Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 2-1 Human Resource Management 11 th Edition Chapter 2 BUSINESS ETHICS AND CORPORATE.

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 2-1

Human Resource Management 11th EditionChapter 2

BUSINESS ETHICS AND CORPORATE SOCIAL

RESPONSIBILITY


HRM in Action:Going Strategic with Corporate Social

Responsibility

• HR professionals have helped their careers by doing work that impacts the bottom line and focusing their efforts on corporate social responsibility

• HR professionals that are leaders of CSR activities place themselves in spotlight for top management to see

• Approximately 2/3 of U.S. HR professionals are directly involved in CSR activities


Ethics

Discipline of dealing with what is good and bad, or right and wrong, or with moral duty and obligation


CEO Must Be Involved

• 67% of investors said they would move their account if they discovered the company was involved in unethical behavior

• Jeff Immelt GE’s CEO begins and ends each annual meeting of 220 officers and 600 senior managers by restating company’s fundamental integrity principles: “GE’s business success is built on our reputation with all stakeholders for lawful and ethical behavior. Commercial considerations never justify cutting corners. Upholding this standard is the specific responsibility of the leaders in the room.”


Unethical Examples

• Enron, Arthur Andersen, WorldCom, Global Crossing, Adelphia Communications, Tyco International, and others

• Ruthless self-interest that motivates leaders of some large corporations has been revealed

• To have served on Enron board has become a badge of shame


Not Just Corporations

• Virtually no occupation has not had its own painful ethical crisis in recent years.

• Even so, business ethics scandals continue to be headline news stories. Lying on resumes, obstruction of justice, destruction of records, stock price manipulation, cutting corners to meet Wall Street’s expectations, fraud, waste, and abuse are occurring all too often when those in business go ethically wrong.


A Model of Ethics

Type I Ethics Type II Ethics

Sources of ethical

guidance

Our beliefs about what is right or wrong

Our actionsLead to Determine


Sources of Ethical Guidance

• Number of sources to determine what is right or wrong, good or bad, moral or immoral

• Bible and other holy books • Conscience • Significant others • Codes of Ethics• Sources of ethical guidance should

lead to our beliefs or convictions about what is right or wrong


Type I Ethics

• Strength of relationship between what individual or organization believes to be moral and correct and what available sources of guidance suggest is morally correct

• Example: HR manager believes it is acceptable not to hire minorities, despite fact that almost everyone condemns this practice


Type II Ethics

• Strength of relationship between what one believes and how one behaves

• Example: Manager knows it is wrong to discriminate, but does so anyway


Legislating Ethics

• Procurement Integrity Act

• Federal Sentencing Guidelines for Organizations (FSGO)

• Corporate and Auditing Accountability, Responsibility and Transparency Act


Procurement Integrity Act of 1988

• Prohibits release of source selection and contractor bid or proposal information

• Restrictions on former employees

• Passed after reports of military contracts for $500 toilet seats

• Also $5,000 hammer


Federal Sentencing Guidelines for Organizations (FSGO) of 1992

• Outlined effective ethics training program

• Promised softer punishments for wayward corporations that had ethics programs in place

• Executives needed to be proactive

• Organizations responded by creating ethics officer positions, installing ethics hotlines, and developing codes of conduct


Corporate and Auditing Accountability, Responsibility and Transparency Act of

2002

• Known as Sarbanes-Oxley Act, primary focus to redress accounting and financial reporting abuses in light of recent corporate scandals

• Criminalized many corporate acts

• Whistle-blower protections

• Prohibits loans to executives and directors


Corporate and Auditing Accountability, Responsibility and Transparency Act of

2002 (Cont.)

• Management may not discharge, demote, suspend, threaten, harass, or discriminate against an employee protected by the Act

• Protects any employee who lawfully provides information to governmental authorities concerning conduct he or she reasonably believes constitutes mail, wire, or securities fraud; violations of any rule or regulation issued by the SEC; or violations of any other federal law relating to fraud against shareholders


2003 - Bechtel v Competitive Technologies Inc.

• Supreme Court case involving wrongful termination under Sarbanes-Oxley’s whistle-blower-protection rule

• Court ruled that the company violated Act by firing two employees and ordered them reinstated


Code of Ethics

• Statement of values adopted by company, its employees and directors; sets official tone of top management regarding expected behavior

• Code of ethics establishes rules by which organization lives and becomes part of organization’s corporate culture


Ethics Officer

• Larger firms appoint ethics officer

• Keeps code on front burner for employees

• Ethics committee often established


Baldrige National Quality Award

• Increased emphasis on ethics in leadership

• Criteria: Senior leaders should serve as role models to rest of organization


Adolph Coors Company Example

• Developed one of the nation’s most comprehensive ethics programs

• Company offers its employees considerable resources including interactive online courses, ethics leadership training, decision map, highly detailed set of policies, and help line.

• Goal of program is to step beyond rules and guidelines and teach employees how to think, clarify, and analyze situations.


Human Resource Ethics

• Application of ethical principles to HR relationships and activities

• Code of Ethics – Many companies have a code of ethics


Human Resource Ethics (Cont.)

