Chapter 4: Demonstrating Ethical Behavior and Social Responsibility
I. MANAGING BUSINESS ETHICALLY AND RESPONSIBLY.
A. Ethical behavior can influence your success in business.
B. SOCIAL RESPONSIBILITY means that a business shows concern for the welfare of society as a whole.
II. LEGALITY IS ONLY THE FIRST ETHICAL STANDARD.
LEARNING GOAL 1. Explain why legality is only the first step in behaving ethically.
A. MORAL AND ETHICAL BEHAVIOR ARE NOT THE SAME AS FOLLOWING THE DICTATES OF THE LAW.
1. Social responsibility and moral and ethical behavior go BEYOND the law.
a. Ethics deals with the proper relations with and responsibilities toward other people.
b. Legality deals with much smaller issues.
c. It only refers to laws we have written to protect ourselves-many immoral acts fall within our laws.
2. The term 'ethics' can be defined many ways.
a. Some philosophers distinguish between ethics and morals.
b. The terms 'ethical' and 'moral' are used interchangeably in this text.
c. ETHICS refers to the standards of moral behavior; that is, behavior that is accepted by society as right or wrong.
B. PERSONAL ETHICS BEGIN AT HOME.
LEARNING GOAL 2. Ask the three questions one should answer when faced with a potentially unethical action.
1. Society as a whole is not too socially minded.
a. A recent book revealed that most Americans have few moral absolutes.
b. Nearly one-third said they never contributed to a charity.
c. Two-thirds of U.S. high school seniors said they would lie to achieve a business objective.
2. ETHICAL BEHAVIOR BEGINS WITH YOU AND ME.
a. We cannot expect 'society' to become more moral and ethical unless we as individuals commit to becoming more moral and ethical ourselves.
3. It is important to KEEP ETHICS IN MIND when making a business decision.
a. There is not always an easy choice.
b. Sometimes the obvious solution from an ethical point of view has drawbacks from a personal or professional point of view.
c. Sometimes there is no desirable alternative.
4. Three 'ETHICS CHECK QUESTIONS' can help individuals and organizations be sure their decisions are ethical:
a. IS IT LEGAL
b. IS IT BALANCED?
(i) (Will I win everything at the expense of another party?)
(ii) An ethics-based manager tries to make decisions that benefit all parties involved.
c. HOW WILL IT MAKE ME FEEL ABOUT MYSELF?
5. Individuals and companies that develop a strong ethics code and have a better chance than most of behaving ethically.
C. ETHICS IS MORE THAN AN INDIVIDUAL CONCERN.
1. Some managers think ethics is a personal matter-that they are not responsible for an individual's misdeeds.
2. Individuals do not usually act alone-they need the implied, if not the direct, cooperation of others to behave unethically in a corporation.
3. After the disastrous 1992 experience of Sears Automotive Services, Sears replaced 23,000 pages of policies and procedures with a simple booklet called 'Freedoms amp; Obligations.'
D. ORGANIZATIONAL ETHICS BEGINS AT THE TOP.
LEARNING GOAL 3. Describe management's role in setting ethical standards.
1. People learn their standards and values from OBSERVING WHAT OTHERS DO, not what they say.
2. Corporate values are INSTILLED BY THE LEADERSHIP and example of strong top managers.
3. In companies such as IBM and Xerox a high value system has become pervasive, and employees feel part of a corporate mission that is socially beneficial.
4. There are many REASONS WHY A BUSINESS SHOULD BE MANAGED ETHICALLY:
a. To maintain a good reputation, keep existing customers, attract new customers, or avoid lawsuits.
b. To reduce turnover or avoid government intervention.
c. To please customers, employees, and society.
d. Because it is the right thing to do.
III. SETTING CORPORATE ETHICAL STANDARDS.
LEARNING GOAL 4. Distinguish between compliance-based and integrity-based ethics codes and list the six-steps in setting up a corporate ethics code.
A. Although ethics codes vary greatly, they can be classified into two major categories: compliance-based and integrity-based.
1. COMPLIANCE-BASED ETHICS CODES- emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers.
2. INTEGRITY-BASED ETHICS CODES define the organization's guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees.
B. A long-term improvement of America's business ethics calls for a six-step approach to ENFORCING ETHICS CODES:
1. TOP MANAGEMENT must adopt and unconditionally support an explicit corporate code of conduct.
2. EMPLOYEES must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly.
3. MANAGERS and others must be trained to consider the ethical implications of all business decisions.
4. AN ETHICS OFFICE MUST BE SET UP- phone lines should be established so that employees who don't want to be seen with an ethics officer can inquire about ethical matters anonymously.
5. OUTSIDERS such as suppliers, subcontractors, distributors, and customers must be told about the ethics program.
a. Often pressure to put aside ethical considerations comes from the outside.
b. It helps employees resist such pressure when everyone knows what the ethical standards are.
