Understanding business 11th by mchugh nickels chap004

All rights reserved.Demanding Ethical and Socially Responsible Behavior CHAPTER 4... Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in set

McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc All rights reserved.

Demanding Ethical and Socially Responsible Behavior

CHAPTER 4

LEARNING OBJECTIVES

4-2

1 Explain why obeying the law is only the first step in

behaving ethically.

2 Ask the three questions you need to answer when

faced with a potentially unethical action.

3 Describe management’s role in setting ethical

standards.

LEARNING OBJECTIVES

4-3

4 Distinguish between compliance-based and

integrity-based ethics codes, and list the six steps in setting

up a corporate ethics code.

5 Define corporate social responsibility and compare

corporations’ responsibilities to various stakeholders.

6 Analyze the role of U.S businesses in influencing

ethical behavior and social responsibility in global

markets.

NAME that COMPANY

4-5

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!

LIFE AFTER SCANDAL

4-6

LO 4-1

• Scandals have shaken the real estate, mortgage

and banking industries

• How do 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.

• 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

BERNIE MADOFF’S PONZI SCHEME

4-7

WHAT is a PONZI SCHEME?

Source: Securities and Exchange Commission, www.sec.gov, accessed November 2014 4-8

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

• Ethics The standards of moral behavior

Behaviors that are accepted by society as right

versus wrong.

WHAT are ETHICS?

4-9

LO 4-1

ETHICS and YOU

4-11

LO 4-2

• Plagiarizing from online

materials is the most

common form of cheating

FACING ETHICAL DILEMMAS

- How will it make me

feel about myself?

BRIBERY BAD BOYS

Five FCPA Investigations

Source: SEC, www.sec.gov, accessed November 2014 4-13

LO 4-2

TURNING EX-CONS into

• Defy and Rohr’s other organizations have helped create 60 startups and many ex-cons find employment.

TEST PREP

4-15

• What are ethics?

• How do ethics differ from legality?

• When faced with ethical dilemmas, what

questions can you ask yourself that might help

you make ethical decisions?

ETHICS START at the TOP

• Trust between workers and

managers must be based on

fairness, honesty, openness

and moral integrity

FACTORS INFLUENCING

MANAGERIAL ETHICS

4-17

LO 4-3

ETHICS CODES

4-18

LO 4-4

• An increasing number of companies have

adopted written codes 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 guiding values, create an environment that supports ethically sound behavior and stress a

shared accountability.

HOW to IMPROVE AMERICA’S

BUSINESS ETHICS

4-19

LO 4-4

1 Top management must adopt and

unconditionally support an explicit corporate

code of conduct

2 Employees must understand that senior

management expects all employees to act

ethically

3 Managers and others must be trained to consider the ethical implications of all business decisions

4 An ethics office must be set up with which

employees can communicate anonymously

HOW to BLOW the WHISTLE

Source: Kiplinger’s Personal Finance, June 2013 4-21

LO 4-4

1 Decide carefully and quickly

2 Make sure you have all allegations filed with the

right agencies

3 File your allegations with as many agencies that

are appropriate

4 Gather your information legally

5 Research the process

TEST PREP

4-22

• What are compliance-based and integrity-based ethics codes?

• What are the six steps to follow in establishing

an effective ethics program in a business?

CORPORATE SOCIAL

RESPONSIBILITY

4-23

LO 4-5

• Corporate Social Responsibility (CSR) The

concern businesses have for the welfare of society.

• CSR is based on a commitment to integrity,

fairness, and respect

• CSR proponents argue that businesses owe their

existence to the societies they serve and cannot exist in societies that fail

CORPORATE RESPONSIBILITY

and POLICY

4-25

LO 4-5

• Corporate Responsibility Includes everything

from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and

providing a safe work environment.

social and political issues.

POSTIVE IMPACTS

of COMPANIES

4-26

LO 4-5

• Xerox offers a Social Service Leave program.

• More and more companies are encouraging

employees to volunteer while on company time

• The majority of MBA students surveyed reported

they would take a lower salary to work for a

socially responsible company

Source: Parade Magazine.

HELPING HANDS

Most Generous Celebrities

4-27

LO 4-5

Source: Forbes, www.forbes.com, accessed November 2014.

GENEROUS GUYS

World’s Biggest Givers in 2013

4-28

LO 4-5

PRESIDENT KENNEDY’S BASIC

RIGHTS of CONSUMERS

4-29

LO 4-5

• The Right to Safety

• The Right to be Informed

• The Right to Choose

• The Right to be Heard

HOW DO CUSTOMERS KNOW?

4-30

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

Source: Entrepreneur, www.entrepreneur.com, accessed September 2014.

SOCIAL CUSTOMER CONTACT

Do’s and Don’ts of Using Twitter for Business

4-31

LO 4-5

INSIDER TRADING

4-32

LO 4-5

• Insider Trading Insiders

using private company

information to further their own

fortunes or those of their family

• Create jobs and provide a chance for upward

• Offer salaries and

benefits that help

employees reach

their personal

goals.

Source: Fortune, www.fortune.com, accessed November 2014.

AMERICA’S MOST ADMIRED

WHEN EMPLOYEES

are UPSET…

4-35

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.

SOCIETY and the ENVIRONMENT

4-36

LO 4-5

• Over one-third of working Americans receive

their salaries from nonprofits – who are

dependent on funding from others

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

• Environmental efforts may increase costs, but

can offer good opportunities

energy-efficiency industries account for 9 million U.S

jobs

SUSTAINABILITY’S in the BAG

4-38

• Rickshaw Bagworks makes

sustainable accessories built to

SOCIAL AUDITING

4-39

LO 4-5

• Social Audit A systematic evaluation of an

organization’s progress toward implementing socially responsible and responsive programs.

1) Socially conscious investors 2) Socially conscious research

organizations 3) Environmentalists 4) Union officials

5) Customers

TEST PREP

4-40

• 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?

INTERNATIONAL ETHICS

4-41

LO 4-6

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

GOING by a DIFFERENT STANDARD

4-42

• 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 do 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?

TEST PREP

4-43

• 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?