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Title: Practicing Ethical Behavior and Social Responsibility Chapter 2


1
Practicing Ethical Behavior and Social
ResponsibilityChapter 2
2
  • Two ImportantConcepts

Social Responsibility
Ethical Behavior
3
Corporate Fraud
  • The new millennium has ushered in a wave of
    fraud, investment scams, and ethical lapses
    unprecedented in scope. Worse yet, such
    corruption has cost thousands of employees their
    jobs, clipped investor stock portfolios by
    billions, and destroyed the faith of many in
    Corporate America and its underlying securities
    markets.
  • Adelphia. For 50 years, John Rigas, the founder
    of the sixth largest U.S. cable company, lived
    the American Dream. But he and his two
    sonsTimothy and Michaelwere accused of
    committing one of the largest frauds ever
    perpetrated on investors and creditors.
  • WorldCom. This long-distance telecom giant
    shocked investors when it revealed in 2002 that
    it had engaged in one of the biggest frauds in
    corporate history. The company admitted to
    overstating cash flow by 3.9 billion by
    reporting ordinary expenses as capital
    expenditures. The accounting fraud allowed
    WorldCom to post a 2001 profit of 1.4 billion
    instead of reporting a loss for that year.
  • Ford and Firestone. Faulty Firestone tires on
    Ford Explorers are blamed for 271 deaths and more
    than 800 injuries worldwidenumbers that
    investigators said could've been much lower if
    both companies had reacted sooner to evidence of
    product failure. Firestone blamed the problem on
    Ford (and on Explorer drivers) Ford blamed the
    problem on Firestone. Firestone refused to recall
    the tires, then Ford stepped in and replaced the
    tires on nearly 50,000 vehicles in 16 counties
    outside the United Statesbut neither company
    bothered to inform U.S. authorities or customers
    until similar failures started to show up in this
    country.

4
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5
What Is Ethical Behavior?
6
Unethical Behavior
Cheating on Expense Accounts
Misuse of Company Resources
Creative Accounting
Padding Invoices
Insider Trading
Conflicts of Interest
7
Unethical Behavior
  • Even legitimate companies can mislead investors
    by withholding vital information. For example
    Enron and WorldCom both showed that with a little
    creative accounting, a business that is in
    financial trouble can be made to look attractive,
    even to government regulators and astute
    investors.
  • Some business executives take advantage of the
    investor by using the companys earnings or
    resources for personal gain. Perhaps the most
    common approach is to cheat on expense accounts.
  • Padding invoices and then splitting the
    overcharge with the supplier is another common
    ploy.

8
Unethical Behavior
  • Other tactics include selling company secrets to
    competitors and using confidential, nonpublic
    information gained from ones position in a
    company to benefit from the purchase and sale of
    stocks. Such insider trading is illegal and is
    closely checked by the Securities and Exchange
    Commission (SEC).
  • Another way that businesspeople can harm others
    is by getting involved in a conflict of interest
    situation. A conflict of interest exists when
    choosing a course of action will benefit one
    persons interests at the expense of another or
    when an individual chooses a course of action
    that advances his or her personal interests over
    those of the employer.

9
Ethical Business Behavior
Organizational Behavior
Influential Factors
Knowledge
Cultural Differences
10
Promoting Ethical Behavior
  • Top executives
  • Written code
  • Ethics training
  • Ethics officer
  • Reporting system

11
Making Ethical Decisions
12
Ethical Situations
13
Social Responsibility in Business
Early 20th Century
Middle 20th Century
Early 21st Century
Maximize Profits
Provide Jobs and Pay Taxes
Balance Profits and Social Issues
14
Percentage of Executives Who Strongly Agree or
Agree That Companies Should
Percentage
  • Be environmentally responsible
  • Be ethical in operations
  • Earn profits
  • Employ local residents
  • Pay taxes
  • Encourage and support employee volunteering
  • Contribute money and leadership to charities
  • Be involved in economic development
  • Be involved in public education
  • Involve community representatives in business
    decisions
  • Target a portion of purchasing toward local
    vendors
  • Help improve quality of life for low-income
    populations

100 100 96 94 94 89 85 75 73 62 61 54
15
Balancing Business and Stakeholders Rights
Business
Consumers
Employees
Investors
Society
Informed Purchase
Equity Health Safety
Profits Fair Disclosure
Clean Environment
Safe Products
Product Choice
16
Efforts to Increase Social Responsibility
Social Audit
Philanthropy
Cause-Related Marketing
17
Causes of Pollution
18
Government Efforts to Reduce Pollution The
Environmental Protection Agency
Regulate Air and Water
Reduce Automobile Emissions
License Pesticides
Control Toxic Substances
Safeguard Drinking Water
19
Business Effortsto Reduce Pollution
20
Responsibility TowardConsumers
The Right to Safe Products
The Right to Be Informed
The Right to Choose
The Right to Be Heard
21
Responsibility Toward Investors
Fair Profit Distribution
Ethical Behavior
Social Responsibility
22
Responsibility TowardEmployees
Equal Employment Opportunity
Affirmative Action
Occupational Health and Safety
Americans with Disabilities Act
23
Worldwide Ethics and Social Responsibility
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