6. THE ETHICS CODE MUST BE ENFORCED.
a. If rules are broken, CONSEQUENCES should follow quickly.
b. This will communicate to employees that the code is serious and cannot be broken.
IV. CORPORATE SOCIAL RESPONSIBILITY.
LEARNING GOAL 5. Define social responsibility and examine corporate responsibility to various stakeholders.
A. SOCIAL PERFORMANCE of a company has several dimensions:
1. CORPORATE PHILANTHROPY includes charitable donations to nonprofit organizations.
2. CORPORATE RESPONSIBILITY includes everything from minority hiring to the making of safe products, and more.
3. CORPORATE POLICY refers to the position a firm takes on issues that affect the firm and society.
B. IMPACT OF CORPORATIONS ON SOCIETY
1. Many people get a one-sided view of the impact that companies have on society.
2. Few people see the positive impacts, such as the commitments of many companies to volunteerism.
3. In a recent survey, two-thirds of the MBA students surveyed said that they would take a lower salary to work for a socially responsible company.
4. Social responsibility is seen differently through the eyes of various stakeholders to whom businesses are responsible.
C. RESPONSIBILITY TO CUSTOMERS.
1. Business is responsible to satisfy customers with goods and services of real value.
2. Pleasing the customer is not as easy as it seems.
3. Three out of five new businesses fail-perhaps because their owners failed to please their customers.
D. RESPONSIBILITY TO INVESTORS.
1. Milton Friedman has said that corporate social responsibility means making money for stockholders.
2. Some believe that before you can do good you must do well; others believe that by doing good, you can also do well.
3. Many people believe that it makes financial as well as moral sense to invest in companies that are planning ahead to create a better environment.
E. RESPONSIBILITY TO EMPLOYEES.
1. Businesses have a responsibility to CREATE JOBS.
2. Business has an obligation to see to it that HARD WORK AND TALENT ARE FAIRLY REWARDED.
3. Business also has a responsibility to MAINTAIN JOB SECURITY or, if layoffs are impossible to avoid, give employees warning.
F. RESPONSIBILITY TO SOCIETY.
1. A major responsibility of business to society is to CREATE NEW WEALTH.
a. Most nonprofits own shares of publicly- held companies
b. As those share prices increase, funds are available to benefit society.
2. Businesses are responsible for PROMOTING SOCIAL JUSTICE.
a. For its own well-being, business depends on its employees being active in civil society such as politics, law, churches, arts and charities.
b. Many companies use group volunteer projects to encourage team building while improving their communities.
3. Business is responsible for CONTRIBUTING TO MAKING ITS OWN ENVIRONMENT A BETTER PLACE.
4. Many corporations are publishing reports that document their net social contribution.
G. SOCIAL AUDITING.
1. How can you know hoe well organizations are making social responsiveness an integral part of top management's decision making?
2. A SOCIAL AUDIT is a systematic evaluation of an organization's progress toward implementing programs that are socially responsible and responsive.
3. PROBLEMS related to social auditing:
a. It is DIFFICULT TO DEFINE what 'socially responsible and responsive.'
b. Business activities and their effects on society are DIFFICULT TO MEASURE.
4. Some suggest that positive actions be added up and NEGATIVE EFFECTS SUBTRACTED to get a NET SOCIAL CONTRIBUTION.
5. Four groups serve as 'watchdogs' regarding how well companies enforce their ethical and social responsibility policies:
a. SOCIALLY CONSCIOUS INVESTORS, who insist that companies extent the company's own high standards to all their suppliers.
b. ENVIRONMENTALISTS, who apply pressure by naming names of companies that don't abide by the environmentalists' standards.
c. UNION OFFICIALS, who hunt down violations and force companies to comply to avoid negative publicity.
d. CUSTOMERS, who take their business elsewhere if a company demonstrates socially irresponsible practices.
V. INTERNATIONAL ETHICS AND RESPONSI BILITY.
LEARNING GOAL 6. Analyze the role of American businesses in influencing ethical and social responsibility in global markets.
A. ETHICAL PROBLEMS ARE NOT UNIQUE TO THE UNITED STATES.
1. The text gives the examples of recent 'influence peddling' in Japan, South Korea, and China.
2. WHAT IS NEW IS THAT LEADERS ARE BEING HELD TO NEW, HIGHER STANDARDS.
B. Many American businesses are demanding socially responsible behavior from international suppliers.
1. They make sure their suppliers do not violate U.S. human rights and environmental standards.
2. In contrast there are companies such Nike that have often been criticized for the low pay and long hours of factory workers in Asia.
3. Should international suppliers be required to adhere to American ethical standards? What about countries where child labor is an accepted part of society? What about multi-national corporations?
a. None of these questions are easy to answer.
b. They show how complex social responsibility issues are in international markets.
c. It isn't enough for a company to be right when it comes to ethics and social responsibility-it also has to convince its customers it's right.