What do you know

about the GREAT

Wall of China?
Truth Behind the Great Wall of China
The Great Wall of China is one of the Seven Wonders of
the World. It was originally built centuries ago to keep out
all invading armies. It was built so tall and so wide that
no army could penetrate it. At least that’s what they
thought.

The Chinese were successfully invaded three times

during the first one hundred years. In none of those
cases, however, did the enemy climb the wall, or tunnel
through it. In every case, they simply bribed the guards
at the gate.
What an illustration for us today. We spend so
much time, effort and money attempting to
create programs to solve problems. We work
on the “outside” to prevent anything bad from
happening. Unfortunately, we fail to address
the real need inside our hearts.

One Bad Apple affects the whole farm…

One Bad fish affects the whole pond!

Business Ethics and
Social Responsibility
By

FRANCOIS L. DETERA, MM.

Teacher III, SNHS-SHS, ABM Subject Group
If you STAND
for Nothing,
you FALL for
anything.
 Learning Objectives:

1. Understand the mechanisms whereby companies

can be made to act in the best interest of
shareholders, stakeholders and society as a
whole;
2. Gain knowledge of general ethical principles as
applied to the special situations of business and
the ability to make informed judgments through
case analyses; and
3. Develop ability to formulate basic strategies in
relation to corporate ethics and governance.
 Chapter 1
The Role of
Business in
Social &
Economic
Development
 Organization
- a collection of persons working together for a
common purpose
- group of individuals who are cooperating
willingly and effectively for a common end
- made up of people and their relationships with
one another.
Business Organization
- a group of people with varied skills, which uses
property or talents, to produce goods and services,

which can be sold to others for more than their costs.

Or it may be considered as a system through which
economic activity is organized and directed
by those who seek to make a profit.

- includes any lawful activity carried on continuously,

which involves buying and selling,
or manufacturing, or financing, or the rendering of a
service for money.
Kinds of Business

1. Commerce - the transfer or exchange of goods and

services with the movement of goods from point of
production to point of consumption.
2. Industry - primarily concerned with the creation of
form utility or the production of goods
a. genetic – agriculture, foresty
b. extractive - mining
c. manufacturing – finished product
d, construction - infrastructure
3. Services – cater to personal needs of people
a. recreation
b. personal
c. finance

Objectives of Business
1. Creation and distribution of products
2. Personal satisfaction – profits, salaries
3. Protection/enhancement of resources
4. Economy and effectiveness of operation
 Purpose of Business Firm

Social point of view

Firms exist to supply goods and services
to consumers as efficiently as possible.
Individual point of view
The firm exists to supply income, power,
prestige, creative satisfaction or a
combination of these to those who work
for it or with it.
Forms of Business Organization:

1.Sole proprietorship – is a business that is

owned by a single individual who has full control
and authority in running this kind of business
- owner owns all the assets and is solely
responsible for all the liabilities of the company.
- He enjoys all the profits but also suffers all
losses of this business.
- must apply for a business trade name and be
registered with the Department of Trade and
Industry.
Forms of Business Organization:

2. Partnership - a business organization where

two or more persons contribute money,
property, or industry to carry on a business
with the intention of dividing the profit
among themselves.
General – partners have unlimited liability for the debts
and obligation of the partnership.
Limited – one or more partners have unlimited liability
and limited partners have liability only up to
the amount of their capital contributions.
Forms of Business Organization:

3. Corporation– composed of juridical persons

established under the Corporation Code and
regulated by the SEC with a personality separate
and distinct from that of its stockholders.
- The liability of the shareholders of a corporation
is limited only to the amount of their share
capital.
- It consists of at least five to 15 incorporators, each
of whom must hold at least one share and must
be registered with the SEC.
- Minimum paid up capital is P5,000.
Socio-economic Contribution of Business Organization

1. Employment
provide people with:
a. income
b. satisfaction
c. sense of identity and pride
2. Technological change and innovation
a. lower costs
b. product quality
c. quick service
Socio-economic Contribution of Business
Organization

