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*Chapter Four

DemandingEthical and

SociallyResponsible

Behavior

Copyri ght © 2010 by the McGraw-Hil l Companies, Inc. All ri ghts reserved. McGraw-Hill/Irwin

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*Profile

• Chipotle is dedicated to producing quality foodwhich has led to current annual sales over $1billion.

STEVE ELLS Chipotle Mexican Grill

• Ells’ mission is to serve

“Food With Integrity.”

• Chipotle is the leading

restaurant buyer ofhumanely raised meats.

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*Ethics is More

Than Legality

• Scandals have shaken the realestate, mortgage and bankingindustries.

• How do we restore trust in thefree market system?

- Punish those who have broken the

law.- Make accounting records more

transparent.

- Consider what is ethical, not justwhat is legal.

LIFE AFTER SCANDAL

LG1

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*Ethical Standards

are Fundamental

• Ethics -- The standards of moral behavior.

Behaviors that are accepted by society as right

versus wrong.

WHAT are ETHICS?

LG1

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*Ethical Standards

are Fundamental

Right:

• Integrity

•

Respect for human life• Self control

• Honesty

• Courage

• Self-sacrifice

Wrong:

• Cheating

• Cowardice

• Cruelty

BASIC MORAL VALUES

LG1

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• Enron: One executive is serving a 24 year sentence foraccounting fraud while another will be released in October2011.

• Arthur Andersen: Convicted of tampering with witnesses,

the company was dissolved and about 28,000 people losttheir jobs.

• Tyco International: Two executives stole $600 million fromthe company and are scheduled to be released from prisonin 2030.

• Adelphia Communication: Two executives were convictedof conspiracy, bank and securities fraud and givensentences of 15 and 20 years.

• WorldCom: Former CEO was convicted of fraud,

conspiracy and false filings and sentenced to 25 years.

PAYING the PRICE (Legal Briefcase)

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*Ethics Begins

with Each of Us

• Plagiarizing from Internet materials is the mostcommon form of cheating in schools today.

ETHICS and YOU

LG2

• Studies found a strong

relationship between

academic dishonesty

and dishonesty at work.

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*Ethics Begins

with Each of Us

• Ask yourself these questions:

- Is it legal?- Is it balanced?

- How will it make me feel about myself?

FACING ETHICAL DILEMMAS

LG2

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• Every minute, people upload 10 hours of video toYouTube – not all is user-generated content.

• Viacom sued YouTube for $1 billion for allowing

episodes of its popular shows on the site.

• Viacom holds YouTube responsible for carrying the

illegal content, rather than the individuals who

uploaded it.• Who do you think should be accountable for the

copyright violations -- the website or those whouploaded the videos?

To TUBE or NOT to TUBE (Making Ethical Decisions)

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*Progress

Assessment

• What are ethics?

•

How do ethics differ from legality?

• When faced with ethical dilemmas, whatquestions can you ask yourself that might help

you make ethical decisions?

PROGRESS ASSESSMENT

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*Managing

Businesses

Ethically and

Responsibly

• Trust between workers andmanagers must be based on

fairness, honesty, opennessand moral integrity.

• Leadership can help instill

corporate values inemployees.

ETHICS START at the TOP

LG3

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*Managing

Businesses

Ethically and

Responsibly

FACTORS INFLUENCINGMANAGERIAL ETHICS

Individual Organizational Environmental

• Values

•

Work Background• Family Status

• Personality

• Top Level

ManagementPhilosophy

• Firm’s Reward

System

• Job Dimensions

• Competition

•

EconomicConditions

• Social/Cultural

Institutions

LG3

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* Setting

Corporate

Ethical

Standards

• An increasing number of companies haveadopted written codes of ethics.

•

Compliance-Based Ethics Code -- Emphasize preventing unlawful behavior by increasing control

and by penalizing wrongdoers.

• Integrity-Based Ethics Code -- Define the

organization’s guiding values, create an environment

that supports ethically sound behavior and stress a

shared accountability among employees.

