BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY

Doing Well by Doing Good

ETHICS AND SOCIAL
RESPONSIBILITY

SOCIAL
ETHICS
Beliefs about RESPONSIBILITY
right and wrong. The obligation of a business
to contribute to society.

A Close Relationship, but Not the Same

 ETHICS/PERSONAL CHARACTER

A study of 36,000 high school students revealed:

82% admitted that they lied to parent within the past 12 months
about something significant.

60% admitted that they cheated on a test at school within

the past 12 months.

33% admitted that they copied an Internet document within

the past 12 months.

19% admitted that they stole something from a friend within

the past 12 months.

28% admitted that they stole something from a store within

the past 12 months.

A 2006 Study conducted by Josephson Institute of Ethics

 ETHICS: MURKIER THAN YOU
THINK
Legal and Unethical Legal and Ethical
Promoting R-rated movies to young teens Producing high quality products

Producing products that you know will break before Rewarding integrity
their time
Paying non-living wages to workers in developing Leading by example
countries
Treating employees fairly

Contributing to the community

Respecting the environment

Illegal and Unethical Illegal and Ethical

Embezzling money
Engaging in sexual harassment
Practicing Collusion with competitors
Providing rock-bottom prices only to distributors in
underserved areas
Collaborating with other medical clinics to guarantee
low prices in low-income countries (collusion)

Encouraging fraudulent accounting

UNIVERSAL ETHICAL STANDARDS

Developed by
Character
Counts, a
nonpartisan
organization of
educators,
community
leaders, and
ethicists.
 BUSINESS ETHICS: NOT AN
OXYMORON

Ethical Dilemma most challenging business

Ethical Dilemma
Negative Consequences
Negative Consequences decisions seem to arise
Two unfavorable
Two options
unfavorable options when values are in conflict

Ethical Lapse
Business Ethics – the
Clear misconduct Business Ethics
application of–right
the application
and wrong
of right and wrong in the workplace
in the workplace.
 ETHICS AND THE
INDIVIDUAL
Framework for Ethical Decisions
Framework for Ethical Decisions:
 Do you understand the dimensions
1. Do
of you understand the
the problem?
dimensions of the problem?
 Who would benefit? Who would
2. Who would benefit? Who would
suffer?
suffer?
 Are the alternative solutions legal?
3. Are
Arethe alternative
they fair? solutions
legal? Are they fair?
 Does your decision make you
4. Does your decision make you
comfortable?
comfortable?
 Could you defend your decision on
5. Could you defend
the nightly news?your decision
on the nightly news?
Creating and Maintaining an Ethical
Organization

 Organizational Culture
 Role of Top Management
 Code of Ethics
 Executive Buy-in
 Clear expectations
 Integrated approach
 Global and local
 Whistleblower support
 Reporting and Enforcement
 ETHICS FAME AND SHAME
Sherron Watkins, former vice president of Enron reported the accounting
Irregularities that led to the discovery of corporate fraud.

Stanley O’Neal began as Merrill Lynch began racking up losses

that led to its collapse, he announced his “retirement.”

Martha Stewart was convicted of obstructing justice in a $40,000

well timed stock sale.

Whole Foods CEO, John Mackey posted thousands of comments on Yahoo Finance,
hyping his company and attacking Wild Oats, which he was planning to purchase.

Sanjay Kumar of Computer Associates was convicted of

massive accounting fraud in 2006.