3. Choices
a. what to buy
b. what to eat
c. what to pursue
4. Entrepreneurship
a. to run own business
b. build substantial wealth
5. Social role
a. interact with other people
b. take people overseas to situations they have not
experience before
 Principles Underlying Business
1. Fairness relates to being just, equitable, and
impartial.
- Protect Shareholders rights
- Treat all shareholders including
minorities, equitably
- Provide effective redress for violations
 Justice
Involves evaluations of fairness or the disposition to
deal with perceived injustices of others
• Distributive justice: An evaluation of the results of a
business relationship
• Procedural justice: Based on the processes and
activities that produce the outcomes or results
• Interactional justice: Based on an evaluation of the
communication processes used in business
relationships
QUOTE OF THE DAY

“Praise Progress. It’s a

moving TARGET.”
– Ken Blanchar, et.al
 INTERPRETATION:
When a good performance is
followed by something positive,
naturally people want to continue that
behaviour. It’s important to emphasize
here not to wait for exactly right
behaviour before you respond
positively. Otherwise, you might wait
forever. 
 Justice as Freedom: Libertarisanism
• Libertarians consider it wrong to tax someone to provide benefits to
someone else.
• No way of distributing goods can be just or unjust apart from an
individual's free choice.
• Robert Nozick, a leading libertarian, suggests this principle as the
basic principle of distributive justice:
o “From each according to what he chooses to do, to each
according to what he makes for himself (perhaps with the
contracted aid of others) and what others choose to do for him
and choose to give him of what they've been given previously
(under this maxim) and haven't yet expended or transferred.”

TME 2 © Dr Keith Y.N. Ng 23

Justice as Fairness: John Rawls’ Theory

• Principle 1 – Principle of Equal liberty

o each citizen's liberties protected from invasion by others
o must be equal to those of others.
o basic liberties = the right to vote, freedom of speech and
conscience and the other civil liberties, freedom to hold
personal property, and freedom from arbitrary arrest.

• Principle 2a – Difference Principle

o assumes a productive society will incorporate inequalities
o asserts that steps be taken to improve the position of the most
needy members of society,
o unless such improvements would so burden society that they
make everyone, including the needy, worse off than before

TME 2 © Dr Keith Y.N. Ng 24

Justice as Fairness: John Rawls’ Theory
• Principle 2b – Principle of Fair Equality of Opportunity
o everyone should be given an equal opportunity to qualify for
the more privileged positions in society's institutions.
o a principle is moral if it would be acceptable to a group of
rational persons who know they will live under it themselves.
o Incorporates the Kantian principles of reversibility and
universalizability, and treats people as ends and not as means.
• Main Criticism:
o just because a group of people would be willing to live under a
principle does not mean that it is morally justified.

TME 2 © Dr Keith Y.N. Ng 25

 Principles Underlying Business
2. Accountability The obligation of an individual or an
organization to account for its activities, accept
responsibility for them, and to disclose the result in a
transparent manner. It includes responsibility for money
or other entrusted property.
- Ensure that management is accountable to the
Board
- Ensure that the Board is accountable to
shareholders
 Accountability
It is about being responsible to someone for actions
taken; about being able to explain, clarify and justify
actions. It implies that someone has a right to know
and hold an organization to account; and that the
organization has a duty to explain and account for
its actions.
Why is accountability important?
• Civil society organizations are often criticized for
being:
• Inefficient or wasteful
• Unprofessional or lacking reliable systems
• Not representative or not legitimate
• Being accountable disproves these perceptions
Principles Underlying Business
3. Transparency is… Making information publicly
available (routinely not only
when it is requested)
• Being clear about what your purpose, aims,
activities and structures are
• Being open about who your loyalties are to (eg.
churches, political parties, donors, other
organizations) – declaring conflicts of interest
• Being consultative
• Being committed to accuracy and integrity
Transparency
Ensure timely, accurate disclosure on all
material matters, including the financial situation,
performance, ownership and corporate
governance.
For example
• Printing and distributing an annual report each year
• Making your accounts easily available
• Having a strategic plan and periodically assessing
progress against the plan
• Providing updates to community & stakeholders

• Literally… something is transparent when we can

see through it!
Why is transparency important?

