Developing a

Business Mindset

Chapter 4 Business in
Business Ethics and
Corporate Action 8e
Social Responsibility Bovée/Thill
 Learning Objectives

1. Discuss what it means to practice good

business ethics, and highlight three
factors that influence ethical decision
making.
2. Define corporate social responsibility
(CSR), and explain the difference
between philanthropy and strategic CSR.
3. Distinguish among the four perspectives
on corporate social responsibility.
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 Learning Objectives (cont.)

4. Discuss the role of business in protecting

the natural environment, and define
sustainable development.
5. Identify four fundamental consumer rights
and the responsibility of business to
respect them.
6. Explain the responsibilities businesses
have toward their employees.

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Exhibit 4.1
Public Perceptions of
Business Ethics

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 What is Ethical Behavior?

• Ethics • Transparency
 The rules or  The degree to
standards which affected
governing the parties can observe
conduct of a person relevant aspects of
or group transactions or
decisions

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 What is Ethical Behavior? (cont.)

• Insider trading
 The use of unpublicized information that an
individual gains from the course of his or her
job to benefit from fluctuations in the stock
market

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 What is Ethical Behavior? (cont.)

• Competing fairly and honestly

• Communicating truthfully
• Being transparent
• Not causing harm to others

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Factors Influencing Ethical Behavior

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 Organizational Behavior

• Code of ethics
 A written statement that sets forth the
principles that guide an organization’s
decisions
• Whistle-blowing
 The disclosure of information by a company
insider that exposes illegal or unethical
behavior by others within the organization

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 Ethical Decision Making

• Ethical lapse
 A situation in which an individual or a group
makes a decision that is morally wrong,
illegal, or unethical
• Ethical dilemma
 A situation in which more than one side of an
issue can be supported with valid arguments

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Finding the Right Answer When Faced
with an Ethical Dilemma

• Make sure you frame the situation

accurately, taking into account all relevant
issues and questions.
• Identify all parties who might be affected
by your decision.
• Be as objective as possible.

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Finding the Right Answer When Faced
with an Ethical Dilemma (cont.)

• Don’t assume that other people think the

way you do.
• Watch out for conflicts of interest.
• Conflict of interest
 A situation in which competing loyalties can lead
to ethical lapses, such as when a business
decision may be influenced by the potential for
personal gain

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Exhibit 4.3 Approaches to Resolving
Ethical Dilemmas

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 Corporate Social Responsibility

• Corporate social responsibility (CSR)

 The idea that business has obligations to
society beyond the pursuit of profits

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 The Relationship between
Business and Society
• Consumers in contemporary societies
enjoy and expect a wide range of
benefits, from education and healthcare
to credit and products that are safe to
use.
• Profit-seeking companies are the
economic engine that powers modern
society; they generate the vast majority of
the money in a nation’s economy.
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 The Relationship between
Business and Society (cont.)

• Much of what we consider when

assessing a society’s standard of living
involves goods and services created by
profit-seeking companies.
• Companies cannot hope to operate
profitably without the many benefits
provided by a stable, functioning society.

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 Philanthropy vs. Strategic CSR

• Philanthropy
 The donation of money, time, goods, or
services to charitable, humanitarian, or
educational institutions
• Strategic CSR
 Social contributions that are directly aligned
with a company’s overall business strategy

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 Perspectives on Corporate
Exhibit 4.4
Social Responsibility

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 Defensive CSR

• Nongovernmental organizations
(NGOs)
 Nonprofit groups that provide charitable
services or promote social and environmental
causes

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 CSR: The Natural Environment

• First, the creation, delivery, use, and

disposal of products that society values
virtually always generate pollution and
consume natural resources.
• Second, “environmental” causes are
often as much about human health and
safety as they are about forests, rivers,
and wildlife.

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 CSR: The Natural Environment (cont.)

• Third, many of these issues often require

tough trade-offs, occasional sacrifice,
disruptive change, and decision making in
the face of uncertainty.

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Exhibit 4.5 Sources of Electricity in
the United States

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 Efforts to Conserve Resources
and Reduce Pollution

• Cap and trade

 A type of environmental policy that gives
companies some freedom in addressing the
environmental impact of specified pollutants,
by either reducing emissions to meet a
designated cap or buying allowances to offset
excess emissions

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 Major Federal
Environmental Legislation
• Clean Air Act (1963)
• Solid Waste Disposal Act (1965)
• National Environmental Policy Act (1969)
• Resource Recovery Act (1970)
• Clean Water Act (1972)
• Noise Control Act (1972)
• Endangered Species Act (1973)
• Safe Drinking Water Act (1974)
• Toxic Substances Control Act (1976)
• Nuclear Waste Policy Act (1982)
• Marine Protection, Research, and Sanctuaries Act (1988)
• Oil Pollution Act (1990)
• Energy Independence and Security Act (2007)
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 The Trend towards Sustainability

• Sustainable development
 Operating business in a manner that
minimizes pollution and resource depletion,
ensuring that future generations will have vital
resources

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 CSR: Consumers

• Consumerism
 A movement that pressures businesses to
consider consumer needs and interests
• Identity theft
 A crime in which thieves steal personal
information and use it to take out loans and
commit other types of fraud

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 CSR: Consumers (cont.)

• The right to buy safe products – and to

buy them safely
• The right to be informed
• The right to choose which products to buy
• The right to be heard

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 CSR: Employees

• Discrimination
 In a social and economic sense, denial of
opportunities to individuals on the basis of
some characteristic that has no bearing on
their ability to perform in a job

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 CSR: Employees (cont.)

• Affirmative action
 Activities undertaken by businesses to recruit
and promote members of groups whose
economic progress has been hindered
through either legal barriers or established
practices

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Exhibit 4.8 Fatal Occupational Injuries

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 Applying What You’ve Learned

1. Discuss what it means to practice good

business ethics, and highlight three
factors that influence ethical decision
making.
2. Define corporate social responsibility
(CSR), and explain the difference
between philanthropy and strategic CSR.
3. Distinguish among the four perspectives
on corporate social responsibility.
Copyright © 2017 Pearson Education, Inc. 4-31
 Applying What You’ve Learned (cont.)

4. Discuss the role of business in protecting

the natural environment, and define
sustainable development.
5. Identify four fundamental consumer rights
and the responsibility of business to
respect them.
6. Explain the responsibilities businesses
have toward their employees.

Copyright © 2017 Pearson Education, Inc. 4-32

Copyright © 2017 Pearson Education, Inc. 4-33