chapter 6 strategic approaches to improving ethical behavior social responsibility and business...

CHAPTER 6

Strategic Approaches to Improving Ethical Behavior Strategic Approaches to Improving Ethical Behavior

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

The Need forOrganizational Ethics Programs

• Organizations are held accountable for the conduct of their employees.– Without such programs, employees may not understand

acceptable behavior.

• Organizations can create unethical corporate cultures.– Pressure to succeed– Rewarding the wrong behavior

• Stakeholders demand greater ethical andsocial responsibility.

Codes of Conduct

• Formal statements that describe what an organization expects of its employees – Reflect the board of directors and senior

management’s desire for organizational compliance

– Assess key risks for the organization

Ethics Officers

• Assess organizational needs and risks• Develop and distribute the code of ethics• Conduct ethics training programs• Establish and maintain a confidential system to respond to

ethics questions• Make certain the company is in compliance with government

regulation• Monitor and audit ethics conduct• Take action when there is a code violation• Review and update the code

Ethics Training and Communication

• Educates employees about the firm’s policies, expectations, relevant laws and regulations, and general social standards

• Makes employees aware of available resources, support systems, and personnel who can assist with ethics and legal advice

• Can empower employees

Establishing Systems to Monitorand Enforce Ethical Standards

• Help or assistance lines– Report and request assistance with ethical concerns

• Observation and feedback– Determine level of adequacy in handling ethical issues

• Whistle-blowing– Exposing an employer’s wrongdoing to

outsiders, such as the media or government agencies– Protection for accurate exposures

Leaders influence Corporate Culture

• Organizational leaders use their power and influence to shape corporate culture. Power refers to the influence that leaders have over the behavior and decisions of subordinates.

• Transformational vs. transactional leaders• Exerting power is one way to influence the

ethical decision-making framework.

Five Power Bases

• There are five power bases from which one person may influence another:– Reward power– Coercive power– Legitimate power– Expert power– Referent power

CHAPTER 7

Employee RelationsEmployee Relations

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Psychological Contract

• The beliefs, perceptions, expectations, and obligations that make up the agreement between individuals and the organizations that employ them – Largely unwritten – Details of the contract develop through

interactions with managers and coworkers and through perceptions of the corporate culture

Changes in Employees’Psychological Contract with Employers

Legal Responsibilities to Employees

• Employment at will• Wages and benefits• Labor unions• Health and safety• Equal Opportunity Employment• Sexual Harassment

– Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature

Ethical Responsibilities to Employees

• Training and development• Diversity• Allow for work/life balance

– Assist employees in balancing work responsibilities with personal and family responsibilities

– Provide flexibility• Flextime, Job sharing, Child care, Elder care, Health

clubs

Philanthropic Activities

• Corporate giving affects employee attitudes toward the organization.

• Employees benefit from participating in volunteerism programs and other philanthropic projects.– Builds teamwork skills – Educates employees – Example: More than 30,000 volunteers support the Ronald

McDonald House Charities, donating one million hours of service per year (Source: www.rmhc.com, 11/30/09).

CHAPTER 8

Consumer RelationsConsumer Relations

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Consumer Economic Issues

• Consumers are primary stakeholders because their awareness, purchase, use and repurchase of products is vital to a company’s existence.

• Consumers and business are connected by an economic relationship.

• Consumers exchange money for goods or services. • Consumers expect the products they purchase to perform as

guaranteed by the sellers. – In the early 1900s “let the buyer beware” typified the power

that business- not consumers- wielded in exchange relationships. This is still true in less developed parts of the world.

Motivations forIllegitimate Consumer Complaints

Additional Legal Issues and Relevant Laws

• Health and safety– Pure Food and Drug Act

• Credit and ownership– Home Ownership and Equity Protection Act

• Marketing, advertising, and packaging– Federal Trade Commission Act– Telemarketing and Consumer Fraud

and Abuse Prevention Act

Additional Legal Issues and Relevant Laws (cont.)

• Sales and warranties• Product liability- a business’s legal

responsibility for the performance of its products– Toy Safety Act

• International issues• Consumerism protect consumers from an

imbalance of power

Ethical Issues

• Consumer Bill of Rights– Right to choose– Right to safety– Right to be informed– Right to be heard– Right to seek redress– Right to privacy

Philanthropic Issues

• Consumers are increasingly concerned with organizations’ social responsibility.

