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Being Ethical and Socially Responsible
Inside Business – Panera Cares
What do you think about the
Panera Cares cafes?
Do businesses have to choose between social responsibility and profits?
Business Ethics is the application of moral standards to business situations.
What is more important – a business’s responsibility to society, its employees, or to its stockholders?
Who determines to what moral standard businesses should be held?
Movements in the building
© ROMAN GORIELOV/SHUTTERSTOCK
Do employees have a right to privacy, or does their time belong completely to their employers?
Fairness and honesty
Businesspeople are expected to refrain from knowingly deceiving, misrepresenting, or intimidating others.
A businessperson should put the welfare of others and that of the organization above his or her own personal welfare.
Conflict of interest
Issues arise when a businessperson takes advantage of a situation for personal gain rather than for the employer’s interest.
Business communications that are false, misleading, or deceptive are both illegal and unethical.
Factors Affecting Ethical Behavior
Have you ever had to do something you thought might be or knew was wrong, but felt you didn’t have a choice or that it was worth the risk?
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.
Factors Affecting Ethical Behavior (cont’d)
Three general sets of factors appear to influence the standards of behavior in an organization.
Individual knowledge of an issue
Use of the Internet
Presence of opportunity
What factors have to be at work to allow something like the Bernie Madoff “ponzi scheme” to be as successful as it was for as long as it was?
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 for violations
Informing the press or government officials about unethical practices within one’s organization
Sarbanes-Oxley Act of 2002 adopted tough new provisions to deter and punish corporate and accounting fraud and corruption.
How important is whistleblower protection?
To what extent should an employer be free to hire and fire whom they choose?
Would you be scared to report your employer?
© JOHN ROMAN IMAGES/SHUTTERSTOCK
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.
How socially responsible a firm acts may affect the decisions of customers to do or continue to do business with the firm.
Does a company’s social responsibility affect your decision to do business with them?
How many of the social programs in the text were you familiar with before you read the chapter?
General Mills Foundation
Merck & Co., Inc
Guidelines for Making Ethical Decisions
1. Listen and learn.
Recognize the problem or opportunity; be sure you understand others.
2. Identify the ethical issues.
Examine how others are affected by the situation; understand the viewpoint of those involved in the decision or its consequences.
3. Create and analyze options.
Put aside strong feelings; come up with alternatives; assess which options offer the best results.
4. Identify the best option from your point of view.
Consider and test it against criteria such as respect, understanding, caring, fairness, honesty, and openness.
5. Explain your decision and resolve any differences that arise.
May involve arbitration or additional proposals.
Special Areas of Concern for Managerial Ethics
Areas of Concern
Relationship of the firm to the employee
Hiring and firing
Wages and working conditions
Relationship of the employee to the firm
Honesty and expense accounts
Relationship of the firm
Fairness of pricing
Honesty in advertising
Right of privacy
Using the Internet
The International Business Ethics Institute is a private nonprofit educational organization that promotes global business ethics and corporate responsibility.
© IVELIN RADKOV/SHUTTERSTOCK
CLASS EXERCISE How ethical is it?
© DMITRIJS BINDEMANIS/SHUTTERSTOCK
The manufacturer of a leading insect spray changes the formulation of its product to eliminate problems experienced by people allergic to some of the ingredients. The manufacturer does not inform consumers. The change in the formula will make the product less effective.
A bribe is paid to a company official in the island country of Kocomo to facilitate the movement of a product in that country. Bribes are a normal and expected business practice in Kocomo.
A beer company engages in an advertising campaign that is targeted to undergraduate college students, many of whom are under the legal drinking age.
A rental car company strongly advises customers to purchase insurance when renting a car. Although most personal car insurance covers the insured motorist when driving a rental car, most rental car customers are not aware of this.
© YURI ARCURS/SHUTTERSTOCK
Consumer Reports publishes the results of a study on shampoos that provides strong evidence that all shampoos are basically the same. In fact, the results suggest that a mild dish-washing liquid will do the same job for a lot less money. After the study is published, a leading shampoo marketer claims that its product will remove oil, add body, condition, and replenish hair better than any competing shampoo and do it all in one step.
© ION PRODAN/SHUTTERSTOCK
The Evolution of Social Responsibility in Business
In the first quarter of the 20th century, there were very few government protections for workers or consumers.
Caveat Emptor – “Buyer Beware”
What you see is what you get, and if it’s not what you expected, too bad.
Most people believed that competition and the marketplace would correct abuses.
The government became involved only in cases of obvious abuse.
Early Government Regulations
Insert Table 2.2 from 9e, p.52
The Great Depression and Beyond
Pressure mounted for the government to help with the economy and social conditions.
Franklin D. Roosevelt instituted economic and social programs like the Works Progress Administration and the Civilian Conservation Corps.
Civilian Conservation Corps, c.1933
As government regulation has increased, so has everyone’s awareness of the social responsibility of business.
