chapter 2 - dadang iskandar · pdf file08.03.2016 · ethics (cont.) •ethical...

Chapter 2 Conducting

Business Ethically

and Responsibly

―The more I help others

to succeed, the more I

succeed.‖ — Ray Kroc, Founder,

McDonald‘s

What Is Ethical Behavior?

• Ethics

– Right and wrong,

good and bad, in

actions that affect

others

• Ethical Behavior

– Conforming to

generally accepted

ethical norms

Ethical Considerations

• Regarding a particular act…

– Utility: Does it optimize what is best for those

who are affected by it?

– Rights: Does it respect the rights of the

individuals involved?

– Justice: Is it consistent with what we regard

as fair?

– Caring: Is it consistent with people‘s

responsibilities to each other?

Expanded Model of Ethical Judgment

Making

Figure 2–2

Gather the facts concerning the act or policy

Is the act or policy acceptable according to the four ethical norms?

• Utility: Does it optimize the satisfaction of all constituencies?

• Rights: Does it respect the rights and duties of the individuals involved?

• Justice: Is it consistent with the canons of justice?

• Caring: Is it consistent with the responsibility to care?

Is there any reason for overriding one or two of the ethical norms?

Is one ethical norm more important than the others?

Is there any reason why a person may have been forced into

committing an act or following a policy?

No on all

criteria No on one or

two criteria

Yes on all

criteria

The act or policy is not ethical. The act or policy is ethical.

No Yes

Data

Gathering

Analysis

Judgment

The Coca Cola Scare Case

Company Practices and

Business Ethics Best Approach: Open, Honest, Responsive!

The Tylenol Scare Case

How Much Privacy Does Your

Employer Owe You? • Email

• Internet

• Cellular Phones

Formalizing the Commitment to

Ethics

Adopting Written Codes

Instituting Ethics Programs

Social Responsibility: Balancing

Commitments to Stakeholders

• Stakeholders

– Groups, individuals, and organizations that are

directly affected by the practices of an

organization Employees Investors

Local Communities

Customers Suppliers CORPORATION

Responsibility Toward the

Environment • Air pollution

• Water pollution

• Land pollution

– Toxic waste

– Recycling

Responsibility Toward

Customers

Consumer Rights

Unfair Pricing

Ethics in Advertising

Responsibility Toward

Employees

Legal and Social

Commitments

Whistle-blowers

Responsibility Toward Investors

• Improper financial

management

• Check kiting

• Insider trading

• Misrepresentation

of finances

Level of Social Responsibility

Approaches to Social

Responsibility

Defensive

Stance

Obstructionist

Stance

Accommodative

Stance

Proactive

Stance

Lowest Highest

Actively

Avoids

Responsibility

Does Legal

Minimum

Responds to

Requests

Actively Seeks

Opportunities

to Contribute

Ethics, Social Responsibility,

and the Small Business

Do small businesses

face different issues

with regard to ethics

and social

responsibility?

Chapter Review

• Discuss how individuals develop their personal

codes of ethics.

• Explain why ethics matter in the workplace.

• Distinguish social responsibility from ethics.

• Show how social responsibility applies to

environmental issues and to relationships with

customers, employees, and investors.

• Identify four approaches to social responsibility.

• Describe the four steps a firm must take to implement

a social responsibility program.

• Explain how social responsibly and ethics affect

small business.

Ethics

• Ethics

–the system of rules governing the ordering of values

•affects people‘s behavior and the ‗goods‘ that are worth seeking

•values - principles of conduct

– ethics becomes more complicated when a situation dictates that

one value overrules another

–business ethics - the moral principles and standards

that guide behavior in the world of business

Ethics (cont.)

• Ethical systems –moral philosophy - the principles, rules, and values

people use in deciding what is right and wrong

–universalism - individuals should uphold certain values, regardless of the immediate result

• important values are those that society needs to function

–teleology - an act is morally right if it produces a desired result

•egoism - acceptable behavior maximizes consequences for the individual

•utilitarianism - seeks the greatest good for the greatest number of people, thereby maximizing total utility

Ethics (cont.)

• Ethical systems (cont.)

–deontology - focuses on the rights of individuals

•ensures that equal respect is given to all persons

•concentrates on means

–relativism - ethical behavior defined by the opinions

and behavior of relevant other people

•acknowledges the existence of different theoretical viewpoints

•group consensus is sought

– positive consensus signifies that an action is right, ethical, and

acceptable

Ethics (cont.)

