part 1 Ferrell Hirt Ferrell BUSINESS A CHANGING

part Business in a Changing World 1 CHAPTER 1 The Dynamics of Business and Economics CHAPTER 2 Business Ethics and Social Responsibility CHAPTER 3 Business in a Borderless World FHF

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Business Ethics [ An identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical ] http: //www. youtube. com/watch? v=i. KQe. Pn. Q 8 FUU FHF 2 -3

Ethical Decisions in Organizations Most unethical activities are supported by a culture encouraging employees to bend the rules v Countrywide Financial § ‘Liar loans’ § Culture that encouraged cutting corners in order to make profits v American International Group § Manipulation of accounting § Overstatement of earnings– forced to restate earnings $3. 9 billion lower FHF 2 -4

Social Responsibility Business’s obligation is to maximize its positive impact and minimize its negative impact on society § § § Known for high-end luxury shoes and accessories Launched a lower-cost brand Ferragamo WORLD Aimed at socially conscious consumers Eco-friendly materials Proceeds go to help the Acumen Fund, which provides funding for businesses in East Africa, India and Pakistan FHF 2 -5

A Timeline of Ethical and Social Responsibility Concerns FHF 2 -6

Laws and Regulations § Laws and regulations encourage businesses to conform to society’s basic standards, values, and attitudes. § § Sarbanes-Oxley Act, 2002 Troubled Assets Relief Program FHF 2 -7

The Role of Ethics in Business Growing concerns about legal and ethical issues in business § § § Antitrust violations Accounting fraud Cybercrimes Unfair competitive practices Tax fraud FHF 2 -8

Ethical Issues [ An identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical ] FHF 2 -9

Ethical Issues § § Involve all organizational activities • For profit businesses • Non-profits • Government • Schools and universities Learning to recognize and resolve ethical issues are important in maintaining an ethical business climate FHF 2 -10

Ethical Conduct Helps To: § § § Build Trust Promote confidence Validate relationships FHF 2 -11

How to Judge the Ethics of a Situation § Examine the situation from your stakeholders’ position, including customers and competitors § People often need years of experience to accurately recognize and react to ethical situations § Ethical situations vary by culture FHF 2 -12

Highly Ethical Companies Are generally more profitable! § § Recognized as highly ethical § Perfect score three years in a row in a Competitive Enterprise Institute ranking § History of environmental advocacy and stakeholder awareness Awarded ‘Corporation of the Year’ by Michigan Minority Business Development Council FHF 2 -13

Recognizing Ethical Issues in Business Many business issues may seem straightforward and easy to resolve on the surface, but are really very complex FHF 2 -14

Unethical Behavior in Business § § § Misuse of company resources Abusive & intimidating behavior Conflict of interest Fairness & honesty Communications Business relationships FHF 2 -15

Sources of Unethical Behavior Misuse of Company Resources § The most commonly observed misconduct ü ü Time theft ü ü Stealing office supplies Use of personal email and social networking sites at work is a growing problem Unauthorized use of equipment and software FHF 2 -16

Sources of Unethical Behavior Abusive and Intimidating Behavior / Bullying FHF 2 -17

Sources of Unethical Behavior in Organizations Conflict of interest § § Advance personal interest over others’ interests Benefit self at the expense of the company Bribes represent a conflict of interest because they benefit an individual at the expense of an organization or society FHF 2 -18

Corruption Perceptions Index Least Corrupt Countries… 1. New Zealand 12. Hong King/Luxembourg (tied) 2. Denmark 14. Australia 3. Singapore/ Sweden (tied) 16. Germany/ Ireland (tied) 5. Switzerland 17. Japan/ United Kingdom 6. Finland/Netherlands (tied) 19. United States 8. Australia/Canada/Iceland (3 -way tie) 20. Barbados 11. Norway Source: “Corruption Perceptions Index 2009, ” Transparency International, http: //www. transparency. org/policy_research/ surveys_indices/cpi/2009/cpi_2009_table (accessed January 22, 2010). FHF 2 -19

Fairness & Honesty Are at the heart of business ethics § § How employees use resources No deceit, coercion, or misrepresentations Fair competition Disclosure of potential harm caused by products FHF 2 -20

Ethical Concerns in Communications § § § False/misleading advertising Deceptive personal selling tactics Truthfulness in product safety and quality Unsubstantiated claims Product labeling FHF 2 -21

Ethical Concerns in Business Relationships with customers, suppliers and co-workers § § Ethical behavior within a business is important ü ü Keeping company secrets ü Avoiding undue pressure Meeting obligations and responsibilities Managers’ responsibility to create ethical work environment and provide a positive example FHF 2 -22

