*

Chapter Four

*
Demanding
Ethical and
Socially
Responsible
Behavior

McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
 *
LIFE AFTER SCANDAL Ethics is More
Than Legality

LG1
*
• Scandals have shaken the real
estate, mortgage and banking
industries.
• How do we restore trust in the
free market system?
- Punish those who have broken the
law.
- Make accounting records more
transparent.
- Consider what is ethical, not just
what is legal.
4-2
 *
WHAT are ETHICS? Ethical Standards
are Fundamental

LG1
*
• Ethics -- The standards of moral behavior.
Behaviors that are accepted by society as right
versus wrong.

4-3
 *
BASIC MORAL VALUES Ethical Standards
are Fundamental

LG1
*
Right: Wrong:
• Integrity •Cheating
• Respect for human life •Cowardice
•Cruelty
• Self control
• Honesty
• Courage
• Self-sacrifice

4-4
 *
PAYING the PRICE
(Legal Briefcase)

• Enron: One executive is serving a 24 year sentence for

*
accounting fraud while another will be released in October
2011.
• Arthur Andersen: Convicted of tampering with witnesses,
the company was dissolved and about 28,000 people lost
their jobs.
• Tyco International: Two executives stole $600 million
from the company and are scheduled to be released from
prison in 2030.
• Adelphia Communication: Two executives were
convicted of conspiracy, bank and securities fraud and
given sentences of 15 and 20 years.
• WorldCom: Former CEO was convicted of fraud,
conspiracy and false filings and sentenced to 25 years.
4-5
 *
ETHICS and YOU Ethics Begins
with Each of Us

LG2
*
• Plagiarizing from Internet materials is the most
common form of cheating in schools today.

• Studies found a strong

relationship between
academic dishonesty
and dishonesty at work.

4-6
 *
FACING ETHICAL DILEMMAS Ethics Begins
with Each of Us

LG2
*
• Ask yourself these questions:
- Is it legal?
- Is it balanced?
- How will it make me feel about myself?

4-7
 *
Managing
ETHICS START at the TOP Businesses
Ethically and
Responsibly
LG3
*
• Trust between workers and
managers must be based on
fairness, honesty, openness
and moral integrity.

• Leadership can help instill

corporate values in
employees.

4-8
 * Managing
FACTORS INFLUENCING Businesses
Ethically and
MANAGERIAL ETHICS Responsibly
LG3
*
Individual Organizational Environmental
• Values • Top Level • Competition
• Work Background Management • Economic
• Family Status Philosophy Conditions
• Personality • Firm’s Reward • Social/Cultural
System Institutions
• Job Dimensions

4-9
 * Setting
Corporate
ETHICS CODES Ethical
Standards
LG4
*
• An increasing number of companies have
adopted written codes of ethics.

• Compliance-Based Ethics Code --

Emphasize preventing unlawful behavior by
increasing control and by penalizing wrongdoers.

• Integrity-Based Ethics Code -- Define the

organization’ s guiding values, create an
environment that supports ethically sound behavior
and stress a shared accountability among
employees.
4-10
 * Setting
Corporate
HOW to IMPROVE AMERICA’S Ethical
BUSINESS ETHICS Standards
LG4
*
1. Top management must adopt and
unconditionally support an explicit corporate
code of conduct.

2. Employees must understand that senior

management expects all employees to act
ethically.

3. Managers and others must be trained to consider

the ethical implications of all business decisions.
4-11
(continued)
 * Setting
Corporate
HOW to IMPROVE AMERICA’S Ethical
BUSINESS ETHICS Standards
LG4
*
• An ethics office must be set up with which
employees can communicate anonymously.
Whistleblowers -- People who report illegal or
unethical behavior.
1. Involve outsiders such as
suppliers, subcontractors,
distributors and customers.
2. The ethics code must be
enforced.

4-12
 * Setting
Corporate
HOW to PREVENT UNETHICAL Ethical
BEHAVIORS Standards
LG4
*
1. Managers must communicate the organization’s
vision on ethical behavior.