• Throughout your text, there are many topics where HR professionals can have a major impact on ethics (examples below)

• Do you strive to create a diverse workforce?

• Do you strive to recruit and select the best qualified applicant for the job?


Ethics Training

• Federal Sentencing Guidelines for Organizations Act outlined effective ethics training program

• Educate employees in company’s standards and procedures through publications and training

• Ethics training should be for everyone from top to bottom


Professionalization of Human Resource

Management


Profession

A vocation characterized by existence of:

• Common body of knowledge

• Procedure for certifying members of profession


HR Professional Groups

• Society for Human Resource Management - Largest national professional organization for HR management individuals

• Human Resource Certification Institute - Recognize HR professionals through certification program


HR Professional Groups (Cont.)

• American Society for Training and Development - Largest specialized professional organization in human resources

• WorldatWork - Managerial and HR professionals responsible for establishment, execution, administration or application of compensation practices and policies


Corporate Social Responsibility

• Implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect interests of groups other than themselves.

• When corporation behaves as if it has a conscience

• How company as a whole behaves toward society


Trends & InnovationsBayer Corporation: A Quality Example of

Corporate Social Responsibility

• United States Bayer Corporation continues the tradition of social responsibility its parent company, Bayer AG, began many years ago

• Company has more than 300 corporate social responsibility programs worldwide

• Bayer’s core values involve “improving quality of life while harmonizing commercial efficiency, ecology and social commitment”


Who Determines?

Organization’s top executives usually determine corporation’s approach to corporate social responsibility


Stakeholder Analysis and Social Contract

Most organizations have large number of stakeholders


Organizational Stakeholder

• Individual or group whose interests are affected by organizational activities

• Society is increasingly holding corporate boards of directors and management accountable for putting interest of stakeholders first

• Some of the stakeholders for Crown Metal Products, a fictitious manufacturer, are identified

• Only a few, identified by bold arrows, are viewed as constituencies


STAKEHOLDERS OF CROWN METAL PRODUCTS

Stanley Crow (Sole stockholder)

Charitable Organizations

Neighbors

Customers

Employees and

Managers Unemployed Workers (Potential

employees)

Guaranty Bank

(Lender)

Suppliers

Other Banks in Area

(Prospective lenders)

Local Businesses

Local Government

Agencies

U.S. Government

Competitors

Crown Metal

Products


Social Contract • Set of written and unwritten rules and

assumptions about acceptable interrelationships among various elements of society

• Embedded in customs of society

• Social contract often involves quid pro quo • Concerns relationships with individuals,

government, other organizations, and society


The Social Contract

The Organization

Individuals

Other Organizations

Government

Society


Obligations to Individuals

• Certain obligations to employees

• Expect fair day’s pay for fair day’s work, and perhaps much more


Obligations to Other Organizations

• Must be concerned with relationships involving other organizations

• Commercial businesses are expected to compete with one another on honorable basis

• Charities such as United Way expect support from business


Traditional View of Social Responsibility

• Businesses best meet obligations through pursuit of their own interests

• Some companies view social contract mainly in terms of the company’s interests


Obligations to Government

• Under auspices of government, companies have license to do business, along with patent rights, and trademarks

• Expected to recognize need for order rather than anarchy

• Expected to work with guidelines of governmental organizations such as Equal Employment Opportunity Commission and Office of Federal Contract Compliance Programs


Obligations to Society in General

• Traditional view of business responsibility has been that businesses should produce and distribute goods and services in return for profit

• Businesses operate by public consent with basic purpose of satisfying needs of society


Sir Thomas More

• Said in 16th century, “If virtue were profitable, common sense would make us good and greed would make us saintly.” More knew virtue is not profitable, so people must make hard choices from time to time.

• Corporate strategists are being held to a higher standard than just pursuing their own interests, or even those of stockholders; they must consider the interests of other groups too.


Social Audit

Systematic assessment of a company’s activities in terms of its social impact


Possible Types of Social Audits

• Simple inventory of activities

• Compilation of socially relevant expenditures

• Determination of social impact

• Ideal social audit would involve determining the true benefits to society of any socially-oriented business activity


Steps for Establishing and Implementing Corporate Social Responsibility (CSR) Program

1. Person assigned responsibility for program; structure developed

2. Review of what company is presently doing regarding CSR

3. Shareholders’ expectations and perspectives determined

4. Write policy statements covering CSR areas such as environmental, social, and community issues


CSR Steps (Cont.)

5. Develop set of corporate objectives and action plan to implement policies

6. Create company quantitative and qualitative targets and performance indicators over 2-5 year period, along with measurement, monitoring and auditing mechanisms

7. Communicate direction of CSR to stakeholders and fund managers

8. Determine progress of CSR program

9. Report progress of CSR program


A Global Perspective:Multinational Whistle-Blowing

• In East Asia, corporate members are viewed as family members, so it is wrong to report them

• In Japan, lifetime employment and strict seniority system discourage workers from questioning management decisions, dictating, instead, that employees show unbounded loyalty to coworkers

• In China, attempts to introduce corporate hotlines can remind employees of horrors of Cultural Revolution

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Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 2-1 Human Resource Management 11 th Edition Chapter 2 BUSINESS ETHICS AND CORPORATE.

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