• It shows our communities, members, stakeholders, partners,

donors that we are being behaving ethically
• Builds confidence in us
• Sets standards for others in our organization (and for other
organizations)
• Remember that with transparency PERCEPTION IS AS
IMPORTANT AS REALITY!
• This means that behaving ethically isn’t enough – we need to
clearly show that we are behaving ethically.
• Put simply, accountability is about clear roles and
responsibilities and systems to support this
(behaving responsibly)
• Transparency is about accurate information being
made openly and easily available (behaving
honestly)
• The two go together – a good organization will
have clear roles and responsibilities as well as
widely available information about itself.
A pregnant female bank teller was ordered by management
to go on leave as soon her belly got big enough that if she
were to face against the wall her belly would touch the wall
before her feet do. Outraged by the sexual discrimination,
she demanded that all employees male and female should
undergo this face-the-wall test, to which the management
reluctantly complied. The bank sent on leave one female
teller and three men, all vice presidents.

“All in a Day’s Work,” Reader’s Digest

 Discuss
• Examples of corrupt, secretive, evasive
behaviors in organizations
• Examples of how these behaviors might be
resolved by more transparent behavior
For example: the same person always goes to
conferences and no one else does…
• …produce a roster for conference attendance or
some other system that will ensure more equal
opportunities for everyone
Exercise
• Identify two to three ways that accountability in your
organization can be improved (accountability
mechanism).
• If you want to focus on your own organization, identify
at least two for your organization.
QUOTE OF THE DAY

“WHEN MISTAKES
OCCUR, REDIRECT THE
ENERGY.”
– Ken Blanchard, et.al.
 INTERPRETATION:

When people make mistakes

they usually know it. What they
really would like is ADVICE on how
they can avoid making the same
mistake again. That’s what
redirection is all bout – getting
people’s energy refocused on the
right things. 
 KRAFT
The Kraft code of ethics contains just 10 short rules of ethical
behavior that all employees must follow. The introduction to the
Kraft code of ethics suggests that employees should let values
guide their actions in all cases. The code also stresses that if
something seems wrong, it should be addressed directly. The
code includes a speaking-up policy that requires employees to
speak up if they are aware of any violations of the code, even
those they have committed themselves. The 10 rules are: Make
food that is safe to eat; market responsibly; treat people fairly;
respect the free market; compete fairy; respect the environment;
deal honesty with the government; keep honest books and
records; never trade on inside information; give Kraft Foods your
complete business loyalty.
 Quote of the Day

No one can make you

feel inferior without
your permission!
- Eleanor Roosevelt
 Interpretation:
I go out into the world every day
with the attitude that my “OKAYNESS”
is not up for grabs. I firmly believe that
“God did not make junk.” This does not
mean I don’t have areas of my life that
need improvement- just that at my
basic core, I’m okay.
 Company
Policies/Practices
 Fundraising Policy
• Knowledge of and adherence to company’s
requirements
• Solicitation materials are accurate, truthful and
candid
• Reasonableness of costs encouraged
• Inform public and donors with information on
fundraising costs and practices
 Financial Statements

 Financial Statements
 Directors as stewards of charity’s financial and other resources
 Board (or authorized committee) should conduct periodic reviews of financial
statements, auditor’s letters or finance and audit committee reports
 Audited Financial Statements
 State law may impose audit requirements
 Audit Committee: may be appropriate to ensure independence and competence of
auditor, quality of audit, and independence and competence of key personnel on
audit engagement team
 Financial Oversight
 Procedures to assure that assets used in accordance with mission
 Reporting to the Board on financial activities
 Discussion by the Board of financial activities
 Preparation of independent accountant’s report
 Preparation of management letter by independent accountant

