Contemporary Business

18th Edition
Louis E. Boone; David L. Kurtz; Susan Berston

Chapter 2

Business Ethics and Social Responsibility

Learning Objectives
1. Explain the concern for ethical and societal issues.
2. Describe the contemporary ethical environment.
3. Discuss how organizations shape ethical conduct.
4. Describe how businesses can act responsibly to
satisfy society.
5. Explain the ethical responsibilities of businesses to
investors and the financial community.

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Concern for Ethical and Societal Issues (1 of 2)
• Business Ethics
• The standards of conduct and moral values governing
work actions and decisions in the work environment.
• Social Responsibility
• Businesses must take social issues into account
• How a business decision impacts the environment,
employees, and customers
• Enhancement of society’s welfare through
philosophies, policies, procedures, and actions

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Concern for Ethical and Societal Issues (2 of 2)
• Firms have many responsibilities—to customers, to
employees, to investors, and to society as a whole
• Often no clear-cut choices
• Business ethics are often shaped by the organization’s
ethical climate
• Codes of conduct
• Ethical standards
• Doing the right things should be supported and
applauded

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The Contemporary Ethical Environment
• High-profile investigations and arrests in headlines
• Corporate Social Responsibility Efforts Benefit:
• Consumers
• Investors
• Employees
• The environment
• The companies themselves
• The vast majority of businesses are ethical
• New corporate officers charged with deterring
wrongdoing and ensuring ethical standards
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Starbucks Standards of Business
Conduct (1 of 3)
To inspire and nurture the human spirit—one person, one cup, and one
neighborhood at a time. Here are the principles of how we live that every day:
Our Coffee
It has always been, and will always be, about quality. We're passionate about
ethically sourcing the finest coffee beans, roasting them with great care, and
improving the lives of people who grow them. We care deeply about all of this;
our work is never done.
Our Partners
We're called partners, because it's not just a job, it's our passion. Together, we
embrace diversity to create a place where each of us can be ourselves. We always
treat each other with respect and dignity. And we hold each other to that
standard.

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Starbucks Standards of Business
Conduct (2 of 3)
Our Customers
When we are fully engaged, we connect with, laugh with, and uplift the lives of our
customers—even if just for a few moments. Sure, it starts with the promise of a perfectly
made beverage, but our work goes far beyond that. It's really about human connection.
Our Stores
When our customers feel this sense of belonging, our stores become a haven, a break from
the worries outside, a place where you can meet with friends. It's about enjoyment at the
speed of life—sometimes slow and savored, sometimes faster. Always full of humanity.
Our Neighborhood
Every store is part of a community, and we take our responsibility to be good neighbors
seriously. We want to be invited in wherever we do business. We can be a force for positive
action—bringing together our partners, customers, and the community to contribute every
day. Now we see that our responsibility—and our potential for good—is even larger. The
world is looking to Starbucks to set the new standard, yet again. We will lead.

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Starbucks Standards of Business
Conduct (3 of 3)
Our Shareholders
We know that as we deliver in each of these areas, we enjoy the kind of success that
rewards our shareholders. We are fully accountable to get each of these elements right so
that Starbucks—and everyone it touches—can endure and thrive.
Onward.

Source: Company website, Our Starbucks Mission," http://globalassets. starbucks.com,

accessed January 23, 2016.

FIGURE 2.1 Starbucks Standards of Business Conduct

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Coca-Cola Company’s Global
Sustainability Goals
1. Since 2010, the company has empowered 1.7 million
women producers, suppliers, distributors, retailers,
recyclers, and artisans.
2. 221 billion liters of water have been replenished through
community and watershed projects across the globe.
3. Sixty percent of bottles and cans equivalent to what was
introduced in the marketplace were refilled or recovered
and recycled.
4. $106 million was donated across more than 200
countries and territories.

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The Contemporary Ethical Environment
• Sarbanes Oxley Act
• A 2002 law that added oversight for the nation’s
major companies
• Includes a special oversight board to regulate public
accounting firms that audit the financial records of
these corporations
• New rules and regulations for securities trading and
accounting practices
• Companies are required to publish a code of ethics
• Development of ethical compliance programs
• Provides safeguards for whistleblowers

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Current Ethical Environment
• Current environment includes ethical compliance
officers
• Companies adopt a three-pronged approach to
ethics and social responsibility
• Corporate philanthropy
• Anticipating and managing risks
• Identifying opportunities to create value by doing the
right thing