Pierre Omidyar, the founder of eBay has given away over

$100 million to Tufts University Micro Finance Fund.
SPECTRUM OF SOCIAL
RESPONSIBILITY

LESS
LESS MORE
Responsible
Responsible Responsible

Businesses that do not Businesses that Businesses that

recognize obligations respond on a case-by- integrate social
to society and do only case basis to requests responsibility into
what’s legally for contributions their strategic plans
required
SOCIAL RESPONSIBILITY

Responsibility to
Whom? Stakeholders are any
groups that have a stake –
or a personal interest - in the
performance and actions
of an organization.
RESPONSIBILITY TO……

EMPLOYEES Creating Jobs that Work

CUSTOMERS Value, Honesty and Communication

INVESTORS Fair Stewardship and Full

Disclosure
COMMUNITY Business and the Greater Good

ENVIRONMENT Sustainable Development

RESPONSIBILITY TO EMPLOYEES:
CREATING JOBS THAT WORK

 Meet Legal Standards

 Workplace Safety
 Minimum Wage/Overtime
Requirements
 Value Employees
 Provide Work/Life Balance
 DOES IT PAY TO PAY MORE?

Costco Wal-Mart’s
Sam’s Club

Average hourly wage $15.97 $11.52

Annual health costs per worker $5,735 $3,500
Covered by health plan 82% 47%
Employee turnover 6%/yr 21%/yr
Labor and overhead costs 9.8% of sales 17% of sales
Profits per employee $13,647 $11,039
RESPONSIBILITY TO CUSTOMERS

CONSUMERISM:

• The Right to Be Safe

• The Right to Be Informed

• The Right to Choose

• The Right to be Heard

 APPLE COMPUTERS
Planned Obsolescence –
Deliberately designing products
to fail in order to shorten
the time between consumer
repurchases
APPLE COMPUTERS:
• iPods had irreplaceable battery.
• Batteries died after 18 months.
• Customers were encouraged to
purchase new iPods
• Two customers posted high profile
protest movies online.
• APPLE announced replacement
program.
APPLE iPHONES

• Apple introduced the iPhone on June 9,

2007 to rave reviews despite $599 price tag

• Apple dropped the price to $200 to increase

customers

• Customers were livid!

• CEO, Steve Jobs apologized and gave

customers $100 store credit
 RESPONSIBILITY TO INVESTORS

FAIR STEWARDSHIP AND FULL DISCLOSURE

 Legal Requirements
Legal Requirements
 Sarbanes-Oxley
• Sarbanes-Oxley
Responsibleuse
 Responsible useofof Corporate
Corporate
Dollars
Dollars
• Honesty
 Honesty
Is Optimism or Pessimism
Is Optimism
 Socially or Pessimism
Responsible?
Socially Responsible?
 RESPONSIBILITY TO
COMMUNITY

Cause-related Marketing –
partnerships between businesses
and nonprofit organizations,
designed to spike sales for the
company and raise money Corporate Responsibility -
for the nonprofit. The actions of the business
rather than donations of
Corporate Philanthropy - money and time.
business donations to
nonprofit groups, including
both money and time.
RESPONSIBILITY TO ENVIRONMENT

Green Marketing –
marketing environmental
products and practices
to gain a competitive edge.
RESPONSIBILITY TO ENVIRONMENT

 Responsibility to environment is a part of

responsibility to community
• Responsibility to environment is a part of
responsibility to community
 Reducing the amount
• Reducing of trash
the amount is more
of trash important
is more
thanimportant
recyclingthan recycling
•Although consumers support green
 Although consumers
marketing, support
they may not begreen
willingmarketing,
to sacrifice
theyquality
may not be willing to sacrifice quality
CAUSE RELATED MARKETING

 The term was coined in 1983 by

American Express
 Raise Funds for Statue of Liberty
Restoration
 Campaign to donate $.01 for every
dollar charged on credit card.
 New Cardholders Grew 45%
 Card Usage Grew 28%
 Statue of Liberty Restored Early
 ETHICS & SOCIAL RESPONSIBILITY
IN THE GLOBAL ARENA

 Corruption is part of the culture

in many countries
 Bribes or Gifts

 Labor issues in host countries

can be complicated
 Living Wage
 Child Labor
 Code of Conduct
MONITORING ETHICS AND SOCIAL
RESPONSIBILITY

SOCIAL AUDIT

A systematic evaluation of
how well a firm is meeting its
ethics and social
responsibility objectives.