Chapter 2. Conducting Business Ethically and Responsibly

Transcription

1 Chapter 2 Conducting Business Ethically and Responsibly

2 The more I help others to succeed, the more I succeed. Ray Kroc, Founder, McDonald s

3 What Is Ethical Behavior? Ethics Right and wrong, good and bad, in actions that affect others Ethical Behavior Conforming to generally accepted ethical norms

4 Ethical Considerations Regarding a particular act Utility: Does it optimize what is best for those who are affected by it? Rights: Does it respect the rights of the individuals involved? Justice: Is it consistent with what we regard as fair? Caring: Is it consistent with people s responsibilities to each other?

5 Data Gathering Expanded Model of Ethical Judgment Making Gather the facts concerning the act or policy Is the act or policy acceptable according to the four ethical norms? Utility: Does it optimize the satisfaction of all constituencies? Rights: Does it respect the rights and duties of the individuals involved? Justice: Is it consistent with the canons of justice? Caring: Is it consistent with the responsibility to care? Analysis No on all criteria No on one or two criteria Yes on all criteria Is there any reason for overriding one or two of the ethical norms? Is one ethical norm more important than the others? Is there any reason why a person may have been forced into committing an act or following a policy? No Yes Judgment The act or policy is not ethical. The act or policy is ethical. Figure 2 2

6 Company Practices and Business Ethics Best Approach: Open, Honest, Responsive! The Coca Cola Scare Case The Tylenol Scare Case

7 How Much Privacy Does Your Employer Owe You? Internet Cellular Phones

8 Formalizing the Commitment to Ethics Adopting Written Codes Instituting Ethics Programs

9 Social Responsibility: Balancing Commitments to Stakeholders Stakeholders Groups, individuals, and organizations that are directly affected by the practices of an organization Employees Investors Customers CORPORATION Suppliers Local Communities

10 Responsibility Toward the Environment Air pollution Water pollution Land pollution Toxic waste Recycling

11 Responsibility Toward Consumer Rights Customers Unfair Pricing Ethics in Advertising

12 Responsibility Toward Employees Legal and Social Commitments Whistle-blowers

13 Responsibility Toward Investors Improper financial management Check kiting Insider trading Misrepresentation of finances

14 Approaches to Social Responsibility Lowest Level of Social Responsibility Highest Obstructionist Stance Defensive Stance Accommodative Stance Proactive Stance Actively Avoids Responsibility Does Legal Minimum Responds to Requests Actively Seeks Opportunities to Contribute

15 Ethics, Social Responsibility, and the Small Business Do small businesses face different issues with regard to ethics and social responsibility?

16 Chapter Review Discuss how individuals develop their personal codes of ethics. Explain why ethics matter in the workplace. Distinguish social responsibility from ethics. Show how social responsibility applies to environmental issues and to relationships with customers, employees, and investors. Identify four approaches to social responsibility. Describe the four steps a firm must take to implement a social responsibility program. Explain how social responsibly and ethics affect

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18 Ethics Ethics the system of rules governing the ordering of values affects people s behavior and the goods that are worth seeking values - principles of conduct ethics becomes more complicated when a situation dictates that one value overrules another business ethics - the moral principles and standards that guide behavior in the world of business

19 Ethics (cont.) Ethical systems moral philosophy - the principles, rules, and values people use in deciding what is right and wrong universalism - individuals should uphold certain values, regardless of the immediate result important values are those that society needs to function teleology - an act is morally right if it produces a desired result egoism - acceptable behavior maximizes consequences for the individual utilitarianism - seeks the greatest good for the greatest number of people, thereby maximizing total utility

20 Ethics (cont.) Ethical systems (cont.) deontology - focuses on the rights of individuals ensures that equal respect is given to all persons concentrates on means relativism - ethical behavior defined by the opinions and behavior of relevant other people acknowledges the existence of different theoretical viewpoints group consensus is sought positive consensus signifies that an action is right, ethical, and acceptable

21 Ethics (cont.) Ethical systems (cont.) virtue ethics - morality defined by what a mature person with good moral character would deem right society s rules provide a moral minimum individual s can transcend rules by applying personal standards Kohlberg s model of cognitive moral development preconventional stage - decisions based on concrete rewards, punishments, and immediate self-interest conventional stage - actions conform to societal expectations principled stage - follow self-chosen ethical principle see beyond authority, laws, and norms