• Ethical systems (cont.) –virtue ethics - morality defined by what a mature person with

‗good‘ moral character would deem right

• society‘s rules provide a moral minimum

• individual‘s can transcend rules by applying personal standards

– Kohlberg’s model of cognitive moral development

• preconventional stage - decisions based on concrete rewards, punishments, and immediate self-interest

• conventional stage - actions conform to societal expectations

• principled stage - follow self-chosen ethical principle

– see beyond authority, laws, and norms

Ethics (cont.)

• The ethics environment –Ethical climate - processes by which decisions are

evaluated and made on the basis of right and wrong •unethical corporate behavior may be the responsibility of an unethical individual

– often reveals a company culture that is ethically lax

–Corporate ethical standards- organizations must be explicit regarding their ethical standards and expectations

• there are many different corporate ethical standards – golden rule

– accepted business practice

– intuitive approach

Business Ethics and Social

Responsibility • Business Ethics:

– The principles and standards that define

acceptable conduct in business

• Social Responsibility:

– A business‘s obligation to maximize its

positive impact and minimize its negative

impact on society

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved

Recognizing an Ethical Issue

• An ethical issue is an identifiable problem,

situation, or opportunity that requires a

person to choose from among several

actions that may be evaluated as right or

wrong, ethical or unethical

Did You Know?

The most common types of observed misconduct

are lying, withholding information, and abusive/

intimidating behavior.


Ethical Issue Categories

• Conflict of interest

• Fairness and

honesty

• Communications

• Business

relationships


Conflict of Interest

• Occurs when a person must choose

whether to advance their own

personal interest or those of others


Fairness and Honesty

• The heart of business

ethics

– General values of

decision makers


Communications

• False and misleading

advertising and deceptive

personal-selling tactics

anger customers and may

cause a business to fail.


Business Relationships

• Businesspeople must be ethical toward

their customers, suppliers, and others in

their workplace.


Reasons For Not Reporting

Observed Misconduct 1. Fear of not being considered a team player

2. Didn‘t believe corrective action would be taken

3. Feared retribution or retaliation from supervisor

or management

4. No one else cares about business ethics so

why should I

5. Didn‘t trust organization to keep report

confidential

Source: 1997 Society for Human Resource Management/Ethics Resource Center Business Ethics Survey Report, p. 21.

Climate Factors Conducive To

Unethical Behavior

Financial concerns

take precedence over

ethical considerations

Ethics considered

from legal or public

relations viewpoint

Emphasis on short-

term revenues

Danger

Signs

No written code

of ethics

Shareholders concerns

take precedence over

other constituencies

Lack clear procedures

for dealing with ethical

problems

Desire for “quick

fix” solutions

Misconduct Observed in the

Workplace

Questions to Consider in Determining

Whether an Action is Ethical

• Are there any potential legal restrictions or

violations that could result from the action?

– Question: If I do this will it break any laws?

• Does your company have a specific code of

ethics or a policy on the action?

– Question: If I do this will I go against the

employee handbook?




• Is this activity customary in your industry?

• Are there any industry trade groups that

provide guidelines or codes of conduct

that address this issue?

– Question: If I do this will I violate any trade

practices?




• Would this activity be accepted by your

coworkers?

• Will your decision or action withstand open

discussion with coworkers and managers

and survive untarnished?

– Question: Will my action cause peer

acceptance or rejection, or any peer

pressure?




• How does this activity fit with your own

beliefs and values?

– Question: Will my action violate any of my

personal ethics, religious beliefs, or social

values?


Ethics (cont.)

• The ethics environment (cont.)

–Ethics codes - most visible sign of corporate

commitment to ethical behavior

•must be tailored to individual company‘s philosophies

•address subjects such as employee conduct, community and

environment, shareholders, customers, political activity

–Ethics programs

•compliance-based - designed by corporate counsel to prevent,

detect, and punish legal violations

– increases surveillance and controls

• integrity-based - guiding principles that instill personal

responsibility for ethical behavior

Define the

issue clearly Identify the

relevant values

in the

situation

Implement the

decision

Ethical

Decision

Making

Weigh conflicting

values and choose

option that

balances them

Ethical Decision Making

Three Factors that Influence

Business Ethics

Individual

Standards

and

Values

Managers’

and

Coworkers’

Influence

Opportunity:

Codes and

Compliance

Requirements

Ethical/Unethical

Choices

in Business


Codes of Ethics

• Formalized rules and standards that

describe what a company expects of its

employees

Did You Know?

Written ethics standards are more often found in

larger companies than smaller ones.


Whistleblowing

• The act of an employee exposing the

employer‘s wrongdoing to outsiders

– The media

– Government regulatory agencies


The Facts on Business

Ethics Today

• Of employees surveyed:

– 50% reported that their organizations have an

ethics officer or a phone line for ethics advice

– 84% reported that their organizations offer

mandatory ethics training

– 54% reported that ethics training was useful

at work

Source: Ethics Resource Center, 2000 National Business Ethics Survey: How

Employees Perceive Ethics at Work.

