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Responsibility, Ethics, & Social Responsibility Learning Objectives Explain the development of personal codes of ethics Explain why ethics are important in the workplace Distinguish social responsibility from ethics Explain how a firm’s ethics affects environmental policy and the relationships that a firm has with its customers, employees and investors Identify three general approaches to social responsibility What is Ethical Behaviour? “ethics”: standards or moral values which dictate what is right and what is wrong, or good or bad are culturally-based and formed based upon society’s expectations vary by person, and by situation everyone develops their own “code of ethics” Influences on Ethical Behaviour Family Experiences Personal Code of Ethics Peer Group Company Policies on Business Ethics Canadians are becoming suspect of businesses In 1990, 45% felt that businesses are unprincipled, compared to 20% in 1980 Companies are creating codes of ethics to guide employees in day-to-day business decisions Top management must provide ethical guidelines, and set an example, for all employees Are there any ETHICS in business? No! Class over! “Ethics is for suckers” “If you believe in that bunk, they’ll walk all over you” “Where did you grow up -- on a farm?” Serious Green = ETHICS That’s all you need to know! WHY STUDY ETHICS? By giving reasons for its judgments and prohibitions, its central purpose is to secure valid principles of conduct and values that can be instrumental in guiding actions and producing good character. Looks very good on a resume! “I’m a good person” “Being good - that’s ethical” “Looking out for your fellow man, that’s ethics” “You know, do one to others - or was it do others first?” The Environments of Business Environment factors that affect an organization, and the situations within which the organization functions External Environment all factors such as laws, competition, technology, social-cultural norms and trends, and ecology, that are outside the organization and that may affect it Business Ethics Defined Ethics: the study of right & wrong and the morality of choices that individuals make. An ethical decision or action is one that is “right” according to some standard of behaviour. Business Ethics: the application of moral standards to business. Ethical Issues: these often arise out of a business’s relationship with: investors, customers, employees, creditors, competitors e..g. investors want financial decisions to boost sales, profits, and ROI (return on investment). customers expect expect products to be safe, reliable, reasonably prices employees expect fair treatment in hiring, promotion, compensation creditors expect “on time” payments competitors expect fair & honest business practices How Do You Know if it is Ethical? Expense accounts padding? Sexual harassment or kidding? errors in work- tell supervisor or not ? personal calls on company phones? theft by fellow workers: tell supervisor, ignore, confront? Doing the “RIGHT” thing: Choosing the “ethical thing to do” is a personal responsibility. For each situation: What are the ethical issues? How do YOU feel? What are the consequences of your decision? Other people: how will your actions affect others? Take Action: doing nothing is NOT an ethical choice! You MUST use your ethics! Social Responsibility A business’s collective code of ethics towards: the environment its customers its employees its investors Responsibility Towards the Environment Responsibility Towards Consumers Social Responsibility Responsibility Towards Investors Responsibility Towards Employees Influences on Business Social Responsibility Environment Responsibility Issues Air Pollution Water Pollution Land Pollution Toxic Waste Acid Rain Air Pollution unsuitable air quality which can affect the health of all people, with immediate effects on those who have pre-existing medical conditions or allergies created due to chemical emissions created in the manufacturing of products and the operation of motor vehicles legislation has been directed to controlling or eliminating polluting practices Acid Rain contaminated rainfall created by emissions of sulphur by power and manufacturing plants located in the midwest affects eastern Canada and the United States can seriously damage forests and streams can be controlled by existing technology but at tremendous cost to business costs could force a firm into losses, or outright bankruptcy Water Pollution water contamination due to years of release of toxic chemicals into lakes, rivers and streams chief offenders are businesses such as pulp and paper plants, and municipalities who dump raw sewage is being curbed by legislation, education, and affordable new technology Land Pollution contamination of grounds and soil due to dumping of toxic waste and mishandling of landfills key issues today include curbing polluting practices and restoring contaminated lands new developments include: emphasis on recycling new forms of solid waste disposal changes in forestry practices Toxic Waste release of toxic chemicals or radioactive byproducts of the manufacturing process contaminates land, air and water such substances cannot be