiven the fast pace of change in the world today, society and businesswill face different issues in the future. While it is difficult to predict thefuture, current trends provide hints of what may be in store in the yearsto come.

Various economic and social data provide an in-depth picture ofchanges occurring in American society. The racial and ethnic mix ofthe labor force will continue to change. The Internet is dramaticallyaltering how people communicate and businesses operate. Computer-related jobs are multiplying, as entrepreneurs establish Internet com-panies to find new applications of this new technology.

Businesses are apt to become more and more involved in providingsocial services to the community that, in the past, had been providedby families, funded by the government, or purchased by individuals.The general public has become more conscious of environmental andhuman rights issues, and there is growing concern over balancing fam-ily and work life. Businesses have to ensure that their activities do notharm the natural environment and that they respect the individual rightsof a rapidly diversifying workforce. As societal values change, eachbusiness will continue to shape and be shaped by the society in whichit functions.

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EnrichmentAsk students to read an articleabout the future from The Fu-turist or other magazines andto write a summary or give anoral report to the class.

Background NoteMany successful companieslike IBM and Nestle’s operatein many countries and employa highly diverse workforce.

ReteachingUse Transparency Master 2-4to summarize factors affectingfuture jobs.

EnrichmentAsk students to form smallgroups to make a list of “fairand reasonable” types of so-cial activities that the largestbusinesses in their communi-ties might undertake and thatare not already being done.Ask them to describe howeach activity might benefit thebusiness as well as the com-munity. Answers will vary.

CHAPTER CONCEPTS■ The U.S. population has been growing largely because of immi-

gration and because Americans are living longer. It is alsobecoming more diverse. The trend has been for people and busi-nesses to locate to the southern part of the country.

■ American society and its values are in constant change and thisaffects how businesses function. Changes include the growth inthe number of women in the workforce, changes in the natureof the family, increasing job insecurity, stress, and violence.Poverty and discrimination persist. Businesses are becomingmore environmentally conscious.

■ Businesses are responding to employee needs by redesigningjobs, improving workplace health and safety, and providing flexi-ble scheduling and family-friendly benefits.

■ Ethical conduct by businesses requires doing more than the lawprescribes. Businesses establish codes of ethics to identify rightand wrong behavior for employees. Managers are often con-fronted by situations in which ethical solutions are not clear-cut.

■ The goal of business extends beyond merely making profits tobeing socially responsible to their various stakeholders.

BUILD VOCABULARY POWERDefine the following terms and concepts.1. baby boom 12. Net Generation2. baby bust 13. telecommute3. Frost Belt 14. recycling4. Sun Belt 15. ethics5. Rust Belt 16. business ethics6. labor force 17. code of ethics7. labor participation rate 18. business confidentiality8. glass ceiling 19. social responsibility9. sticky floor syndrome 20. stakeholders

10. comparable worth 21. non-governmental11. Generation X organizations

REVIEW FACTS1. What factors are contributing to the growth of the population in

the U.S.?2. What has caused the decline in the number of young workers in

recent years?3. Why is the age and ethnic make-up of the population important

to business?4. How has the movement of people from cities to suburbs and

from the Frost Belt to the Sun Belt affected cities and businesses?

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REVIEWCHAPTER 2See the Teacher’s ResourceManual for solutions to end-of-chapter activities.

5. Why has there been an increase in the labor participation ratefor women?

6. Why are many women and minorities unable to advance intheir organization?

7. Why is it difficult for employers to design and implement com-parable worth plans?

8. Give two examples of how values have changed in the U.S. in thepast 20 years and how these changes have affected businesses.

9. Why do forward-looking firms provide wellness and fitness pro-grams and child-care facilities for their employees?

10. What actions has the federal government taken to protect theenvironment?

11. If a firm agrees to abide by the CERES Principles, what impactwill it have on how it organizes and operates its business?

12. How does ethics differ from laws?13. Give two reasons why businesses should not get involved in

socially responsible projects.14. Give two reasons why businesses should be socially responsible.15. In the coming decade, (a) what types of occupations will have

the greatest growth potential and (b) what types of occupationswill have the least growth potential?

DISCUSS IDEAS1. Why should anyone who studies American business principles

and management also study the social problems of the U.S.?2. If present trends in the composition of the population continue,

what types of businesses will be most affected in the future?3. Employers cannot always find people to fill some of the new jobs

that have been created. Discuss what employers, the education sys-tem, businesses, and governments can do to address this problem.

4. List and discuss the factors that contribute to poverty.5. Most city bus drivers are male, but nearly all nurses are female.

Bus drivers often earn more money than nurses. (a) Does theidea of comparable worth apply to both jobs? (b) How mightyou argue that nurses should be paid the same, more, or lessthan bus drivers?

