Chapter 4 Demanding Ethical and Socially Responsible Behavior Ethics Standard of moral behavior, that is, behavior accepted

d by society as right versus wrong. Both managers and workers cite low managerial ethics as a major cause of US business competitive woes. Employees report frequently violating safety standards and goofing off as much as seven hours a week. 3 or every 4 citizens do not give any time to the community in which they live. 38 percent of teens feel that lying cheating plagiarizing or behaving violently is sometimes necessary. Two recent studies found a strong relationship between academic dishonesty among undergraduates and dishonestly at work. Ethical Dilemmas You must choose between equally unsatisfactory alternatives According to Ken Blanchard and religious leader Norman Vincent Peale, ask yourself the following when trying to balance ethics: In my proposed action legal? Is it balanced? How will it make me fell about myself?

Managing Businesses Ethically and Responsibly Ethics is caught more than it is taught. People learn their standards and value from observing what others do, not from hearing what they say. The majority of CEOs surveyed recently attributed unethical employee-conduct to leaderships failure to establish ethical standards and culture. Trust and cooperation between workers and managers must be based on fairness, honesty openness, and more integrity. A business should be managed ethically to maintain a good reputation; to keep existing customers and attract new ones; to avoid lawsuits; to reduce employee turnover; to avoid government intervention in the form of new laws and regulations controlling business activities; to please customers, employees and society; and simply to do the right thing. Individuals do not usually act alone; they need the implied if not the direct, cooperation of others to behave unethically in a corporation.

Setting Corporate Ethical Standards Compliance-based ethics codes Ethical standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoing. Integrity-based ethics codes Ethical standards that define the organizations guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees.

Corporate Social Responsibility (CSR) A business concern for the welfare of society. It is based on integrity, fairness and respect. US economist Milton Friedman made the famous statement that the only social responsibility of business is to make money for stockholders. He thought that doing anything else was moving dangerously toward socialism.

Some critics of CSR believe that a managers sole role is to complete and win the marketplace. Some think that those that pursue CSR are doing so with other peoples money, which they invested to make more money, not to improve society. In this view, spending money on CSR activities is stealing. CSR defenders believe that businesses own their existence the societies they serve and cannot succeed in societies that fail. Adam Smith, the father of capitalism, believed that self-interested pursuit of profit was wrong and that benevolence was the highest value. CSR defenders acknowledge that businesses have deep obligations to investors and should not attept governmenttype social responsibility projects. However, they also argue that CSR makes more money for investors in the long run. Companys with good ethical reputations attract and retain better employees, draw more customers, and enjoy greater employee loyalty. Social Performance Dimensions: o o o o Corporate philanthrophy charitable donations to nonprofit groups of all kinds. 8% of businesses participate. Corporate social initiatives enhanced forms of corporate philanthrophy. They are more directly related to the companys competencies Corporate responsibility everything from hiring minority workers to making safe products, minimzing pollution, using energy wisely and providing a sake work environment. Corporate policy Refers to the position a firm takes on social and political issues.

President George W. Bush signed an executive order established the USA Freedom Corps to oversee Citizen Corps, a program designed to strengthen homeland security efforts through the help of volunteers.

Responsibility to Customers President John F. Kennedy proposed four basic rights of consumers: the right to safety, the right to be informed, the right to choose and the right to be heard. Achieved only if business recognize them and take action in the marketplace. It is not enough for companies to brag about their social responsibility efforts: they must live up to the expectation they raise or face the consequences

Responsibility to the Investors Ethical behavior does not subtract from the bottom line, it adds to it. Insider Trading An unethical activity in which insiders use private company information to further their own fortunes or those of their family and friends. After the deluge of insider trader cases made public in the early 2000s, the SEC adopted a new rule called Regulation FD (fair disclosure). It requires companies that release any information to share it with everybody, not just a few select people.

Responsibility to Employees Studies have shown that what most influences a companys effectiveness and financial performance is responsible human resource management.

In their book Contented Cows Give Better Milk, Bill Catlette and Richard Hadden compared, contented cow companies with common cow companies. The contented employees outgrew their counterparts by four to one for more than 10 years. They out earned the common cow companies by nearly 40 billion and generated 800, 000 jobs. This was attributed to the commitment and caring for their employees. According to the Association of Certified Fraud Examiners, employee fraud costs US businesses approx 5% of annual revenue and causes 30 percent of business failure.