Two Views of Social Responsibility
Originated in the 18th century.
Society will benefit most when business is left alone to produce and market profitable products that society needs.
Company’s primary responsibility is to make a profit for its shareholders.
Social responsibility is the problem of government, environmental groups, and charities.
Two Views of Social Responsibility (cont’d)
Business should be concerned with the impact of its decisions on society.
Firms take pride in their social responsibility obligations.
It is in the best interest of firms to take the initiative in social responsibility matters.
Society will demand changes if a corporation is not a responsible member of society.
Provides protection against legal action from special-interest groups.
Economic Model Emphasisn
Quality of life
Exploitation of natural resources
Conservation of natural resources
Internal, market-based decisions
Market-based decisions with some community controls
Balance of economic return and social return
Firm’s or manager’s interest
Firm’s and community’s interests
Minor role for government
Is there a middle ground?
The Pros and Cons of Social Responsibility
As a part of society, business can’t ignore social problems.
Business has the means to tackle social problems.
Addressing social problems can create a more stable environment.
Socially-responsible decision making prevents government intervention.
Businesses are primarily responsible to shareholders.
Corporate time, money and talent should be used to create profit.
Individual businesses can’t be expected to solve problems affecting society in general.
Social issues are the problem of government officials elected for that purpose.
The Pros and Cons of Social Responsibility (cont’d)
If you owned your own business, how concerned would you be with social responsibility?
Who can afford to be more concerned with social responsibility – small businesses or big corporations?
Consumer Bill of Rights
Right to Safety
Right to be Informed
Right to Choose
Right to be Heard
Right to Consumer Education
Right to Service
Major Federal Legislation Protecting Consumers Since 1960
Federal Hazardous Substances Labeling Act (1960)
Warning labels on toxic household chemicals
Kefauver-Harris Drug Amendments (1962)
Drug testing and labeling for both generic and trade names
Cigarette Labeling Act (1965)
Warning labels on packages and ads
Fair Packaging and Labeling Act (1966)
Labels on products sold across states must include net wt, ingredients, and mfg name/address
Motor Vehicle Safety Act (1966)
Standards for safer cars
Truth in Lending Act (1968)
Finance charge disclosure in both dollars and annual percentage rates
Major Federal Legislation Protecting Consumers (cont’d)
Credit Card Liability Act (1970)
Card holder liability limited to $50 per card; unsolicited cards stopped
Fair Credit Reporting Act (1971)
Consumers can get credit reports and correct errors
Consumer Product Safety Commission Act (1972)
Established an abbreviated procedure for registering certain generic drugs
Fair Credit Billing Act (1974)
Consumer can challenge billing errors
Equal Credit Opportunity Act (1974)
Equal credit opportunities for males/females and single/married people
Magnuson-Moss Warranty-Federal Trade Commission Act (1975)
Minimum standards for written consumer warranties for products over $15
Amendments to Equal Credit Opportunity Act (1976, 1994)
Discrimination prohibited when granting credit
Fair Debt Collection Practices Act (1977)
Abusive collection practices by third parties outlawed
Nutrition Labeling and Education Act (1990)
FDA review of food labeling and packaging
Telephone Consumer Protection Act (1991)
Automated dialing and prerecorded-voice calling prohibited
Consumer Credit Reporting Reform Act (1997)
Credit issuers are responsible for accurate credit data
Children’s Online Privacy Protection Act (2000)
Parents control info collected from kids; commercial websites protect child info
Do Not Call Implementation Act (2003)
Directed the FCC and FTC to apply consistent rules on telemarketing
Credit Card Accountability, Responsibility, and Disclosure Act (2009)
Provided the most sweeping changes in credit card protections since the Truth in Lending Act of 1968
Which federal legislation has had the biggest impact on your life?
A number of anti-discrimination laws were passed in the 1960s and 1970s but abuses still exist.
Equal Employment Opportunity Commission (EEOC) is the federal agency empowered to investigate complaints of employment discrimination and to sue firms that practice it.
Employment Practices (cont’d)
Affirmative Action Programs
Designed to increase the number of minority employees at all levels of an organization.
Written plans are required for employers with federal contracts of more than $50,000 per year.
Problems arise from the use of quotas and charges of reverse discrimination.
Do you think there is still a need for Affirmative Action policies?
Training programs for the hard-core unemployed
Workers with little education or vocational training and a long history of unemployment
National Alliance of Business (NAB)
A joint business-government program to train the hard-core unemployed
Concern for the Environment
© M. SHCHERBYNA/SHUTTERSTOCK
Safeguarding the environment requires
EPA enforcement actions
Water quality has improved in recent years, but high levels of toxic pollutants are still found in some waters.
Pollutants threaten the health of both people and wildlife.
Cleanup is complicated and costly because of runoff and toxic contamination.