The Nature of Social

Responsibility • Four Dimensions:

– Economic – earn profits

– Legal – comply with the law

– Ethical

• Not just ―for profit‖ only

– Voluntary & Philanthropic

• Promote human welfare and goodwill


The Pyramid of Social Responsibility

Ethical Responsibilities

being ethical; doing what is right, just,

and fair; avoiding harm

Voluntary

Responsibilities

being a

―good corporate citizen;‖

contributing to the

community and quality of life

Source: Adapted from Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.

Legal Responsibilities

obeying the law (society‘s codification

of right and wrong)

Economic Responsibilities

being profitable

Best Corporate Citizens

1. Fannie Mae

2. Procter & Gamble

3. Intel Corporation

4. St. Paul Companies

5. Green Mountain Coffee Roasters

6. Deere & Company

7. Avon Products

8. Hewlett-Packard

9. Agilent Technologies

10. Ecobab

11. Imation

12. IBM

13. Nuveen Investments

14. Herman Miller

15. J. M. Smucker

16. Safeco

17. Timberland

18. Zimmer Holdings

19. Cisco

20. 3M

Source: Philip Johnansson, ―The Best 100 Corporate Citizens,‖ Business Ethics, March/April

2001, p. 15.

Arguments for Social Responsibility

1. Business helped to create many of the social

problems that exist today, so it should play a

significant role in solving them

2. Businesses should be more responsible

because they have the financial and technical

resources to help solve social problems

3. As members of society, businesses should do

their fair share to help others


Arguments for Social

Responsibility

4. Socially responsible decision making by

businesses can prevent increased government

regulation

5. Social responsibility is necessary to ensure

economic survival

– Businesses must take steps to help solve the social

and environmental problems that exist today


Arguments Against Social

Responsibility 1. Managers are sidetracked from the primary

goal of business

– Earning profits

2. Participation in social programs gives

businesses greater power, perhaps at the

expense of particular segments of society


Arguments Against Social

Responsibility

3. Some people question whether business has

the expertise needed to assess and make

decisions about social problems

4. Many people believe that social problems are

the responsibility of government agencies and

officials


Social Responsibility Issues


• Organizational relationships with owners and

stockholders:

– Profit and ROI

• Employee relations:

– Providing a safe workplace, adequate pay,

information about the company, listening to

grievances, and treating employees fairly

• Consumer relations:

– Respecting the rights of customers and providing

them with safe and satisfying products

Social Responsibility Issues

• Environmental issues:

– Animal rights

– Pollution

– Global warming

• Community relations:

– Responsibility to the general welfare of

the community

Did You Know?

In one year, Americans generated 230 million

tons of trash and recycled 23.5 percent of it.


John F. Kennedy‘s 1962

Consumer Bill of Rights • The right to safety

• The right to be informed

• The right to choose

• The right to be heard

Did You Know?

John F. Kennedy was the 35th President of

the United States.


Responsibility of the Ethics

Officer • Provide advice about ethics to employees and

management

• Distribute the company‘s code of ethics

• Create and maintain an anonymous, confidential

service to answer questions about ethical issues

• Take action on ethics violations

• Review and modify the code of ethics as needed


Corporate Social Responsibility

• Corporate social responsibility –the obligation toward society assumed by business

•maximizes it positive effects on society and minimizes it negative effects

–economic responsibilities - produce goods and services that society wants at a price that perpetuates the business

–legal responsibilities - obey local, state, federal and relevant international laws

–ethical responsibilities - meeting other societal expectations, not written as law

–voluntary responsibilities - additional behaviors that society finds desirable and that the values of the business support

Voluntary

Responsibilities

Be a good corporate

citizen

Ethical

Responsibilities

Be ethical

Legal

Responsibilities

Obey the law

Economic

Responsibilities

Be profitable

Pyramid Of Corporate Social

Responsibility


(cont.) • Contrasting views

–profit maximization view •managers obligated to maximize the present value of the firm

•economic performance is an organization‘s primary social responsibility

–business judgment rule - allows management wide latitude in policy if the policy can be justified

•duty to pursue profits is not absolute

–principled moral reasoning view •ethical actions are not optional, but mandatory

•organizations have a wider range of responsibilities that extend beyond the production of goods and services for a profit

