*

Chapter Four

*
Demanding
Ethical and
Socially
Responsible
Behavior

McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
 *
STEVE ELLS Profile

Chipotle Mexican Grill

*
• Chipotle is dedicated to producing quality food
which has led to current annual sales over $1
billion.
• Ells’ mission is to serve
“Food With Integrity.”
• Chipotle is the leading
restaurant buyer of
humanely raised meats.

4-2
 *
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.
4-3
 *
WHAT are ETHICS? Ethical Standards
are Fundamental

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

4-4
 *
BASIC MORAL VALUES Ethical Standards
are Fundamental

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

4-5
 *
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.
4-6
 *
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.

4-7
 *
Ethics Begins
FACING ETHICAL DILEMMAS with Each of Us

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

4-8
 *
To TUBE or NOT to TUBE
(Making Ethical Decisions)
*
• Every minute, people upload 10 hours of video to
YouTube – not all is user-generated content.
• Viacom sued YouTube for $1 billion for allowing
episodes of its popular shows on the site.
• Viacom holds YouTube responsible for carrying the
illegal content, rather than the individuals who
uploaded it.
• Who do you think should be accountable for the
copyright violations -- the website or those who
uploaded the videos?
4-9
 *
PROGRESS ASSESSMENT Progress
Assessment

*
• What are ethics?

• How do ethics differ from legality?

• When faced with ethical dilemmas, what

questions can you ask yourself that might help
you make ethical decisions?

4-10
 *
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.

4-11
 * 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

4-12
 * 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.

4-13
 * 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.
4-14
(continued)
 * Setting
Corporate
HOW to IMPROVE AMERICA’S Ethical
BUSINESS ETHICS Standards
LG4
*
4. An ethics office must be set up with which
employees can communicate anonymously.
Whistleblowers -- People who report illegal or
unethical behavior.
5. Involve outsiders such as
suppliers, subcontractors,
distributors and customers.
6. The ethics code must be
enforced.

4-15
 * Setting
Corporate
HOW to PREVENT UNETHICAL Ethical
Standards
BEHAVIORS 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)
4-16
 * Setting
Corporate
HOW to PREVENT UNETHICAL Ethical
Standards
BEHAVIORS LG4
*
5. Discussions of ethics must be included in the
decision-making process.

6. Accountability must be taken seriously at all

levels in the organization.

7. Organizations must act fast when a crisis occurs.

8. Employees must know they have to defend and

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

4-17
 *
PROGRESS ASSESSMENT Progress
Assessment

*
• What are compliance-based and integrity-based
ethics codes?

• What are the six steps to follow in establishing an

effective ethics program in a business?

4-18
 *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.
4-19
 *Corporate
CORPORATE PHILANTHROPY Social
Responsibility
and SOCIAL INITIATIVES LG5
*
• Corporate Philanthropy -- Includes charitable
donations.

• Corporate Social Initiatives -- Includes enhanced

forms of corporate philanthropy.

4-20
 *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.

4-21
 *Corporate
POSTIVE IMPACTS Social
Responsibility
of COMPANIES LG5
*
• Xerox offers a Social Service Leave program.
• Citizen Corps encourages volunteers to help
strengthen homeland security by helping in their
community.
• Two-thirds of MBA students surveyed reported
they would take a lower salary to work for a
socially responsible company.

4-22
 * Corporate
To WHOM MUCH HAS Social
Responsibility
BEEN GIVEN…
America’s Charitable Giving LG5
*

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

4-23
 * Corporate
HELPING HANDS Social
Responsibility
Most Generous Celebrities*
LG5
*
Who? How Much?
Oprah Winfrey $50.2 Million
Herb Alpert $13 Million
Barbara Streisand $11 Million
Paul Newman $10 Million
Mel Gibson $9.9 Million
Angelina Jolie & Brad Pitt $8.4 Million
Michael Jordan $5 Million
Eric Lindros $5 Million
Lance Armstrong $5 Million

*Donations made in 2007

Source: Parade Magazine, www.parade.com, September 14, 2008.