Acid rain from sulfur emissions of industrial smokestacks is contributing to the deterioration of coastal waters, lakes, and marine life.
Concern for the Environment (cont’d)
Carbon dioxide emissions in the upper atmosphere are contributing to global warming.
Carbon monoxide and hydrocarbons emitted by motor vehicles and smoke and other pollutants emitted by manufacturing plants can be partially eliminated through pollution-control devices.
Weather and geography can contribute to air pollution.
How do we restore damaged or contaminated land and how do we protect unpolluted land from future damage?
Technology produces chemical and radioactive waste.
Shortage of landfill space for waste disposal and incinerators produce toxic ash.
Other causes of land pollution include strip-mining, nonselective cutting of forests, development of agriculture land for housing and industry.
The EPA has been criticized for its handling of the $1.6 billion Superfund created in 1980 by Congress.
Excessive noise can do physical harm.
Noise levels can be reduced by isolating the source of the noise or modifying machinery and equipment.
Noise Control Act of 1972 established noise emission standards for aircraft, railroads, and interstate motor carriers.
© TOMAS SEREDA/SHUTTERSTOCK
Major Environmental Laws
National Environmental Policy Act (1970)
Established EPA to enforce federal environmental laws
Clean Air Amendment (1970)
Automotive, aircraft, and factory emission standards
Water Quality Improvement Act (1970)
Strengthened water regulations; provided for large fines
Resource Recovery Act (1970)
Enlarged solid-waste disposal program; EPA enforcement
Water Pollution Control Act Amendment (1972)
Standards for cleaning navigable waters; elimination of harmful waste disposal by 1985
Noise Control Act (1972)
Standards for major sources of noise; EPA advises FAA on standards for planes
Clean Air Act Amendment (1977)
New deadlines for cleaning up polluted areas; review of existing air quality standards
Major Environmental Laws (cont’d)
Resource Conservation and Recovery Act (1984)
Federal regulation of potentially dangerous solid-waste disposal
Clean Air Act Amendment (1987)
National air-quality standard for ozone
Oil Pollution Act (1990)
Expanded oil spill prevention and response activities; established the Oil Spill Liability Trust Fund
Clean Air Act Amendments (1990)
Motor vehicles must be equipped with onboard systems to control about 90% of refueling vapors
Food Quality Protection Act (1996)
Required a new safety standard (reasonable certainty of no harm) for all pesticides used on foods
American Recovery and Reinvestment Act (2009)
$7.22 billion to EPA to protect/ promote “green” jobs, healthier environment
Who Should Pay for a Clean Environment?
Governments and businesses spend billions annually to reduce pollution.
Much of the money required is supposed to come from already depressed industries.
A few firms have discovered it is cheaper to pay a fine than to install equipment for pollution control.
Many business leaders say tax money should be used because business is not the only source of pollution.
Environmentalists say the cost is an expense of doing business.
Consumers will probably pay a large part of the costs—either as taxes or in the form of higher prices.
Do government regulations regarding the environment limit business and economic growth?
Implementing a Program of Social Responsibility
Developing a program of social responsibility
Secure the commitment of top executives.
Plan the program.
Appoint top-level executive as director to implement the plan.
Prepare a social audit--
A comprehensive report of what the organization has done and is doing with regard to social issues that affect it.
Funding the program
Pass program costs on to consumers as higher prices.
Absorb the program costs as a business expense.
Seek tax reductions or other incentives.
Fortune’s Most Admired Companies
Johnson & Johnson
Procter & Gamble
Source: Fortune magazine,
PBS Video about Business Ethics in the 21st Century
In a new 30-minute documentary, William F. Baker leads a timely discussion about the future of American corporations and how they are redefining their approach to achieving success.
Suggestion: Present learners with ethical dilemmas to discuss to illustrate how complicated it can get to choose what is “right” and “wrong”.
You can find a variety of ethical dilemmas here: http://www.globalethics.org/dilemmas.php
Has Sarbanes-Oxley Failed? NY Times Room for Debate on Sarbanes-Oxley
News story about a whistleblower who was fired from a Florida DoT
The Human Resources Dept said they “just happened” to find out about a DUI in the employee’s past.
The filmmaker Laura Poitras profiles William Binney, a 32-year veteran of the National Security Agency who helped design a top-secret program he says is broadly collecting Americans' personal data. Related Article: http://nyti.ms/STdGJz
PBS film about the Civilian Conservation Corps
Economist article on The Consumer Financial Protection Bureau
Overview of Corporate Social Responsibility from Prof. Thomas Beschorner, University of St.Gallen
Forbes articles on corporate social responsibility
NY Times Room for Debate on Affirmative Action
Congressional Research Service (Library of Congress) report on the Superfund
Spotted Owl Controversy
Room for Debate – Keystone Pipeline
e of pollution.
PBS film about the Civilian Con