*
*Chapter Four
Demanding Ethical and
Socially Responsible
Behavior
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
*
*Profile
• Chipotle is dedicated to producing quality food which has led to current annual sales over $1 billion.
STEVE ELLSChipotle Mexican Grill
• Ells’ mission is to serve “Food With Integrity.”
• Chipotle is the leading restaurant buyer of humanely raised meats.
4-2
*
*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
LG1
4-3
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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?
LG1
4-4
*
*Ethical Standards are Fundamental
Right:• Integrity
• Respect for human life
• Self control
• Honesty
• Courage
• Self-sacrifice
Wrong:•Cheating•Cowardice•Cruelty
BASIC MORAL VALUES
LG1
4-5
*
*
• Enron: One executive is serving a 24 year sentence for accounting fraud while another will be 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)
4-6
*
*Ethics Begins with Each of Us
• Plagiarizing from Internet materials is the most common form of cheating in schools today.
ETHICS and YOU
LG2
• Studies found a strong relationship between academic dishonesty and dishonesty at work.
4-7
*
*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
4-8
*
*
• Every minute, people upload 10 hours of video to YouTube – not all is user-generated content.
• Viacom sued YouTube for $1 billion for allowing episodes of its popular shows on the site.
• Viacom holds YouTube responsible for carrying the illegal content, rather than the individuals who uploaded it.
• Who do you think should be accountable for the copyright violations -- the website or those who uploaded the videos?
To TUBE or NOT to TUBE(Making Ethical Decisions)
4-9
*
*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
LG3
4-10
*
*Managing Businesses Ethically and Responsibly
FACTORS INFLUENCING MANAGERIAL ETHICS
Individual Organizational Environmental• Values• Work Background• Family Status• Personality
• Top Level Management Philosophy
• Firm’s Reward System
• Job Dimensions
• Competition• Economic
Conditions• Social/Cultural
Institutions
LG3
4-11
*
* Setting Corporate Ethical Standards
• Compliance-Based Ethics Code –
• Emphasizes prevention of unlawful behavior by increasing control and by penalizing wrongdoers.
• Integrity-Based Ethics Code –
• Define guiding values• Create an environment that supports ethically
sound behavior • Stress a shared accountability among
employees.
ETHICS CODES
LG4
4-12
*
* Setting Corporate Ethical Standards
1. Top management must adopt and unconditionally support an explicit corporate code of conduct.
2. Employees must understand that senior management expects all employees to act ethically.
3. Managers and others must be trained to consider the ethical implications of all business decisions.
(continued)
HOW to IMPROVE AMERICA’S BUSINESS ETHICS
LG4
4-13
*
* Setting Corporate Ethical Standards
4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers -- People who report illegal or unethical behavior.
HOW to IMPROVE AMERICA’S BUSINESS ETHICS
LG4
5. Involve outsiders such as suppliers, subcontractors, distributors and customers.
6. The ethics code must be enforced.
4-14
• Whistleblowers
*
*
Source: James Gehrke, Magnify Leadership & Development, November 2008.
1. Managers must communicate the organization’s vision on ethical behavior.
2. Organizations must have a code of ethics.
3. Policies have to be enforced regarding ethical offences.
4. Ethical responsibility must be taught to all employees.
(continued)
HOW to PREVENT UNETHICAL BEHAVIORS LG4
Setting Corporate Ethical Standards
4-16
*
*
Source: James Gehrke, Magnify Leadership & Development, November 2008.
5. Discussions of ethics must be included in the decision-making process.
6. Accountability must be taken seriously at all levels in the organization.
7. Organizations must act fast when a crisis occurs.
8. Employees must know they have to defend and maintain the company’s reputation.
HOW to PREVENT UNETHICAL BEHAVIORS LG4
Setting Corporate Ethical Standards
4-17
*
*Corporate Social Responsibility
• Corporate Social Responsibility (CSR) – • The concern businesses have for the welfare of
society.
• CSR
• based on a commitment to integrity, fairness, and respect.
• CSR proponents
• say that businesses owe existence to societies they serve and cannot exist in societies that fail.
CORPORATE SOCIAL RESPONSIBILITY
LG5
4-18
4-19
Levels of CorporateLevels of CorporateSocial ResponsibilitySocial Responsibility
Societal ResponsibilitySocietal Responsibility
Stakeholder ResponsibilityStakeholder Responsibility
Profit ResponsibilityProfit Responsibility
Owners/StockholdersOwners/StockholdersGeneralGeneral
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.
*
*Corporate Social Responsibility
• Corporate Philanthropy –
• Includes charitable donations.
• Corporate Social Initiatives –
• Includes enhanced forms of corporate philanthropy.
CORPORATE PHILANTHROPY and SOCIAL INITIATIVES
LG5
4-20
*
*Corporate Social Responsibility
• Corporate Responsibility –
• Includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment.
• Corporate Policy –
• Position a firm takes on social and political issues.
CORPORATE RESPONSIBILITY and POLICY LG5
4-21
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*Corporate Social Responsibility
• Xerox offers a Social Service Leave program.
• Citizen Corps encourages volunteers to help strengthen homeland security by helping in their community.
• Two-thirds of MBA students surveyed reported they would take a lower salary to work for a socially responsible company.
POSTIVE IMPACTS of COMPANIES
LG5
4-22
*
*
Source: Wall Street Journal, www.online.wsj.com, June 23, 2008.
