Chapter 4 Ethics and Social Responsibility

1. Chapter 4Ethics and Social Responsibility

2. The Difference Between Ethics and Laws • Ethics • Socially accepted norms and behaviors • We don’t make fun of other people • We don’t swindle people out of money by tricking them. • Example of unethical : puppy mills? Conflicts of interest? • CAN get you sued! • Laws • Ethics that have agreed-upon penalties attached to them if violated. • Example of illegal: Enron debacle, HealthSouth affair

3. Types of Ethical Tests for Daily Decisions • Legal • Is there a law against the decision you are making? • Justice • Is your decision or action fair and equitable? • Is it balanced? • The Mama Test • How would I feel if my Mama found out about this? • How about if it were communicated in the news? • Does this just feel wrong??

4. Ethics in the Corporate World • P. 94: “People learn their standards and values from observing what others do, not hearing what they say. This is as true in business as it is at home.” • Employees watch others to determine what is socially acceptable. • Strong leaders know that their actions are being mimicked.

5. * * PAYING the PRICE(Legal Briefcase) • Enron: One executive is serving a 24 year sentence for accounting fraud while another will be released in October 2011. • Arthur Andersen:Convicted of tampering with witnesses, the company was dissolved and about 28,000 people lost their jobs. • Tyco International: Two executives stole $600 million from the company and are scheduled to be released from prison in 2030. • Adelphia Communication:Two executives were convicted of conspiracy, bank and securities fraud and given sentences of 15 and 20 years. • WorldCom: Former CEO was convicted of fraud, conspiracy and false filings and sentenced to 25 years. 4-5

6. Ethics in the Corporate World • Relationships at work should be based on trust, openness, integrity, honesty, and fairness. • Businesses should act ethically because: • Good reputation • Keep customers • Keep employees • Avoid lawsuits • Sleep at night! • “Overly ambitious goals can create an environment in which unethical actions… can occur.”

7. Ethics in the Corporate World • Compliance Codes of Ethics • Reinforced by penalties for violations • Negative reinforcement • Integrity-Based Codes of Ethics • Reinforced by cultural change and policies, appealing to everyone’s greater good • Positive reinforcement • Whistleblowing Roger Boisjoly, formerly of Morton Thiokol

8. How to Make Ethics Work at Your Company • There must be a code of ethics for the company. • Policies have to be communicated through training. • Policies have to be upheld. • Ethics have to be brought up in decision-making. • Employees need to be reminded that they are the ones protecting the company’s ethics.

9. Social Responsibility • Corporate Philanthropy • Giving money and company time to other causes • Social initiatives • The company decides to set up a program to help some cause (usually the program relates to what the company does) • Socially Responsible Practices and Policies • What types of things do you think companies can do to be more socially responsible other than the above?

10. Areas of Social Responsibility • Responsibility to Consumers • Keep them safe, give them information, hear their feedback • Responsibility to Investors • Keep them informed, be honest with them, try to build their wealth • Responsibility to Employees • Create jobs for them; make them contented • Responsibility to Community • Environmental impact, community welfare

11. Freidman or Smith? • Milton Freidman: • Social responsibility is too close to socialism. A business’s role is to enhance shareholder wealth. Giving that to society is not a business’s right. • Adam Smith: • Benevolence is the utmost responsibility. Self-interested pursuit of profit is wrong The invisible hand must churn the wealth around.

12. * Corporate Social Responsibility * LG5 To WHOM MUCH HAS BEEN GIVEN…America’s Charitable Giving ¾ of U.S. adults give no time in their community Source: Wall Street Journal, www.wsj.com, June 23, 2008. 4-12

13. Social Audit • A systematic process of evaluating the business’s effect on society, good and bad • Designed to meet the needs of each unique business • What types of things could be measured?

14. Ethics Legislation • Sarbanes-Oxley Act • All public corporations must have a way for employees to report unethical behavior anonymously AND to protect those people from retaliatory behavior from the company. • Regulation FD (SEC) • Corporations must tell everyone when substantive news happens, not just a chosen few. • Foreign Corrupt Practices Act • American businesspersons may not bribe foreign officials.

15. International Issues • Labor • Hours worked, fumes, health, child labor • Living wage as a new concept • Bribery • Socially accepted gift-giving or illegal? • Environmental Impact • Pollution, deforestation, mining • Global Imperialism • As U.S. companies expand, they take U.S. culture with them.

16. * International Ethics and Social Responsibility * LG6 GIVERS AROUND the WORLDShare of GDP Source: Forbes, www.forbes.com, March 24, 2008. 4-16