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1
BEING ETHICAL AND SOCIALLY RESPONSIBLECHAPTER-02
Dr. Gehan Shanmuganathan, (DBA)
2
LEARNING OBJECTIVES
Understand what is meant by business ethics
Identify the types of ethical concerns that arise in the business world
Discuss the factors that affect the level of ethical behavior in
organizations
Explain how ethical decision making can be encouraged
Describe how our current views on the social responsibility of
business have evolved
Explain the two views on the social responsibility of business and
understand the arguments for and against increased social
responsibility
3
LEARNING OBJECTIVES CONT…….
Discuss the factors that led to the consumer
movement and list some of its results
Analyze how present employment practices are
being used to counteract past abuses
Describe the major steps of pollution, their
causes, and their cures
Identify the steps a business must take to
implement a program of social responsibility
4
DIVINE CHOCOLATE’S RECIPE FOR SALES AND SOCIAL RESPONSIBILITY
5
DIVINE CHOCOLATE SOCIAL RESPONSIBILITY
Government set the policy to collect cocoa beans from
local producers in Ghana
Small farmers set up a cooperative society to focus on the
quality factor through earth friendly production methods
and complying with requirements for safe and healthy
working conditions
They achieved fair trade certification and invested on
social welfare (wells, daycare centers)
Started warehouse and trained farmers
Opened retail outlets in U.K. and U.S.A and gained profit
share
6
BUSINESS ETHICS DEFINITION
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DEFINITION
Business Ethics is the study of right and
wrong and of the morality of the choices
individuals make. (Pride B.,Hughes B., Kapoor
J., 2012)
An ethical decision or an action is one that is
right according to some standard of
behavior. Business ethics is duplication of
moral standards to business situations.
8
FACTORS AFFECTING ETHICAL BEHAVIOR
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FACTORS AFFECTING ETHICAL BEHAVIOR
10
EXAMPLES OF UNETHICAL BUSINESS CONDUCTED
Copley Pharmaceuticals falsifying drug manufactures’
reports to the Food and Drug Administration (paid $
10.65 million fine)
Investor fraud by Bernard Madoff non-executive
chairman of NASDAQ stock market in 2009
TAP Pharmaceutical company sales representatives
offered every Urologist in the United States a big-screen
TV, computers, fax machines, and golf vacations if the
doctors prescribed TAP’s new prostate cancer drug
Lupron (Govt won $ 875 million from the law suite)
11
ETHICAL PRACTICES WITHIN SUPPLY CHAIN
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ETHICAL PRACTICES WITHIN SUPPLY CHAIN
13
ETHICAL BEHAVIOR IS A COST OR AN INVESTMENT ?
14
COST/ INVESTMENT CONNOTATION
15
IMPACT OF BUSINESS ETHICS
Long terms profits and survival
High corporate image building
Positive corporate culture
Influence all the stakeholders
16
ETHICAL ISSUES IN BUSINESS
Sales – pharmaceutical representatives using
rewarding systems to promote their pharmaceutical
products
Production – use of animal skin to produce winter
cloths and jackets
Human Resources – use of child labor
Finance – providing inflated financial information to
creditors
Marketing – promising undeliverable benefits
through advertising
17
FAIRNESS AND HONESTY
Fairness and honesty in business are two important
ethical concerns
Business people are expected to refrain from
Knowingly deceiving (Nutella – Hazelnut spread ,Lawsuit)
Misrepresenting (use of soap and becoming actors)
Intimidating others (reports on economic situation)
No employee should take unfair advantage of anyone
through manipulation, concealment, abuse of
privileged information, misinterpretation of material
facts or any other unfair dealing practices
18
ORGANIZATIONAL RELATIONSHIPS
A business person may be tempted to place
his or her personal welfare above the welfare
of others or the welfare of the organization
Unethical behavior in this area are,
Taking credit for others’ ideas or work
Not meeting one’s commitments in a mutual
agreement
Pressuring others to behave unethically
19
CONFLICT OF INTEREST
Conflict of interest results when a
businessperson takes advantage of the
situation for his or her own personal interest
rather than for the organizational interest.
These are common when payments and
gifts make their way into business deals
Anything given to a person that might unfairly
influence that person’s business decision is
bribe and all bribes are unethical
20
BUSINESS COMMUNICATION
Business communications, especially
advertising, can present ethical questions.
False and misleading advertising is illegal
and unethical, and it can infuriate customers.
The most sensitive areas for advertising in
this regard would be advertisements aimed
at children, health related products. Examples……….discuss….
21
FACTORS AFFECTING ETHICAL BEHAVIOR
22
FACTORS AFFECTING ETHICAL BEHAVIOR
Individual factors affecting ethics –
Individual knowledge, personal values,
personal goals (aspiration and persuasion)
Social factors affecting ethics – cultural
norms, coworkers, significant others
(spouses, friends, and relatives), use of the
Internet
23
OPPORTUNITY AS A FACTOR AFFECTING ETHICS
Presence of opportunity
Opportunity refers to the amount of freedom an
organization gives an employee to behave
unethically if he or she makes that choice. In some
organizations, certain company policies and
procedures reduce the opportunity to be unethical
(code of ethics). For example, if there are two
employees involved in performing a task.
