Chapter 5 Bom 120

Chapter 5

Ethics and Social Responsibility

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What is ethics?

• YouTube - Business Ethics• A set of principles outlining a behavioral code

that lays out what is good and right or bad and wrong

• May outline obligations and appropriate moral actions for both the individual and the organization

• Ethics does not just apply to business• It may be difficult for individuals or groups in

society to agree upon what is right and wrong

Business Ethics: a moving target

• 1980’s saw a rising tide of public criticism regarding behaviour in business and government

• What was acceptable in the past was no longer acceptable

• Ralph Nader wrote “Unsafe at Any Speed” in the early 1960’s questioning car makers ethics

• This led to a government inquiry and automobile recalls

• YouTube - Ford Pinto

What can be done to restore the trust in the free-market system?

1. Those that have broken the law need to be PUNISHED ACCORDINGLY.

2. New laws making ACCOUNTING RECORDS more transparent and more laws making business people more ACCOUNTABLE.

Moral and ethical behaviour goes BEYOND the law.

Ethics deals with the proper relations and responsibilities toward other people.

LEGALITY deals with the much narrower issues. It deals with laws we have written to protect ourselves.

(see ethical dilemmas)

Factors Influencing Managerial Ethics

IndividualFactors

OrganizationalFactors

EnvironmentalFactors

•Values

•Work Background

•Family Status

•Personality

•Economic Conditions

•Social and Cultural Institutions

•Competition

•Top Level Management Philosophy

•The Firm’s Reward System

•Job Dimensions

Ethics Check Questions

o Is it legal?

o Is it balanced? (Fair/ win-win)

o How will it make me feel about myself?(Will it make you feel proud?)(Would you feel good if your decision was published in the Daily Gleaner?)YouTube - Business Ethics - My Life in Headlines(Would you feel good if your family knew about it?)

Legal vs. Ethical

• The law provides boundaries for defining what activities are illegal

• The law, however, does not outline what is “ethical.”

Why Should Businesses be Managed Ethically?

o To maintain a good reputation

o To keep existing customers

o To attract new customers

o To avoid lawsuits

o To reduce employee turnover

o To avoid government intervention

o To please customers, employees and society

o TO DO THE RIGHT THING!

Codes of Ethics

• Compliance-Based– Increase control and

penalize wrongdoers

• Integrity-Based– Define guiding values– Support ethical

behaviour– Shared accountability

Six Steps to Improve Ethics

1. Top management support2. Expectations begin at the top3. Ethics imbedded in training4. Ethics office set up (Whistleblowers)

5. External stakeholders informed (that there is an ethics program in place)

6. There must be enforcement (timely)

*ETHICS OFFICER

Business Ethics Scenarios

1. Receiving a Holiday Gift:

• A supplier sends a basket of expensive foodstuffs to your home at Christmas with a card: "We hope you and your family enjoy the 'goodies.'". What action(s) might you want to take?

2. Sales Expense:

• The purchasing manager for a large company agrees to give you an order (their first), expecting you agree to make a $200 donation to his favorite charity, a local youth sports team. How do you respond?

3. Sales Expense Reimbursement:

• A customer executive from Southeast Asia will visit your HQ facility and meet with your executive team. Your independent Southeast Asian agent requests that you reimburse the customer for his expenses, including expenses that could violate your company's policies. The agent will reimburse you. How do you proceed?

4. References:

• A large, prospective client calls you and asks about a competitor's reputation. One of your long time customers had a very bad experience with this competitor. What information do you share with the prospect? How do you respond to the prospect call?

5. Gratuities:

• A customer has a large sailing yacht on a vessel that your company will be discharging. The customer is present and is watching the off-loading operation.

• The five stevedores you manage pull off a very tricky maneuver, safely transferring the yacht to the trailer. The customer is elated, and reaches into his pocket, pulling out a big wad of $50 bills. What do you do?

6. Conflict of Interest:

• As department manager, you are hosting an informal celebration in the office. The food budget is $200. Your next door neighbor has just started her own catering business and asks to supply the food. Since she is just starting out, she'll do it at cost and provide extra items at no charge. What might you want to consider?

7. More Competition:

• You are in a head-to-head battle with your arch competitor, Evil Enterprises. One of your co-workers approaches you. He has recently joined your company after having worked for a second competitor for several years.

• He suggests, "I made notes on all of Evil's bids when I could get the data. They use some clear cost standards. Would you like me to bring my notes to the office tomorrow and let you look through them?" How do you respond?

The Polluter’s Dilemma

• Jonica Gunson is the environmental compliance manager for a small plastics manufacturing company. She is currently faced with the decision whether or not to spend money on new technology that will reduce the level of a particular toxin in the wastewater that flows out the back of the factory and into a lake.  The factory's emission levels are already within legal limits. However, Jonica knows that environmental regulations for this particular toxin are lagging behind scientific evidence. In fact, a scientist from the university had been quoted in the newspaper recently, saying that if emission levels stayed at this level, the fish in the lakes and rivers in the area might soon have to be declared unsafe for human consumption. 

• Further, if companies in the region don't engage in some self-regulation on this issue, there is reason to fear that the government — backed by public opinion — may force companies to begin using the new technology, and may also begin requiring monthly emission level reports (which would be both expensive and time consuming). 

• But the company's environmental compliance budget is tight. Asking for this new technology to be installed would put Jonica's department over-budget, and could jeopardize the company's ability to show a profit this year. 

Questions for Discussion:

• What motives would the company have to install the new technology?

• What motives would the company have to delay installing the new technology?

• Why might the companies in this region prefer for the government to impose new regulations?

CORPORATE RESPONSIBILITY IN THE 21st CENTURY

• There are 2 different views of corporate responsibility to stakeholders:

• 1. THE STRATEGIC APPROACH- requires that management’s primary orientation be toward the economic interests of shareholders.

• 2. **THE PLURALISTIC APPROACH- recognizes the special responsibility of management to optimize profits, but not at the expense of stakeholders.

Responsibility Defined

• Corporate Social Responsibility (CSR) The concern businesses have for the welfare of society.• Corporate Philanthropy – charitable donations to

non-profit groups.• Corporate Social Initiatives - enhanced forms of

corporate philanthropy. i.e., Johnson & Johnson sends medical supplies to disaster areas.

• Corporate Responsibility – acting responsibly within society

• Corporate Policy – position on social and political issues

Levels of Corporate Responsibility

• Responsibility to Customers• Responsibility to Investors (insider training)

• Responsibility to Employees

• Responsibility to Society

• Responsibility to the Environment

Social Auditing: is a systematic evaluation of an organizations’ progress toward implementing programs that are socially responsible & responsive.

POSITIVE ACTIONS – NEGATIVE EFFECTS = NET SOCIAL CONTRIBUTION

THE WATCHDOGS

• Socially conscious investors• Environmentalists• Union officials• Customers