CH.2 - Business Ethics and Social Responsibility

Supporting Social Causes

Companies and executives often take active roles in initiatives to improve health and social welfare in the United States and elsewhere.

Employees

Companies are responsible for providing employees with safe, healthy places to work—as well as environments that are free from sexual harassment and all types of discrimination. They should also offer appropriate wages and benefits.

air pollution

Curbing global warming will require international cooperation. More than 190 nations (though not the United States) have stated their support for this initiative by endorsing the Kyoto Protocol, an agreement to slow global warming by reducing worldwide carbon-dioxide emissions. **What can business do? They can reduce greenhouse emissions by making vehicles, factories, and other facilities more energy efficient.

ethical decision

Decision in which there is a right (ethical) choice and a wrong (unethical or illegal) choice. **entails a *"right-versus-wrong"* decision—one in which there is a right (ethical) choice and a wrong (unethical or illegal) choice.

Issues of Honesty and Integrity

Don't sit around in an ethically toxic environment and lose your integrity a little at a time; get out before the water gets too hot and your options have evaporated.

customers

---The purpose of any business is to satisfy customers, who reward businesses by buying their products. Sellers are also responsible—both ethically and legally—for treating customers fairly.

wages and benefits

--employers must obey laws governing minimum wage and overtime pay. A minimum wage is set by the federal government, though states can set their own rates. --When there's a difference, the higher rate applies. --By law, employers must also provide certain benefits—social security (which provides retirement benefits), unemployment insurance (which protects against loss of income in case of job loss), and workers' compensation (which covers lost wages and medical costs in case of on-the-job injury). --Most large companies pay most of their workers more than minimum wage and offer considerably broader benefits, including medical, dental, and vision care, as well as pension benefits.

how to avoid an ethical lapse

1) is the action illegal? 2) is it unfair to some parties? 3) if I take it, will I feel badly about it? 4) will I be ashamed to tell my family, friends, coworkers, or boss? 5) will I be embarrassed if my action is written up in the local newspaper? **If you answer yes to any one of these five questions, you're probably about to do something that you shouldn't.

how to face an ethical dilemma

1. Define the problem and collect relevant facts 2. Identify feasible options 3. Assess the effect of each option on stakeholders 4. Establish criteria for determining the most appropriate action 5. Select the best option based on the established criteria

How to maintain honesty and integrity

1. Follow your own code personal conduct ; act according to your own convictions rather than doing whats convenient at the time 2. while at work, focus on your job, not on non work related activities, such as emails and personal phone calls 3. don't appropriate office supplies or products or other company resources for your own use 4. be honest with customers, management, coworkers, competitors, and the public. 5. remember that its the small, seemingly trivial day to day activities and gestures that build your character.

Kennedy identified four consumer rights:

1. The right to safe products. A company should sell no product that it suspects of being unsafe for buyers. Thus, producers have an obligation to safety-test products before releasing them for public consumption. The automobile industry, for example, conducts extensive safety testing before introducing new models (though recalls remain common). 2. The right to be informed about a product. Sellers should furnish consumers with the product information that they need to make an informed purchase decision. That's why pillows have labels identifying the materials used to make them, for instance. 3. The right to choose what to buy. Consumers have a right to decide which products to purchase, and sellers should let them know what their options are. Pharmacists, for example, should tell patients when a prescription can be filled with a cheaper brand-name or generic drug. Telephone companies should explain alternative calling plans. 4. The right to be heard. Companies must tell customers how to contact them with complaints or concerns. They should also listen and respond.

organizational approaches to ethics

1. must start with ethical leadership that creates a company culture 2. leaders should keep in constant touch with subordinates about ethical policies and expectations. 3. leaders must be willing to hold subordinates accountable for their conduct and to take appropriate action

Stages of corporate responsibility

1.) *Defensive* When companies are first criticized over some problem or issue, they tend to take a defensive, often legalistic stance. They reject allegations of wrongdoing and refuse to take responsibility, arguing that fixing the problem or addressing the issue isn't their job. 2.) *Compliant* During this stage, companies adopt policies that acknowledge the wishes of the public. As a rule, however, they do only what they have to do to satisfy their critics, and little more. They're acting mainly to protect brands or reputations and to reduce the risk of litigation. 3.) *Managerial* When it becomes clear that the problem won't go away, companies admit that they need to take responsibility and action, so they look for practical long-term solutions. 4.) *Strategic* At this point, they may start to reap the benefits of acting responsibly. They often find that responding to public needs gives them a competitive edge and enhances long-term success. 5.) *Civil* Ultimately, many companies recognize the importance of getting other companies to follow their lead. They may promote participation by other firms in their industries, endorsing the principle that the public is best served through collective action.

