Bus 100

Chapter 2
BUSINESS ETHICS AND
SOCIAL RESPONSIBILITY
 LEARNING
OBJECTIVES
After reading this chapter, you should be able to:
1. Explain how individuals develop their personal codes of
ethics and why ethics are important in the workplace.
2. Distinguish social responsibility from ethics, identify
organizational stakeholders, and characterize social
consciousness today.
3. Show how the concept of social responsibility applies
both to environmental issues and to a firm’s
relationships with customers, employees, and investors.

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 LEARNING
O B J E C T I V E S (cont’d)

After reading this chapter, you should be

able to:
4. Identify four general approaches to social
responsibility and describe the four steps that
a firm must take to implement a social
responsibility program.
5. Explain how issues of social responsibility and
ethics affect small business.

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 What’s in It for Me?

 By understanding the material in this

chapter, you’ll be better able to:
 Assess ethical and socially responsible issues
facing you as an employee and as a boss or
business owner.
 Understand the ethical and socially
responsible actions of businesses you deal
with as a consumer and as an investor.

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 Ethics in the Workplace
 Ethics
 Beliefs about what’s right and wrong or good and bad
 Ethical Behavior
 Behavior conforming to individual beliefs and social
norms about what’s right and good
 Unethical Behavior
 Behavior conforming to individual beliefs and social
norms about what is defined as wrong and bad
 Business Ethics
 The ethical or unethical behaviors by employees in the
context of their jobs
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 Individual Values and Codes

 Sources of Personal Codes of Ethics

 Childhood responses to adult behavior
 Influence of peers
 Experiences in adulthood
 Developed morals and values

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 Business and Managerial
Ethics
 Managerial Ethics
 The standards of behavior that guide individual
managers in their work
 Ethics affect a manager’s behavior toward:
 employees
 the organization
 other economic agents—customers, competitors,
stockholders, suppliers, dealers, and unions
 Ethical Concerns
 Ambiguity (e.g., financial disclosure)
 Global variation in business practices (e.g., bribes)

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 Assessing Ethical Behavior

 Simple Steps in Applying Ethical Judgments

 Gather the relevant factual information
 Analyze the facts to determine the most
appropriate moral values
 Make an ethical judgment based on the
rightness or wrongness of the proposed
activity or policy

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Assessing Ethical
Behavior
 Ethical Norms and the Issues They Entail
 Utility: Does a particular act optimize the
benefits to those who are affected by it? Do
all relevant parties receive “fair” benefits?
 Rights: Does the act respect the rights of all
individuals involved?
 Justice: Is the act consistent with what’s fair?
 Caring: Is the act consistent with people’s
responsibilities to each other?
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 Company Practices and
Business Ethics
 Encouraging Ethical Behavior Involves:
 Adopting written codes of conduct and
establishing clear ethical positions for the conduct
of business
 Having top management demonstrate its
support of ethical standards
 Instituting programs to provide periodic ethics
training
 Establishing ethical hotlines for reporting and
discussion of unethical behavior and activities
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Core Principles and Organizational Values

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Social Responsibility
 Social Responsibility
 The overall way in which a business attempts
to balance its commitments to relevant groups
and individuals (stakeholders) in its social
environment
 Organizational Stakeholders
 Groups, individuals, and organizations that are
directly affected by the practices of an
organization and, therefore, have a stake in its
performance
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Major Corporate Stakeholders

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 The Stakeholder Model of
Responsibility
 Customers
 Businesses strive to treat customers fairly and honestly
 Employees
 Businesses treat employees fairly, make them a part of the team, and
respect their dignity and basic human needs
 Investors
 Businesses follow proper accounting procedures, provide information
to shareholders about financial performance, and protect shareholder
rights and investments
 Suppliers
 Businesses emphasize mutually beneficial partnership arrangements
with suppliers
 Local and International Communities
 Businesses try to be socially responsible
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Contemporary Social
Consciousness

 The Concept of Accountability

 The expectation of an expanded role for
business in protecting and enhancing the
general welfare of society

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 Areas of Social
Responsibility

 Responsibility Toward the Environment

 Controlling air, water, and land pollution
 Properly disposing of toxic waste
 Engaging in recycling

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 Areas of Social
Responsibility (cont’d)
 Responsibility Toward Customers
 Involves providing quality products and pricing products fairly
 Consumerism
 Social activism dedicated to protecting the rights of
consumers in their dealings with businesses
 Basic Consumer Rights
 To possess safe products
 To be informed about all relevant aspects of a product
 To be heard
 To choose what to buy
 To be educated about purchases
 To courteous service
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 Consumer Rights (cont’d)
 Unfair Pricing
 Collusion: When two or more firms agree to
collaborate on such wrongful acts as price
fixing
 Price gouging: Responding to increased
demand with overly steep (and often
unwarranted) price increases
 Ethics in Advertising
 Truth in advertising
 Morally objectionable advertising
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 Areas of Social
Responsibility (cont’d)
 Responsibility Toward Employees
 Legal and social commitments to:
 not practice illegal discrimination
 provide a physically and socially safe workplace
 provide opportunities to balance work and life
 provide protection for whistleblowers (an employee who
discovers and tries to put an end to a company’s
unethical, illegal, or socially irresponsible actions by
publicizing them)
 Responsibility Toward Investors
 Proper financial management (no insider trading)
 Proper representation of finances
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 Implementing Social
Responsibility (SR) Programs
 Arguments Against SR
 The cost of SR threatens profits.
 Business have too much control over which and
how SR issues would be addressed.
 Business lacks expertise in SR matters.
 Arguments for SR
 SR should take precedence over profits.
 Corporations as citizens should help others.
 Corporations have the resources to help.
 Corporations should solve problems they create.
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 Approaches to Social
Responsibility
 Obstructionist Stance
 A company does as little as possible and may
attempt to deny or cover up violations
 Defensive Stance
 A company does everything required of it legally but
no more
 Accommodative Stance
 A company meets its legal and ethical requirements
and also goes further in certain cases
 Proactive Stance
 A company actively seeks to contribute to the well-
being of groups and individuals in its social
environment 21
Spectrum of Approaches to Corporate Social
Responsibility

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 Managing Social
Responsibility Programs
1. Social responsibility must start at the top and be
considered as a factor in strategic planning.
2. A committee of top managers must develop a
plan detailing the level of management support.
3. One executive must be put in charge of the
firm’s agenda.
4. The organization must conduct occasional social
audits—systematic analyses of its success in
using funds earmarked for its social
responsibility goals.
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 Social Responsibility and
the Small Business
 Large Business versus Small Business
Responses to Ethical Issues
 Differences are primarily differences of scale.
 More issues are questions of individual ethics.

 Ethics and social responsibility are

decisions faced by all managers in all
organizations, regardless of rank or size.

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