24
ETHICAL CODES
The existence of an ethical code and the
importance management places on this code
are other determinants of opportunity
25
ENFORCEMENT AS A CONTROLLING MECHANISM
The degree of enforcement of company
policies, procedures, and ethical codes is a
major force affect the opportunity
26
ENCOURAGING ETHICAL BEHAVIOR
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ENCOURAGING ETHICAL BEHAVIOR
Governments role in encouraging ethics – the government
can encourage ethical behavior by legislating more stringent
regulations. Eg- Health Insurance Portability and Accountability
Act of 1996 (HIPPA) Privacy and security of health information
rule
Trade associations role in encouraging ethics – trade
associations can and often do provide ethical guidelines for
their members
Individual companies’ role in encouraging ethics – codes
of ethics that companies provide to the employees are perhaps
the most effective way to encourage ethical behavior
Whistleblowing – informing the press or company officials
about unethical practices within one’s organization
28
ETHICS IN DIFFERENT LEVELS IN AN ORGANIZATION
Top-Level Mgrs
.
Middle-Level Mgrs.
First-Level Mgrs.
Individual Contributors (Operatives and
Specialists)
MANAGERIAL LEVELSChairman of the Board, CEO, president, executive vice president, vice president, group team leader, chancellor
Director, branch manager, department chairperson, chief of surgery, team leader
1.2
Chairman of the Board, Corporate culture(Stakeholder Ethics)
Quality, information, employment, and so on(Functional Ethics)
Setting corporate values(Ethical Values)
Courtesy, politeness(Operational Ethics)
30
SOCIAL RESPONSIBILITY
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SIMPLE BUSINESS OPERATION
EmploymentSocial welfareCharity service
Environmentalconcerns
32
STAKE HOLDERS AND THEIR NEEDS
33
STAKE HOLDERS AND THEIR NEEDS
34
SOCIAL RESPONSIBILITY
Social responsibility definition
The recognition that business activities have an
impact on society and the consideration of the
impact and business decision-making
Eg- how Walmart delivered $ 20 million in cash,
100 truck loads of free merchandise, and food for
100,000 meals for those who affected by
Hurricane Katrina in New Orleans
See for more examples in pages 47 through 50 in
the text book
35
THE EVOLUTION OF SOCIAL RESPONSIBILITY IN BUSINESS
36
EVOLUTION OF MARKET STRUCTURE AND CONSUMERISM
Market Structure Consumerism
37
TWO VIEWS
38
TWO VIEWS OF SOCIAL RESPONSIBILITY
The economic
model
This views that
society will benefit
most when business
is left alone to
produce and market
profitable products
that society needs
The
socioeconomic
model
According to this
concept the business
should emphasize
not only profits but
also the impact of its
decisions on society
39
ARGUMENTS FOR INCREASED SOCIAL RESPONSIBILITY
01 – Because business is a part of our society, it cannot
ignore social issues
02 – Business has the technical, financial, and managerial
resources needed to tackle today's complex social issues
03 – By helping resolve social issues, business can create
more stable environment for long-term profitability
04 – Socially responsible decision-making by firms can
prevent increased government intervention, which would
force business to do what they fail to do voluntarily
40
ARGUMENTS AGAINST INCREASED SOCIAL RESPONSIBILITY
01 – Business managers are responsible primarily to stakeholders, so management must be concerned with providing a return on owner's investments
02 – Corporate time, money, and talent should be used to maximize profits, not to solve society's problems
03 – Social problems affect society in general, so individual businesses should not be expected to solve these problems
04 – Social issues are the responsibility of government officials who are elected for that purpose and are accountable to the voters for their decisions
41
CONSUMERISM
42
CONSUMERISM
Consumerism is all activities undertaken
to protect the rights of consumers
Fundamental issues pursued by consumer
movement falls into three categories
Environmental protection
Product performance and safety
Information disclosure
43
THE FOUR BASIC RIGHTS OF CONSUMERS
The right to safety of usage or consumption
The right to be informed on complete
information
The right to choose from a variety of choice
The right to be heard of complaints to take
actions
Discuss with examples…….
44
EMPLOYMENT PRACTICES
45
EMPLOYMENT PRACTICES
Equal treatments in the work place
Equal employment opportunity
46
CONCERN FOR ENVIRONMENT
47
CONCERN FOR ENVIRONMENT
Pollution
Contamination of water, air, or land through the
actions of people in an industrialized society
48
IMPLEMENTING A PROGRAM OF SOCIAL RESPONSIBILITY
01 – Commitment of top executives 02 – Planning 03 – Appointment of a Director 04 – The social audit – a comprehensive
report of what an organization has done and is doing with regard to social issues that affect it
05 – Funding the program 06 – Measure effectiveness of the program
49
QUESTIONS……..
50
WEEKLY ASSIGNMENT – WEEK 02
Overall, would it be more profitable for a
business to follow the economic model or
the socioeconomic model of social
responsibility? Discuss…
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