Chapter 4 (Demanding ethical and socially responsible behavior) PDF

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Prof. Zalatan’s BUS001 Lecture notes & Textbook notes ...

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Chapter 4 Demanding ethical and socially responsible behavior 1. Ethics is more than legality a. Ethics are legality are very different things, legality is only following laws while ethics reflects people’s proper relationships with one another (many unethical and immoral behaviors fall well within out laws, such as gossiping about neighbors or sharing a secret) b. Ethical standards are fundamental i. ii.

Ethics: society’s accepted standard of moral behavior Basic moral integrity common in all books across time: integrity, respect for human life, self-control, honesty, courage, and self-sacrifice

2. Ethics begins with each of us a. Most common form of cheating in school: plagiarizing, including copying and pasting info from the internet i.

To fight this practice, instructors use software lockdowns or turnitin

ii.

Dishonestly at school leads to dishonesty at work

b. Obvious ethical solution may have personal or professional drawbacks i.

Ethical dilemmas- when you are forced to choose between equally unsatisfactory alternatives (such as supervisor telling you to do something unethical and you can’t afford to get fired)

ii.

Ask the following questions when faced with an ethical dilemma 1. Is my proposed action legal? 2. Is it balanced? Will both parties win or will only one? 3. How will it make me feel about myself? Will my family be proud when they hear about this in the news?

3. Managing businesses ethically and responsibly a. Organizational ethics begin at the top of the pyramid, with the leaders and managers. Strong managers can help instill corporate values in employees i. Some managers believe ethics is a personal thing, you either have it or you don’t, but ethics has everything to do with an organization and its management (such as poorly designed incentive programs that reward unethical behaviors for meeting certain goals) b. Trust and cooperation between workers and managers must be based on fairness, honesty, openness, and moral integrity c. Why do businesses need to be managed ethically? i.

Maintain a good reputation

ii.

Keep existing customers

iii.

Attract new customers

iv.

Avoid lawsuits

v.

Reduce employee turnover

vi.

Avoid government intervention in the form of new laws and regulations controlling business activities

vii. viii.

Please customers & employees & society Simply do the right thing

4. Setting corporate ethical standards a. Many companies have written codes of ethics, they are split into 2 categories i.

Compliance-based ethics codes: emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers

ii.

Integrity-based codes: define the organization’s guiding values, create an enviro that supports ethically sound behaviors and stress shared accountability

b. 6 steps to improve business ethics i. Top management need to adopt and unconditionally support an explicit corporate code of conduct ii. Employees must understand that expectations for ethical behaviors begin at the top and that senior management expects all employees to act accordingly iii. Managers and others must be trained to consider the ethical implications of all business decisions iv.

An ethics office must be set up with which employees can communicate anonymously 1. Whistleblowers: insiders who report illegal or unethical

v.

behavior, must feel protected from retaliation Outsiders (suppliers, distributors, customers) must be told about the ethics program

vi.

The ethics code must be enforced with timely action if any rules are broken 1. Most important step, rules must be enforced (can be done thru selection of an ethics officer)

5. Corporate social responsibility a. Corporate social responsibility (CSR): is the concern business have for the welfare of society, not just the owners (it is based on commitment to integrity, fairness, and respect), the bus CSR goal is to max positive impact and min negative impact on society i.

Argues that businesses owe their existence to the societies they serve and cannot succeed in societies that fail

ii.

CSR defenders acknowledge that businesses have deep obligations to investors and should not attempt gov-type social responsibility project 1. Companies with good ethical reputations attract and retain better employees, draw more customers, and enjoy greater employee loyalty

iii.

4 aspects of CSR businesses must consider 1. Economics- use resources efficiently and pay taxes 2. Legal- follow the laws, local, state, and federal 3. Ethical- workers and management must follow company’s code of conduct 4. Voluntary- give back to the community (such as through donations)

b. The social performance of a company has several dimensions Corporate philanthropy- includes charitable donations to nonprofit groups of i. all kinds (such as mcdonald's donation to families with critically ill children) Corporate social initiatives- enhanced forms of corporate philanthropy that ii. directly related to the company’s competencies (such as UPS’s emergency relief team that travels the world to provide support, or starbucks only buying coffee from a fair trade company) iii.