why do good people often make bad choices? (they often make the following justifications )

1.)*My behavior isn't really illegal or immoral.* Rationalizers try to convince themselves that an action is OK if it isn't downright illegal or blatantly immoral. They tend to operate in a gray area where there's no clear evidence that the action is wrong. 2.)*My action is in everyone's best interests.* Some rationalizers tell themselves: "I know I lied to make the deal, but it'll bring in a lot of business and pay a lot of bills." They convince themselves that they're expected to act in a certain way, forgetting the classic parental parable about jumping off a cliff just because your friends are.Adrian Gostick and Dana Telford, The Integrity Advantage (Salt Lake City: Gibbs Smith, 2003), 12. 3.)*No one will find out what I've done.* Here, the self-questioning comes down to "If I didn't get caught, did I really do it?" The answer is yes. There's a simple way to avoid succumbing to this rationalization: Always act as if you're being watched. 4.)*The company will condone my action and protect me.* This justification rests on a fallacy. Betty Vinson may honestly have believed that her actions were for the good of the company and that her boss would **Here's another rule of thumb: If you find yourself having to rationalize a decision, it's probably a bad one. Over time, you'll develop and hone your ethical decision- making skills.

Owners

---Owners invest money in companies. In return, the people who run a company have a responsibility to increase the value of owners' investments through profitable operations ---Managers also have a responsibility to provide owners (as well as other stakeholders having financial interests, such as creditors and suppliers) with accurate, reliable information about the performance of the business

Corporate Citizen Model

*a model of corporate responsibility based on a company's relationships with its stakeholders.* 1. Corporations have an inherent duty to act ethically towards others (stakeholders) THESE INCLUDE: - owners - employees - suppliers - communities 2. Corporations have a responsibility to make positive contributions to the community and society

Bribes vs. Gifts

- Cost of Item - Timing of gift - Type of gift - Connection between the giver and receiver - Check Company Policy ***if you're on the receiving end, it's a good idea to refuse any item that's overly generous or given for the purpose of influencing a decision. But because accepting even small gifts may violate company rules, the best advice is to check on company policy.

Ethical organizational activities

- Treating employees, customers, investors, and the public fairly - Making fairness a top priority - Holding every member personally accountable for his or her action - Communicating core values and principles to all members - Demanding and rewarding integrity from all members in all situations

ethical

Ability and willingness to distinguish right from wrong and when you're practicing one or the other. **Ethics is more than a matter of individual behavior; it's also about organizational behavior. Employees' actions aren't based solely on personal values; they're also influenced by other members of the organization.

business ethics

Application of ethical behavior in a business context. ***Acting ethically in business means more than simply obeying applicable laws and regulations: It also means being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your company, its owners, and its workers.

Corporate Social Responsibility

Approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economic, ethical, and social decisions. deals with actions that affect a variety of parties in a company's environment. **A socially responsible company shows concern for its stakeholders

What accounts for the difference, despite the mandate of federal law?

For one thing, the jobs typically held by women tend to pay less than those typically held by men. In addition, men often have better job opportunities. For example, a man newly hired at the same time as a woman will often get a higher-paying assignment at the entry level. Coupled with the fact that the same sort of discrimination applies when it comes to training and promotions, women are usually relegated to a lifetime of lower earnings.

Building diverse workforces

In helping to build more diverse workforces, such initiatives contribute to competitive advantage for two reasons: (1) People from diverse backgrounds bring new talents and fresh perspectives to an organization, typically enhancing creativity in the development of new products. (2) By reflecting more accurately the changing demographics of the marketplace, a diverse workforce improves a company's ability to serve an ethnically diverse population.

whistle-blowing

Individual who exposes illegal or unethical behavior in an organization. **Whistle-blowing often means career suicide. ---Even those who get to keep their jobs experience painful repercussions. As long as they stay, some people will treat them (as one whistle-blower puts it) "like skunks at a picnic"; if they leave, they're frequently blackballed in the industry. **On a positive note, there's the 2002 Sarbanes-Oxley Act, which protects whistle-blowers under federal law.

stakeholders

Parties who are interested in the activities of a business because they're affected by them. **anyone who, like owners, employees, customers, and the communities in which it does business, has a "stake" or interest in it.

