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Chapter Two
Being Ethical and
Socially Responsible
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Business Ethics Defined
• Ethics
– The study of right and wrong
• Business ethics
– The application of moral
standards to business
situations
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Ethical Issues
• Fairness and honesty
– Business people are expected to refrain from knowingly deceiving, misrepresenting, or intimidating others
• Organizational relationships
– A business person should put the welfare of others and that of the organization above their own personal welfare
• Conflict of interest
– Issues arise when a business person takes advantage of a situation for personal gain rather than for the employer’s interest
• Communications
– Business communications that are false, misleading, or deceptive are both illegal and unethical
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Factors Affecting Ethical Behavior
Source: Based on O.C. Ferrell and Larry Gresham, “A Contingency Framework for Understanding Ethical Decision Making in Marketing,”
Journal of Marketing, summer 1985, p. 89.
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Source: USA Today, 1997.
How Often People Say They Lie
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How do you decide what is right or
wrong?
• Is there a process you use?
• Where did you learn to make decisions this
way?
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Encouraging Ethical Behavior
External to a specific
organization
•Governmental legislation and regulations
•Trade association guidelines
Within an organization
•Code of ethics
•A written guide to acceptable and ethical behavior as defined by an organization; it outlines policies, standards, and punishments
•Organizational environment
•Management direction
•Employee training
Whistle-blowing
•Informing the press or government officials about unethical practices within one’s organization
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“The Six Pillars of Character”
1. Trustworthiness
2. Respect
3. Responsibility
4. Fairness
5. Caring
6. Citizenship
For more detail go to the website by clicking on this hotlink.
Source: Josephson Institute of Ethics, “Resources: Making Ethical Decisions- The Six Pillars of Character,” http://www.josephsoninstitute.org/MED/MED-2sixpillars.htm.
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Can Ethics be taught?
Yes
• Courses on business
ethics teach students
how to analyze the
ethical problems they
face
No
• An individual’s beliefs,
values, and morals are
developed long before
he or she enters school
or begins a career.
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or
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Class Exercise
• Discuss the following…
– The manufacturer of a leading insect spray changes the product to eliminate an ingredient that many are allergic to. The change will make the product less effective. The manufacturer does not inform consumers.
– About 33% of all business failures each year are traced back to employee theft and other employee crime.
– The average worker admits to wasting 2.09 hours per workday surfing the Internet.
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Social Responsibility
• The recognition that business activities have an impact on society and the consideration of that impact in business decision making
– Social responsibility costs money, but is also good business
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The Evolution of Social
Responsibility in Business (cont’d)
• The Great Depression and beyond
– Franklin D. Roosevelt instituted
economic and social programs
– Laws were passed to correct business
abuses
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Two Views of Social Responsibility
• Economic model
– The view that society will benefit most
when business is left alone to
produce and market profitable
products that society needs
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Two Views of Social Responsibility (cont’d)
• Socioeconomic model
– The concept that business should
emphasize not only profits but also
the impact of its decisions on society
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Class Exercise
• Give some examples of socially responsible
activities by organizations in your area or
other national or international organizations
with which you are familiar.
• Bill and Melinda gates have given away more
than $10 Billion. Is such philanthropy the
responsibility of all corporate leaders?
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Employment Practices
• Progress toward affirming the rights of employees to equal treatment in the workplace
– Minority
• A racial, religious, political, national, or other group regarded as different from the larger group of which it is a part and that is often singled out for unfavorable treatment
• Anti-discrimination laws passed in 1960s and 1970s
• But abuses still exist
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Employment Practices (cont’d)
• Affirmative Action programs– Plans designed to increase the number of minority
employees at all levels within an organization
– Problems arise from the use of quotas and charges of reverse discrimination
– Equal Employment Opportunity Commission (EEOC)
• The federal agency empowered to investigate complaints of employment discrimination and to sue firms that practice it
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Concern for the Environment
• Pollution– The contamination of water, air, or land
through the actions of people in an industrialized society
• Environmental Protection Agency (EPA)– The federal agency charged with enforcing
laws affecting the environment
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Concern for the Environment (cont’d)
• Noise pollution
– Excessive noise can do physical harm
– Ways to reduce noise levels
• Isolating the source of the noise
• Modifying machinery and equipment
– If noise cannot be reduced, workers can be protected by wearing noise-reduction gear