rendered harmless and must be carefully stored pressure on businesses to “clean up” can come from many sources (Greenpeace, banks refusing financing, consumer and social interest groups) Customer Responsibility Issues Rights of Consumers Unfair Pricing Consumer Rights Issues influenced by consumerism: a social movement that seeks to protect and expand the rights of consumers in their dealings with businesses consumers have the: right to safe products right to be informed right to be heard right to choose what they want to buy with free competition Unfair Pricing Issues illegal pricing practices may occur due to the intentional (and also illegal) limiting of competition collusion is the practice of a group of companies conspiring to fix prices collusion results in inflated prices and a lack of competition which negatively affects consumers Employee Responsibility Issues Human resource management issues Social responsibility issues Privacy issues Encouraging ethical behaviour Human Resource Management Issues Recruiting Hiring Training Promoting Compensating Fair treatment of all employees without discrimination based upon sex, race or other factors Social Responsibility Towards Employees safe workplaces socially and emotionally- not abuse or harassment physically - safe work environment Privacy of Employees determining how much control is acceptable in the workplace drug testing video monitoring employees may not be aware that they are being monitored, or they may not know when they will be monitored, which increases job stress Encouraging Ethical Employee Behaviour top management support for ethical behaviour is critical “whistle-blowers” are employees who report unethical behaviour the company should support its “whistle blowers” rather than threatening them with dismissal or other form of penalty Responsibility Towards Investors Improper Financial Management Kiting Cheques Insider Trading Misrepresentation of Finances Improper Financial Management doing a poor job of managing the financial resources of a company may involve payment of high salaries, lavish expense accounts and similar practices which results in perks for management with little or no control over how money is spent may be legally unpunishable because no law has been broken it may be difficult to replace management because unrest in the firm may devalue its stock Cheque Kiting an illegal practice of writing cheques against money which has not yet arrived in the bank account a creative “cheque kiter” can write cheques from account to account with very little money to back it up the assumption is that the money will arrive before the cheque needs to clear becoming difficult to do with modern-day computerized banking Insider Trading using confidential (non-public) information to gain from the sale of stock involves gaining knowledge of inside information about the company to prior to making the purchase may also involve the collusion of various investors buying and selling stock at the appropriate time in order to make huge profits Misrepresenting Financial Information companies must conform to accounting guidelines called “Generally Accepted Accounting Principles” (GAAP) failure to follow GAAP in order to inflate expected profit figures can mislead investors Social Responsibility Goals Vary there is no one way for firms to approach social responsibility some feel that the investors’ needs should be met before the needs of society, employees or customers many feel that because large corporations are so powerful they have an obligation to serve society first Approaches to Social Responsibility social-obligation approach social-reaction approach social-response approach Social-Obligation Approach a company simply meets the requirements of the law and standard business practices is consistent with the argument that profits should not be spent on social programs example: tobacco companies did not include health warnings on cigarette packs until required to by law Social-Responsibility Approach a company will go beyond basic legal and business requirements if called upon to do so, but not of their own accord example: matching employee contributions to social programs or charities Social-Response Approach in addition to meeting basic legal and business requirements, companies proactively seek opportunities to contribute in a meaningful way to society examples: McDonald’s support of children’s hospitals Tim Hortons’ camps for underpriveleged children Social Responsibility Social Audit Appointment of a Director Strategic Planning Top Management Support Managing Social Responsibility Programs Step 1: Top Management Support Support of top management is essential to move the workplace towards adopting a social responsibility program Top managers must develop a policy statement outlining their commitment to more ethical behaviour Step 2: Strategic Planning A committee of top managers must develop a plan which describes the level of company support which will be given to meeting goals of social responsibility Examples: percent of sales revenues to go to social causes promise to train chronically unemployed people Step 3: Appoint a Director an executive-level administrator must be appointed to oversee the social