22 Ethics (cont.) The ethics environment Ethical climate - processes by which decisions are evaluated and made on the basis of right and wrong unethical corporate behavior may be the responsibility of an unethical individual often reveals a company culture that is ethically lax Corporate ethical standards- organizations must be explicit regarding their ethical standards and expectations there are many different corporate ethical standards golden rule accepted business practice intuitive approach

23 Business Ethics and Social Business Ethics: Responsibility The principles and standards that define acceptable conduct in business Social Responsibility: A business s obligation to maximize its positive impact and minimize its negative impact on society Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

24 Recognizing an Ethical Issue An ethical issue is 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 Did You Know? The most common types of observed misconduct are lying, withholding information, and abusive/ intimidating behavior. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

25 Ethical Issue Categories Conflict of interest Fairness and honesty Communications Business relationships Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

26 Conflict of Interest Occurs when a person must choose whether to advance their own personal interest or those of others Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

27 Fairness and Honesty The heart of business ethics General values of decision makers Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

28 Communications False and misleading advertising and deceptive personal-selling tactics anger customers and may cause a business to fail. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

29 Business Relationships Businesspeople must be ethical toward their customers, suppliers, and others in their workplace. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

30 Reasons For Not Reporting Observed Misconduct 1. Fear of not being considered a team player 2. Didn t believe corrective action would be taken 3. Feared retribution or retaliation from supervisor or management 4. No one else cares about business ethics so why should I 5. Didn t trust organization to keep report confidential Source: 1997 Society for Human Resource Management/Ethics Resource Center Business Ethics Survey Report, p. 21.

31 Climate Factors Conducive To Unethical Behavior Shareholders concerns take precedence over other constituencies Emphasis on shortterm revenues No written code of ethics Lack clear procedures for dealing with ethical problems Danger Signs Desire for quick fix solutions Ethics considered from legal or public relations viewpoint Financial concerns take precedence over ethical considerations

32 Misconduct Observed in the Workplace

33 Questions to Consider in Determining Whether an Action is Ethical Are there any potential legal restrictions or violations that could result from the action? Question: If I do this will it break any laws? Does your company have a specific code of ethics or a policy on the action? Question: If I do this will I go against the employee handbook? Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

34 Questions to Consider in Determining Whether an Action is Ethical Is this activity customary in your industry? Are there any industry trade groups that provide guidelines or codes of conduct that address this issue? Question: If I do this will I violate any trade practices? Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

35 Questions to Consider in Determining Whether an Action is Ethical Would this activity be accepted by your coworkers? Will your decision or action withstand open discussion with coworkers and managers and survive untarnished? Question: Will my action cause peer acceptance or rejection, or any peer pressure? Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

36 Questions to Consider in Determining Whether an Action is Ethical How does this activity fit with your own beliefs and values? Question: Will my action violate any of my personal ethics, religious beliefs, or social values? Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

37 Ethics (cont.) The ethics environment (cont.) Ethics codes - most visible sign of corporate commitment to ethical behavior must be tailored to individual company s philosophies address subjects such as employee conduct, community and environment, shareholders, customers, political activity Ethics programs compliance-based - designed by corporate counsel to prevent, detect, and punish legal violations increases surveillance and controls integrity-based - guiding principles that instill personal responsibility for ethical behavior

38 Ethical Decision Making Define the issue clearly Identify the relevant values in the situation Ethical Decision Making Implement the decision Weigh conflicting values and choose option that balances them

39 Three Factors that Influence Business Ethics Individual Standards and Values Managers and Coworkers Influence Opportunity: Codes and Compliance Requirements Ethical/Unethical Choices in Business Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

40 Codes of Ethics Formalized rules and standards that describe what a company expects of its employees Did You Know? Written ethics standards are more often found in larger companies than smaller ones. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

41 Whistleblowing The act of an employee exposing the employer s wrongdoing to outsiders The media Government regulatory agencies Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

42 The Facts on Business Ethics Today Of employees surveyed: 50% reported that their organizations have an ethics officer or a phone line for ethics advice 84% reported that their organizations offer mandatory ethics training 54% reported that ethics training was useful at work Source: Ethics Resource Center, 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work.

