Understanding business 11th by mchugh nickels chap004

CHAPTER Demanding Ethical and Socially Responsible Behavior McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc All rights reserved LEARNING OBJECTIVES Explain why obeying the law is only the first step in behaving ethically Ask the three questions you need to answer when faced with a potentially unethical action Describe management’s role in setting ethical standards 4-2 LEARNING OBJECTIVES Distinguish between compliance-based and integritybased ethics codes, and list the six steps in setting up a corporate ethics code Define corporate social responsibility and compare corporations’ responsibilities to various stakeholders Analyze the role of U.S businesses in influencing ethical behavior and social responsibility in global markets 4-3 PATTY STONESIFER Martha’s Table • Held high-level positions with the Gates Foundation and the White House • Founded Martha’s Table in 2013 with the goal of providing healthy food, affordable clothing and quality education to D.C.’s locals 4-4 NAME that COMPANY The wage and benefit packages offered by this company are among the best in hourly retail Even part-time workers are covered by its health plan Increased benefits reduce employee turnover to less than a third of the industry average Name that company! 4-5 LIFE AFTER SCANDAL LO 4-1 • Scandals have shaken the real estate, mortgage and banking industries • How we restore trust in the free market system? - Punish those who have broken the law - Make accounting records more transparent - Consider what is ethical, not just what is legal 4-6 BERNIE MADOFF’S PONZI SCHEME • Bernie Madoff is serving 150 years behind bars • His exclusive wealth management firm was a gigantic Ponzi scheme • Though exact amounts are uncertain, it is believed he stole about $65 billion from his investors 4-7 WHAT is a PONZI SCHEME? LO 4-1 • A fraud by paying returns to existing investors from funds contributed by new investors • New investors are promised opportunities claimed to generate high returns with little or no risk • Fraudsters focus on attracting new money to make promised payments Source: Securities and Exchange Commission, www.sec.gov, accessed November 2014 4-8 WHAT are ETHICS? LO 4-1 • Ethics The standards of moral behavior Behaviors that are accepted by society as right versus wrong 4-9 BASIC MORAL VALUES Right: • Integrity • Respect for human life LO 4-1 Wrong: •Cheating •Cowardice •Cruelty • Self-control • Honesty • Courage • Self-sacrifice 4-10 PRESIDENT KENNEDY’S BASIC RIGHTS of CONSUMERS LO 4-5 • The Right to Safety • The Right to be Informed • The Right to Choose • The Right to be Heard 4-29 HOW DO CUSTOMERS KNOW? LO 4-5 • The primary use of social media is to communicate CSR efforts • Social media allows companies to reach a broad, diverse group and connect directly to them • Now more than ever, it’s important for companies to live up to their expectations 4-30 SOCIAL CUSTOMER CONTACT LO 4-5 Do’s and Don’ts of Using Twitter for Business Source: Entrepreneur, www.entrepreneur.com, accessed September 2014 4-31 INSIDER TRADING LO 4-5 • Insider Trading Insiders using private company information to further their own fortunes or those of their family and friends • Unethical behavior does financial damage to a company and investors are cheated 4-32 RESPONSIBILITY to EMPLOYEES LO 4-5 • Create jobs and provide a chance for upward mobility • Treat employees with respect • Offer salaries and benefits that help employees reach their personal goals 4-33 AMERICA’S MOST ADMIRED COMPANIES of 2014 10 LO 4-5 Apple Amazon Google Berkshire Hathaway Starbucks Coca-Cola Disney FedEx Southwest Airlines General Electric Source: Fortune, www.fortune.com, accessed November 2014 4-34 WHEN EMPLOYEES are UPSET… LO 4-5 • Employee fraud costs U.S businesses about 5% of annual revenue and causes 30% of all business failures • Disgruntled workers relieve frustration by: - Blaming mistakes on others - Manipulating budgets and expenses - Making commitments they intend to ignore - Hoarding resources - Doing the minimum 4-35 SOCIETY and the ENVIRONMENT LO 4-5 • Over one-third of working Americans receive their salaries from nonprofits – who are dependent on funding from others • The green movement emerged as concern about global warming increased • Many companies are trying to minimize their carbon footprints – the amount of carbon released during an item’s production, distribution, consumption and disposal 4-36 RESPONSIBILITY to the ENVIRONMENT LO 4-5 • Environmental efforts may increase costs, but can offer good opportunities • The emerging renewable-energy and energyefficiency industries account for million U.S jobs • By 2030, as many as 40 million “Green” jobs will be created 4-37 SUSTAINABILITY’S in the BAG • Rickshaw Bagworks makes sustainable accessories built to last • The “three Fs” are followed company-wide Form Function Footprint 4-38 SOCIAL AUDITING LO 4-5 • Social Audit A systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs • Five Types of Watchdogs 1) Socially conscious investors 2) Socially conscious research organizations 3) Environmentalists 4) Union officials 5) Customers 4-39 TEST PREP • What is corporate social responsibility, and how does it relate to each of a business’s major stakeholders? • What is a social audit, and what kinds of activities does it monitor? 4-40 INTERNATIONAL ETHICS LO 4-6 • Many businesses want socially responsible behavior from their international suppliers • In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business • Partners in the Organization of American States signed the Inter-American Convention Against Corruption 4-41 GOING by a DIFFERENT STANDARD • A telecommunications employee returns to his home country to work and the company reimburses living expenses so he can live in a safe area The employee is trying to the honorable thing for his family and the company is trying to keep the employee safe If the employee uses the money to help his family instead, is it right for the company to stop payment? 4-42 TEST PREP • How are U.S businesses demanding socially responsible behavior from their international suppliers? • Why is it unlikely that there will be a single set of international rules governing multinational companies soon? 4-43 ... NAME that COMPANY The wage and benefit packages offered by this company are among the best in hourly retail Even part-time workers are covered by its health plan Increased benefits reduce employee... from his investors 4-7 WHAT is a PONZI SCHEME? LO 4-1 • A fraud by paying returns to existing investors from funds contributed by new investors • New investors are promised opportunities claimed... of ethics • Compliance-Based Ethics Code Emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers • Integrity-Based Ethics Code Define the organization’s