Fiduciary Responsibility

MANAGERS have the responsibility to safeguard a company's assets and handle its funds in a trustworthy manner. **To enforce managers' fiduciary responsibilities for a firm's financial statements and accounting records, the Sarbanes-Oxley Act of 2002 requires CEOs and CFOs to attest to their accuracy. The law also imposes penalties on corporate officers, auditors, board members, and any others who commit fraud.

volunteerism

Many companies support employee efforts to help local communities. **Patagonia, for example, a maker of outdoor gear and clothing, lets employees leave their jobs and work full-time for any environmental group for two months—with full salary and benefits

financial contributions by companies

Many large corporations donate a percentage of sales or profits to worthwhile causes.

land pollution

Patagonia relies on organically grown cotton, which is more expensive, because it doesn't requires harmful chemicals. Its fleece products are made with postconsumer recycled (PCR) fleece, which is actually made with recycled plastic bottles. So far, the company's efforts to build a more sustainable system has saved 86 million plastic bottles from ending up in landfills."Fabric: Recycled Polyester," Patagonia Web site,

equal opportunity and diversity

People must be hired, evaluated, promoted, and rewarded on the basis of merit, not personal characteristics. This, too, is the law—namely, Title VII of the 1964 Civil Rights Act.

insider trading

Practice of buying or selling of securities using important information about the company before it's made public. it's illegal, and you could go to jail for it. ex: selling stock of company when you get word its going downhill

Companies have the following functions:

Provide jobs Pay taxes Support local education, health, and recreation activities Donate funds to community projects Encourage employees to volunteer their time Donate equipment and products for a variety of activities

acid rain

Rain containing acids that form in the atmosphere when industrial gas emissions (especially sulfur dioxide and nitrogen oxides) combine with water.

sexual harassment

Sexual harassment occurs when anemployee makes "unwelcome sexualadvances, requests for sexual favors, and other verbal or physical conduct of a sexual nature" to another employee who doesn't welcome the advances. It's also sexual harassment when "submission to or rejection of this conduct explicitly or implicitly affects an individual's employment, unreasonably interferes with an individual's work performance or creates an intimidating, hostile or offensive work environment."

ethical lapse

Situation in which an individual makes a decision that's unmistakably unethical or illegal. ***Betty Vinson, for example, had an ethical lapse when she caved in to her bosses' pressure to cook the WorldCom books

code of conduct

Statement that defines the principles and guidelines that employees must follow in the course of all job-related activities. ex: Hersheys

water pollution

The Environmental Protection Agency (EPA) has been a major force in cleaning up U.S. waters. Companies are now held to stricter standards in the discharge of wastes into water treatment systems.

Equal pay and the wage gap

The Equal Pay Act of 1963 requires equal pay for both men and women in jobs that entail equal skill, equal effort, equal responsibility, or similar working conditions. ---In 1963, women earned, on average, $0.589 for every $1 earned by men. By 2010, that difference—which we call the wage gap—has been closed to $0.812 to $1, or approximately 81 percent

health and safety

The process of ensuring that the working environment within a firm is both a healthy and a safe one. ***About four in one hundred thousand U.S. workers die in workplace "incidents" each year. The Department of Labor categorizes deaths caused by conditions like those at Johns Manville as "exposure to harmful substances or environments."

Conflicts of Loyalty

a bind between being loyal either to your employer or to a friend or family member ex: if boss says coworker may be fired soon

communities

communities see the addition of business in community is beneficial and loss as detrimental --They provide jobs, pay taxes, and support local education, health, and recreation programs. Both big and small businesses donate funds to community projects, encourage employees to volunteer their time, and donate equipment and products for a variety of activities. Larger companies can make greater financial contributions

conflicts of Interest

conflicts that occur when employees or managers engage in activities on behalf of the company and have a personal interest in the outcome of those activities

ethical dilemma

is a morally problematic situation: You have to pick between two or more acceptable but often opposing alternatives that are important to different groups. Experts often frame this type of situation as a "right-versus-right" decision

Corporate Social Responsibility (CSR)

refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economic, ethical, and social decisions. **What motivates companies to be "socially responsible" to their various stakeholders? We hope it's because they want to do the right thing, and for many companies, "doing the right thing" is a key motivator. The fact is, it's often hard to figure out what the "right thing" is: What's "right" for one group of stakeholders isn't necessarily just as "right" for another.

Companies that share the responsibility for the legal and ethical treatment of consumers with several government agencies:

the Federal Trade Commission (FTC), which enforces consumer-protection laws; the Food and Drug Administration (FDA), which oversees the labeling of food products; and the Consumer Product Safety Commission, which enforces laws protecting consumers from the risk of product- related injury.

Sustainability

the principle of providing products today that don't compromise the ability of future generations to meet their needs. **Companies that undertake sustainability initiatives believe that meeting business needs and protecting the environment are not mutually exclusive. They must do both ex: google argues that companies should measure performance using three separate bottom lines: --profit, people, and planet (or the 3Ps). In addition to reporting profit through their income statement, companies should also report their progress in being socially responsible to other people(stakeholders, including employee, customers, owners) and to the planet (the environment).