 Document Retention
 Existence of document retention policy
 Adherence to document retention policy
 Documentation of board meetings and retention of such documentation
Chapter 2
Foundations
of the
Principles of
Business
Ethics
 Ethics
• Ethics
o The established customs, morals, and
fundamental human relationships that exist
throughout the world.
• Ethical Behavior
o Behavior that is morally accepted as good or right
as opposed to bad or wrong.
 Business Ethics
• The application of the general ethical rules to
business behavior.
• If a society deems dishonesty to be unethical
and immoral, then anyone in business who is
dishonest with employees, customers, creditors,
stockholders, or competition is acting unethically
and immorally.
 Ethical Dilemma
• A situation in which a person must
decide whether or not to do
something that, although beneficial
to oneself or the organization, may
be considered unethical and
perhaps illegal.
 Ethical Dilemma
A complex situation that will often involve an
apparent mental conflict between moral options,
in which to obey one would result in
transgressing another.
* Truth vs. Loyalty
* Short term vs. Long term
* Justice vs. Mercy
* Individual vs. Community
Truth vs. Loyalty
Do you tell the truth or remain loyal to the person
or org. that is asking you not to reveal the truth?
Short term vs. Long term
- Does your decision have a short term consequence or
a longer term consequence?
Justice vs. Mercy
- Do you perceive this issue as a question of dispensing
justice or mercy? (which one are you comfortable with?
Individual vs. Community
- Will your choice impact one individual or a wider
group of community?
 On-the-Job Ethical Dilemmas
Situation in which a business
decision may be influenced for
personal gain.
Employee’s disclosure of
illegal, immoral, or
unethical practices in the
organization.
Telling the truth and
adhering to deeply felt
ethical principles in
business decisions.
Businesspeople expect
employees to be loyal
and truthful, but ethical
conflicts may arise.
Ethical Dilemmas Faced by Managers

Should I conduct
personal business
on company time?
 Analyzing Ethical Dilemmas in Business
• Business managers and employees need a set of
decision guidelines that will shape their thinking
when on-the-job ethics issues occur
• These guidelines should help them
o Identify and analyze the nature of an ethical
problem, and
o Decide which course of action is likely to produce
an ethical result
Take a break…
ETHICAL DILEMMA:

You have worked at the same company with your best friend
for the last ten years-in fact, he told you about the job and got
you the interview. He works in the marketing department and
is up for the promotion to marketing director-a position he has
been wanting for a long time. You work in sales, and on your
weekly conference call, the new marketing director-someone
recruited from outside the company-joins you. Your boss
explains that although the formal announcement hasn’t been
made yet, the company felt it was important to get the new
director up to speed as quickly as possible. He will be joining
the company in two weeks, after completing his two weeks’
notice with his current employer. Should you tell your friend
what happened?
 ETHICAL DILEMMA:

Take me Out to the Cheap Seats

My dad takes me to a lot of baseball games and

always buys the cheapest tickets in the park.
When the game starts, he moves to a better,
unoccupied seats, dragging me along. It
embarrasses me. Is it okay for us to sit in seats
we didn’t pay for?
 Fostering Business Ethics
Code of Ethics
o Describes the general value system,
ethical principles, and specific ethical
rules that a company tries to apply.
Code of Ethics sets a standard for which each
member of the profession can be expected to meet.
It is a promise to act in a manner that protects the
public’s well-being.

It describes the minimum requirements

for conduct, and behavioral expectations rather
than specific activities.

It allows individuals to hold themselves to the highest

standards in any given behavior or action.
 Codes of Ethics...