43 The Nature of Social Responsibility Four Dimensions: Economic earn profits Legal comply with the law Ethical Not just for profit only Voluntary & Philanthropic Promote human welfare and goodwill Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

44 The Pyramid of Social Responsibility Voluntary Responsibilities being a good corporate citizen; contributing to the community and quality of life Ethical Responsibilities being ethical; doing what is right, just, and fair; avoiding harm Legal Responsibilities obeying the law (society s codification of right and wrong) Economic Responsibilities being profitable Source: Adapted from Archie B. Carroll, The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders. Business Horizons 34 (July/August 1991): 42.

45 Best Corporate Citizens 1. Fannie Mae 2. Procter & Gamble 3. Intel Corporation 4. St. Paul Companies 5. Green Mountain Coffee Roasters 6. Deere & Company 7. Avon Products 8. Hewlett-Packard 9. Agilent Technologies 10. Ecobab 11. Imation 12. IBM 13. Nuveen Investments 14. Herman Miller 15. J. M. Smucker 16. Safeco 17. Timberland 18. Zimmer Holdings 19. Cisco 20. 3M Source: Philip Johnansson, The Best 100 Corporate Citizens, Business Ethics, March/April 2001, p. 15.

46 Arguments for Social Responsibility 1. Business helped to create many of the social problems that exist today, so it should play a significant role in solving them 2. Businesses should be more responsible because they have the financial and technical resources to help solve social problems 3. As members of society, businesses should do their fair share to help others Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

47 Arguments for Social Responsibility 4. Socially responsible decision making by businesses can prevent increased government regulation 5. Social responsibility is necessary to ensure economic survival Businesses must take steps to help solve the social and environmental problems that exist today Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

48 Arguments Against Social Responsibility 1. Managers are sidetracked from the primary goal of business Earning profits 2. Participation in social programs gives businesses greater power, perhaps at the expense of particular segments of society Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

49 Arguments Against Social Responsibility 3. Some people question whether business has the expertise needed to assess and make decisions about social problems 4. Many people believe that social problems are the responsibility of government agencies and officials Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

50 Social Responsibility Issues Organizational relationships with owners and stockholders: Profit and ROI Employee relations: Providing a safe workplace, adequate pay, information about the company, listening to grievances, and treating employees fairly Consumer relations: Respecting the rights of customers and providing them with safe and satisfying products Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

51 Social Responsibility Issues Environmental issues: Animal rights Pollution Global warming Community relations: Responsibility to the general welfare of the community Did You Know? In one year, Americans generated 230 million tons of trash and recycled 23.5 percent of it. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

52 John F. Kennedy s 1962 Consumer Bill of Rights The right to safety The right to be informed The right to choose The right to be heard Did You Know? John F. Kennedy was the 35th President of the United States. Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

53 Responsibility of the Ethics Officer Provide advice about ethics to employees and management Distribute the company s code of ethics Create and maintain an anonymous, confidential service to answer questions about ethical issues Take action on ethics violations Review and modify the code of ethics as needed Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

54 Corporate Social Responsibility Corporate social responsibility the obligation toward society assumed by business maximizes it positive effects on society and minimizes it negative effects economic responsibilities - produce goods and services that society wants at a price that perpetuates the business legal responsibilities - obey local, state, federal and relevant international laws ethical responsibilities - meeting other societal expectations, not written as law voluntary responsibilities - additional behaviors that society finds desirable and that the values of the business support

55 Pyramid Of Corporate Social Responsibility Voluntary Responsibilities Be a good corporate citizen Ethical Responsibilities Be ethical Legal Responsibilities Obey the law Economic Responsibilities Be profitable

56 Corporate Social Responsibility (cont.) Contrasting views profit maximization view managers obligated to maximize the present value of the firm economic performance is an organization s primary social responsibility business judgment rule - allows management wide latitude in policy if the policy can be justified duty to pursue profits is not absolute principled moral reasoning view ethical actions are not optional, but mandatory organizations have a wider range of responsibilities that extend beyond the production of goods and services for a profit

57 Corproate Social Responsibility Reconciliation (cont.) based on the idea that ethical behavior is both right and more profitable competitive advantages of socially responsible actions, especially over the long-term avoid unnecessary and costly regulation pay dividends to the reputation of the company profits can be made from attempts to solve society s problems

