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Chapter 4: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

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CHAPTER 4: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY Doing Well by Doing Good CAUSE RELATED MARKETING The term was coined in 1983 by American Express Raise Funds for ... – PowerPoint PPT presentation

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Title: Chapter 4: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY


1
Chapter 4 BUSINESS ETHICS AND SOCIAL
RESPONSIBILITY
  • Doing Well by Doing Good

2
ETHICS AND SOCIAL RESPONSIBILITY
ETHICS Beliefs about right and wrong.
SOCIAL RESPONSIBILITY The obligation of a
business to contribute to society.
A Close Relationship, but Not the Same
3
ETHICS/PERSONAL CHARACTER
A study of 43,000 high school students revealed
59 admitted that they cheated on a test at
school within the past 12 months 38 admitted
doing so two or more times.
62 admitted that they copied anothers homework
two or more times within the past 12 months.
18 admitted that they stole something from a
friend within the past 12 months.
28 admitted that they stole something from a
store within the past 12 months.
39 believe that a person has to lie or cheat
sometimes in order to succeed.
A 2011 Study conducted by Josephson Institute of
Ethics
4
ETHICS MURKIER THAN YOU THINK
Legal and Unethical
Promoting R-rated movies to young teens
Producing products that you know will break before their time
Paying non-living wages to workers in developing countries
Consumer goods-producing companies subcontract to factories overseas in India, China, and Southeast Asia where there is use of child and sweatshop labor
Taking up an employees time to ask questions about a product with the intent to purchase it elsewhere
Legal and Ethical
Producing high quality products
Rewarding integrity
Leading by example
Treating employees fairly
Contributing to the community
Illegal and Unethical
Embezzling money
Engaging in sexual harassment
Practicing Collusion with competitors
Encouraging fraudulent accounting
Illegal and Ethical
Providing rock-bottom prices only to distributors in underserved areas
Collaborating with other medical clinics to guarantee low prices in low-income countries (collusion)
Stopping at a red light at a deserted intersection, out in the country, where you can see that there are no cars for miles, and then proceeding through the red light.
Smuggling of medicines into war- and disease-stricken areas
5
UNIVERSAL ETHICAL STANDARDS
Developed by Character Counts, a nonpartisan
organization of educators, community leaders, and
ethicists.
6
BUSINESS ETHICS NOT AN OXYMORON
Ethical Dilemma Negative Consequences Two
unfavorable options
  • Ethical Dilemma
  • Negative Consequences
  • Two unfavorable options

Most challenging business decisions seem to arise
when values are in conflict
Business Ethics the application of right and
wrong in the workplace
Ethical Lapse Clear misconduct
  • Business Ethics the application of right and
    wrong in the workplace.

7
Ethical Dilemma
  • Youve just done a great job on a recent project
    at your company. Your boss has been very vocal
    about acknowledging your work and the increased
    revenue that resulted from it.
  • Privately, she said that you clearly earned a
    bonus of at least 10, but due to company
    politics, she was unable to secure the bonus for
    you. She also implied that if you were to submit
    inflated expense reports for the next few months,
    she would look the other way and you could pocket
    the extra cash as well-deserved compensation for
    your contribution.

8
Ethical Dilemma
  • One of the engineers on your staff has an
    excellent job offer from another company and asks
    your advice on whether or not to accept the
    position.
  • You need him to complete a project that is
    crucial to your company (and to your own career).
    You also have been told --- in strictest
    confidence by senior management --- that when the
    project is complete, the company will lay off all
    internal engineers.
  • If you advise him to stay, he would lose the
    opportunity and end up without a job. If you
    advise him to go, you would violate the companys
    trust and jeopardize your career.

9
Ethical Dilemma
  • As a successful entrepreneur, you see a new
    technology ready to be launched that is really
    good for the growth of your company and the
    clients. But, adopting the technology would mean
    reducing the man power of the company.
  • You have to think about the betterment of the
    clients and provide them with the best of
    services, but on the other hand, you also have to
    think about the employees who have contributed in
    the growth of the company.
  • If you think about your employees and reject the
    technology then are you doing justice with your
    clients? And if you accept the technology are you
    then betraying the employees?

10
Ethical Dilemma
  • Mary works as a secretary in a department within
    a branch of a large corporation. The branch
    director has decided that the job of her
    department director, Jim, will soon be
    discontinued. Although Mary and a few others in
    her department have this knowledge, Jim does
    not.  For a few weeks, Jim was directed to work
    on an array of special projects at his home
    office. In the meantime, an employee from a
    different department is told to move in to Jim's
    office.
  • The branch director instructs Mary and other
    support staff to change Jim's voice mail, move
    his files out of the office, and erase his name
    from his assigned parking spot. Mary is told the
    human resources department will call Jim to let
    him know what has taken place.
  • That week Jim calls Mary because he cannot get
    into his voice mail. He wants to know if there
    are any technical problems about which he should
    know. Mary feels torn should she tell him the
    truth now or should she rely on human resources
    staff to tell him?