Corproate Social Responsibility

(cont.) •Reconciliation

–based on the idea that ethical behavior is both

right and more profitable

–competitive advantages of socially responsible

actions, especially over the long-term

• avoid unnecessary and costly regulation

•pay dividends to the reputation of the company

•profits can be made from attempts to solve society‘s

problems


(cont.) • Corporate social responsiveness

–the process companies follow and the actions they take

in the domain of corporate social responsibility

•CSR1 (corporate social responsibility) - principles, philosophies,

and beliefs

•CSR2 (corporate social responsiveness) - processes companies

follow and the actions they take

•both CSR1 and CSR2 have their critics in academia and

business

–stakeholder management - managers do not manage

relationships with society but with stakeholders

Performance

Do less than required

Do the least that is required

Do all that is required

Do more than is required

Approach

1. Reactive

2. Defensive

3. Accommodative

4. Proactive

Posture or Strategy

Deny responsibility

Admit responsibility

but fight it

Accept responsibility

Anticipate responsibility

Approaches To Corporate Social

Responsiveness


(cont.) •Strategic voluntarism

–corporate philanthropy has become more

strategic

•strive to do things that matter

•get recognition for their contributions

•support causes that both capitalize on and serve their

businesses

–community service is increasingly an employee

benefit

The Political Environment

• Competitive advantage –progressive organizations realize that government may

be the source of competitive advantages for an individual company or an entire industry

–numerous examples of public policy that assists business

• Corporate legitimacy –motive for business involvement in the public policy

process

–organizations are legitimate to the extent that their goals and methods are consistent with those of society

–domain defense - activities intended to counter challenges to the organization‘s legitimacy


(cont.) • Strategies for influencing the political environment

–public affairs department - monitors key events and trends, analyzes their effects on the organization, recommends organizational responses, and implements political strategies

–Lobbying - traditional form of influence • involves political professionals or company executives who establish communication channels with regulatory bodies

–Political action committees (PACs) - make donations to candidates for political office

•companies may ask employees or shareholders for contributions to political candidates, subject to certain limitations

• ―protection money‖ - donated money intended to ensure that company is not disadvantaged in the legislative process

International

relations

Investor and

stockholder

relations

Activities

of

Public

Affairs

Issues

management

Government

relations

Institutional

advertising

Corporate

contributions

Public

relations

Public Affairs Department


(cont.) • Strategies for influencing the political environment (cont.) –Corporate constituency programs - organizational

effort to identify, educate, and motivate individuals to take political action that could benefit the organization

•encourage interested stakeholders to take grassroots action

•probably requires the greatest commitment of organizational resources

–Coalition building - finding other organizations or voter groups that share political interests on a particular legislative issue

•combine efforts and power to influence the environment


(cont.) • Strategies for influencing the political environment (cont.) –Stonewalling - use of public relations, legal action, and

administrative processes to prevent or delay the introduction of legislation and regulation that may have an adverse impact on the organization

• rarely changes the conditions that led to the adverse regulation

•consumes considerable time and money, and may boomerang

–Strategic retreat - response to adverse regulatory change

•efforts to adapt products and processes to changes in the political and social environments while minimizing the negative effects of those changes

The Natural Environment

• Environmental issues

–range of issues is broad, and the impact huge

•must consider a mix of technical, ethical, social, and competitive

issues

– e.g., many technological developments used by business are

contributing to the destruction of ecological ecosystems

• A risk society

–sources of risk include:

•excessive production of hazards

•ecologically unsustainable consumption of natural resources

–risk has proliferated due to population explosion,

industrial pollution, and environmental degradation

The Natural Environment (cont.)

• Ecocentric management

–has as its goal the creation of sustainable economic

development and improvement of quality of life

worldwide for all organizational stakeholders

–seeks to minimize negative environmental impact

–design for environment (DFE) - tool for creating

products that are easy to recover, reuse, or recycle

•all environmental effects of a product are examined during the

design phase

– assessments of inputs

– analysis of how consumers will use and dispose of the product

Environmentally

appropriate production

technologies

Products with

ecofriendly

packaging

Use smaller

resource quantities

Products with

recyclable

materials Ecocentric

Management

Encourage low

energy loss

Ecocentric Management

The Natural Environment (cont.)

•Environmental agenda for the future

–corporations are the only organizations with the resources, technology, and global power to help create a sustainable world •webs of companies with a common ecological vision can combine their efforts into high-leverage, impactful action

–companies beginning to acquire the motivation to solve environmental problems •may represent the biggest opportunity in the history of commerce

Key Topics

• Individual codes of ethics and the

importance of ethics in the workplace

• Key terms

– Social responsibility in U.S. business

– Environmental issues and stakeholder

relationships

– Approaches and implementation

– Implications for small business

chapter 2 - dadang iskandar · pdf file08.03.2016 · ethics (cont.) •ethical...

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