ETHICS AND SOCIAL RESPONSIBILITY

Values• Values are what we prize and cherish most

• All things cannot be valued equally• You must be willing to sacrifice lower priority values for those that

are MOST important.

Self Centeredness vs. Empathy• As a child you are taught to be self-centered

• Hungry = Food• Cold = Warmth• Hurt = Nurturing

• When your needs are met you learned to feel secure = health self-esteem

• As a teenager you are expected to move past your own needs and consider others = empathy

Ethics in Business• Ethics – set of moral principles or values that govern

behavior• Managers must face sometimes difficult ethical decisions in

business situations.

• Code of Ethics – document that outlines the principles of conduct to be used in making decisions within an organization

A Code of Ethics Content May Address the following:• Honesty• Adherence to the law• Product safety and quality• Health and safety in the

workplace• Conflicts of interest• Employment practices• Staffing and marketing

practices• Financial reporting• Pricing, billing, and

contracting

• Trading in securities/using confidential information

• Acquiring and using information about competitors

• Security• Payments to obtain bonuses• Protection of the environment

Behaving Ethically and Unethically• Behaving ethically:

• Helps employees gain the trust of the people with whom they work• Helps businesses gain the trust of customers, suppliers, and others

• Behaving unethically:• Can hurt or end a businessperson’s career• Can cause a company to lose millions of dollars or even go out of

business altogether

Behaving Honestly• Sarbanes-Oxley Act of 2002

• Due to Enron and WorldCom scandals, President Bush signed this act that affects the reporting and governance of public companies and their directors and officers.

• Employee Theft• Employers trust their employees not to steal from them.

• Embezzlement• Stealing supplies, inventory

Behaving Honestly• Hours worked

• Employees who behave ethically are honest about the hours they work.

• Ethical employees will only miss work when they are truly ill or have a legitimate reason to be home.

• Records• One of the worst ethical lapses an employee can commit is falsifying

records. • Damages company reputation• Can have grave effects on health of public (i.e. pharmaceutical company)

Dealing with Ethical Dilemmas• An ethical dilemma is a situation in which the ethical

course of action is not clear.

The ‘Heinz’ Dilemma• Mr. Heinz is ordinarily a law-abiding man. One day, his

wife becomes gravely ill. Heinz takes her to the doctor, who prescribes a medication for her. She does quite well on this medication and begins to recover. However, Heinz has no insurance and runs out of money quickly paying for this expensive medication. After a few months, he can no longer purchase the medication and his wife begins to take a turn for the worse. One day, he is in the pharmacy and notices that no one is behind the counter. The medication is in plain view. Should he steal the medication to help his sick wife?

The Old Woman in the Airport• You are in the airport, trying to catch a flight that is about

to leave. As you run down the crowded corridor, an elderly woman suddenly slips in front of you and falls to the ground with a cry. Do you stop to help, if you know you will miss your flight because of it?

The Trolley• A trolley is running out of control down a track. In its path

are 5 people who have been tied to the track by a mad philosopher. Fortunately, you can flip a switch which will lead the trolley down a different track. Unfortunately, there is a single person tied to that track. Should you flip the switch? Why?

Trolley cont.• As before, a trolley is hurtling down a track towards five

people. You are on a bridge under which it will pass, and you can stop it by dropping a heavy weight in front of it. As it happens, there is a man next to you - your only way to stop the trolley is to push him over the bridge and onto the track, killing him to save five. Should you proceed? Why? How is this case different from the first?

Solving Ethical Dilemmas – Ask:• Have you defined the problem accurately?• How would you define the problem if you stood on the

other side of the fence?• Whom could your decision or action injure? • Can you discuss the problem with the affected parties

before you make your decision?

Solving Ethical Dilemmas - Ask• Are you confident that your position will be as valid over a

long period of time as it seems now?• Could you disclose without qualm your decision to action

to your boss, your CEO, the board of directors, your family, and society as a whole?

Laws Relating to Ethical Behavior• The Sherman Act

• Monopolies became illegal.

• Wheeler-Lea Act of 1938• Banned unfair or deceptive acts, such as false advertising, inform

customers of possible negative consequences of using products.

Consumer ProtectionSeveral laws and agencies were designed to protect

consumers against unethical and unsafe business practices:• The Federal Food, Drug, and Cosmetic Act of 1938

• Food and Drug Administration (FDA)

• Consumer Product Safety Commission (CPSC) • Forces manufacturers to recall products that may be defective

• Truth in Leading Act of 1968• Enacted to protect consumers in their dealing with lenders and

creditors.

Environmental Protection

• National Environmental Policy Act of 1969• Created Environmental Protection Agency (EPA)• Protects human health and safeguards the air, water, and land.

• The Clean Air Act of 1970 • Regulates air emissions.

• The Toxic Substances Control Act of 1976 • Gave the EPA the ability to track industrial chemicals produced In or

importing into the U.S.

• The Clean Water Act of 1977• Sets standards on the type and quality of pollutants that industries

can put into bodies of water

Ethical Standards and Culture• Corporate Gift Giving

• In Japan, lavish gifts are a part of business.• In United States, government officials are not allowed to accept

gifts (and many corporations have policies against this).• When doing business abroad, be sure to understand culture.

Ethical Standards and Culture• Intellectual Property

• Ownership of ideas, such as inventions, books, movies, and computer programs

• In the U.S., creators of intellectual property have the exclusive right to market and sell their work (guaranteed through patent, trademark, and copyright laws)

Social Responsibility• Social responsibility refers to the obligation that individuals or

businesses have to help solve social problems. • Profit Maximization• Trusteeship Management• Social Involvement• Philanthropy and Volunteerism• Environmental Awareness• Sensitivity to Diversity and Quality of Work Life

Profit Maximization• In the 19th and early 20th centuries, business owners in

the U.S. believe that their role was simply to maximize profits their companies earned.

• Social problems were not considered a legitimate business activity.

Trustee Management• Recognized that owners of business had obligations to do

more than just earn profits.• Businesses had obligations to their employees, their

customer, and their creditors.• Most businesspeople continued to hold this view until the

1960’s.

Social Involvement• During the 1960’s, people believed businesses should use

their influence to address social issues, such as poverty, crime, environmental destruction, and illiteracy.

• Business have obligations to all the people affected by their actions – stakeholders.• Employees, customers, suppliers, and the community

Social Audit• A review of a businesses social responsiveness

Philanthropy and Volunteerism• A company can demonstrate social responsibility by

contributing time and money to charitable, cultural, and civic organizations.

• Some companies grant employees paid time off to participate in charitable activities.

• Many companies offer “matching” programs.

Environmental Awareness• Businesses limit the damage their business causes on the

environment.• Business can establish policies to reduce pollution.

• For example, encouraging employees to carpool.

• Business can use biodegradable and refillable containers.• Ex: The Body Shop