Lecture Business: A changing world - Chapter 3: Business ethics and social responsibility

In this chapter, we take a look at the role of ethics and social responsibility in business decision making. After reading this chapter, you will be able to: Define business ethics and examine its importance; detect some of the ethical issues that may arise in business, specify how businesses can promote ethical behaviour; define social responsibility and explain its relevance to business; debate an organization''s social responsibilities to owners, employees, consumers, the environment, and the community.

Chapter Three Business Ethics and Social Responsibility   © 2003 McGraw­Hill Ryerson Limited Comparison of Business Ethics  and Social Responsibility Business Ethics Refers to the principles and  standards that define  acceptable  conduct in the world  of business 3-1 Social Refers to a business’s obligation  Responsibility   to maximize its positive impact  and minimize its negative  impact  on society   © 2003 McGraw­Hill Ryerson Limited Ethical Issue 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 3-2   © 2003 McGraw­Hill Ryerson Limited Reactions to Unethical  Employers What happened when surveyed employees found out their employers  were doing something that was against the employee’s ethical  standards… 3-3   tried to resolve the situation without losing job 40% talked to boss 38% did nothing   9% quit   5% other   1% not sure   7% © 2003 McGraw­Hill Ryerson Limited Source: Yankelovich Partners Survey, PRNewswire, October 6, 1998 Reasons for Not Reporting  Observed Misconduct 3-4 Fear of not being considered a team player Didn’t believe corrective action would be taken Feared retribution or retaliation form supervisor or  management No one else cares about business ethics so why  should I? Didn’t trust organization to keep report  confidential â2003McGrawưHillRyersonLimited Source:1997SocietyforHumanResourceManagement/Ethics ResourceCenterBusinessEthicsSurveyReport,p.21 EthicalIssueCategories 3-5   Conflict of interest Fairness and honesty Communications Business associations © 2003 McGraw­Hill Ryerson Limited Questions to Consider in Determining  Whether an Action is Ethical 3-6a   • Are there any potential legal restrictions or  violations that could result from the action? • Does you company have a specific code of  ethics or a policy on the action? • Is this activity customary in your industry? Are  there any industry trade groups that provide  guidelinesorcodesofconductthataddressthis issue? â2003McGrawưHillRyersonLimited QuestionstoConsiderinDetermining WhetheranActionisEthical 3-6b Wouldthisactivitybeacceptedbyyour coworkers?Willyourdecisionoraction withstandopendiscussionwithcoworkersand managersandsurviveuntarnished? Howdoesthisactivityfitwithyourownbeliefs andvalues? â2003McGrawưHillRyersonLimited FrameworkforEthicalandMoral Decisionmaking Recognizeamoralissue Get the facts Evaluate the alternatives from various  moral perspectives Make a decision Act, then reflect on the decision later 3­6c   © 2003 McGraw­Hill Ryerson Limited Codes of Ethics 3­6d Formalized rules and standards that  describe what a company expects of  its employees   © 2003 McGraw­Hill Ryerson Limited Three Factors that  Influence Business Ethics 3-7 Individual Individual Standards Standards and and Values Values   Managers’ Managers’ and and Coworkers’ Coworkers’ Influence Influence © 2003 McGraw­Hill Ryerson Limited Opportunity: Opportunity: Codes and Codes and Compliance Compliance Requirements Requirements Ethical/Unethical Ethical/Unethical Choices Choices in Business in Business Whistle Blower Cases 3-8a   Who paid? SmithKline Beecham  Clinical Laboratories How much? $325 million Whistle­blower share? $52 million ($42.3 million being appealed) Allegations? Paid kickbacks to doctors and  billed Medicare for unordered  tests © 2003 McGraw­Hill Ryerson Limited Source: “Taxpayers Against Fraud”, USA Today, November 9, 1998, p. 15B Whistle Blower Cases 3-8b   Who paid? United Technologies How much? $150 million Whistle­blower share? $22.5 million Allegations? Billed U.S. military for work  not yet performed © 2003 McGraw­Hill Ryerson Limited Source: “Taxpayers Against Fraud”, USA Today, November 9, 1998, p. 15B Arguments for Social  Responsibility Voluntary Responsibilities being a  “good corporate citizen”; contributing to the community and quality of life 3-9 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); playing by the rules of the game Economic Responsibilities being profitable   © 2003 McGraw­Hill Ryerson Limited 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 Arguments for Social  Responsibility 3-10 Business helped to create many of the social problems that exist today, so it  should play a significant role in solving them, especially in the areas of  pollution reduction and cleanup Businesses should be more responsible because they have the financial and  technical resources to help solve social problems As members of society, businesses should do their fair share to help others Socially responsible decision making by businesses can prevent increased  government regulation Social responsibility is necessary to ensure economic survival: If businesses  want educated and healthy employees, customers with money to spend, and  suppliers with quality goods and services in years to come, they must take  steps to help solve the social and environmental problems that exist today   © 2003 McGraw­Hill Ryerson Limited Arguments Against Social  Responsibility 3-11 It sidetracks managers from the primary goal of business–earning  profits. Every dollar donated to social causes or otherwise spent on  society's problems is a dollar less for owners and investors Participation in social programs gives businesses greater power,  perhaps at the expense of particular segments of society Some people question whether business has the expertise needed to  assess and make decisions about social problems Many people believe that social problems are the responsibility of  government agencies and officials, who can be held accountable by  voters   © 2003 McGraw­Hill Ryerson Limited Social Responsibility Issues 3-12 • Organizational relationships with owners and  stockholders • Employee relations • Consumer relations • Environmentalconcerns animalrights pollution Communityrelations â2003McGrawưHillRyersonLimited JohnF.Kennedys Consumer Bill of Rights 3-13   • • • • Right to safety Right to be informed Right to choose Right to be heard © 2003 McGraw­Hill Ryerson Limited Solve the Dilemma a What are some of the ethical issues involved  in giving a customer an award for  consumption behavior without notifying  him/her first? b Do you see this as a potential violation of  privacy? c How would you handle the situation if you  were Jon? 3-14   © 2003 McGraw­Hill Ryerson Limited Explore Your Career Options 3-15 How do you explain the emergence  of career opportunities in the field  of business ethics and social  responsibility?   © 2003 McGraw­Hill Ryerson Limited Additional Discussion  Questions and Exercises 3-16a What makes ethical decisions so difficult? Many organizations are primarily concerned with earning a  profit or a return on their investment. Does this concern for  owners and investors present an ethical dilemma for  companies when weighing business decisions that  favour  employees and/or the general public? The right to be heard is one of the four rights of  consumers. How are some corporations addressing this  consumer concern?   © 2003 McGraw­Hill Ryerson Limited Additional Discussion  Questions and Exercises 3-16b Find examples of environmental issues in newspapers or  business journals. Do these issues influence businesses? Imagine you are a salesperson. When does offering a gift,  such as basketball tickets, become a bribe rather than just a  sales practice?   © 2003 McGraw­Hill Ryerson Limited Chapter 3 Quiz 3-17a Which of the following has the greatest effect on ethical behaviour in  organizations? a authority of an employee’s superiors b an employee’s perception of the ethics of coworkers and managers c an employee’s personal beliefs about what is right or wrong d investor’s perceptions of ethics Copying someone else’s work and presenting it as you own is a ethics b bribe c plagiarism d greenmail   © 2003 McGraw­Hill Ryerson Limited Chapter 3 Quiz 3-17b A code of ethics is a a set of formalized rules and standards describing what the company  expects of its employees b a government legislation enforced by government agencies c a set of principles that describe what a person believes is the right way  to behave d the impact of a business’s activities on society Which one of the following is NOT one of the four rights provided in  John F. Kennedy’s consumer bill of rights?  a right to safety b right to be informed c right to sue d right to choose   © 2003 McGraw­Hill Ryerson Limited VIDEO QUESTIONS 3-18   Is it the responsibility of coffee consumers to ensure that small producers  receive a fair price for their product? Why or why not? If the price paid to the growers represents only ten percent of the retail  price of coffee, why is the retail price of Fair Trade coffee approximately  double the regular price? Who benefits the most from the higher price paid by consumers for Fair  Trade labeled coffee? What alternative approach to the problem of poverty among small  producers can you suggest? © 2003 McGraw­Hill Ryerson Limited ...Comparison of Business Ethics and Social Responsibility Business Ethics Refers to the principles and standards that define  acceptable  conduct in the world of business 3-1 Social Refers to a business s obligation ... describe what a company expects of  its employees   © 2003 McGraw­Hill Ryerson Limited Three Factors that  Influence Business Ethics 3-7 Individual Individual Standards Standards and and Values Values... Some people question whether business has the expertise needed to  assess and make decisions about social problems Manypeoplebelievethatsocialproblemsaretheresponsibilityof governmentagenciesandofficials,whocanbeheldaccountableby voters â2003McGrawưHillRyersonLimited