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Chapte

2
Today's Environment for
Business Ethics and
Related Social Issues

Learning Goals
1

Explain the concepts of business


ethics and social responsibility

Describe the factors that influence


business ethics.

List the stages in the development


of ethical standards and discuss how
organizations shape ethical
behavior.

Describe how businesses social


responsibility is measured and
summarize the responsibilities
of business to the general
public, customers, and
employees.
Explain why investors and the
financial community are
concerned with business ethics
and social responsibility.

Concern for Ethical and


Societal Issues

Business Ethics
The standards of conduct and moral values
governing actions and decisions in the work
environment.

Social responsibility
Balance between whats right and whats profitable
Often no clear-cut choices
Often shaped by the organizations ethical climate

Sarbanes-Oxley Act
A 2002 law that added oversight for the nations
major companies and a special oversight board
to regulate public accounting firms that audit
the financial records of these corporations.

The Contemporary Ethical


Environment

High-profile investigations and arrests in


headlines.

Vast majority of businesses are ethical.

New corporate officers charged with


deterring wrongdoing and ensuring ethical
standards.

Business Approach to Ethics


and Social Responsibility

Engage in traditional corporate


philanthropy, which involves giving to
worthy causes.
Anticipate and manage risks.
Identify opportunities to create value by
doing the right thing.
See how Walmart highlights corporate
responsibility on its website.

Individuals Make a Difference

Individuals can make the


difference in ethical
expectations and
behavior.
Putting own interest
ahead of the
organization
Lying to employee
Misrepresenting hours
Safety violations
Internet abuse
Technology is expanding
unethical behavior.

Development of Individual
Ethics

On-the-Job Ethical Dilemmas


Situation in which a
business decision
may be influenced
for personal gain.

Telling the truth and


adhering to deeply
felt ethical principles
in business
decisions.

Employees

Businesspeople

disclosure of

expect employees

illegal, immoral,

to be loyal and

or unethical

truthful, but

practices in the

ethical conflicts

How Organizations Shape


Ethical Conduct

Ethical Awareness

Code of Conduct:
Formal statement that
defines how the
organization expects and
requires employees to
resolve ethical
questions.

Ethical Education

Codes of conduct cannot


detail a solution for
every ethical situation,
so corporations provide
training in ethical
reasoning.

Ethical Action

Helping employees
recognize and reason
through ethical problems
and turning them into
ethical actions.

TI Ethics Quick Test

Ethical Leadership
Executives must
demonstrate ethical
behavior in their actions.

use clear, explicit language


rather than euphemisms for
corrupt behavior

encourage behavior that


generates and fosters ethical

Acting Responsibly to Satisfy


Society
Social Responsibility

Managements consideration of profit,


consumer satisfaction, and societal well-being
of equal value in evaluating the firms
performance.

Contributions to the overall economy, job


opportunities, and charitable contributions and

Areas of Responsibility

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.

Green marketing
Sustainability

Developing the Quality of the Workforce.


Enhancing quality of the overall workforce through
education and diversity initiatives.
Corporate Philanthropy. Cash contributions,
donations of equipment and products, and
supporting the volunteer efforts of company
employees.

Responsibilities to Customers
CONSUMERISM
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


choose the products and services they want.

The Right to Be Heard. Ability of consumers to


express legitimate complaints to the appropriate
parties.

Responsibilities to Employees

Workplace Safety. Monitored by Occupational Safety


and Health Administration.
Quality-of-Life Issues. Balancing work and family
through flexible work schedules, subsidized child care,
and regulation such as the Family and Medical Leave
Act of 1993.
Ensuring Equal Opportunity on the Job. Providing
equal opportunities to all employees without
discrimination; many aspects regulated by the Equal
Employment Opportunity Commission.
Age Discrimination. Age Discrimination in
Employment Act of 1968 protects workers age 40 or
older.
Sexual Harassment and Sexism. Avoiding
unwelcome actions of a sexual nature; equal pay for
equal work without regard to gender.

Responsibilities to Investors

Obligation to make profits for


shareholders.
Expectation of ethical and moral
behavior.
Protection of investors by the
Securities and Exchange
Commission
and state regulations.