• are formal statements of what an organization

expects in the way of ethical behavior
o will solve every dilemma
o provide rules & guidelines
o reflects senior management’s desire for
compliance with values, rules & policies in
support of an ethical climate
• should be specific enough to be reasonably
capable of preventing misconduct
 ETHICAL DILEMMA:

Take me Out to the Cheap Seats

My dad takes me to a lot of baseball games and

always buys the cheapest tickets in the park.
When the game starts, he moves to a better,
unoccupied seats, dragging me along. It
embarrasses me. Is it okay for us to sit in seats
we didn’t pay for?
 QUOTE OF THE DAY

“SUCCESS is NOT
FOREVER and FAILURE is
NOT FATAL.”
– Ken Blanchard & Don Shula
 INTERPRETATION:
Don Shula had a 24 hour rule. He allowed
himself, his coaches and his players a maximum of
24 hours after a football game to celebrate a
victory or bemoan a defeat. During that time, they
were encouraged to experience the thrill of victory
or the agony of defeat as deeply as possible. Once
the 24-hour rule had passed, they put it behind
them and focused their energies on preparing for
the next opponent. DON’T GET A BIG HEAD WHEN
YOU WIN OR TOO DOWN IN THE DUMPS WHEN YOU
LOSE. KEEP THINGS IN PERSPECTIVE. SUCCESS IS NOT
FOREVER, AND FAILURE ISN’T FATAL AT ALL. 
Ethical Considerations in Transacting with
Employees
1. Recruitment

Screening – to identify those applicants who have a good chance

of qualifying for the job.

Job description – lists pertinent details about the job,

including its duties, responsibilities, working
conditions, and physical requirements.
Job specification – describes the qualifications an
employee needs, such as skills, educational
experience, appearance, and physical attributes.
Ethical Considerations in Transacting with
Employees

2. Selection
Tests - are designed to measure the applicant’s verbal,
quantitative and logical skills.
Aptitude tests – help determine job suitability.
Skill tests – measure the applicant’s proficiency in specific
areas.
Personality tests – helps determine the applicant’s
maturity and sociability.
Dexterity tests – determine how nimbly applicants can
use their hands and fingers.
Interviews – cautions against rudeness, and hostility in
interviewing applicants
Ethical Considerations in Transacting with
Employees
3. Promotions

Seniority – longevity on a job or with a firm.

Inbreeding – the practice of promoting
exclusively from within the firm
Nepotism – the practice of showing favoritism
to relatives and close friends

Note: Management’s Prerogative

Ethical Considerations in Transacting with
Employees
4. Discipline and discharge
Discipline (disciple) “to teach so as to mold”.
Managers are obliged to discipline workers who violate
behavioral standards because it is necessary for the good of
the firm, other employees, and society at large.

Labor Law provision– reasons for discipline or discharge

that deal directly with job performance.
Due process – refers to the specific and systematic means
workers have of appealing discipline and discharge. It is
the step- by-step procedure by which an employee can
appeal a managerial decision.
 Four Methods of Ethical Reasoning
Virtues
o Values and character are critical determining factors
Utilitarian
o Compares benefits and costs of a decision, policy or action
o Costs and benefits can be economic, social or human
Rights
o Person or group is entitled to something or to be treated in a
certain way
o Examples of basic human rights are right to life, safety, and due
process
Justice
o Means benefits and burdens are distributed equally, according to
some accepted rule
Four Methods of Ethical Reasoning
 Applying Ethical Reasoning to Business Activities
Use the virtues, utility, rights, and justice framework as a tool to
analyze real business ethics dilemmas

• Ethical analysis is complete, the decision maker should ask the

question: Do all of the above ethics approaches lead to the same
decision?
o If all the answers are “Yes”, the proposed action is ethical
o If all the answers are “No”, the action is unethical and needs
to be reconsidered
o If “Yes” and “No” answers are mixed, you must decide which
takes priority
 Moral Philosophy
• Principles or rules that people use to decide
what is right or wrong
o Presents guidelines for determining how to settle conflicts in human interests
o Guides businesspeople in formulating strategies and resolving ethical issues