11
Ethical Dilemma
  • You are a psychiatrist and your patient has just
    confided to you that he intends to kill a woman.
    You're inclined to dismiss the threat as idle,
    but you aren't sure.
  • Should you report the threat to the police and
    the woman or should you remain silent as the
    principle of confidentiality between psychiatrist
    and patient demands?
  • Should there be a law that compels you to report
    such threats?

12
Ethical Dilemma
  • On March 13, 1841, an American ship, the William
    Brown, left Liverpool, England for Philadelphia,
    Pennsylvania. In addition to her cargo, she
    carried 17 crewmen and 65 passengers, who were
    mostly Scots and Irish emigrants. On the night of
    April 19, 250 miles from Newfoundland, the
    William Brown struck an iceberg and began to sink
    rapidly. There were two lifeboats, one small and
    one large. The captain and most of the crew took
    the small lifeboat, and the passengers crowded
    aboard the large lifeboat. There was not enough
    space on the large lifeboat for all the
    passengers, and 31 died on board the William
    Brown when it sank.
  • First Mate Francis Rhodes, Alexander William
    Holmes, and another seaman commanded the large
    lifeboat. The passengers were still dressed in
    their night clothes and suffered terribly in the
    cold Atlantic weather, which was made worse by a
    pelting rain. The two lifeboats stayed together
    through the night but separated the morning of
    the 20th because the captain, George L. Harris,
    thought there was a better chance of rescue if
    the two boats took different directions.

13
Ethical Dilemma
  • Rhodes said that his boat was overcrowded and
    that some people would have to be thrown
    overboard to keep it from capsizing. Captain
    Harris said, "I know what you'll have to do.
    Don't speak of that now. Let it be the last
    resort." Throughout the day of the 20th and into
    the night, the rain and the waves worsened. The
    boat began to leak and fill with water, despite
    constant bailing. Around ten o'clock that night,
    Rhodes cried out in despair, "This work won't do.
    Help me, God. Men, go to work."

Holmes and the other seaman began throwing people
overboard. They threw 14 men and two women into
the freezing water. They chose single men only,
spared the married men on board, and threw the
two women overboard only because they were
sisters of a man already thus ejected and had
demanded to be sacrificed with their kin. None of
the crew was thrown out.
14
Ethical Dilemma
  • Defendant Alexander William HolmesCrime
    Charged ManslaughterChief Defense Lawyer David
    Paul BrownChief Prosecutor William M.
    MeredithJudge Baldwin (historical records do
    not indicate his first name)Place Philadelphia,
    PennsylvaniaDates of Trial April 13-23,
    1842Verdict GuiltySentence 6 months in
    prison and a 20 fine

http//law.jrank.org/pages/2482/Alexander-Holmes-T
rial-1842.html
15
Ethical Dilemma
  • Jane has been operating a consulting business for
    about a year and has been doing very well. About
    a month ago, she decided she needed to hire
    someone to help her. After interviewing several
    candidates, she decided to hire the best one of
    the group, Sara. She called Sara on Monday to
    tell her she had gotten the job. They both agreed
    that she would start the following Monday and
    that Sara could come in and fill out all of the
    hiring paperwork at that time.
  • On Tuesday, of the same week, a friend of Jane's
    called her to say that she had found the perfect
    person for Jane. Jane explained that she had
    already hired someone, but the friend insisted.
    "Just meet Kim. Who knows, maybe you might want
    to hire her in the future!"

16
Ethical Dilemma
  • Rather reluctantly, Jane consented. "All right,
    if she can come in tomorrow, I'll meet with her,
    but that's all." "Oh, I'm so glad. I just know
    you're going to like her!" Jane's friend
    exclaimed.
  • And Jane did like her. She like her a lot. Jane
    had met with Kim on Wednesday morning. She was
    everything that Jane had been looking for and
    more. In terms of experience, Kim far surpassed
    any of the candidates Jane had previously
    interviewed, including Sara. On top of that, she
    was willing to bring in clients of her own which
    would only increase business. All in all, Jane
    knew this was a win-win situation.
  • But what about Sara? She had already given her
    word to Sara that she could start work on Monday
    and she only had the resources to hire one person
    at this point.

17
Ethical Dilemma
  • Clearly, the best business decision was to hire
    Kim. But what about the ethical decision? If her
    business did poorly or Sara couldn't provide
    enough support, the business would suffer. As a
    result, her family would suffer. Money was
    already tight, what with two boys in college. And
    yet she knew Sara also had a family she was
    supporting. Plus, she had been so enthusiastic
    about starting to work.
  • Obviously, Jane had a problem - an ethical
    problem. Should she hire Sara (whom she'd already
    given her word) or Kim (who was obviously the
    best person for the job)?

18
Ethical Dilemma
  • According to Kenneth Blanchard and Norman Vincent
    Peale, authors of The Power of Ethical
    Management, there are three questions you should
    ask yourself whenever you are faced with an
    ethical dilemma.

