***

4-11-1McGraw-Hill/Irwin

Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

Nickels McHugh McHughNickels McHugh McHugh

**Demonstrating Demonstrating

Ethical Ethical Behavior Behavior

and Social and Social ResponsibilityResponsibility4

CH

APT

ER

*

* *

***

4-2

EthicsEthics• More Than LegalityMore Than Legality

• Standards are Standards are Fundamental Fundamental• Ethics begins with each Ethics begins with each

of usof us

***

4-3

Top U.S. Ethical IssuesTop U.S. Ethical Issues

0% 10% 20% 30% 40% 50% 60%

Producing Low-quality or Unsafe Products

Discrimination

Securities and/or Bank Fraud

Unfair Treatment of Employees/Customers

Bribes and Kickbacks

Lack of Public Trust in Corporate America

Dishonesty with Customers

Lying on Reports/Falsifying Records

Conflicts of Interest

Deceptive Sales/Marketing Practices

Improper Accounting Practices

Source: CMO Magazine, October 2004

***

4-4

Ways to PreventWays to Prevent Unethical BehaviorUnethical Behavior

Source: CMO Magazine, Oct. 2004

0% 10% 20% 30% 40% 50% 60% 70% 80%

New Laws

Adding Ethics Classesto College Programs

A Code of Conduct

Publicity About ThoseBeing Punished

Employee EducationPrograms

Increasing Penaltiesfor Offenders

***

4-5

Privacy ProtectorsPrivacy ProtectorsBased on a Privacy Trust Score (PTS):Based on a Privacy Trust Score (PTS):• Health care providers scored the highestHealth care providers scored the highest• Grocery Stores and Department of Grocery Stores and Department of

Homeland Security (DHS) scored the Homeland Security (DHS) scored the lowestlowest

• Democrats have higher PTS than all Democrats have higher PTS than all other political affiliationsother political affiliations

• 81% of the respondents feel privacy is 81% of the respondents feel privacy is important or very importantimportant or very importantSource: www.darwinmag.com, November 2003

***

4-6

Ethics of MBA StudentsEthics of MBA StudentsPercent of MBA Students Who Would:Percent of MBA Students Who Would:

• Buy Stock on Inside InformationBuy Stock on Inside Information 52%52%• Reveal Corp. Secrets to Spouse/FamilyReveal Corp. Secrets to Spouse/Family 50%50%• Let a Gift Sway Purchasing DecisionLet a Gift Sway Purchasing Decision 26%26%• Pay Someone Off to Close a Pay Someone Off to Close a 13%13%

Business DealBusiness Deal

Source: USA Today

***

4-7

Most Popular Ways to Most Popular Ways to Monitor EmployeesMonitor Employees

• Internet (74%)Internet (74%)

• Background Exams (62%)Background Exams (62%)

• Store and Review Email (43%)Store and Review Email (43%)

• Store and Review Computer Files (31%)Store and Review Computer Files (31%)

• Videotape Employees (18%)Videotape Employees (18%)

Source: USA Today

***

4-8

Ethics Check Questions:Ethics Check Questions:

• Is It Legal?Is It Legal?

• Is It Balanced?Is It Balanced?

• How Will It Make Me Feel AboutHow Will It Make Me Feel About Myself?Myself?

***

4-9

Why Don’t We Why Don’t We Trust Corporations?Trust Corporations?

Source: USA Today

***

4-10

Factors InfluencingFactors Influencing Managerial EthicsManagerial Ethics

IndividualIndividual OrganizationalOrganizational EnvironmentalEnvironmental

• ValuesValues• Work Work BackgroundBackground• Family StatusFamily Status

• PersonalityPersonality

• Top Level Mgmt. Top Level Mgmt. PhilosophyPhilosophy

• The Firm’s The Firm’s Reward SystemReward System

• Job DimensionsJob Dimensions

• CompetitionCompetition

• Economic Economic ConditionsConditions

• Social/Cultural Social/Cultural InstitutionsInstitutions

***

4-11

Codes of EthicsCodes of Ethics

• Compliance-BasedCompliance-Based

• Integrity-BasedIntegrity-Based

***

4-12

Steps to ImproveSteps to Improve U.S. Business EthicsU.S. Business Ethics

1.1. Top management supportTop management support2.2. Employees’ understandingEmployees’ understanding3.3. Managers’ trainingManagers’ training4.4. Ethics OfficeEthics Office5.5. Outsiders must be informedOutsiders must be informed6.6. Enforcement of ethics codeEnforcement of ethics code

***

4-13

Levels of CorporateLevels of CorporateSocial ResponsibilitySocial Responsibility

Societal ResponsibilitySocietal Responsibility

Stakeholder ResponsibilityStakeholder Responsibility

Profit ResponsibilityProfit ResponsibilityOwners/StockholdersOwners/Stockholders

GeneralGeneral

PublicPublic

CustomersCustomers

EmployeesEmployees

Suppliers/DistributorsSuppliers/Distributors

EcologicalEcological

EnvironmentEnvironment

Public Interest GroupsPublic Interest Groups

Source: Source: MarketingMarketing, 5/E by Berkowitz, Kerin, Hartley, and Rudelius., 5/E by Berkowitz, Kerin, Hartley, and Rudelius.

***

4-14

Corporate Responsibility(Percent of country’s top 100 companies that publish

separate CR reports)

Source: Source: Financial Times,Financial Times, June 15, 2005 June 15, 2005

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Spain

Italy

US

Germany

France

UK

Japan

***

4-15

Social AuditSocial Audit• CompanyCompany

• Outside Groups that serve Outside Groups that serve as watchdogs:as watchdogs:• Socially-Conscious Socially-Conscious

InvestorsInvestors• EnvironmentalistsEnvironmentalists• Union OfficialsUnion Officials• CustomersCustomers

***

4-16

International EthicsInternational Ethics and Social Responsibilityand Social Responsibility

• Ethical problems are Ethical problems are NotNot Unique to Unique to the U.S. managersthe U.S. managers

• Demand for Socially Responsible Demand for Socially Responsible Behavior from Global SuppliersBehavior from Global Suppliers

• Joint Initiative on Corporate Joint Initiative on Corporate Accountability and Workers’ RightsAccountability and Workers’ Rights

• Inter-American Convention Against Inter-American Convention Against CorruptionCorruption

***

4-17

Best Company ReputationBest Company Reputation

• Johnson & Johnson (80.6)Johnson & Johnson (80.6)

• Coca-Cola (79.7)Coca-Cola (79.7)

• Google (79.5)Google (79.5)

• UPS (79.4)UPS (79.4)

• 3M (78.8)3M (78.8)

Source: USA Today

***

4-18

Most Admired Most Admired Global CompaniesGlobal Companies

1.1. General ElectricGeneral Electric

2.2. ToyotaToyota

3.3. Procter & GambleProcter & Gamble

4.4. FedExFedEx

5.5. Johnson & JohnsonJohnson & Johnson

6.6. MicrosoftMicrosoft

7.7. DellDell

8.8. Berkshire HathawayBerkshire Hathaway

9.9. Apple ComputerApple Computer

10.10. Wal-MartWal-Mart

Source: Fortune, 2006