© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 1

Practicing Ethical Practicing Ethical Behavior and Social Behavior and Social

ResponsibilityResponsibility

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 2

Two Important ConceptsTwo Important Concepts

• Social responsibility

• Ethical behavior

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 3

Corporate FraudCorporate Fraud

• Enron

• Tyco

• Arthur Andersen

• Adelphia

• WorldCom

• Ford and Firestone

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 4

What Is Ethical Behavior?What Is Ethical Behavior?

• Competing fairly and honestly

• Communicating truthfully

• Not causing harming to others

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 5

Unethical BehaviorUnethical Behavior

• Cheating on expense accounts

• Misuse of company resources

• Creative accounting

• Padding invoices

• Insider trading

• Conflicts of interest

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 6

Factors Influencing Factors Influencing Ethical BehaviorEthical Behavior

• Cultural differences

• Knowledge

• Organizational behavior

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 7

Promoting Ethical Promoting Ethical BehaviorBehavior

• Top executives

• Written code of ethics

• Ethics training

• Ethics officer

• Reporting system

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 8

Making Ethical DecisionsMaking Ethical Decisions

Is It Ethical?Is It Ethical? PhilosophicalPhilosophicalApproachesApproaches

StakeholderStakeholderIssuesIssues

OutsidersOutsidersOutsidersOutsiders

SupervisorsSupervisorsSupervisorsSupervisors

EmployeesEmployeesEmployeesEmployees

UtilitarianismUtilitarianismUtilitarianismUtilitarianism

Individual, LegalIndividual, Legaland Human Rightsand Human RightsIndividual, LegalIndividual, Legal

and Human Rightsand Human Rights

Principles Principles of Justiceof JusticePrinciples Principles of Justiceof Justice

Legality Legality and Balanceand Balance

Legality Legality and Balanceand Balance

AcceptabilityAcceptabilityAcceptabilityAcceptability

FeasibilityFeasibilityFeasibilityFeasibility

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 9

Ethical SituationsEthical Situations

• Ethical dilemmas

• Ethical lapses

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 10

Social Responsibility in Social Responsibility in BusinessBusiness

• Early 20th Century

–Maximize profits

• Middle 20th Century

– Provide jobs and pay taxes

• Early 21st Century

– Balance profits and social issues

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 11

Percentage of Executives Who “Strongly Agree” or “Agree” That Companies Should:

•Be environmentally responsible

•Be ethical in operations

•Earn profits

•Employ local residents

•Pay taxes

•Encourage and support employee volunteering

•Contribute money and leadership to charities

•Be involved in economic development

•Be involved in public education

•Involve community representatives in business decisions

•Target a portion of purchasing toward local vendors

•Help improve quality of life for low-income populations

Percentage

100

100

96

94

94

89

85

75

73

62

61

54

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 12

Balancing Business and Balancing Business and Stakeholders’ RightsStakeholders’ Rights

• Business

• Investors

• Consumers

• Employees

• Society

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 13

Efforts to Increase Social Efforts to Increase Social ResponsibilityResponsibility

• Social audit

• Cause-related marketing

• Philanthropy

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 14

Causes of PollutionCauses of Pollution

• Industrial discharges

• Vehicle emissions

• Chemical spills

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 15

Government Efforts to Government Efforts to Reduce PollutionReduce Pollution

• Environmental protection agency

– Regulate air and water

– Reduce automobile emissions

– License pesticides

– Control toxic substances

– Safeguard drinking water

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 16

Business Efforts at Business Efforts at ReductionReduction

• Environmental issues

• Environmental staff

• Performance expectations

• Performance rewards

• Long-term cost

• Product development

• Supplier expectations

• Training and awareness

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 17

Responsibility Toward Responsibility Toward ConsumersConsumers

• The right to safe products

• The right to be informed

• The right to choice

• The right to be heard

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 18

Responsibility Toward Responsibility Toward InvestorsInvestors

• Fair profit distribution

• Social responsibility

• Ethical behavior

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 19

Responsibility Toward Responsibility Toward EmployeesEmployees

• Equal employment opportunity

• Affirmative action

• Americans with Disabilities Act

• Occupational health and safety

© Prentice Hall, 2005 Business In Action 3e Chapter 2 - 20

Global Ethics and Social Global Ethics and Social ResponsibilityResponsibility

• Bribery

• Environmental abuse

• Unscrupulous business practices