2. Organizations must have a code of ethics.

3. Policies have to be enforced regarding ethical

offences.

4. Ethical responsibility must be taught to all

employees.

Source: James Gehrke, Magnify Leadership & Development, November 2008. (continued)
4-13
 * Setting
Corporate
HOW to PREVENT UNETHICAL Ethical
BEHAVIORS Standards
LG4
*
1. Discussions of ethics must be included in the
decision-making process.

2. Accountability must be taken seriously at all

levels in the organization.

3. Organizations must act fast when a crisis occurs.

4. Employees must know they have to defend and

maintain the company’s reputation.
Source: James Gehrke, Magnify Leadership & Development, November 2008.

4-14
 *Corporate
CORPORATE SOCIAL Social
Responsibility
RESPONSIBILITY
LG5
*
• Corporate Social Responsibility (CSR)
-- The concern businesses have for the welfare of
society.
• CSR is based on a commitment
to integrity, fairness, and
respect.

• CSR proponents argue that

businesses owe their existence
to the societies they serve and
cannot exist in societies that
fail.
4-15
 *Corporate
CORPORATE PHILANTHROPY Social
Responsibility
and SOCIAL INITIATIVES
LG5
*
• Corporate Philanthropy -- Includes charitable
donations.

• Corporate Social Initiatives -- Includes

enhanced forms of corporate philanthropy.

4-16
 *Corporate
CORPORATE RESPONSIBILITY Social
Responsibility
and POLICY LG5
*
• Corporate Responsibility -- Includes
everything from hiring minority workers to making
safe products, minimizing pollution, using energy
wisely, and providing a safe work environment.

• Corporate Policy -- The position a firm takes on

social and political issues.

4-17
 * Corporate
To WHOM MUCH HAS Social
BEEN GIVEN… Responsibility
America’s Charitable Giving LG5
*

Source: Wall Street Journal, www.wsj.com, June 23, 2008.

4-18
 *
PRESIDENT KENNEDY’S BASICResponsibility
to Customers
RIGHTS of CONSUMERS LG5
*
• The Right to Safety

• The Right to be Informed

• The Right to Choose

• The Right to be Heard

4-19
 *
INSIDER TRADING Responsibility
to Investors

LG5
*
• Insider Trading -- Insiders
using private company information
to further their own fortunes or
those of their family and friends.

• Unethical behavior does

financial damage to a company
and investors are cheated.

4-20
 *
RESPONSIBILITY to Responsibility
to Employees
EMPLOYEES
LG5
*
• Create jobs and provide a chance for upward
mobility.
• Treat employees with respect.
• Offer salaries and benefits that help employees
reach their personal goals.

4-21
 *
SOCIAL AUDITING Social Auditing

LG5
*
• Social Audit -- A systematic evaluation of an
organization’ s progress toward implementing
programs that are socially responsible and
responsive.

• Four Types of Social Audit Watchdogs

- Socially conscious investors
- Environmentalists
- Union officials
- Customers
4-22
 What do the watchdogs do?
• Investors – insist on high stds to suppliers
• Environmentalists – they name companies
that do not comply with preset standards
• Union officials – hunt violations and force
compliance to avoid public scrutiny
• Customers – make buying decisions based on
social conscience
 * International
INTERNATIONAL ETHICS Ethics and
Social
Responsibility
LG6
*
• Many businesses want socially responsible
behavior from their international suppliers.
• The Joint Initiative on Corporate Accountability
and Workers’ Rights was designed to make
creating a single set of labor standards and
inspecting factories easier.
• In the 1970s, the Foreign Corrupt Practices Act
criminalized the act of paying foreign
businesses or government leaders in order to
get business.
4-24
 PROFESSIONAL ETHICS
• 1. HONESTY
• 2. INTEGRITY
• 3. FAIRNESS
• 4. PURSUIT OF EXCELLENCE
• 5. ACCOUNTABILITY