- Learning Objectives

- Explain why obeying the law is the only first step in behaving ethically
- Ask the three questions to answer when faced with a potentially unethical
question
- Describe management’s role in setting ethical standards
- Distinguish between compliance-based and integrity-cased ethics codes, and list
the six steps that can be considered when setting up a corporate ethics code
- Define corporate social responsibility, and compare corporations’ responsibilities
to various stakeholders
- Discuss the importance of ethical behavior and social responsibility in global
markets.
- Learning Objective 1: Explain why obeying the law is only the first step in
behaving ethically
- Ethical standards are fundamental
- We define ethics as the standards of moral behavior, that is, the behavior
that is accepted by society as right versus wrong.
- Many people today have few moral absolutes.
- Learning Objective 2: Ask the three questions to answer when faces with a
potentially unethical action
- (1) Is my proposed action legal?
- This is the most basic question in business ethics, but it is only the first.
- (2) Is it balanced?
- Not every situation can be completely balanced, but the health of our
relationships requires us to avoid major imbalances over time. An ethical
business person has a win-win attitude and tries to make decisions that
benefit all.
- (3) How wil it make me feel about myself?
- Decisions that go against out sense of right and wrong make us feel bad -
they erode our self-esteem. That is why an ethical business person does
what is proper as well as what is profitable.
- Learning Objective 3: Describe management’s role in setting ethical standards
- Ethics is caught more than it is taught. That is, people learn their standards and
values from observing what others do, not hearing what they say.
- Trust and cooperation between workers and managers must be based on
fairness, honesty, openness and moral integrity. The same applies to
relationships among businesses and among nations.
- Learning Objective 4: Distinguish between compliance-based and integrity-based
ethics codes, and list the six steps that can be considered when setting up a
corporate ethics code.
- Setting corporate ethical standards
- Compliance-based ethics codes emphasize the prevention of unlawful
behavior by increasing control and penalizing wrongdoers
 - Integrity-based ethics codes define the organization’s guiding values,
create an environment that supports ethically sound behavior, and stres
shared accountability among employees.
- Six steps process to 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 seior management expects all employees to act
accordingly.
- Managers and other must be trained to consider the ethical implications
of all business decisions
- An ethics office must be set up. Phone lines to the ofice should be
established so that employees who don’t necessarily want to be seen with
an ethics officer can inquire about ethical matters anonymously.
Whistleblowers (people who report illegal or unethical behavior) must feel
protected from retaliation as often sometimes this exposure can lead to
great career and personal cost.
- Outsiders such as suppliers, subcontractors, distributors, and customers
must be told about the ethics program. Pressure to put aside ethical
considerations often come from the outside, and it helps employees to
resist such pressure when everyone knows what the ethical standards
are.
- The ethics code must be enforced with timely action if any rules are
broken. This is the most critical step.
- Learning Objective 5: Define corporate social responsibility, and compare
corporations’ responsibilities to various stakeholders
- Corporate social responsibility (CSR) is the concern businesses have for the
welfare of society, not just for their owners. It is based on a commitment to
integrity, fairness, and respect.
- Part of CSR includes the general idea of combining shopping with ethics. This
concept, termed “ethical consumerism”, is a strategy where “companies provide
products that appeal to people’s best selves”
- The social performance of a company has several dimensions:
- Corporate philanthropy: includes charitable donations to non-profit groups
of all kinds.
- Corporate social initiatives: includes enhanced forms of corporate
philanthropy
- 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: refers to the position a firm takes on social and political
issues.
- Concepts of social corporate responsibility (two different views of corporate
responsibility)
 - The strategic approach: requires that management’s primary orientation
be toward the economic interests of shareholders.
- The rationale is this: as owners, shareholders have the right to
expect management to work in their best interests; that is, to
optimize profits.
- The pluralist approach: this approach recognizes the special responsibility
of management to optimize profits, but not at the expense of employees,
suppliers, and members of the community.
- This approach recognizes the moral responsibilities of
management that apply to all human beings.
- Responsibility to customers
- Consumers have four basc rights
- (1) the right to safety
- (2) the right to be informed
- (3) the right to choose
- (4) the right to be heard
- One way of failing to please customers is to be less than honest with
them. The payoff for socially conscious behaviour can be new customers
who admire the customer’s social efforts.
- Responsibility to investors
- Insider trading uses private company information to further insiders’ own
fortunes, or those of their family and friends.
- Responsibility employees
- If a company treats employees with respect, they usually respect the
company as well. Mutual respect can make a huge difference in a
company’s bottom line
- One way a company can demonstrate commitment and caring is to give
its employees salaries and benefits that help them reach their personal
goals.
- Responsibility to societ
- One of business’ responsibilities to society is to create new wealth, which
is disbursed to employees, suppliers, shareholders, and other
stakeholders.
- BUsinesses are also partially responsible for promoting social justice.
- Responsibility to environment
- Businesses are often criticized for their role in destroying the environment
- We are seeing more efforts to reverse years of neglect to the
environment.
- Environment efforts may increase a company’s cost, but they also allow
the company to charge higher prices, increase market share, or both.
- Social auditing
- A social audit is a systematic evaluation of an organizations progress
toward implementing programs that are socially responsible and
responsive.
 - In addition to social audits conducted by companies themselves, there
are five types of groups that serve as watchdogs regarding how well
companies enforce their ethical and social responsibility policies
- Socially concious investors
- Socially conscious research organizations
- Environmentalists
- Union officials
- Customers
- Sustainable development: means implementing a process that integrates
environmental, economic, and social considerations into decision making.
- Learning Objective 5: Discuss the importance of ethical behavior and social
responsibility in global markets.
- Fair trade is a growing social movement dedicated to making sure that producers
in developing countries are paid a fair price for the goods we consume (rather
than exploiting poor people), resulting in more money in their pockets
- Put another way, it is a strategy for poverty alleviation and sustainable
development with the purpose of creating opportunities for producers who
have been disadvantaged or marginalized by the traditional economic
model.