Presentation on theme: "Chapter 4: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY"— Presentation transcript:
1 Chapter 4: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
Doing Well by Doing Good
2 ETHICS AND SOCIAL RESPONSIBILITY
Beliefs about right and wrong. SOCIAL RESPONSIBILITY The obligation of a business to contribute to society. Ethics and social responsibility are often discussed together, they are not the same but they are closely related. A Close Relationship, but Not the Same
3 ETHICS/PERSONAL CHARACTER
A study of 36,000 high school students revealed: 82% admitted that they lied to parent within the past 12 months about something significant. 60% admitted that they cheated on a test at school within the past 12 months. 33% admitted that they copied an Internet document within the past 12 months. 19% admitted that they stole something from a friend within the past 12 months. 28% admitted that they stole something from a store within the past 12 months. A 2006 Study conducted by Josephson Institute of Ethics
4 ETHICS: MURKIER THAN YOU THINK
Legal and Unethical Legal and Ethical Promoting R-rated movies to young teens Producing high quality products Producing products that you know will break before their time Rewarding integrity Paying non-living wages to workers in developing countries Leading by example Treating employees fairly Contributing to the community Respecting the environment Illegal and Unethical Illegal and Ethical Embezzling money Providing rock-bottom prices only to distributors in underserved areas Engaging in sexual harassment Collaborating with other medical clinics to guarantee low prices in low-income countries (collusion) Practicing Collusion with competitors Encouraging fraudulent accounting
5 UNIVERSAL ETHICAL STANDARDS
Developed by Character Counts, a nonpartisan organization of educators, community leaders, and ethicists.
6 BUSINESS ETHICS: NOT AN OXYMORON
Ethical Dilemma Negative Consequences Two unfavorable options Ethical Dilemma Negative Consequences Two unfavorable options most challenging business decisions seem to arise when values are in conflict Ethical Lapse Clear misconduct Business Ethics – the application of right and wrong in the workplace Business Ethics – the application of right and wrong in the workplace.
7 ETHICS AND THE INDIVIDUAL
Framework for Ethical Decisions Do you understand the dimensions of the problem? Who would benefit? Who would suffer? Are the alternative solutions legal? Are they fair? Does your decision make you comfortable? Could you defend your decision on the nightly news? Framework for Ethical Decisions: Do you understand the dimensions of the problem? Who would benefit? Who would suffer? Are the alternative solutions legal? Are they fair? Does your decision make you comfortable? Could you defend your decision on the nightly news?
8 Creating and Maintaining an Ethical Organization
Organizational Culture Role of Top Management Code of Ethics Executive Buy-in Clear expectations Integrated approach Global and local Whistleblower support Reporting and Enforcement
9 ETHICS FAME AND SHAME Sherron Watkins, former vice president of Enron reported the accounting Irregularities that led to the discovery of corporate fraud. Stanley O’Neal began as Merrill Lynch began racking up losses that led to its collapse, he announced his “retirement.” Martha Stewart was convicted of obstructing justice in a $40,000 well timed stock sale. Whole Foods CEO, John Mackey posted thousands of comments on Yahoo Finance, hyping his company and attacking Wild Oats, which he was planning to purchase. Sanjay Kumar of Computer Associates was convicted of massive accounting fraud in 2006. Pierre Omidyar, the founder of eBay has given away over $100 million to Tufts University Micro Finance Fund.
10 SPECTRUM OF SOCIAL RESPONSIBILITY
No Contribution Responsive Contribution Proactive Contribution LESS Responsible LESS Responsible MORE Responsible Businesses that do not recognize obligations to society and do only what’s legally required Businesses that respond on a case-by-case basis to requests for contributions Businesses that integrate social responsibility into their strategic plans
11 SOCIAL RESPONSIBILITY
Responsibility to Whom? Stakeholders are any groups that have a stake – or a personal interest - in the performance and actions of an organization.
12 RESPONSIBILITY TO…… EMPLOYEES Creating Jobs that Work CUSTOMERS
Value, Honesty and Communication INVESTORS Fair Stewardship and Full Disclosure COMMUNITY Business and the Greater Good ENVIRONMENT Sustainable Development
13 RESPONSIBILITY TO EMPLOYEES: CREATING JOBS THAT WORK
Meet Legal Standards Workplace Safety Minimum Wage/Overtime Requirements Value Employees Provide Work/Life Balance
14 DOES IT PAY TO PAY MORE? Costco Wal-Mart’s Sam’s Club
Average hourly wage $15.97 $11.52 Annual health costs per worker $5,735 $3,500 Covered by health plan 82% 47% Employee turnover 6%/yr 21%/yr Labor and overhead costs 9.8% of sales 17% of sales Profits per employee $13,647 $11,039
15 RESPONSIBILITY TO CUSTOMERS
CONSUMERISM: The Right to Be Safe The Right to Be Informed The Right to Choose The Right to be Heard
16 Planned Obsolescence –
APPLE COMPUTERS Planned Obsolescence – Deliberately designing products to fail in order to shorten the time between consumer repurchases APPLE COMPUTERS: iPods had irreplaceable battery. Batteries died after 18 months. Customers were encouraged to purchase new iPods Two customers posted high profile protest movies online. APPLE announced replacement program.
17 APPLE iPHONES Apple introduced the iPhone on June 9, to rave reviews despite $599 price tag Apple dropped the price to $200 to increase customers Customers were livid! CEO, Steve Jobs apologized and gave customers $100 store credit
18 RESPONSIBILITY TO INVESTORS
FAIR STEWARDSHIP AND FULL DISCLOSURE Legal Requirements Sarbanes-Oxley Responsible use of Corporate Dollars Honesty Is Optimism or Pessimism Socially Responsible? Legal Requirements Sarbanes-Oxley Responsible use of Corporate Dollars Honesty Is Optimism or Pessimism Socially Responsible?
19 RESPONSIBILITY TO COMMUNITY
Cause-related Marketing – partnerships between businesses and nonprofit organizations, designed to spike sales for the company and raise money for the nonprofit. Corporate Responsibility - The actions of the business rather than donations of money and time. Corporate Philanthropy - business donations to nonprofit groups, including both money and time.
20 RESPONSIBILITY TO ENVIRONMENT
Green Marketing – marketing environmental products and practices to gain a competitive edge.
21 RESPONSIBILITY TO ENVIRONMENT
Responsibility to environment is a part of responsibility to community Reducing the amount of trash is more important than recycling Although consumers support green marketing, they may not be willing to sacrifice quality Responsibility to environment is a part of responsibility to community Reducing the amount of trash is more important than recycling Although consumers support green marketing, they may not be willing to sacrifice quality
22 CAUSE RELATED MARKETING
The term was coined in 1983 by American Express Raise Funds for Statue of Liberty Restoration Campaign to donate $.01 for every dollar charged on credit card. New Cardholders Grew 45% Card Usage Grew 28% Statue of Liberty Restored Early
23 ETHICS & SOCIAL RESPONSIBILITY IN THE GLOBAL ARENA
Corruption is part of the culture in many countries Bribes or Gifts Labor issues in host countries can be complicated Living Wage Child Labor Code of Conduct
24 MONITORING ETHICS AND SOCIAL RESPONSIBILITY
SOCIAL AUDIT A systematic evaluation of how well a firm is meeting its ethics and social responsibility objectives.
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