4-24
 * Corporate
WHO GIVES? Social
Responsibility
Five States Contribute More Than
a Third of the Nation’s Donations LG5
*
1. California – 12.1%
2. New Jersey – 8.9%
3. Pennsylvania – 5.2%
4. Washington – 5%
5. New York – 5%

Source: Conde Nast Portfolio, www.portfolio.com, January 2008.

4-25
 * Corporate
GENEROUS AMERICANS Social
Responsibility
Americans Donated $295,020,000,000 in 2006
LG5
*

Source: Fast Company, www.fastcompany.com, May 2008.

4-26
 *
PRESIDENT KENNEDY’S BASIC Responsibility
to Customers
RIGHTS of CONSUMERS LG5
*
• The Right to Safety

• The Right to be Informed

• The Right to Choose

• The Right to be Heard

4-27
 *
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.

4-28
 *
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.

4-29
 *
AMERICA’S MOST ADMIRED Responsibility
to Employees
COMPANIES LG5
*
1. Apple 11. Wal-Mart
2. Berkshire Hathaway 12. Coca-Cola
3. Toyota 13. Walt Disney
4. Google 14. Wells Fargo
5. Johnson & Johnson 15. Goldman Sachs
6. Proctor & Gamble 16. McDonald’s
7. FedEx 17. IBM
8. Southwest Airlines 18. 3M
9. General Electric 19. Target
10. Microsoft 20. J.P. Morgan Chase
Source: Fortune, www.fortune.com, March, 2009.

4-30
 *Responsibility
SOCIETY and to Society and
the Environment
the ENVIRONMENT LG5
*
• Over one-third of working Americans receive
their salaries from nonprofits – who are
dependent on funding from others.

• The green movement emerged as concern about

global warming increased.

• Many companies are trying to minimize their

carbon footprints – the amount of carbon
released during an item’s production, distribution,
consumption and disposal.
4-31
 *Responsibility
RESPONSIBILITY to the to Society and
the Environment
ENVIRONMENT LG5
*
• Environmental efforts may increase costs but
can offer good opportunities.

• The emerging renewable-energy and energy-

efficiency industries account for 8.5 million U.S.
jobs.
• By 2030, as many as 40
million “Green” jobs will
be created.

4-32
 *
GREEN GREED
(Thinking Green)
*
• With public concern over the environment,
companies are finding greener ways of doing
business.
• Some companies are claiming they are more
environmentally responsible than they actually
are, a practice called “greenwashing”.
• Web sites such as Greener Choices and
Greenwashing Index screen ads for
greenwashing.
4-33
 *
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
4-34
 *
PROGRESS ASSESSMENT Progress
Assessment

*
• What’s corporate social responsibility, and how
does it relate to each of a business’s major
stakeholders?

• What’s a social audit, and what kinds of activities

does it monitor?

4-35
 * 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.
4-36
 * International
Ethics and
GIVERS AROUND the WORLD Social
Share of GDP Responsibility
LG6
*

Source: Forbes, www.forbes.com, March 24, 2008.

4-37
 *
ETHICAL CULTURE CLASH
(Reaching Beyond Our Borders)

*
• Almost half of Motorola’s employees live
outside the U.S.
• A Motorola employee returns to his home
country to work and the company reimburses
living expenses so he can live in a safe area.
The employee is trying to do the honorable thing
for his family and the company is trying to keep
the employee safe.
• If the employee uses the money to help his
family instead, is it right for the company to stop
payment?
4-38
 *
PROGRESS ASSESSMENT Progress
Assessment

*
• How are U.S. businesses demanding socially
responsible behavior from their international
suppliers?

• Why is it unlikely that there will be a single set of

international rules governing multinational
companies soon?

4-39