19
Ethics Multiple Touchpoints
  • Individuals must make their own
  • ethical choices
  • BUT
  • The organization can have a significant influence
    on decisions

20
Creating and Maintaining an Ethical Organization
  • Organizational Culture
  • Role of Top Management
  • Code of Ethics
  • Executive Buy-in
  • Clear expectations
  • Integrated approach
  • Global and local
  • Whistleblower support
  • Reporting and Enforcement

21
ETHICS FAME AND SHAME
Sherron Watkins, former vice president of Enron
reported the accounting Irregularities that led
to the discovery of corporate fraud.
Stanley ONeal began as Merrill Lynch began
racking up losses that led to its collapse, he
announced his retirement.
Martha Stewart was convicted of obstructing
justice in a 40,000 well timed stock sale.
Whole Foods CEO, John Mackey posted thousands of
comments on Yahoo Finance, hyping his company
and attacking Wild Oats, which he was planning to
purchase.
Sanjay Kumar of Computer Associates was convicted
of massive accounting fraud in 2006.
Pierre Omidyar, the founder of eBay has given
away over 100 million to Tufts University Micro
Finance Fund.
22
SPECTRUM OF SOCIAL RESPONSIBILITY
23
SOCIAL RESPONSIBILITY
Responsibility to Whom?
Stakeholders are any groups that have a stake
or a personal interest - in the performance
and actions of an organization.
24
RESPONSIBILITY TO
25
RESPONSIBILITY TO EMPLOYEES CREATING JOBS THAT
WORK
  • Meet Legal Standards
  • Workplace Safety
  • Minimum Wage/Overtime Requirements
  • Value Employees
  • Provide Work/Life Balance

26
DOES IT PAY TO PAY MORE?
Costco Wal-Marts Sams Club
Average hourly wage 15.97 11.52
Annual health costs per worker 5,735 3,500
Covered by health plan 82 47
Employee turnover 6/yr 21/yr
Labor and overhead costs 9.8 of sales 17 of sales
Profits per employee 13,647 11,039
27
RESPONSIBILITY TO CUSTOMERS
  • The Right to Be Safe
  • The Right to Be Informed
  • The Right to Choose
  • The Right to be Heard

Consumerism a social movement suggests that
consumer rights should be the starting point
Planned Obsolescence Deliberately designing
products to fail in order to shorten the time
between consumer repurchases
28
APPLE COMPUTERS
Planned Obsolescence
  • APPLE COMPUTERS
  • iPods had irreplaceable battery.
  • Batteries died after 18 months.
  • Customers were encouraged to purchase new iPods
  • Two customers posted high profile protest movies
    online.
  • APPLE announced replacement program.

29
APPLE iPHONES
  • Apple introduced the iPhone on June 9, 2007 to
    rave reviews despite 599 price tag
  • Apple dropped the price to 200 to increase
    customers
  • Customers were livid!
  • CEO, Steve Jobs apologized and gave customers
    100 store credit

30
RESPONSIBILITY TO INVESTORS
FAIR STEWARDSHIP AND FULL DISCLOSURE
  • Legal Requirements
  • Sarbanes-Oxley
  • Responsible use of Corporate Dollars
  • Honesty
  • Is Optimism or Pessimism Socially Responsible?
  • Legal Requirements
  • Sarbanes-Oxley
  • Responsible use of Corporate Dollars
  • Honesty
  • Is Optimism or Pessimism Socially Responsible?

31
RESPONSIBILITY TO COMMUNITY
Cause-related Marketing partnerships between
businesses and nonprofit organizations,
designed to spike sales for the company and
raise money for the nonprofit.
Corporate Responsibility - The actions of the
business rather than donations of money and time.
Corporate Philanthropy - business donations to
nonprofit groups, including both money and time.
32
RESPONSIBILITY TO ENVIRONMENT
Green Marketing marketing environmental
products and practices to gain a competitive
edge.
33
RESPONSIBILITY TO ENVIRONMENT
  • Responsibility to environment is a part of
    responsibility to community
  • Reducing the amount of trash is more important
    than recycling
  • Although consumers support green marketing, they
    may not be willing to sacrifice quality
  • Responsibility to environment is a part of
    responsibility to community
  • Reducing the amount of trash is more important
    than recycling
  • Although consumers support green marketing, they
    may not be willing to sacrifice quality

34
CAUSE RELATED MARKETING
  • The term was coined in 1983 by American Express
  • Raise Funds for Statue of Liberty Restoration
  • Campaign to donate .01 for every dollar charged
    on credit card.
  • New Cardholders Grew 45
  • Card Usage Grew 28
  • Statue of Liberty Restored Early

35
ETHICS SOCIAL RESPONSIBILITY IN THE GLOBAL ARENA
  • Corruption is part of the culture in many
    countries
  • Bribes or Gifts
  • Labor issues in host countries can be complicated
  • Living Wage
  • Child Labor
  • Code of Conduct

36
MONITORING ETHICS AND SOCIAL RESPONSIBILITY
SOCIAL AUDIT
A systematic evaluation of how well a firm is
meeting its ethics and social responsibility
objectives.
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