No single moral philosophy is accepted by

everyone
Moral Philosophy Perspectives

• Teleology
o Egoism
o Utilitarianism
• Deontology
• The Relativist
• Virtue Ethics
• Justice Perspectives
o Distributive
o Procedural
o Interactional
 Teleology
Considers acts as morally right or acceptable if
they produce some desired result such as
pleasure, knowledge, career growth, the realization
of a self interest, or utility
• Assesses moral worth by
looking at the consequences

individual, called consequentialist

Source: Stockbyte
 Categories of Teleology
1. Egoism: Right or acceptable behavior defined in terms
of consequences to the individual
o Maximizes personal interests
Enlightened egoists take a long-term perspective
and allow for the well being of others
2. Utilitarianism: Seeks the greatest good for the
greatest number of people
Rule utilitarians determine behavior based on
principles designed to promote the greatest utility
Act utilitarians examine a specific action itself, not rules
governing it
 Deontology
• Refers to moral philosophies that focus on the rights of
individuals and on the intentions associated with a
particular behavior
o Believe that individuals have certain absolute rights
Rule deontologists believe that conformity to general
moral principles determines ethicalness
Act deontologists hold that actions are the proper basis
on which to judge morality or ethicalness
 Relativist Perspective
- the belief that concepts such as right and wrong, goodness and
badness, or truth and falsehood are not absolute but change from
culture to culture and situation to situation
• From the relativist perspective, individuals and groups derive
definitions of ethical behavior subjectively from experience
Descriptive relativism relates to observing cultures
Metaethical relativists understand that people naturally see
situations from their own perspectives
o No objective way of resolving ethical disputes between cultures
Normative relativists assume that one person’s opinion is as
good as another’s
Case:
4 security guards were dismissed after they
refused to shave off their beards

Their reason for the refusal was that they belonged

to Baptised Nazareth Group, which prevented
them from shaving their beards.

Question: Is there illegal dismissal and religious

discrimination
Court in favour of the Employer because:

it is an inherent job requirement that guards be

clean-shaven because they need to be neat for
work

employer is entitled to set uniform dress codes as

a condition of employment
will the employer be required to reasonably
accommodate the employee’s religious beliefs?

- Lucas v Engelbrecht SA (Pty) Ltd

* employee was dismissed after she refused to
wear trousers because of her Christian beliefs
not to wear men’s clothes
* employer justified the rule on the basis that
there was an Occupational Safety Regulation
which required staff not to wear `loosely
fitting clothes’ near moving machinery
* dismissal was unfair because she had made
an effort to wear heavy, denim narrow skirts
 Chapter 3
Social
Responsibility
of
Entrepreneurs
Responsibilities To the
of Business general
public

To Business To
customers Social employees
Responsibility

To
investors
and
financial
community
Responsibilities To the general public
Public Health Issues What to do about inherently
dangerous products such as alcohol, tobacco,
vaccines, and steroids.
Protecting the Environment Using resources
efficiently, minimizing pollution.
• Recycling Reprocessing used materials To the general
public
for reuse.
Developing the Quality of the Workforce
Enhancing quality of the overall workforce
through education and diversity initiatives. To customers
Business Social To
Responsibility employees

Corporate Philanthropy Cash contributions,

donations of equipment and products, and
supporting the volunteer efforts of company
To investors and
financial community
employees.
Responsibilities To customers
The Right to Be Safe Safe operation of products,
avoiding product liability.
The Right to Be Informed Avoiding false or
misleading advertising and providing effective
customer service.
The Right to Choose Ability of consumers
To the general
to choose the products and services they public

want.
The Right to Be Heard Ability of consumers to
express legitimate complaints to the To customers
Business Social To
Responsibility employees

appropriate parties

To investors and
financial community
Responsibilities To employees
Workplace Safety Programs for Occupational
Safety and Health Administration.
Quality-of-Life Issues Balancing work and family
through flexible work schedules
Ensuring Equal Opportunity on the Job
Providing equal opportunities to all employees To the general
public
without discrimination; many aspects regulated
by law.
Gender Discrimination equal pay for equal work
Business Social To
without regard to gender. To customers Responsibility employees

