Understanding business 11th by mchugh nickels chap004

CHAPTER 4

Demanding
Ethical and
Socially
Responsible
Behavior

McGraw-Hill/Irwin

Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.


LEARNING OBJECTIVES

1. Explain why obeying the law is only the first step in
behaving ethically.
2. Ask the three questions you need to answer when
faced with a potentially unethical action.
3. Describe management’s role in setting ethical
standards.

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LEARNING OBJECTIVES

4. Distinguish between compliance-based and integritybased ethics codes, and list the six steps in setting
up a corporate ethics code.
5. Define corporate social responsibility and compare
corporations’ responsibilities to various stakeholders.

6. Analyze the role of U.S. businesses in influencing
ethical behavior and social responsibility in global
markets.
4-3


PATTY STONESIFER
Martha’s Table

• Held high-level positions
with the Gates
Foundation and the
White House.
• Founded Martha’s
Table in 2013 with the
goal of providing healthy
food, affordable clothing
and quality education to
D.C.’s locals.
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NAME that COMPANY

The wage and benefit packages offered by this
company are among the best in hourly retail.
Even part-time workers are covered by its
health plan. Increased benefits reduce
employee turnover to less than a third of the
industry average.

Name that company!
4-5


LIFE AFTER SCANDAL

LO 4-1

• Scandals have shaken the real estate, mortgage
and banking industries.
• How do we restore trust in the free market
system?
-

Punish those who have broken the law.

-

Make accounting records more transparent.

-

Consider what is ethical, not just what is legal.

4-6


BERNIE MADOFF’S
PONZI SCHEME

• Bernie Madoff is serving 150
years behind bars.
• His exclusive wealth
management firm was a
gigantic Ponzi scheme.
• Though exact amounts are
uncertain, it is believed he
stole about $65 billion from
his investors.
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WHAT is a PONZI SCHEME?

LO 4-1

• 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.

Source: Securities and Exchange Commission, www.sec.gov, accessed November 2014.

4-8


WHAT are ETHICS?

LO 4-1

• Ethics -- The standards of moral behavior.
Behaviors that are accepted by society as right
versus wrong.

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BASIC MORAL VALUES
Right:
• Integrity
• Respect for human life

LO 4-1

Wrong:
•Cheating
•Cowardice
•Cruelty

• Self-control
• Honesty
• Courage
• Self-sacrifice
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ETHICS and YOU

LO 4-2

• Plagiarizing from online
materials is the most
common form of cheating
in schools today.
• Studies found a strong
relationship between
academic dishonesty and
dishonesty at work.
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FACING ETHICAL DILEMMAS

LO 4-2

• Ask yourself these
questions:
- Is it legal?
- Is it balanced?
- How will it make me
feel about myself?

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BRIBERY BAD BOYS

LO 4-2

Five FCPA Investigations

Source: SEC, www.sec.gov, accessed November 2014.

4-13


TURNING EX-CONS into
ENTREPRENEURS
• Life after prison can be very difficult
for those with criminal records.
• Catherine Rohr started Defy
Ventures to help ex-cons launch
their own businesses.
• Defy and Rohr’s other organizations
have helped create 60 startups and
many ex-cons find employment.


TEST PREP
• What are ethics?
• How do ethics differ from legality?
• When faced with ethical dilemmas, what
questions can you ask yourself that might help
you make ethical decisions?

4-15

ETHICS START at the TOP

LO 4-3

• Organizational ethics begin at
the top.
• Managers can help instill
corporate values in
employees.
• Trust between workers and
managers must be based on
fairness, honesty, openness
and moral integrity.
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FACTORS INFLUENCING
MANAGERIAL ETHICS

LO 4-3

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ETHICS CODES

LO 4-4

• 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.
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HOW to IMPROVE AMERICA’S
BUSINESS ETHICS

LO 4-4

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.
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HOW to IMPROVE AMERICA’S
BUSINESS ETHICS

LO 4-4

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.

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HOW to BLOW the WHISTLE

LO 4-4

1. Decide carefully and quickly.
2. Make sure you have all allegations filed with the
right agencies.
3. File your allegations with as many agencies that
are appropriate.
4. Gather your information legally.
5. Research the process.
Source: Kiplinger’s Personal Finance, June 2013.

4-21


TEST PREP

• What are compliance-based and integrity-based
ethics codes?
• What are the six steps to follow in establishing
an effective ethics program in a business?

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CORPORATE SOCIAL
RESPONSIBILITY

LO 4-5

• Corporate Social Responsibility (CSR) -- The
concern businesses have for the welfare of society.

• CSR is based on a commitment to integrity,
fairness, and respect.
• CSR proponents argue that businesses owe their
existence to the societies they serve and cannot
exist in societies that fail.
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CORPORATE PHILANTHROPY

and SOCIAL INITIATIVES

LO 4-5

• Corporate
Philanthropy -Includes charitable
donations.

• Corporate Social
Initiatives -- Include
enhanced forms of
corporate philanthropy.

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CORPORATE RESPONSIBILITY
and POLICY

LO 4-5

• Corporate Responsibility -- Includes everything
from hiring minority workers to making safe products,
minimizing pollution, using energy wisely, and
providing a safe work environment.

• Corporate Policy -- The position a firm takes on
social and political issues.

4-25