58 Corporate Social Responsibility (cont.) Corporate social responsiveness the process companies follow and the actions they take in the domain of corporate social responsibility CSR1 (corporate social responsibility) - principles, philosophies, and beliefs CSR2 (corporate social responsiveness) - processes companies follow and the actions they take both CSR1 and CSR2 have their critics in academia and business stakeholder management - managers do not manage relationships with society but with stakeholders

59 Approaches To Corporate Social Responsiveness Approach Posture or Strategy Performance 1. Reactive 2. Defensive 3. Accommodative 4. Proactive Deny responsibility Admit responsibility but fight it Accept responsibility Anticipate responsibility Do less than required Do the least that is required Do all that is required Do more than is required

60 Corporate Social Responsibility Strategic voluntarism (cont.) corporate philanthropy has become more strategic strive to do things that matter get recognition for their contributions support causes that both capitalize on and serve their businesses community service is increasingly an employee benefit

61 The Political Environment Competitive advantage progressive organizations realize that government may be the source of competitive advantages for an individual company or an entire industry numerous examples of public policy that assists business Corporate legitimacy motive for business involvement in the public policy process organizations are legitimate to the extent that their goals and methods are consistent with those of society domain defense - activities intended to counter challenges to the organization s legitimacy

62 The Political Environment (cont.) Strategies for influencing the political environment public affairs department - monitors key events and trends, analyzes their effects on the organization, recommends organizational responses, and implements political strategies Lobbying - traditional form of influence involves political professionals or company executives who establish communication channels with regulatory bodies Political action committees (PACs) - make donations to candidates for political office companies may ask employees or shareholders for contributions to political candidates, subject to certain limitations protection money - donated money intended to ensure that company is not disadvantaged in the legislative process

63 Public Affairs Department Issues management Institutional advertising Corporate contributions Activities of Public Affairs Government relations Public relations Investor and stockholder relations International relations

64 The Political Environment (cont.) Strategies for influencing the political environment (cont.) Corporate constituency programs - organizational effort to identify, educate, and motivate individuals to take political action that could benefit the organization encourage interested stakeholders to take grassroots action probably requires the greatest commitment of organizational resources Coalition building - finding other organizations or voter groups that share political interests on a particular legislative issue combine efforts and power to influence the environment

65 The Political Environment (cont.) Strategies for influencing the political environment (cont.) Stonewalling - use of public relations, legal action, and administrative processes to prevent or delay the introduction of legislation and regulation that may have an adverse impact on the organization rarely changes the conditions that led to the adverse regulation consumes considerable time and money, and may boomerang Strategic retreat - response to adverse regulatory change efforts to adapt products and processes to changes in the political and social environments while minimizing the negative effects of those changes

66 The Natural Environment Environmental issues range of issues is broad, and the impact huge must consider a mix of technical, ethical, social, and competitive issues e.g., many technological developments used by business are contributing to the destruction of ecological ecosystems A risk society sources of risk include: excessive production of hazards ecologically unsustainable consumption of natural resources risk has proliferated due to population explosion, industrial pollution, and environmental degradation

67 The Natural Environment (cont.) Ecocentric management has as its goal the creation of sustainable economic development and improvement of quality of life worldwide for all organizational stakeholders seeks to minimize negative environmental impact design for environment (DFE) - tool for creating products that are easy to recover, reuse, or recycle all environmental effects of a product are examined during the design phase assessments of inputs analysis of how consumers will use and dispose of the product

68 Ecocentric Management Encourage low energy loss Products with recyclable materials Ecocentric Management Use smaller resource quantities Products with ecofriendly packaging Environmentally appropriate production technologies

69 The Natural Environment (cont.) Environmental agenda for the future corporations are the only organizations with the resources, technology, and global power to help create a sustainable world webs of companies with a common ecological vision can combine their efforts into high-leverage, impactful action companies beginning to acquire the motivation to solve environmental problems may represent the biggest opportunity in the history of commerce

70 Key Topics Individual codes of ethics and the importance of ethics in the workplace Key terms Social responsibility in U.S. business Environmental issues and stakeholder relationships Approaches and implementation Implications for small business