• Organizations are increasingly linking philanthropic efforts with consumer interests in order to strengthen ties to consumers.– Avon—breast cancer fundraising– Home Depot—Habitat for Humanity– Eastman Kodak—World Wildlife Fund

CHAPTER 9

Community Relations and Strategic PhilanthropyCommunity Relations and Strategic Philanthropy

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Community Stakeholders

• Issues of concern include:– Pollution of the environment – Land use – Economic advantages to the region – Discrimination – Exploitation of workers and consumers

• Neighbor of choice– An organization that builds and

sustains trust within the community

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Responsibilities to the Community

• Economic issues• Legal issues• Ethical issues• Philanthropic issues

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Economic Issues

• Business is vital to the community.• Buyer-seller interaction stimulates the economy.

• Companies hire, train, and buy supplies, raw materials, utilities, advertising services, and other local goods and services.

• A company’s departure or retrenchment froma community can be devastating tothe local economy.• Downsizing• Plant closings

Legal Issues

• A company must operate within legal and regulatory parameters.

• Companies are granted a license to operate.– Business license– Sales tax number

• Many mega-retailers have faced rejection because people believe they threaten small “mom & pop” businesses.

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Ethical Issues

• Companies may evaluate the role and impact of their decisions on communities from an ethical perspective.

• Business leaders are taking greater responsibility for determining how they can assist in improving communities.– Improving public schools and education – Assisting in the development of mass transit – Supporting environmental initiatives

Philanthropic Issues

• Historically this has meant providingsupport for worthy causes.– Gifts– Grants– Other resources

• Volunteer programs– Employees donate time in support of social causes

(volunteerism).– Communities benefit from the application of new skills

and initiative toward problems; and companies develop better community relations.

Strategic Philanthropy

• The synergistic use of an organization’s core competencies and resources to address key stakeholders’ interests and to achieve both organizational and social benefits – Goes beyond traditional benevolent philanthropy – Involves both financial and non-financial

contributions to stakeholders – Involves employees, organizational

resources, and expertise

Cause-Related Marketing

• An organization’s products are tied directly to a social concern.• Percentage of sales are usually donated to a cause appealing to a

relevant target market.• Overall goal is to increase product sales for a defined period

of time.• Charity partners often assist in promoting the alliance

(e.g., Habitat for Humanity partnered with Home Depot).• American Express pioneered this process in 1983 by donating a

percentage of credit card sales to the Statue of Liberty and Ellis Island Restoration Fund.

CHAPTER 11

Sustainability IssuesSustainability Issues

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Sustainability

• Sustainability is the potential for long-term well-being of the natural environment, including all biological entities, as well as the interaction among nature and individuals, organizations, and business strategies.

• Sustainability includes the assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles while maintaining the natural environment.

Global Environmental Issues

• Natural environment– Air, Water, Land Pollution– Global Warming– Acid Rain– Deforestation– Urban Sprawl– Waste Management– Genetically Modified Food

Ways to Curb Environmental Issues

• DOE – Jabatan Alam Sekitar• Environmental Legislation• Alternative energy – wind, solar, hydro, biofuel,

electric etc.• Recycling• Green Marketing• Emissions reduction• Socially Responsible Buying• Environmental Management – ISO 14000

CHAPTER 12

Social Responsibility in a Global EnvironmentSocial Responsibility in a Global Environment

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

The expanding global marketplace requires that executives and managers develop the ability to conduct business effectively and socially responsibly indifferent regions of the world.

The Global Marketplace

Employee Issues in Global Environment • Wages and benefits relative to home country standards• Attitudes toward employees from different genders and

ethnicities, especially in executive positions• Existence of collective bargaining efforts• Laws and regulations for employee rights, health, and safety• Norms of employee volunteering• Availability and comfort with open-door policies and other

management practices

Consumer Issues in Global Environment

• Laws and regulations on product safety and liability

• Presence and power of consumer rights groups• Respect for the product needs of subcultures

and minority groups• Attitudes and accommodations for customers

with disabilities

Shareholder Issues in Global Environment

• Laws and regulations regarding ownership and corporate governance

• Stability and governance of stock exchanges• Willingness and ability to participate in

shareholder meetings

Supplier Issues in Global Environment

• Ethical and social considerations in the supply chain

• Prices offered to suppliers in developed countries and developing countries in comparison to other suppliers

• Availability and attitudes toward minority suppliers

Community Issues in Global Environment

• Norms of community relations and dialogue• Expectations of community service and/or

philanthropy• Rights of indigenous people• Availability and quality of infrastructure

(roads, utilities, schools, etc.)

Environmental Issues in Global Environment

• Environmental law and regulations• Availability of “green” electricity, recycled

materials, and other environmentally friendly inputs

• Environmental expectations relative to those in home country

• Use of natural resources to achieve business goals