Sexual Harassment Avoiding unwelcome actions

of a sexual nature;
To investors and
financial community
Responsibilities To Investors and Financial Community

• Obligation to make profits for

shareholders.
• Expectation of ethical and moral
behavior. To the general
public

• Investors protected by
regulation by the
Securities and Exchange To customers
Business Social
Responsibility
To
employees

Commission
and state regulations.
To investors and
financial community
Responsibilities To suppliers/vendor partners
- Prompt payment for delivered
goods

- Regular orders w/ acceptable

profit margin
To the general
public
Responsibilities to Creditors

• Principal and interest payments Business Social To

To customers Responsibility employees

• Repayment of debt according to

the agreed schedule
To investors and
financial community
Responsibilities To retailers/wholesalers
• Accurate deliveries of products on
time

• Products at a reasonable cost

• Safe and reliable products To the general

public

Responsibilities to Government

• Tax revenue
Business Social To
To customers Responsibility employees

• Operation in compliance with all

relevant legislations To investors and
financial community
 - The actions of an organization that are targeted
toward achieving a social benefit over and above
maximizing profits for its shareholders and meeting
all its obligations.

- It is a shared pattern of beliefs, expectations and

meanings that influence and guide the thinking &
behaviors of the members of that organization.
 Discretionary
Responsibility

D
Ethical Responsibility

Legal Responsibility

Economic Responsibility
1. Economic Responsibilities
- Be profitable
2. Legal Responsibilities
- Obey the Law
3. Ethical Responsibilities
- Do what is right.
4. Discretionary Responsibilities
- Contribute to the community and

Quality of life
Economic Responsibilities

- Based on the underlying foundation of

why a firm has been created which is to
develop economic value.
-Firm has a responsibility to use the
resources available to produce goods and
services for society.
Examples:
- Maximizing earnings per share
- Generating a high & consistent level of
profitability
- Establishing and maintaining a strong
competitive position
- Operating the firm at a high efficiency
level
Legal Responsibilities
The laws and regulations that all firms are
expected to abide by as they perform their
daily functions.
Example:
Operating consistent with gov’t and
legal expectations
Displaying complete compliance w/ all
regulations
Ethical Responsibilities
Change over time because they are based on
expectations of society
Examples:
Meeting expectations of both social and ethical norms
Ability to adapt to new or evolving ethical and moral
norms
Being a good corporate citizen
 Discretionary Responsibilities
-Those responsibilities in which society does not
have a clear message to present to businesses
as to what their courses of action should be
-Left in the hands of the managers to make the
proper judgment
-not considered unethical if they do not participate
in these discretionary responsibilities
Examples:
Giving to charitable org’n.
Providing drug treatment
programs
Providing day care centers
Take a break…
 Activity

Have you been to any fast food chains? What

services did you receive from them? Were you
satisfied with the way you were treated by the
company or its staff? Did they provide what
you wanted quickly and accurately? Was the
staff member friendly or rude? Based on the
discussion above, suggest five qualities or
traits that a successful staff member in the fast
food business should possess.
 Chapter 4
Business
Beyond Profit
Motivation
 What is corporate citizenship?

Implies that the

organization is a
responsible citizen in
meeting all its
obligations
 What is corporate conscience?

Implies that the

organization is run
with an awareness
of its obligations to
society
 1. Instrumental Approach
2. Social Contract Approach
Instrumental Approach

Argue that the only obligation of a

corporation is to maximize profits for
its shareholders in providing goods
and services that meet the needs of its
customers
Social Contract Approach

The perspective that a corporation

has an obligation to society over
and above the expectations of its
shareholders
STAKEHOLDER’S THEORY DEVELOPMENT
1. Berle
-all the powers given to a corporation are to
be used to create benefits to the interests of
the shareholders
-Argued that managers w/in a corporation
should consider themselves trustees and
guardians of the investments made by the
shareholders
 2. Dodd
-Not only should the interests of the
shareholders be considered, but corporations
also need to recognize their obligations to the
community, to their workers and to the
consumers
-Argued that corporations are allowed to
become legal entities because they serve a
purpose to the community instead of just
providing opportunities for financial gain by its
owners.
 3. Freeman
-Believed a stakeholder was any individual or
group that can impact or be impacted by the
actions of the firm
-Definition encompasses any individual or group
that has a vested interest in the operations of
the firm
Examples of CSR Best
Practices
 Starbucks, USA
 Leading retailer,
roaster and brand
of specialty coffee
in the world