Corporate responsibility- include everything that has to do with acting responsibly within society (treating employees fairly and ethically, or producing low-emission vehicles)

iv.

Corporate policy- the position a firm takes on social and political issues (ex: patagonia’s corporate policy include “a love of wild animals, help reverse the steep decline in the overall environmental health of our planet. We donate our time, services and at least 1% of our sales to hundreds of grassroots environmental groups all over the world”)

6. Responsibility to customers a. J.F.K’s 4 basic rights of customers: right to safety, right to be informed, right to choose, right to be heard b. Many companies use social medias to raise awareness of their social responsibility (CRS) efforts i.

This method allows them to reach greater diversity and is low-cost

ii.

They can’t just brag, they must also live up to the expectations they raised or face the consequences

7. Responsibility to investors a. Unethical behaviors does damage in the long run, and shareholders get the consequences b. Insider trading: use private company information to further insider’s own fortunes or those of their family and friends (an unethical mean to improve investor’s own financial health) i. Court rules that ppl who share inside info with others who profit it are guilty of insider trading even if they themselves don’t profit ii.

After this case, SEC adopted a new rule called regulation FD (fair disclosure), requiring companies to release any info to share it with everyone, not just a few select ppl (if companies tell anyone, they must tell everyone—at the same time)

8. Responsibility to employees a. It’s said that the best social program in the world is to create jobs b. Mutual respect between employees and the organization can result in huge differences to a company’s profit i. One way companies can show commintitme and caring is give employees salaries and benefit packages that help them reach their personal goals c. Dissatisfied employees are likely to relieve their frustrations in subtle ways: blaming, being irresponsible, manipulating budgets and expenses, making commitments they intend to ignore, hoarding resources, doing the minimum, making results look better than they are i.

The loss of employee commitment, confidence, and trust in the company can be costly

ii.

Employee fraud costs $6.3 billion (5% of the revenue) annually in the U.S.

9. Responsibility to society and the environment a. Businesses are also partly responsible for promoting social justice i.

Charity is not enough, social contributions include: cleaning up the enviro, building community toilets, providing computer lessons, caring

for elderly, supporting children from low-income families ii.

Ex: with global warming, many companies are getting involved in the green movement (like putting carbon footprint) on the back of the coca cola label 1. The green movement provided consumers with lots of product choices. But making those choices means sorting through the many & confusing claims by manufacturers. The noise in the marketplace challenges even the most dedicated green activists, but taking the easy route of buying what’s most readily available violates the principles of the green movement 2. Enviro efforts may increase a company’s costs but they also allow the companies to charge higher prices 3. The green movement can have a positive impact on the U.S. labor force- emerging renewable-energy and energy-efficiency industries created more jobs in new industries such as the manufacture of solar panels

10. Social auditing a. Social audit: a systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs i.

Problem: how do you measure a firm’s efforts and effects on society

ii.

Many consider workplace issues to include areas such as the environment, product safety, community relations, military weapons contracting, international operations and human rights, and respect for the rights of local people

b. 5 groups serve as watchdogs to social audits conducted by companies i. Socially conscious investors ii. Socially conscious research organizations iii.

Environmentalists- apply pressure by naming companies that don’t

iv. v.

abide by environmentalist’s standards Union officials- force companies to comply to avoid negative publicity Customers- with their buying decisions

11. International ethics and social responsibility a. Ethical problems and issue of social responsibility are universal, but rules and regulations are much stricter now than they were back then b. Many companies also demand socially responsible behavior form their international suppliers i. Those that exploit unethical labors internationally are bashed by critics on

ii.

social media But it is right to determine what’s ethical from one culture’s perspective? A gift in a country can be considered as a bribe in another...