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Ethics Compliance Programs
• Compliance Standards and Procedures (code of ethics)
• High-level personnel responsibility to lead and oversee
• Due care in assignments (to the right individuals)
• Communication of standards and procedures (training)
• Establishment of monitoring and auditing systems and
reporting system
• Enforcement of standards through appropriate
mechanisms (discipline, when necessary)
• Appropriate responses to the offense
• Self-reporting (to government agency, if necessary)
• Applicable industry practice or standards
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Individuals Make a Difference
• Individuals can make the difference in the ethical
environment of an organization
• Unethical behavior can be identified as:
• Putting one’s own interest ahead of the organization
• Lying to employees
• Misrepresenting hours
• Safety violations
• Internet abuse
• Technology has expanded unethical behavior
• All employees face ethical dilemmas
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Development of Individual Ethics
Stage 1: Preconvention
Individual is mainly looking out for his or her own interests. Rules are
followed only out of fear of punishment or hope of reward.

Stage 2: Conventional
Individual considers the interests and expectations of others in making
decisions. Rules are followed because it is a part of belonging to the group.

Stage 3: Postconventional
Individual follows personal principles for resolving ethical dilemmas. He
or she considers personal, group, and societal interests.
Figure 2.2 Stages of Moral and Ethical Development

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Common Business Ethical Challenges
Telling the truth and adhering
Situation in which an
action benefitting one to deeply felt ethical
person or group can principles in business
potentially harm another situations

Employees are expected to be

Employee’s disclosure of loyal, and to act in the best
illegal, immoral, or interests of the company, but
unethical practices in the an ethical conflict can arise
organization when the truth about a
company is not favorable

FIGURE 2.3 Common Business Ethical Challenges

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Loyalty versus Truth
Employers and employees value
honesty and integrity, but what
should happen when employees
misuse Internet privileges for
personal purposes?

© August Columbo/Stockimo/Alamy Stock Photo

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How Organizations Shape Ethical
Conduct

FIGURE 2.4 Structure of an Ethical Environment

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Ethical Awareness
• Awareness is the • A code of conduct is a
foundation of an ethical way to provide support
climate • A formal statement
• Ethical dilemmas will • Defines how the
occur organization expects
• Help employees identify employees to resolve
ethical problems ethical questions
• Give employees
guidance on how to
respond

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Ethical Education
• A code of conduct • Some question whether
provides only a ethics can be taught
framework • Training gives employees
• Business must provide the chances to apply
tools to evaluate options ethical values to
• Many firms have hypothetical situations
instituted ethics training
programs

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Ethical Action
• Firms must allow structures and approaches
• Structure allow decisions to be turned into ethical
actions
• Set realistic goals
• An employee hotline with ethics officers can provide
advice

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Starbucks Ethical Decision Making Framework

• Is it consistent with Our Starbucks Mission, the

Standards of Business Conduct, and any applicable
law or regulation?
• Would your approach embarrass you or Starbucks?
• How would your approach look published in the
newspaper?
• Would you be comfortable with the example it sets
for future decisions?
• If the path isn’t clear, ask for guidance.
• Follow through on your decision.
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Ethical Leadership
• Executives must demonstrate ethical behavior in
their actions
• Use clear, explicit language
• Encourage behavior that generates and fosters values
• Practice moral absolutism
• Without a framework of ethics, damage can impact
stakeholders
• Stakeholders include customers, investors,
employees, and the public

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Acting Responsibly to Satisfy Society (1 of 2)
Social Responsibility
• Equal value in considering profit, consumer satisfaction, and
societal well-being
• Concerns with qualitative dimensions and traditional quantitative
measures
A firm’s social performance is measured through a social audit, and by:
• Equal employment opportunities
• Cultural diversity
• Environmental concerns
• Safe and healthy workplace
• Charitable contributions and community service

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Acting Responsibly to Satisfy Society (2 of 2)

Businesses are judged by

their interactions with the
surrounding community,
including employees
volunteering at charitable
events.

