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BEING ETHICAL AND SOCIALLY RESPONSIBLECHAPTER-02

Dr. Gehan Shanmuganathan, (DBA)

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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

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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

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DIVINE CHOCOLATE’S RECIPE FOR SALES AND SOCIAL RESPONSIBILITY

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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

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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.

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FACTORS AFFECTING ETHICAL BEHAVIOR

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FACTORS AFFECTING ETHICAL BEHAVIOR

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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)

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ETHICAL PRACTICES WITHIN SUPPLY CHAIN

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ETHICAL PRACTICES WITHIN SUPPLY CHAIN

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ETHICAL BEHAVIOR IS A COST OR AN INVESTMENT ?

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COST/ INVESTMENT CONNOTATION

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IMPACT OF BUSINESS ETHICS

Long terms profits and survival

High corporate image building

Positive corporate culture

Influence all the stakeholders

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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

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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

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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

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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

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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….

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FACTORS AFFECTING ETHICAL BEHAVIOR

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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

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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.

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ETHICAL CODES

The existence of an ethical code and the

importance management places on this code

are other determinants of opportunity

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ENFORCEMENT AS A CONTROLLING MECHANISM

The degree of enforcement of company

policies, procedures, and ethical codes is a

major force affect the opportunity

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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

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ETHICS IN DIFFERENT LEVELS IN AN ORGANIZATION

Top-Level Mgrs

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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

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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)

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SOCIAL RESPONSIBILITY

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SIMPLE BUSINESS OPERATION

EmploymentSocial welfareCharity service

Environmentalconcerns

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STAKE HOLDERS AND THEIR NEEDS

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STAKE HOLDERS AND THEIR NEEDS

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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

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THE EVOLUTION OF SOCIAL RESPONSIBILITY IN BUSINESS

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EVOLUTION OF MARKET STRUCTURE AND CONSUMERISM

Market Structure Consumerism

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TWO VIEWS

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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

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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

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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

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CONSUMERISM

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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

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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…….

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EMPLOYMENT PRACTICES

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EMPLOYMENT PRACTICES

Equal treatments in the work place

Equal employment opportunity

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CONCERN FOR ENVIRONMENT

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CONCERN FOR ENVIRONMENT

Pollution

Contamination of water, air, or land through the

actions of people in an industrialized society

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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

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QUESTIONS……..

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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…