Chapter 4 Business Ethics and Social Responsibility 4

Chapter 4 Business Ethics and Social Responsibility

4. 1 Business Ethics A neighbor offered you $15 for picking up her mail. Afterward, she gives you $20 and refuses to take change. She actually gave you two twenties that were stuck together. What would you do? ? ? Be honest. u What would you do if you found a copy of a midterm exam or a diamond ring in the restroom at a restaurant? u

The Nature of Ethics ETHICS- moral principles by which people conduct themselves personally, socially, or professionally. u BUSINESS ETHICS- rules based on moral principles about how businesses and employees out to conduct themselves. u Unethical behavior by customers result in businesses having to raise prices for products. u CODE OF ETHICS- set of guidelines for maintaining ethics in the workplace. u

Laws and Ethics u OSHA (Occupational Safety and Health Administration) part of the US Department of Labor. They set and enforce rules for work-related health and safety.

Ethics and Good Business A code of ethics can cover issues such as employee behavior and environmental safety. u Unethical business practices include, lying, offering merchandise known to be substandard, or treating customers or employees unfairly. u Owner could be fined or spend time in jail. u Employees might be fired or lose his or her license. u

Sample: u Suppose you own an auto-body paint shop. To increase your profits, you charge tope price and use the cheapest paint. One of your customers complains about the quality of paint, but you do not care because she has already paid. What is one customer, right? The is that most businesses (especially small businesses) rely on repeat customers. The amount you make in profits from one unhappy customer may not be worth the lost business. Or would it?

Sample: u Suppose you manage a small film distribution company. You hire Jaime fresh out of business school to run the office. You teach him how to use the computer system, how to deal with customers, and how the business works. You also pay him very little, make him do all your work, and treat him poorly. The first chance Jaime gets, he quits and ends up being hired by one of your competitors. You now have to retrain a new employee to take his place. Meanwhile, your competition no has a well trained employee, who is much more efficient.

Conflicts of Interest u u Conflict between self interest and professional obligation. Ex: A manager of a small business hires his sister to do some work in the firm, but she is clearly unqualified to do the work. Giving the position to the sister will help out the family but will create morale problems with the other employees. It may also damage the business if her work does not get done. When making business decisions, employees have an ethical obligation to act in the best interest of the company.

Ethical Questions: u Is it against the law? Does it violate company or professional policies? u Even if everyone is doing it, how would I feel if someone does this to me? u Am I sacrificing long-term benefits for short-term gains?

ETHICAL Decision Making Process: u 1. Identify the ethical dilemma. u 2. Discover alternative actions. u 3. Decide who might be affected. u 4. List the probable effects of the alternatives. u 5. Select the best alternative.

4. 2 Social Responsibility is the duty to do what is best for the good of society. u Businesses that follow ethical standards value integrity and honesty in employees. u Ethics are an integral part of their business practices. u Some people believe that if a company produces goods that benefit society, it is fulfilling its social responsibility. u

Responsibility to Customers u u u Customers are a business’s first responsibility. They should offer a good, and safe product or service at a reasonable price. FDA (Food and Drug Administration) protects consumers from dangerous or falsely advertised products. Fair competition between businesses is necessary for the marketplace to operate effectively. When companies restrict competition, consumers are affected. They have fewer choices. When a company does not have to compete, it’s productivity decreases.

Responsibility to Employees Some businesses provide work experience for people with limited job skills. u Volunteerism is another way businesses tackle societal problems. u Workers used to have few rights. u New laws: u – Equal Pay Act (1964)-men and women paid the same for doing the same job. – Americans with Disabilities Act

Responsibility to Society u One of the biggest social issues facing businesses today is ENVIRONMENTAL responsibility. u 1970, Environmental Protection Agency (EPA) enforces rules that protect the environment and control pollution.

Responsibility to Creditors and Owners u 1990’s into the 21 st century, a number of corporations kept inaccurate accounting records. Because of this, the federal government passed additional legislation. The Sarbanes-Oxley Act mandates truthful reporting and makes the CEO more accountable for the actions of the financial managers of the firm.