Responsibility to Society and the Environment More than a third of US workers receive salaries from nonprofit organizations that receive funding from others that in turn receive their money from businesses. Environmental efforts may increase a companys costs, but they also allow the company to charge higher prices, increase market share, or both.

Social Auditing Social Auditing A systematic evaluation of an organizations progress toward implementing socially responsible and responsive programs. One of the major problems of conducting a social audit is establishing procedures for measuring a firms activies and their effect on society. Watchdogs to monitor how well companies enforce their ethical and social responsibility. o o o o Socially conscious investors insist that a company extend its own high standard to its suppliers. Environmentalists apply pressure by naming companies that dont abide by environmentalists standards. Rank em and Spank em. Union officials hunt down violations and force companies to comply to avoid negative publicity. Customers make buying decisions based on their social conscience. 55% patronize retailers with a green reputation. 74% buy environmentally friendly and 60% are willing to pay more for time.

International Ethics and Social Responsibility Many US businesses demand socially responsible behavior from their international suppliers, making sure they dont violate US human rights and environmental standards. The fairness of requiring international suppliers to adhere to US ethical standards is not as clear-cut as you might think. Ex. A gift in one cultural can be a bribe in another. It is always ethical for companies to demand compliance with the standards of their own countries. In 1970s, the Foreign Corrupt Practices Act, sent a chill throughout the US business community by criminalizing the act of paying foreign business or government leaders to get business. To identify some form of common global ethic and fight corruption in global markets, partners in the Organization of American States signed the Inter American Convention Against Corrpution. The United Nations and European Union and the Organization for Economic Cooperation and Development, adopted a formal condemnation of corporate bribery.

The International Organization for Standardization (ISO) plans to publish a standard on social responsibility called ISO 26000, with guidelines on product manufacturing fair pay rates, appropriate employee treatment and hiring practices.

Chapter 5 How to Form a Business Basic Forms of Business Ownership Sole Proprietorship A business that is owned and usually managed by one person. Advantages Ease of starting and ending the business Being your own boss Pride of ownership Leaving a legacy Retention of company profit

Disadvantages Unlimited Liability any debts and or damages incurred by the business are your debts and you must p pay them, even if it means selling your home, your car, or whatever else you own Limited financial resources Funds available to the business are limited. Management difficulties Cant compete with larger companies for qualified employees Overwhelming time commitment Its not a job, its not a career, and its a way of life. Few fringe benefits No paid health, disability, no pension no sick leave and no vacation. Limited Growth and Life Span Partnership A legal form of business with two or more owners. Every partner must have at least one general partner. Partnerships General Partnership all owners share in operating the business and in assuming liability for the businesss debt Limited Partnership one of more general partners and one or more limited partners General Partnership an owner partner who has unlimited liability and is active in managing the firm Limited Partner an owner who invests money in the business but does not have any management responsibility or liability for losses beyond his or her investment. Limited Liability the limited partners liability for the debts of the business is limited to the amount they put into the company; their personal assets are not at risk. Master Limited Partnership (MLP) a partner that looks much like a corporation (in that it acts like a corporation and is traded like a partnership and thrus avoids the corporate income. Limited Liability Partnership a partnership that limits partners risk of losing heir personal assets to only their own acts and omissions and to the acts omissions of people under their supervision.

Advantages

More financial resources Shared Management and pooled complementary skills and knowledge Longer Survival No Special Taxes Unlimited Liability Division of profits Disagreements among partners Difficulty of Termination

Disadvantages

Corporations A Conventional Corporation A state chartered legal entity with authority to act and have liability separate from its owner. Advantages Limited liability; Ability to raise more money for investments Sell shares of stock or borrow money; Size; Perpetual life; Ease of attracting talented employees; Separation of ownership from management Initial Cost Extensive Paperwork Double Taxation Two tax returns Size Difficulty of termination Possible conflict with stockholders and board of directors.

Disadvantages

Chapter 6: What does it take to be an Entrepreneur: Self Direction, Self Nurturing, Action Oriented, Highly energetic, Tolerant of uncertainty? Entrepreneurial Team A group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop