Demanding Ethical and Social Responsibility in Business

1. Demanding Ethical and Social Responsibility in Business

2. Scandals, Worldwide Financial Crisis, Lack of Trust • What can be done to restore trust in the free-market system?

3. Passing Laws • Provides punishment for those who have broken the law • Can make accounting records more transparent • Can make businesspeople more accountable • Laws by themselves don’t make people honest, reliable, or truthful

4. Moral and Ethical Behavior is not the same as following the law • Moral and ethical behavior goes beyond the law • Ethics deals with the proper relations with and responsibilities toward other people • Legality deals with much narrower issues • Many immoral acts are not illegal

5. Ethics – what are they anyways? • ETHICS are standards of moral behavior; behavior accepted by society as right versus wrong • Few absolutes – meaning people make situational decisions • There are common standards of ethical behavior • Integrity, respect for life, honesty, courage • Cheating; cowardice; cruelty

6. Golden Rule • Accepted pretty much world-wide • Do unto others as you would have them do unto you

7. Ethics begins with each of us • Low managerial ethics seen as a major problem in America’s competitive problems • Most common form of cheating? Plagiarism • 38% of teens believe lying, cheating, plagiarizing, behaving violently are sometimes necessary

8. Ethics in Business Decision Making • Not always the easy choice • Ethical decision may have personal or professional drawbacks • When there’s no desirable alternative, it’s an ethical dilemma

9. How do you decide? Ethics check questions 1. Is my proposed action LEGAL? 2. Is my proposed action BALANCED? 3. How will this action make me FEEL ABOUT MYSELF? • Individuals and companies that have a strong ethics code tend to behave more ethically than others

10. Management’s role in setting ethical standards

11. ORGANIZATIONAL ETHICS BEGINS AT THE TOP • People learn their standards, values from observing what others do, not what they say • Corporate values instilled by the leadership, example of strong top managers • Trust, cooperation between workers & managers must be based on fairness, honesty, openness, and moral integrity

12. Management Responsibility • Top down, which means management is responsible for employees working for them • Some managers implicitly promote unethical behavior (their actions show that unethical behavior is ok) • Some corporate standards actually encourage dishonesty

13. Factors Influencing Managerial Ethics

14. Compliance-Based Ethics Code • Prevent unlawful behavior by increasing control and by penalizing wrongdoers • It means the company sets the rules, then when someone does something wrong, they are punished

15. Integrity-Based Ethics Codes • Define the organization’s guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees • Makes ethics, and making ethical decisions, part of the corporate culture; stressing teamwork.

16. Improving America’s Business Ethics (6 step program) • 1: TOP MANAGEMENT must adopt and unconditionally support an explicit code of conduct. • 2: EMPLOYEES must understand that expectations for ethical behavior begin at the top and all employees are expected to act ethically. • 3: MANAGERS and others must be trained to consider the ethical implications of all business decisions.

17. 4: AN ETHICS OFFICE must be set up. • WHISTLEBLOWERS(insiders who report illegal or unethical behavior) must feel protected from retaliation • The Corporate And Criminal Fraud Accountability Act (Sarbanes-Oxley, 2002) contains protections for corporate whistleblowers • 5: OUTSIDERS such as suppliers, distributors, and customers must be told about the ethics program • 6: THE ETHICS CODE MUST BE ENFORCED. • If rules are broken, CONSEQUENCES should follow quickly • Enforcementshows that the code is serious and cannot be broken

18. Ethics Code that’s not enforced? • WORTHLESS!!

19. A Good Ethics Officer • Communicates effectively and in a positive manner • Is a counselor and/or an investigator • Maintains confidentiality and is fair • Demonstrates to stakeholders that ethics are important

20. Corporate Social Responsibility • Business’s concern for welfare of society Based on: • Concern for welfare of all stakeholders • Critics say Manager’s only role is to compete and win • Defenders say CSR makes more money for investors in the long run

21. Company Social Performance • Corporate philanthropy – includes charitable donations • Corporate social initiatives –philanthropy directly related to company’s competencies (IBM donating computers) • Corporate responsibility – everything from hiring minority employees to making safe products • Corporate policy – the position a firm takes on social and political issues

22. Responsibility to employees • Create jobs • Fairly reward hard work and talent • Treat employees with respect and employees will treat company with respect • Financially beneficial to company since replacing employees costs 150% - 200% of annual salary • Employer shows commitment and caring by giving employees salaries and benefits that help them reach personal goals

23. When employees have been treated unfairly… • They strike back • Employee fraud • Workplace violence

24. Responsibility to society and environment • Green movement • Carbon footprint • Business responsible to make its own environment a better place • Not all environmental initiatives are successful • Many companies publish social contribution reports

25. Social Auditing • Measure how well a company includes social responsiveness in top decision making • Consider things like workplace issues, environment, product safety, communications, military weapons contracting, international operations, human rights

26. Net Social Contribution • Add up positive actions, subtract negative actions to come up with a net social contribution number

27. Corporate Watchdogs • Monitor how well companies enforce their ethical and social responsibility policies • Socially conscious investors • Environmentalists • Union officials • Customers

28. International Ethics and Social Responsibilities • It’s not just a problem in the USA • Many American companies are demanding socially responsible behavior from international suppliers • Many companies criticized for low pay, long hours, unsafe working conditions for international factory workers

29. Should international suppliers be required to follow US ethical standards? • What about countries where child labor is accepted? • What about multinational corporations?