6. How are changes in technology, primarily the Internet, affectingrelationships between individuals and businesses?

7. Identify a list of employer practices that have enhanced the qual-ity of work life for employees.

8. Give two examples of how environmental goals can be at oddswith energy conservation goals.

9. Since businesses are established for making profits, the only wayto ensure that they behave ethically is to have strong laws thatrequire them to do so. Do you agree with this statement? Justifyyour answer.

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10. On prom night at your school, your town’s Taxicab Associationannounced that it would provide free drop-off and pick-upservices to all students participating in the event. Give threereasons why the Taxicab Association is providing this service.

11. Since values differ from country to country, how should a man-ager address ethical issues? Should she (a) apply American val-ues abroad, (b) follow the value system of the foreign country,or (c) develop a universal value system that can be applied inany country?

12. How can a business ensure that its code of ethics will beeffective?

ANALYZE INFORMATION1. Use the Internet to obtain data on where immigrants to the United

States come from today and from where they came in the 1960s.Explain why and how they have changed. Data can be obtainedfrom the U.S. Census Bureau.

2. Refer to Figure 2-3, which provides information about the laborforce participation rate for males and females, and answer thesequestions:a. What is the trend in the labor force participation rate for

females?b. What is the trend in the labor force participation rate for

males?c. What are the explanations for these trends?d. Do you think participation rates can reach 100 percent? Why

or why not?3. Assume that the total population of the United States is 290 mil-

lion, of which 220 million are 16 years of age and above. Of this220 million, 35 million are full-time homemakers, 45 million arefull-time students, and 20 million are retirees. Six million areunemployed but looking for work. The rest are employed. Withthis information, answer the following questions:a. What is the size of the labor force?b. Calculate the labor force participation rate.c. Which groups are not considered part of the labor force?d. What would happen to the labor force participation rate if the

number of people unemployed increased?4. Consider any business with which you are familiar. It might be a

gas station, a supermarket, a restaurant, or a bank. Assume thatyour business has agreed to follow the CERES Principles. Developa list of specific activities the business must perform if it is to liveup to the Principles.

5. A recent study on ethics of over 2,000 office employees tried todetermine whether people who attend religious services weeklyare more ethical than those who attend rarely. The following

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REVIEW

results were reported in percents. Answer the questions that fol-low the reported results.

Attend Religious ServicesDo you . . . Weekly Rarely

Twist rules when dealing with others 22 33Bend the truth a bit in what you tell

others 21 31Use office equipment for personal

projects 22 37Take time off from work when you

should not have 8 19Feel somewhat less than completely

honest when filing tax returns 8 6

a. Do those who attend religious services weekly or rarely act inunethical ways?

b. For which question is there the greatest percentage differencebetween those who attend religious services weekly and rarely?

c. Why might the people who attend religious services weeklybe more unethical than those who attend rarely in regard tofiling tax returns?

d. In one sentence, what conclusion can you reach from thisstudy?

SOLVE BUSINESS PROBLEMSCASE 2-1Greengrocers, a major food company in the United States, storescans and bottles of packaged foods such as vegetables, fruits, cereal,and meats in its warehouses. The quality of the food in the pack-ages declines over time. Therefore, an expiration date is stamped onthe packages, after which the product cannot be sold, even thoughthe food in the packages is not spoiled and is still edible. Were itnot for strict rules laid down by the government, the expiration datecould easily be pushed to the future and the food would still be fitfor human consumption.

Packages with expired dates are returned to Greengrocers, wherethey are destroyed. Recently an opportunity appeared for Greengro-cers to use the expired food packages. A hurricane had devastatedparts of Mexico, leaving people homeless and without food. Green-grocers decided to make a generous donation of free packagedfood to the destitute Mexicans, and this was announced with greatfanfare. The U.S. military transported the food on one of its reliefflights. The donation was reported in the national media, and Green-grocers received favorable publicity as a socially responsible firmstepping in to lessen human misery in the highest tradition of Amer-ican generosity.

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The donated packages, of course, had expired dates. Mexico’s lawson selling food products with expired dates were very weak andrarely enforced. Greengrocers’ managers assumed that starving peo-ple would rather have food with expired dates than no food. In anycase, the food was still edible. In addition, Greengrocers could claima charitable contribution tax deduction in the United States.

Once the relief flight arrived in Mexico, the donated food wasturned over to a relief organization, Save the Children Fund, for distribution to the hungry. While several young American volunteersunpacked the boxes, they noticed that the packages had expireddates. A huge group of starving Mexicans was waiting for the pack-ages while the correspondent of a television network waited to broad-cast the event in the United States. What was broadcast instead wasnews about the expired dates on the donated food.

Think Critically:1. Since Mexico has weak laws on food dates and the food was still

edible, do you think Greengrocers acted in a socially responsiblemanner? Explain.

2. If you were the president of Greengrocers, how would youexplain your conduct now that the details of the donation wererevealed?