program that the firm has created this may be achieved through a partial time work commitment on the part of existing top managers Step 4: The Social Audit a systematic analysis of how the firm is using funds designated specifically to fund its social initiatives also addresses the effectiveness of the monies that have been spent Small Business Ethics a small business does not have the same impact on society if it acts in an irresponsible way many entrepreneurs decide to conduct themselves in a socially responsible manner because they feel it is important to contribute to society individual entrepreneurs make independent decisions How Your Employer Can Help: A company should establish clear standards of conduct. A system must be in place to investigate alleged violations and to ensure that all employees/managers comply with company policies. Ethical compliance is a problem. 63% in a survey felt pressured to compromise their standards to achieve business goals. 42% witnessed ethics violations. Ethics: Fairness and Honesty: Business persons are expected to refrain from knowingly: deceiving, misrepresenting, or intimidating others. Oil companies seem to have an image problem in regard to pricing. Banks too seem to be perceived as being “fee hungry” with some “hidden” charges. “Organizational Relationships” A business employee is expected to keep the firm’s business confidential and to honour obligations. unethical behaviour may involve: taking credit for the work of others not meeting obligations pressuring others to behave unethically Conflict of Interest In business: taking advantage of a business situation to place one’s personal interests ahead of the firm. e.g. acceptance of “Business Gifts” acceptance may prejudice the decision making process in favour of a supplier who provided gifts Communications: false or misleading advertising- especially those aimed at children or those involving “health-related” products. Factors Affecting Ethical Behaviour Can a person with strong moral values make ethically questionable decisions in a business setting? what affects a person’s decision-making process in a business setting? 3 general sets of factors appear to influence behaviour: individual & social factors and opportunity Factors Affecting Workplace Behaviour Workplace behaviour to some extent determined by the “norms” of one’s culture. e.g. in some countries the standard practice for customs agents to receive gifts for doing their job- in other countries the same actions would be viewed as unacceptable and unethical personal phone calls on company time &expense- is it “OK” because everyone “does it”? A person’s “moral values” can affect one’s perception of what is moral and ethical in the workplace. Opportunity: is the amount of freedom an employee has to behave unethically if he/she makes that choice. Company “Policies & Procedures” reduce the “opportunities for unethical behaviour. e.g. Fast food restaurant- one person takes order/receives payment while another person fills the order when violations are dealt with consistently and firmly, opportunities for unethical behaviour are reduced Encouraging Ethical Behaviour: Can BUSINESS be made more ethical? clearly the answer is “YES”. individual firms, trade associations , and governments can establish written guidelines. trade associations exist for the benefit of their members- can they be self-regulating/ “Code of Ethics”: written guide to what constitutes “proper” behaviour employees MUST recognize why the code exists and topmanagement MUST support and follow the “code” themselves. An “Ethics Officer” may be considered. Whistle Blowing: Informing government or the press about ethics violations by employees who want to act ethically but unethical practices are so ingrained in an organization that the employee feels they have no choice but to “blow the whistle” e.g. Canadian Red Cross and the “Tainted Blood Scandal” of recent years. what of whistle-blowing employees? loss of their jobs? anonymous organizational “hot lines” to report ethics violations? Guidelines for Making Ethical Decisions: 1. Listen & Learn: recognize the problem and listen until you are sure you understand others in the group. 2. Identify the ethical issues: how are co-workers and consumers affected? why do others hold the views they do? 3. Create and Analyze Options: ask everyone involved for ideas & opinions: which option is best and why? which options may address the issues you feel are potential ethics problems? Guidelines for Making Ethical Decisions (con’t): 4. Best Option from YOUR point-of-view test against established criteria respect, understanding, caring, fairness, honesty, openness. 5. Explain your decision/resolve differences: may require “neutral” arbitration from a trusted manager. or: take “time out” to reconsider, consult, exchange written proposals before a decision is reached. The Workplace of Tomorrow External environment will become a greater consideration Media inquiry, government regulation, and public expectations become more important organizational behaviour under closer scrutiny than ever before minor decisions may build or destroy reputation As companies expand globally, ethics are tested by local environments
