Ch 4 Demanding Ethical and Socially Responsible Behavior
Ch 4 – Demanding Ethical and Socially Responsible Behavior
Learning Objectives • LO 4 -1 Explain why obeying the law is only the first step in behaving ethically. • LO 4 -2 Ask the three questions you need to answer when faced with a potentially unethical action. • LO 4 -3 Describe management’s role in setting ethical standards. • LO 4 -4 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. • LO 4 -5 Define corporate social responsibility and compare corporations’ responsibilities to various stakeholders. • LO 4 -6 Analyze the role of U. S. businesses in influencing ethical behavior and social responsibility in global markets.
LO 4 -1 Explain why obeying the law is only the first step in behaving ethically.
Company’s caught in Ethical Scandals • Enron • Tyco • Worldcom • Volkswagon • Facebook • https: //www. ethicalconsumer. org/retailers/five-unethical-companies
Laws are not enough • Laws alone don’t make people honest, reliable, and truthful • If so, crime would disappear • Ethics ≠ Legality
Ethics • Society’s accepted standards of moral behavior • What is right and wrong • The guiding principles which help the individual or group to decide what is good or bad in response to a specific situation
Good Common elements across philosophies Bad • • • Integrity Respect for human life Self-control Honesty Courage Self-sacrifice • Cheating • Cowardice • Cruelty
LO 4 -2 Ask the three questions you need to answer when faced with a potentially unethical action.
Is my proposed action legal? Is it balanced ? Acting fairly? Would I want to be treated like this? How will it make me feel about myself? Questions to ask yourself Would my family or friends be proud of me?
LO 4 -3 What is management’s role in setting ethical standards?
Ethics begins at the top • People learn values and standards from observing others • Permeates all areas: • Good reputation • Keeping customers and gaining new ones • Avoiding lawsuits • Reducing turnover • Avoiding government intervention • Pleasing customers, employees, society
LO 4 -4 Setting corporate ethical standards
Code of Ethics • Carnival cruise line: http: //phx. corporateir. net/phoenix. zhtml? c=140690&p=irol-govconduct • Coca-Cola: https: //www. coca-colacompany. com/ourcompany/governance-ethics • Daimler: https: //www. daimler. com/company/corporategovernance/compliance/principles. html
Compliance-based ethics codes • Preventing unlawful behavior through increasing control and penalizing wrongdoers
Integrity-based ethics codes • Defines organizational values • Creates environment of ethical behavior • Emphasizes shared accountability
6 steps to improving business ethics
1. Explicit Corporate code of conduct • Unconditionally supported by top management • Clearly stated
2. Employee expectations • Should understand that ethical behavior begins at the top, and employees are expected to behave the same
3. Training • Managers and employees should be trained about ethical decision-making and consequences
4. Ethics office • Feedback and communication • Anonymous whistleblowing
5. External awareness • Suppliers, subcontractors, distributors, and customers should be told about the ethics program • The more stakeholders who are aware, the greater the pressure to behave ethically
6. Enforcement • Penalties and consequences of breaking the ethical code are enforced in a timely manner
LO 4 -5 Corporate Social Responsibility
CSR • The concern a company has for the good of society, not just itself • Is it necessary? • Not everyone agrees with doing this as an essential business activity
Milton Friedman • The business of business is business • Only goal is to make profit for stockholders , all else is moving towards socialism • Fair and free competition • Investing in CSR is stealing
Pro-CSR • Businesses owe society for their success • CSR benefits investors in the long run anyway • Attract better employees • Attract more customers • Enjoy higher customer loyalty
Dimensions of Social Performance
Corporate Philanthropy • Charitable donations to nonprofit groups
Corporate social initiatives • Like, philanthropy, but more directly related to company’s competencies
Corporate Responsibility • Acting responsibly within society • Safe products • Hiring diversity • Minimal pollution • Efficient energy use • Safe work environment
Corporate Policy • The position a company takes on social and political issues • Brand campaigns taking a stand on social issues: https: //econsultancy. com/five-brand-campaigns-that-took-a-stand-on-socialissues/ • Patagonia and the environment • North Face / Esprit and conservationism in Chile: https: //www. nytimes. com/2018/02/19/world/americas/patagonia-nationalpark-chile. html
CSR examples • https: //www. prezly. com/academy/relationships/csr/10 -examples-of-exemplary-csrinitiatives
Customers Investors Responsibility to different stakeholders Employees Society and the environment
Customers Responsibility to customers • John F. Kennedy proposed 4 basic consumer rights: • Right to safety • Right to be informed • Right to choose • Right to be heard
Responsibility to customers • A company’s well-known social efforts can be a competitive advantage • Viewed more favorably • Willing to pay more • Awareness tool: social media
Responsibility to investors Investors • Unethical behavior does financial damage • Facebook: https: //www. marketwatch. com/investing/stock/fb • Insider trading • Using private company information to further insiders own fortunes or those of family and friends • the trading of a public company's stock or other securities by individuals with access to nonpublic, or insider, information about the company
Responsibility to employees • Friedman might say that the best social program in the world is a job • Business has responsibility to create jobs in order to grow • Reward systems and Human Resource management • Mutual respect Employees
Contented cows produce more milk
Unhappy employees • Turnover • Expensive to replace • Productivity • Help companies grow faster • Violence in extreme cases
Responsibility to society and the environment • Green movement • Carbon footprint • From production, distribution, consumption, to disposal • No specific guidelines • Can result in higher prices and/or market share • Ciba Chemicals • Starkist tuna • Renewable energy Society and the environment
Measuring CSR through a Social Audit • Systematic evaluation of an organization’s progress towards implementing socially responsible programs • No legal requirements or guidelines • Workplace issues • Environment • Product safety • Community relations • • International operations Human rights Military weapons contracting Respecting rights of locals
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