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Chapter 04
Demanding
Ethical and
Socially
Responsible
Behavior
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Ethical Standards
are Fundamental
WHAT are ETHICS?
LG1
• Ethics -- The standards of moral behavior.
Behaviors that are accepted by society as right
versus wrong.
• What is right is whatever works best for an
individual… This is a mentality that has lead to
current problems.
• Everyone can work it out for themselves…
4-2
WHAT is a PONZI SCHEME?
• A fraud by paying returns to
existing investors from funds
contributed by new investors.
• New investors are promised
opportunities claimed to
generate high returns with
little or no risk.
• Fraudsters focus on attracting
new money to make promised
payments.
Bernie Madoff
Source: Securities and Exchange Commission, www.sec.gov, accessed June 2011.
4-3
COST of CORRUPTION
(Legal Briefcase) early 2000
• Madoff Investment Securities: Bernie Madoff is
serving 150 years behind bars after running his
exclusive wealth management firm as a gigantic Ponzi
scheme. (started in 1970…wealth management firm)
• Enron: Jeffery Skilling is serving a 24 year sentence
for accounting fraud while Richard Causey, who pled
guilty, will be released in October 2011. Former CEO,
Kenneth Lay, died before sentencing. (hiding debt)
4-4
Ethical Standards
are Fundamental
BASIC MORAL VALUES
Is it legal? Is it ethical?
LG1
Right:
• Integrity
• Respect for human life
• Self-control
Wrong:
• Cheating
• Cowardice
• Cruelty
• Honesty
4-5
Ethics Begins
with Each of Us
ETHICS and YOU
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.
4-6
Ethics Begins
with Each of Us
LG2
FACING ETHICAL DILEMMAS
It can be a hard balance…with
equally unsatisfactory
alternatives
• Ask yourself these
questions:
- Is it legal?
Drinking and
driving, stealing
$ from your
company
Would I want to be
treated this way,
I’m I benefitting at
the expense of
others
- Is it balanced?
- How will it make
me feel about
myself?
Will my family be proud,
can I tell my supervisor, has
someone told me not to
tell?
4-7
Managing
Businesses
Ethically and
Responsibly
LG3
ETHICS START at the TOP
• Organizational ethics begin at
the top.
• Managers can help instill
corporate values in
employees – leads to
increased trust and
cooperation.
• Is ethics a personal matter?
• Exp. Cell phone providers
Overly ambitious goals and incentives can create
an environment in which unethical actions like
this can occur
4-8
Setting
Corporate
Ethical
Standards
ETHICS CODES
• Not all US companies practices the same 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.
Exp. Budweiser’s campaign “Drink responsibly”
4-9
Setting
Corporate
Ethical
Standards
LG4
HOW to IMPROVE AMERICA’S
BUSINESS ETHICS
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.
4-10
Setting
Corporate
Ethical
Standards
LG4
HOW to IMPROVE AMERICA’S
BUSINESS ETHICS
4. An ethics office must be set up with which
employees can communicate anonymously.
Whistleblowers -- Insiders who report illegal or
unethical behavior.
5. Involve outsiders such as
suppliers, subcontractors,
distributors and customers.
6. The ethics code must be
enforced.
4-11
Corporate
Social
Responsibility
LG5
CORPORATE SOCIAL
RESPONSIBILITY
• Corporate Social Responsibility (CSR) -- The
concern businesses have for the welfare of society.
• CSR proponents argue that businesses owe
their existence to the societies they serve and
cannot exist in societies that fail.
4-12
Corporate
Social
Responsibility
LG5
CORPORATE PHILANTHROPY
and SOCIAL INITIATIVES
• Corporate Philanthropy -- Includes charitable
donations.
• Corporate Social Initiatives -- Include enhanced
forms of corporate philanthropy.
4-13
Responsibility
to Investors
INSIDER TRADING
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.
Example – IBM take over of Lotus
development
SCC filed charges against 23 people…many
paid penalties of twice their profit
4-14
Responsibility
to Employees
LG5
RESPONSIBILITY to
EMPLOYEES
• Create jobs and provide a chance for upward
mobility.
• Treat employees with respect.
• Offer salaries and benefits that help employees
reach their personal goals.
• Getting even…makes good
people act poorly…
4-15
Social Auditing
SOCIAL AUDITING
LG5
• Social Audit -- A systematic evaluation of an
organization’s progress toward implementing
socially responsible and responsive programs.
• Five Types of Social Audit Watchdogs –
“outside groups”
1)
2)
3)
4)
5)
Socially conscious investors
Socially conscious research organizations
Environmentalists
Union officials
Customers
4-16