Ethics . . .

Ethics is the study of right and wrong and of the morality of the choices individuals make.

An ethical decision is one that is ‘right’ according to some standard of behavior.

Business Ethics

Business Ethics is the application of moral standards to business situations.

Cigarette companies are being fined for their advertising practices.

Group Pressure

Businesses are often influenced by group pressure in their ethical practices:

Investors want management to make sensible financial decisions that will increase sales, profits and returns on their investments.

Customers expect a business’s products to be safe, reliable and reasonably priced.

Group Pressure (continued)

Employees demand to be treated fairly in hiring, promotion, and compensation decisions.

Creditors require payments to be made on time and accounting information provided by the business to be accurate.

Competitors expect the business’s competitive practices to be fair and honest.

Common Ethical Issues

Fairness and Honesty

• Discrimination

• Deceiving or intimidating others

Organizational Relationship

• Taking credit for others work

• Pressuring others to behave unethically

Conflict of InterestWhen an employee takes advantage of a situation for his or her benefit (bribe), rather than for the employer’s interest

CommunicationWhen communication in business, especially advertising, is false or misleading

Case - Deceiving Others

BMW received a court order to pay $2 million to a U.S. buyer because it had failed to inform him that his car paint had been damaged and retouched.Identify the ethical issue that is violated by BMW

a) Organizational Relationships b) Fairness and Honestyc) Conflict of Interestd) Communication

Case – Taking Credit for Others Work

Assume that you are an employee in XYZ Company. Your manager requested a report about the ‘The Demand and Supply of the Real-Estate Market in Bahrain'. After submitting the report, which is part of your duties, you found that your manager submitted it to the CEO under his name only.

Identify the ethical issue that is violated by the managera) Fairness and Honestyb) Organizational Relationshipsc) Conflict of Interest d) Communication

Case - Bribe

Assume that you are a 'contract manager' in XYZ company. You received an expensive watch from one of the bidders.Identify the ethical issue that you violated

a) Fairness and Honestyb) Organizational Relationshipsc) Conflict of Interestd) Communication

Case - Misleading Advertising

This is a billboard ad that is located near to a school. Identify the ethical issue that is violated in the ada) Fairness and Honesty

b) Organizational Relationships

c) Conflict of Interest

d) Communication

Encouraging Ethical Behavior

Government, Trade and Professional Organizations provide ethical guidelines for businesses to follow.

Businesses provide a code of ethics to employees to encourage ethical behavior.

A Code of Ethics is a written guide to acceptable and ethical behavior as determined by that organization. It contains uniform policies, standards and punishments for violations.

(Figure 2.2, p 40)

Encouraging Ethical Behavior (continued)

Employees know what is expected of them and what will happen if they violate the rules when a written code of ethics is provided and enforced.

Code cannot cover every situation.Businesses must create an environment in

which employees recognize the importance of following the written code.

Managers have to provide direction by encouraging communication, serving as a role model, and training employees to make ethical decisions.

Social Responsibility - SR

The recognition that business activities have an impact on society and the consideration of that impact in business decisions

Bahraini Companies. . .

Alba – allows the villagers near the plant to take fresh water from their plant site. They also allow them to use the medical facility when necessary.GPIC – set up a fish nursery in the sea outside their plant to prove that they are not polluters of water. Fish are donated to charities and serve an environmental purpose as they attract flamingos back to the island.Businesses organize walk-a-thons and other events to raise money for various charities on the island.Hotels and other organizations volunteer to clean beaches annually.Some organizations provide scholarships for students to attend universities in Bahrain and around the world.Some organizations are taking responsibility to prevent air, water, land and noise pollution near and around their plants.

International Companies. . .

McDonald’sProvides low-cost housing for people who have seriously ill children – Ronald McDonald Houses.Practices recycling and waste control in its 30,000 restaurants around the world – no longer uses styrfoam containers for its sandwiches and drinks .

StarbucksUses only materials that may be recycled, including the coffee grounds.Buys coffee directly from farmers instead of wholesalers.Provides loans for small coffee farmers.

Models of Social Responsibility

Business decisions are made within the firm; so social responsibility begins with the attitude of management.

Government regulations and public awareness have increased the social responsibility of businesses.

Models of Social Responsibility

The Economic Model of Social Responsibility states that society will benefit most when business is left alone to produce and market profitable products that society needs.

Models of Social Responsibility

The Socioeconomic Model of Social Responsibility states that business should emphasize not only its profits but also the impact of its decision on society.

Comparison of Models of Social Responsibility

Arguments For Social Responsibility:1. Since business is a part of society, it cannot ignore

social issues.2. Business has the technical, financial and managerial

resources needed to tackle today’s complex social issues.

3. By helping resolve social issues, business can create a more stable environment for long-term profitability.

4. Socially responsible decision making by firms can prevent increased government intervention, which would force businesses to do what they decided not to do voluntarily.

Comparison of Models of Social Responsibility

Arguments Against Social Responsibility:1. Business managers are primarily responsible to

investors, so management must be concerned with providing a return on owners’ investments.

2. Corporate time, money and talent should be used to maximize profits, not to solve society’s problems.

3. Social problems affect society in general, so individual businesses should not be expected to solve these problems.

4. Social issues are the responsibility of government officials who are elected for that purpose and are accountable to the voters for their decisions.

What is Consumerism?

Consumerism includes all activities undertaken to protect the rights of consumers.

Consumerism

Six Basic Rights of Consumers

♥ The Right to Safety♥ The Right to Be Informed♥ The Right to Choose♥ The Right to Be Heard♥ The Right to Consumer Education♥ The Right to Service

The Right To Safety

• Safe for intended use

• Explicit directions for proper use

• Tested for quality and reliability

The Right To Be Informed

• Access to complete information about the product before they buy it– Ingredients and Nutrition on

food containers– Fabric and laundering

methods – clothing– Interest rate – Loans

• Potential dangerous of usage– Side effects of medicine

The Right To Choose

• A choice of product offered by many manufacturers and sellers to satisfy a particular need– Competition:

reduction in prices

The Right To Be Heard

Someone will listen and take appropriate action when the consumer complains

– Consumers Relations/ Services: Created a competitive edge

The Right To Consumer Education

Entitles people to be fully informed about their rights as consumers

The Right To Courteous Service

Entitles customer to receive convenient, courteous and responsive treatment from manufacturers and sellers