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Two Views of Social Responsibility
Socioeconomic Model Economic Model
• Business owes its existence • Favored by U.S. economist
to improving the society in Milton Friedman
which it operates.
• Businesses believe that
• Business is not separate their sole role is to
from society maximize profits and
• Business should play a role increase value to
in promoting a healthy and shareholders
prosperous society. • Society will benefit when
business is left alone
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Social Responsibilities of Business

FIGURE 2.5 Social Responsibilities of Business

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Responsibilities to the General Public
• Public Health Issues
• Dangerous products
• Protecting the Environment
• Using resources efficiently
• Developing a quality workforce
• Education and diversity initiatives
• Corporate philanthropy
• Contributions and volunteer efforts to the
public
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Public Health Issues
What should businesses do about products like tobacco,
alcohol, sugary drinks and unhealthy food?
• Tobacco contributes to heart disease, stroke, and cancer
• Childhood obesity rates continue to rise
• Opioid addiction and overdose (narcotics and pain
medication)
• Other serious public health threats include infectious
and chronic disease (heart, cancer, diabetes, and
Alzheimer’s, and HIV)
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Protecting the Environment
• Businesses impact the environment by
• Energy consumption
• Waste produced
• Natural resources used
• Businesses have set goals
• Sustainability initiatives
• Recycling, packaging, green products and services

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Developing the Quality of the Workforce
A nation’s true wealth lies in its people
• An educated, skilled workforce provides the
intellectual capital and know-how to:
• Innovate
• Develop new technology
• Improve productivity,
• Compete in the global marketplace.
• Assistance for women, members of underrepresented
groups, returning military veterans, and those with
disabilities

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Corporate Philanthropy
• Cash contributions, donations of equipment and
products, and supporting company employee
volunteer efforts
• Recipients may include: cultural organizations, adopt-
a-school programs, neighborhood sports programs,
and job training programs.
• Positive benefits: rewards of giving, higher employee
morale, enhanced company image, and improved
customer relationships.
• Marketing efforts are aligned with charitable giving.

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Responsibilities to Customers
Consumers have certain rights, as follows:
• The right to be safe
• Safe operation of products (no injury during use)
• The right to be informed
• Education and product information to make responsible
buying decisions
• The right to choose
• Which products and services do consumers wish to purchase?
• The right to be heard
• A consumer’s voice must be heard with regard to products
and services

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Responsibilities to Employees
• Workplace Safety
• Quality-of-Life Issues
• Ensuring Equal Opportunity on the Job
• Age Discrimination
• Sexual harassment and sexism

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Workplace Safety
• The safety and health of workers is a responsibility of
business
• The Occupational Safety and Health Administration
(OSHA), is a federal regulatory agency
• OSHA tracks and investigates accidents and sets
workplace safety and health standards
• Specific standards for worker safety in industries
including construction, manufacturing, and mining

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Quality-of-Life Issues
• Balancing work and family remains a challenge
• Sandwich generation cares for two generations – their
children and their elderly parents
• Many companies have created innovative ways to help
employees manage hectic work schedules
• Family Leave (Family Medical and Leave Act) is
available to employees

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Equal Opportunity on the Job
• Today’s increasingly diverse workforce must be managed
• There are various laws designed to create a more diverse
workplace
• The Equal Employment Opportunity Commission (EEOC)
was created to increase job opportunities for women and
minorities
• The EEOC is designed to investigate and manage workplace
discrimination based on race, color, religion, disability,
gender, or national origin in any employment practice such
as hiring, firing, promotions, transfers, or wage practices.

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Equal Opportunity Laws
• Title VII of the Civil Rights • Americans with Disabilities
Act of 1964 Act of 1990
• Age Discrimination in • Civil Rights Act of 1991
• Family and Medical Leave
Employment Act of 1967
Act of 1993
• Equal Pay Act of 1963
• Uniformed Services
• Vocational Rehabilitation
Employment and
Act of 1973
Reemployment Rights Act
• Vietnam Era Veterans
of 1994
Readjustment Act of 1974 • Genetic Information
• Pregnancy Discrimination • Nondiscrimination Act of
Act of 1978 2008
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Age Discrimination
• Employers are responsible for
avoiding age discrimination in
the workplace.
• As the average age of workers
rises, employers will benefit
from the older generation’s
knowledge.

Gregg Matthews/The New York Times/Redux Pictures

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Sexual Harassment and Sexism
• Sexual harassment refers to unwelcome sexual
advances, requests for sexual favors, and other verbal
or physical harassment of a sexual nature.
• Sexual harassment is often part of the broader
problem of sexism—discrimination against members
of either sex but primarily affecting women.
• One important sexism issue is equal pay for equal
work.
• The gender pay gap remains in the news.

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Responsibilities to Investors and the
Financial Community
• A fundamental goal for business is an obligation to
make profits for shareholders
• Expectation of ethical and moral behavior
• Investors are protected by the
Securities and Exchange Commission (SEC) and state
regulations
• The SEC investigates suspicions of unethical or illegal
behavior of publicly traded companies.

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Copyright
Copyright © 2019 John Wiley & Sons, Inc.
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