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*Chapter Four
Demanding Ethical and
Socially Responsible
Behavior
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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*Ethics is More Than Legality
• Scandals have shaken the real estate, mortgage and banking industries.
• How do we restore trust in the free market system?
- Punish those who have broken the law.
- Make accounting records more transparent.
- Consider what is ethical, not just what is legal.
LIFE AFTER SCANDAL
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Ethics
• More Than Legality
• Standards are Fundamental
•Ethics begins with each Ethics begins with each of usof us
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*Ethical Standards are Fundamental
• Ethics -- The standards of moral behavior. Behaviors that are accepted by society as right versus wrong.
WHAT are ETHICS?
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Reasons to maintain ethics in Business
• To maintain good reputation• To keep existing customers• To attract new customers• To avoid lawsuits• To reduce employee turnover• To avoid government intervention• To please customers, employees, society
And simply4-6
To do the RIGHT thing
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• Enron: One executive is serving a 24 year sentence for accounting fraud while another was released in October 2011.
• Arthur Andersen: Convicted of tampering with witnesses, the company was dissolved and about 28,000 people lost their jobs.
• Tyco International: Two executives stole $600 million from the company and are scheduled to be released from prison in 2030.
• Adelphia Communication: Two executives were convicted of conspiracy, bank and securities fraud and given sentences of 15 and 20 years.
• WorldCom: Former CEO was convicted of fraud, conspiracy and false filings and sentenced to 25 years.
PAYING the PRICE(Legal Briefcase)
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*Ethics Begins with Each of Us
• Plagiarizing from Internet materials is the most common form of cheating in schools today.
ETHICS and YOU
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• Studies found a strong relationship between academic dishonesty and dishonesty at work.
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*Ethics Begins with Each of Us
• Ask yourself these questions:
- Is it legal?
- Is it balanced?
- How will it make me feel about myself?
FACING ETHICAL DILEMMASLG2
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*Managing Businesses Ethically and Responsibly
• Trust between workers and managers must be based on fairness, honesty, openness and moral integrity.
• Leadership can help instill corporate values in employees.
ETHICS
START
at the
TOP
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* Setting Corporate Ethical Standards
• An increasing number of companies have adopted written codes of ethics.
• Compliance-Based Ethics Code -- Emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers.
• Integrity-Based Ethics Code -- Define the organization’s guiding values, create an environment that supports ethically sound behavior and stress a shared accountability among employees.
ETHICS CODES
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Steps to Improve Business Ethics
1. Top management support2. Employees’ understanding3. Managers’ training
4. Ethics Office- whistle blower
5. Outsiders must be informed6. Enforcement of ethics code with
timely action
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Corporate Social Responsibility
• Corporate Social Responsibility: A business's concern for thewelfare of society.
• Corporate philanthropy:The dimension of soclal
responsibility that includes charitable donations. ex: The Bill
& Melinda Gates Foundation
• Corporate social initiatives: Enhanced forms of corporate philanthropy directly related to the Company’s competencies.
• Corporate responsibility: includes everything from hiring minority, make safe products, minimizing pollution, using energy wisely, and providing a safe work environment
• Corporate policy: refers to the position a firm takes on social and political issues.
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Stakeholders to whom businesses are responsible
• Responsibility to Customers– Right to safety– Right to be informed– Right to choose– Right to be heard
• Responsibility to Investors – insider trading
• Responsibility to Employees
• Responsibility to society and the environment
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*Social Auditing
• Social Audit -- A systematic evaluation of an organization’s progress toward implementing programs that are socially responsible and responsive.
• Four Types of Social Audit Watchdogs
- Socially conscious investors
- Environmentalists
- Union officials
- Customers
SOCIAL AUDITING
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