 Has more than

12,000 company-
operated and
licensed locations
in North America,
Latin America,
Europe, the Middle
East and Asia
Pacific.
 Starbucks, USA
• Entered into partnership with Conservation International in 1998.

• The aim was to promote the adoption of agricultural practices that are
socially, environmentally and economically sustainable.

• Coffee and Farmer Equity Practices (C.A.F.E. Practices) offer incentives

to suppliers who demonstrate independently verified performance of
environmental and social criteria.

• C.A.F.E. Practices has become a model for addressing environmental

and social concerns through a company's supply chain.
 Statoil, Venezuela
• Statoil ASA was a Norwegian
petroleum company established in
1972, now part of StatoilHydro.

• Had negative experience

involving human rights issues in
several countries, including
Venezuela.

•This prompted its subsequent

selection of human rights as a
core value of its business and the
focus of its CSR program.
 Statoil, Venezuela
• Partnered with the United Nations Development Programme (UNDP),
Amnesty International to train local judges on basic human rights and the
legal processes in 1999.

• Statoil made significant financial contributions for the training, but

maintained a low profile by monitoring progress rather than trying to control
the programme.

• The reformed judicial system in 2001 was accompanied by new legislation

with a stronger human rights focus and a new penal code.

• UNDP found the Venezuelan project as ‘a best-practice case’, for possible

replication in other countries.
 Hamburger University Facility
•In 1993, McDonald’s invested $40
million in Hamburger University, a
130,000- square foot facility on an 80-acre
campus located at McDonald’s Corporate
in Oak Brook, IL.
•13 teaching room
•300 seat auditorium
•12 interactive education team rooms
•3 kitchen labs
•State of the art service training labs

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Roy 2009
 Hamburger University
•Hamburger University has become the
company’s global center of excellence for
McDonald’s operations training and
leadership development.

•McDonald’s training mission is to be the

best talent developer of people with the
most committed individuals to Quality,
Service, Cleanliness and Value in the world.
•First company to develop a global
training center

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Roy 2009
Hamburger University cont.
•Hamburger University students
can earn credit toward a college
degree through their course work.

•Ray Kroc once said, “If we are

going to go anywhere, we’ve got
to have talent. And, I’m going to
put my money in talent.”

•McDonald’s spends $1 Billion on

training and development every
year.

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2009 126
Ronald McDonald House Charities
•The mission of Ronald McDonald Charities is to
create, find and support programs that directly
improve the health and well being of children.
•Ronald McDonald Houses are located all around the
world and provide families a way to stick together in
times of need when their children are ill.
•Service Provided:
•Home-cooked meals
•Private bedrooms
•Playrooms for children
•Special suites for children with suppressed
immune systems
•Accredited education programs
•Recreational activities
•Non-clinical support services
•Sibling support services
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 World Children Day

McDonalds restaurants around

the world celebrate world
children’s day with fundraising
activities. In 2006, McDonalds
raised more than $25 million
worldwide to benefit Ronald
McDonald House Charities and
other local children’s charities.

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 Going Green
•McDonald’s has taken the initiative to incorporate
used cooking oil into their operations.

•In several countries across the McDonald’s System,

restaurants are recycling their used cooking oil to
sell to companies that specialize in refining the
product into clean burning diesel for consumer use.

•In 2006, McDonalds in the U.S has began

developing green restaurants.
•Floor Tiles with a high recycled content
•Efficient Lighting Products, Skylights and
Daylight controls
•High efficient rooftops
•Water conserving toilets

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