Chapter 9

Demonstrating Ethical Behavior

and Social Responsibility
Learning Objectives

1. Define ethics
2. Understand the approaches and the
process of making an ethical decision
3. Distinguish between compliance-
based and integrity-based ethics
codes, and list the five steps in setting
up a corporate ethics code
4. Describe the indicators of corporate
social responsibility
Learning Objectives

5. Examine corporate responsibility to

various stakeholders
6. Describe how social responsibility can
be measured
7. Discuss ethics and social
responsibility on a global level
Critical Thinking
Ethics Defined

Right vs. wrong

Sources religion and culture
The Golden Rule
Legality
Ethics
Ethics is defined as out understanding of
the standards of moral behavior toward
others that is accepted by society as right
versus wrong
Many people today have few moral
absolutes
Ethics
They seem to think that what is right is
whatever works best for the individual; that
each person has to work out for himself or
herself the differences between right and
wrong
Ethics

Religion and culture

They are generally our sources of ethics,
which sometimes makes determining the
right ethical course to take in a given
situation a difficult task, since religion and
culture vary among people
Ethics

Diverse cultures
In a country like the United States, with so
many diverse cultures, you might think it
almost impossible to identify common
standards of ethical behavior
Ethics
Golden Rule All of the worlds major
religions support a version of the golden
rule, even if it is only stated in its negative
form:
Do not do unto others as you would not
have them do unto you

Case P. 306(Ethical Culture Crush)

Ethics and Legality
Illegal
means someone could be fined or
imprisoned by a court of law for engaging
in a particular action
Generally, something that is illegal is also
unethical, but the reverse is not always the
case
Something unethical doesnt always have
to be illegal (workshop)
Personal Ethics

Five main approaches to make right

decision
Utilitarian
Rights
Fairness or justice
Common good
Virtue
Figure 9.1 308
Personal Ethics
Center for Applied Ethics
Eight principles:
Concern for the well-being of others
Respect for the autonomy of others
Trustworthiness and honesty
Willing compliance with the law (with
the exception of civil disobedience)
Personal Ethics
Center for Applied Ethics
Eight principles:
Basic justice; being fair
Refusing to take unfair advantage
Benevolence; doing good
Preventing harm to others and the
world around us
Corporate Ethics
Unlike personal ethics, companies have
found they must have a formal code of
ethics by which employees must abide
Whether or not a business has a written
ethics code seems to be determined by
the size of the company
Corporate Ethics
Two formal code of ethics:
Compliance-based
Integrity-based
Five-step improvement process for
Americas business ethics
Corporate Ethics
Compliance-based ethics codes:
Emphasize preventing unlawful behavior
by increasing control and by penalizing
wrongdoers
Corporate Ethics
Integrity-based ethics codes:
Define the organization's guiding values,
create an environment that supports
ethically sound behavior, and stress a
shared accountability among employees

Figure 4.2 P. 310

Corporate Ethics
Five-step process can help improve
business ethics:
Top management must adopt and
unconditionally support an explicit
corporate code of conduct
Employees must understand that
expectations for ethical behavior begin at
the top and that senior management
expects all employees to act accordingly
Corporate Ethics
Five-step process can help improve
business ethics:
Managers and others must be trained
to consider the ethical implications of
all business decisions
Corporate Ethics
Five-step process can help improve
business ethics:
Outsiders such as suppliers,
subcontractors, distributors, and
customers must be told about the
ethics program
The ethics code must be enforced
Sarbanes-Oxley

Whistleblowers
New penalties
New overseeing agency
Flaws of the act
Sarbanes-Oxley
Corporate and Criminal Fraud Accountability
Act
Passed in 2002,
Set new standards for ethical codes of
conduct with organizations
Sarbanes-Oxley
The act has several components:
Whistleblowers
People who report illegal or unethical
behavior
New Penalties
For board of directors, accounting firms,
and management if inaccurate or
fraudulent financial reporting is found
Sarbanes-Oxley
New overseas companies
Regulate, and inspect accounting firms
overseas

The law impacts both big and small

business, investors and employees
Corporate Social Responsibility
Defined
Corporate philanthropy
Charity
Corporate responsibility
Corporate policy
Corporate social responsibility
Is the level of concern a businesses
have for the welfare of society
There are three main determinants or
categories by which we can judge
social performance of a company
Those determinants are corporate
philanthropy, corporate responsibility,
and corporate policy
Corporate philanthropy
Is one indicator of social responsibility
It includes charitable donations to
nonprofit groups of all kinds
Philanthropy isnt limited to large
corporations, as many small
businesses also participate in corporate
philanthropy
MacDonald's houses
Corporate Responsibility

Everything from hiring minority workers,

making safe products, minimizing
pollution, using energy wisely, and
providing a safe work environment
Green Mountain coffee Roasters
A companys corporate policy
The position a firm takes on social and
political issues
Xerox social service leave
Figure 4.3 P. 314
Responsibility to Stakeholders
How to determine corporate social
responsibility

Customers
Investors
Employees
Society & environment
Responsibility to Stakeholders
Customers
Importance of pleasing customers with
real value
3 out of 5 businesses fail for not
satisfying customers
Pay off for socially conscious behavior
Trust is the preference
Suzuki & Daimler cases P.
Responsibility to Stakeholders

Investors
Corporatesocial Responsibility
Inside traders, have chosen unethical
means to improve their own financial
health
Doing the right thing
Responsibility to Stakeholders
Employees
Business responsibilities
Create jobs
Pension
Retain employees
Diversity
Responsibility to Stakeholders
Employees
New Jobs:
Responsibility to create jobs if they want to grow
Pension:
A promise of a steady income after retirement
Replacement costs 150%
Getting even drawbacks
Diverse workforce
Responsibility to Stakeholders
Society and the Environment
Create new wealth
Promote social justice
A public good
Cost Vs Market share
Not all the time profitable
Figure 4.4 P. 316
Measuring Social Responsibility
Profit motive
Social audit
4 watchdogs:
Socially conscious investors
Environmentalists
Union officials
Customers
Not enough to be ethical
Measuring Social Responsibility
A social audit is a systematic evaluation
of a companys progress toward
implementing programs that are socially
responsible.
Measuring Social Responsibility
Watchdogs
In addition to the social audits conducted by the
companies themselves, there are four types of
groups that serve as watchdogs regarding how
well companies enforce their ethical and social
responsibility policies:
1. Socially conscious investors
2. Environmentalists
3. Union officials
4. Customers
 Measuring Social Responsibility
One important thing to remember is that
it isnt enough for a company to be
ethical and socially responsible; it must
also convince the customers it is, too
 Ethics and Social Responsibility
Globally

Ethical problems are not unique to a

USA
Should everyone adhere to USA ethical
standard?
Common global ethic
 Ethics and Social Responsibility
Globally
Ethical problems and issues of social
responsibility are not unique to USA
The justness of requiring international
suppliers to adhere to American ethical
standards is not as clear-cut as you
might think
 Ethics and Social Responsibility
Globally

In an effort to identify some form of

common global ethic and to fight
corruption in global markets
The partners in the Organization of
American States signed the Inter-
American Convention Against
Corruption
 Mustafa Refaat
0020106422559
mrefaat@ibdl.org
Facebook: mustafa refaat
Thank You

Good Luck