Chapter 4 Demanding Ethical and Socially Responsible Behavior Ethics is More than Legality New laws are making accounting records more transparent easy to read and understand and businesspeople more accountable for their actions Ethics society s accepted standards of moral behavior behaviors accepted by society as right or wrong courage and self sacrifice Basic moral values integrity respect for human life self control honesty Wrong values cheating cowardice and cruelty Golden rule do unto others as you would have them do unto you citizens don t give any time to the community that they live in Ethnical dilemmas have to choose between equally unsatisfactory alternatives o Can ask yourself three questions when facing one Is my proposed action legal Is it balanced How will it make me feel about myself Managing Businesses Ethically and Responsibly People learn their standards and values from observing what others do not from hearing what they say Trust and cooperation between workers and managers must be based on fairness honesty openness and moral integrity A business should be managed ethically for many reasons o 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 society and to do the right thing Some managers think ethics is a personal matter either have it or don t Many think individuals don t act alone they need the implied if not the direct cooperation of others to behave unethically in a cooperation Compliance based ethics codes emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers Integrity based ethics codes define the organization s guiding values create an environment that supports ethically sound behavior and stress shared accountability Six steps that can improve U S business ethics o Top management must adopt and support a corporate code of conduct o Employees must understand expectations and act accordingly o Managers and others must be trained to consider the ethical implications o Ethics office set up where employees can communicate anonymously Whistleblowers insiders who report illegal or unethical behavior o Outsiders must be told about the ethics problem o Ethics code must be enforced with timely action Corporate Social Responsibility Corporate Social Responsibility CSR concern businesses have for the welfare of society not just for the owners based on integrity fairness and respect Economist Milton Friedman believed the only social responsibility of business is Adam Smith believed that self interested pursuit of profit was wrong and that to make money for stockholders benevolence was the highest virtue Corporate philanthropy charitable donations to nonprofit groups of all kinds o McDonald s Ronald McDonald House Corporate social initiatives enhanced forms of corporate philanthropy o TNT keeps a 50 person emergency response team on standby 48 hours Corporate responsibility includes everything from hiring workers to make safe products minimize pollution using energy wisely and a safe work environment Corporate policy position firm takes on social and political issues o Patagonia takes a stance towards preservation of environment and nature Responsibilities Responsibility to Customers o John F Kennedy proposed four basic rights of consumers Right to safety to be informed to choose and to be heard o Pleasing customers by offering them real value o Customers prefer to do business with companies they trust Responsibility to Investors Responsibility to Employees o Some people believe you must make money before you can do good o Many investors feel that it makes financial and moral sense to invest in companies that plan ahead to create a better environment o Insider trading user private company information to further insiders own fortunes or those of their family and friends Martha Stewart o Regulation ED requires companies that release information to share it with everybody not just a few people have to tell everyone at same time o Best social program in the world is a job need to create jobs to grow o Mutual respect can make a huge different in success of company o Giving employees salaries and benefits that help them reach their goals helps demonstrate commitment and caring Increased benefits reduce employee turnover o Getting even in one of the best incentives for good people to do bad things o Bad things are loss of employee commitment confidence and trust Responsibility to Society and Environment o More than 2 3 of U S workers receive salaries from nonprofit organizations that receive funding from others that in turn receive their money from businesses o Businesses are responsible for promoting social justice Cleaning environment building community facilities etc o Environmental efforts may increase a company s costs but also allow company to charge higher prices increasing market share Many companies publish reports about their social contribution Social Auditing systematic evaluation of an organization s progress toward implementing socially responsible and responsive programs o One of the major problems is establishing procedures for measuring a firm s activities and their effects on society o Many think it should measure workplace issues the environment product safety community relations military weapons contracting international operations and human rights and respect for local people s rights Social audits force organizations to consider their social responsibility beyond the level of feeling good or public relations Watchdogs to monitor how well companies enforce their responsibilities o Socially conscious investors insist that a company extend its own high o Environmentalists apply pressure by naming companies that don t abide o Union officials hunt down violations and force companies to comply to standards to its suppliers by environmentalists standards avoid negative publicity o Customers make buying decisions based on their social conscience International Ethics and Social Responsibility Ethical problems and issues of social responsibility happen globally Many U S businesses demand socially responsible behavior from their international suppliers making sure they don t violate human rights standards o Sears won t import products made by Chinese prison labor o Nike has been accused by human rights of treating its
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