Corporate Social Responsibility
To WHOM MUCH HAS BEEN GIVEN…
America’s Charitable Giving LG5
4-23
*
*
Source: Parade Magazine, www.parade.com, September 14, 2008.
Corporate Social Responsibility
HELPING HANDSMost Generous Celebrities*
LG5
Who? How Much?
Oprah Winfrey $50.2 Million
Herb Alpert $13 Million
Barbara Streisand $11 Million
Paul Newman $10 Million
Mel Gibson $9.9 Million
Angelina Jolie & Brad Pitt $8.4 Million
Michael Jordan $5 Million
Eric Lindros $5 Million
Lance Armstrong $5 Million
*Donations made in 2007
4-24
*
*
Source: Fast Company, www.fastcompany.com, May 2008.
Corporate Social ResponsibilityGENEROUS AMERICANS
Americans Donated $295,020,000,000 in 2006LG5
4-25
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*Responsibility to Customers
• The Right to Safety
• The Right to be Informed
• The Right to Choose
• The Right to be Heard
PRESIDENT KENNEDY’S BASIC RIGHTS of CONSUMERS LG5
4-26
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*Responsibility to Investors
• Insider Trading –
• Insiders using private company information to further their own fortunes or those of their family and friends.
• Unethical behavior does financial damage to a company and investors are cheated.
INSIDER TRADING
LG5
4-27
*
*Responsibility to Employees
• Create jobs and provide a chance for upward mobility.
• Treat employees with respect.
• Offer salaries and benefits that help employees reach their personal goals.
RESPONSIBILITY to EMPLOYEES
LG5
4-28
*
*
Source: Fortune, www.fortune.com, March, 2009.
1. Apple2. Berkshire Hathaway3. Toyota4. Google5. Johnson & Johnson6. Proctor & Gamble7. FedEx 8. Southwest Airlines9. General Electric10. Microsoft
11. Wal-Mart12. Coca-Cola13. Walt Disney14. Wells Fargo15. Goldman Sachs16. McDonald’s17. IBM18. 3M19. Target20. J.P. Morgan Chase
Responsibility to Employees
AMERICA’S MOST ADMIRED COMPANIES LG5
4-29
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*Responsibility to Society and the Environment
• Over one-third of working Americans receive their salaries from nonprofits –dependent on funding from others.
• The green movement emerged as concern about global warming increased.
• Many companies are trying to minimize their carbon footprints – the amount of carbon released during an item’s production, distribution, consumption and disposal.
SOCIETY and the ENVIRONMENT
LG5
4-30
*
*Responsibility to Society and the Environment
• Environmental efforts may increase costs but can offer good opportunities.
• The emerging renewable-energy and energy-efficiency industries account for 8.5 million U.S. jobs.
RESPONSIBILITY to the ENVIRONMENT LG5
• By 2030, as many as 40 million “Green” jobs will be created.
4-31
*
*
• With public concern over the environment, companies are finding greener ways of doing business.
• Some companies are claiming they are more environmentally responsible than they actually are, a practice called “greenwashing”.
• Web sites such as Greener Choices and Greenwashing Index screen ads for greenwashing.
GREEN GREED(Thinking Green)
4-32
*
*Social Auditing
• Social Audit –
• 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
LG5
4-33
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* International Ethics and Social Responsibility
• Many businesses want socially responsible behavior from their international suppliers.
• The Joint Initiative on Corporate Accountability and Workers’ Rights was designed to make creating a single set of labor standards and inspecting factories easier.
• In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business.
INTERNATIONAL ETHICS
LG6
4-34
Review Only
*
*
Source: Forbes, www.forbes.com, March 24, 2008.
International Ethics and Social Responsibility
GIVERS AROUND the WORLDShare of GDP
LG6
4-36
*
*
• Almost half of Motorola’s employees live outside the U.S.
• A Motorola employee returns to his home country to work and the company reimburses living expenses so he can live in a safe area. The employee is trying to do the honorable thing for his family and the company is trying to keep the employee safe.
• If the employee uses the money to help his family instead, is it right for the company to stop payment?
ETHICAL CULTURE CLASH(Reaching Beyond Our Borders)
4-37
*
*
Source: Conde Nast Portfolio, www.portfolio.com, January 2008.
1. California – 12.1%
2. New Jersey – 8.9%
3. Pennsylvania – 5.2%
4. Washington – 5%
5. New York – 5%
Corporate Social Responsibility
WHO GIVES?Five States Contribute More Than a Third of the Nation’s Donations LG5
4-38
*
*Progress Assessment
• How are U.S. businesses demanding socially responsible behavior from their international suppliers?
• Why is it unlikely that there will be a single set of international rules governing multinational companies soon?
PROGRESS
ASSESSMENT
4-39
*
*Progress Assessment
• What are ethics?
• How do ethics differ from legality?
• When faced with ethical dilemmas, what questions can you ask yourself that might help you make ethical decisions?
PROGRESS
ASSESSMENT
4-40
*
*Progress Assessment
• What are compliance-based and integrity-based ethics codes?
• What are the six steps to follow in establishing an effective ethics program in a business?
PROGRESS
ASSESSMENT
4-41
*
*Progress Assessment
• What’s corporate social responsibility, and how does it relate to each of a business’s major stakeholders?
• What’s a social audit, and what kinds of activities does it monitor?
PROGRESS
ASSESSMENT
4-42