3. Suggest some ways by which Greengrocers can discourageunethical conduct by its employees in the future.

CASE 2-2Cigarettes are a lawful product in the U.S. Many farmers grow tobacco,and big companies such as Phillip Morris process the leaves intocigarettes. Thousands of people are employed in the industry, andlocal, state, and federal governments earn billions of dollars in taxeson the sale of tobacco products.

Although the Surgeon General of the United States has longrequired that cigarette packages carry a warning stating that smok-ing is injurious to health, it was only in the 1990s that a concertedcampaign was mounted to discourage smoking and to punish tobaccocompanies. After denying it for decades, senior managers of thetobacco companies admitted that smoking was addictive and dan-gerous to human health. Lawsuits were filed against the companyby state governments that claimed compensation for the extra med-ical costs that had to be incurred for treating people suffering fromsmoking-related illnesses. Individuals who had become ill from smok-ing sued the tobacco firms for being unwittingly seduced into thehabit through aggressive advertising. Groups such as flight attendantsclaimed that they were subjected to second-hand smoke from pas-sengers and thus needed to be compensated for their suffering. Inaddition, the government drew up plans to ban advertising of tobaccoproducts and ultimately to ban the product itself.

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REVIEW

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Faced with such opposition, the tobacco companies agreed topay the government billions of dollars, reduce their active advertis-ing of the product, and accept stringent laws on how the productwould be described and distributed. Phillip Morris recognized thatthe U.S. was no longer going to be a viable market for its cigarettes.The cost of doing business was only going to rise as individualAmericans began filing lawsuits. The company instead turned itsattention to countries in Asia, such as China, Thailand, and Turkey.In those countries, health concerns over smoking were not yet fullyrecognized, and the governments earned lots of money through tax-ing tobacco products. The quality of locally produced cigarettes wasnot high, and American cigarettes were highly valued. Through cre-ative advertising, American cigarettes had acquired an image of suc-cess, glamour, and independence, all of which made a strong markon young Asian consumers, whose numbers were very large. PhillipMorris agreed to build cigarette factories in the foreign countries tocreate jobs, and foreign governments welcomed that. Sales of PhillipMorris in foreign countries rose sharply while they stagnated in theUnited States.

Think Critically:1. Is the behavior of Phillip Morris to aggressively sell cigarettes

abroad socially responsible? Explain.2. Should the foreign governments be as concerned over tobacco

smoking as the American government is?3. Should individual Americans sue tobacco companies because

they smoke, although they have been warned through labels thatsmoking is harmful?

4. Should Phillip Morris have disclosed to the public that cigarettesmoking was addictive as soon as it found out?

The way people in a community view a business can often deter-mine whether it will be successful or not. A business owner mustconsider changes in population, income, attitudes, and values. Inthis chapter, you will study the social environment in which yourbusiness will operate and the importance of socially responsible andethical operations to business success.

DATA COLLECTION1. Collect newspaper and magazine articles or information from the

Internet that describes social and environmental changes thatcould affect your business. Try to identify issues that have national/international implications as well as those that are currentlyimportant to your own community.

MY BUSINESS, INC.PROJECT:PROJECT:

2. Interview five people of various ages and backgrounds. Ask themto describe their positive and negative feelings about fast-foodbusinesses. Then ask them the same questions about the healthand fitness industry. Create a table that compares the positiveand negative responses for each type of business.

3. Discuss the importance of ethics in business with a business per-son. (Use your business mentor if you have one for the continu-ing project.) Ask the person to identify the areas of business oper-ations where he or she believes ethics is most important.

4. Contact government agencies in your community to identify localrecycling regulations that will affect your type of business as wellas health laws that your business must observe. (Many local andstate governments have a Web site that provides information forbusinesses.) Note the kinds of materials that can be recycled locally.

ANALYSIS1. Using information from the Internet or business publications, try

to describe the typical customers for health and fitness products.Develop charts that illustrate the information you gathered, includ-ing age, gender, education level, ethnicity/race, and any otherimportant descriptive characteristics.

2. Develop at least four business operating procedures that show that you will operate in an ethical and socially responsible man-ner. Examples include use of resources, pollution, product quality,and employment practices. Compose a letter to the city councilabout these procedures. Explain how you will become involvedwith the city and how it will benefit from your presence.

3. Develop a recycling plan. Include the types of materials you willrecycle, how you will collect them, and how and when you willget them to a recycling facility.

4. Analyze the information collected from your interviews with thefive people completed for #2 of the Data Collection activities. Indi-cate what you can do within the operation of your business totake advantage of the positive factors and to overcome the nega-tive factors you identified.

5. A concern expressed about some juice bar businesses is the addi-tion of supplements (vitamins, minerals, energy boosters, etc.) atan additional charge. One aspect is whether supplements can beunhealthy for many people. Another aspect is that the pricecharged for the supplements is very high compared to their costto the business. Each of these is an ethical dilemma for a busi-ness owner. Select either the health dilemma or the pricingdilemma. Complete an analysis of the dilemma, describing bothsides of the issue. Make a specific decision about how youwould respond as the business owner.

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