Plagiarism § The act of taking someone else’s work and presenting it as your own without mentioning the source Ø § § § A major problem in schools and business Students copying others’ work A manager taking credit for a subordinate’s work Employees copying reports and passing the work off as their own FHF 2 -23

Questions to Consider in Determining Whether an Action is Ethical Open discussion of ethical issues does not eliminate ethical problems; it does promote trust and learning in an organization FHF 2 -24

Personal Ethics Is honesty important to students? § In a survey of 25, 000 high school students: ü ü 62% cheated on exams at least once 35% copied documents from the Internet 27% shoplifted 23% cheated to win at sports (Source: “The Biennial Report Card: The Ethics of American Youth, ” Josephson Institute of Ethics, www. josephsoninstitute. org/survey 2004) FHF 2 -25

Ethical Decisions in an Organization are Influenced by Three Key Factors FHF 2 -26

Code of Ethics [ Formalized rules and standards that describe what a company expects of its employees ] FHF 2 -27

Whistleblowing Occurs when an employee exposes an employer’s wrongdoing to outsiders § § Many companies have internal reporting mechanisms in place • Avoid legal action • Negative publicity Whistleblowers often treated negatively and have a difficult time finding other work FHF 2 -28

Four Dimensions to Social Responsibility 1. Economic 2. Legal 3. Ethical 4. Voluntary FHF 2 -29

The Pyramid of Social Responsibility FHF 2 -30

Corporate Citizenship [ The extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders ] FHF 2 -31

Best Corporate Citizens 1. Bristol Myers-Squibb 11. Exxon. Mobil Corp. 2. General Mills, Inc. 12. Wisconsin Energy Corp. 3. IBM Corp. 13. Intel Corp. 4. Merck & Co. , Inc. 14. Proctor & Gamble Co. 5. HP Co, LP 15. Hess Corp. 6. Cisco Systems, Inc. 16. Xerox Corp. 7. Mattel, Inc. 17. 3 M Co. 8. Abbott Laboratories 18. Avon Products, Inc. 9. Kimberly-Clark Corp. 19. Baxter International Inc. 10. Entergy Corp. 20. Monsanto Co. “CRO’s 100 Best Corporate Citizens 2009. ” CRO, http: //www. thecro. com/files/ CRO 100 Best. Corporate. Citizens. List 2009. pdf (accessed January 22, 2010). FHF 2 -32

Formal Ethics and Compliance Programs Arguments for and against these programs FHF 2 -33

Stakeholder Relationships: Shareholders § § Primarily concerned with profit or ROI Financial community at large Proper accounting procedures Protecting owner’s rights and investments FHF 2 -34

Stakeholder Relationships: Employees § § Provide a safe workplace Adequate compensation Listen to grievances Fair treatment FHF 2 -35

Stakeholder Relationships: Consumers Consumerism § Activities that independent individuals, groups and organizations undertake to protect their rights as consumers Ø Critical issue is business’s responsibility to customers to provide satisfying, safe products and to protect their rights as consumers. FHF 2 -36

Kennedy’s Consumer Bill of Rights § § The right to safety The right to be informed The right to choose The right to be heard FHF 2 -37

Stakeholder Relationships: The Environment & Sustainability Issues Sustainability means conducting activities with the long-term well-being of the natural environment in mind. § Involves interaction between ü ü Nature Individuals Organizations Business strategies FHF 2 -38

Stakeholder Relationships: The Environment & Sustainability Issues § Pollution • • • § § Land Water Air Waste disposal Future of energy • Copyright 2009 Utopian Empire Creativeworks | Biomass Energy Plant in Cadillac Michigan Alternative energy FHF 2 -39

Response to Environmental Issues § Many companies have a President of Environmental Affairs Position § Most Fortune 500 companies have in place: ü ü ü § § Written environmental policy Recycling programs Waste-reduction initiatives Environmental consciousness can save money through reducing waste Greenwashing, or creating a positive association with environmental issues for an unsuitable product, service or practice • Is a growing problem FHF 2 -40

Stakeholder Relationships: The Community General community and global welfare § The Avon Foundation Ø Breast Cancer Awareness Crusade § Target’s Take Charge of Education program Ø 1% of Target Red Card purchases donated to educational causes Hardcore unemployed • • National Alliance of Business funds training to help hard-core unemployed to find work and gain self-sufficiency Enhanced self-esteem; help people become productive members of society FHF 2 -41