ETHICS CODES

LG4

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* Setting

Corporate

Ethical

Standards

1. Top management must adopt and unconditionallysupport an explicit corporate code of conduct.

2. Employees must understand that seniormanagement expects all employees to actethically.

3. Managers and others must be trained to considerthe ethical implications of all business decisions.

(continued)

HOW to IMPROVE AMERICA’S

BUSINESS ETHICSLG4

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* Setting

Corporate

Ethical

Standards

4. An ethics office must be set up with whichemployees can communicate anonymously.Whistleblowers -- People who report illegal or

unethical behavior.

HOW to IMPROVE AMERICA’S

BUSINESS ETHICSLG4

5. Involve outsiders such as

suppliers, subcontractors,

distributors and customers.6. The ethics code must be

enforced.

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Source: James Gehrke, Magnify Leadership & Development, November 2008.

1. Managers must communicate the organization’s

vision on ethical behavior.

2. Organizations must have a code of ethics.

3. Policies have to be enforced regarding ethicaloffences.

4. Ethical responsibility must be taught to allemployees.

(continued)

HOW to PREVENT UNETHICALBEHAVIORS

LG4

Setting

Corporate

Ethical

Standards

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Source: James Gehrke, Magnify Leadership & Development, November 2008.

5. Discussions of ethics must be included in thedecision-making process.

6. Accountability must be taken seriously at alllevels in the organization.

7. Organizations must act fast when a crisis occurs.

8. Employees must know they have to defend andmaintain the company’s reputation.

HOW to PREVENT UNETHICALBEHAVIORS

LG4

Setting

Corporate

Ethical

Standards

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*Progress

Assessment

• What are compliance-based and integrity-basedethics codes?

• What are the six steps to follow in establishing aneffective ethics program in a business?

PROGRESS ASSESSMENT

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*Corporate

Social

Responsibility

• Corporate Social Responsibility (CSR) -- The

concern businesses have for the welfare of society.

•

CSR is based on a commitmentto integrity, fairness, andrespect.

• CSR proponents argue thatbusinesses owe their existenceto the societies they serve andcannot exist in societies that

fail.

CORPORATE SOCIALRESPONSIBILITY

LG5

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*Corporate

Social

Responsibility

• Corporate Philanthropy -- Includes charitable

donations.

• Corporate Social Initiatives -- Includes enhanced forms of corporate philanthropy.

CORPORATE PHILANTHROPYand SOCIAL INITIATIVES

LG5

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*Corporate

Social

Responsibility

• Corporate Responsibility -- Includes everything

from hiring minority workers to making safe products,

minimizing pollution, using energy wisely, and providing a safe work environment.

• Corporate Policy -- The position a firm takes on

social and political issues.

CORPORATE RESPONSIBILITYand POLICY

LG5

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*Corporate

Social

Responsibility

• Xerox offers a Social Service Leave program.

• Citizen Corps encourages volunteers to help

strengthen homeland security by helping in theircommunity.

• Two-thirds of MBA students surveyed reported

they would take a lower salary to work for asocially responsible company.

POSTIVE IMPACTSof COMPANIES

LG5

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http://www.xerox.com/about-xerox/citizenship/xerox-foundation/enus.html

http://www.xerox.com/about-xerox/citizenship/xerox-foundation/enus.html

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Source: Wall Street Journal, www.online.wsj.com, June 23, 2008.

Corporate

Social

Responsibility

To WHOM MUCH HASBEEN GIVEN…

America’s Charitable Giving LG5

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http://www.online.wsj.com/

http://www.online.wsj.com/

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Source: Parade Magazine, www.parade.com, September 14, 2008.

Corporate

Social

Responsibility HELPING HANDSMost Generous Celebrities*

LG5

Who? How Much?

Oprah Winfrey $50.2 Million

Herb Alpert $13 Million

Barbara Streisand $11 MillionPaul Newman $10 Million

Mel Gibson $9.9 Million

Angelina Jolie & Brad Pitt $8.4 Million

Michael Jordan $5 Million

Eric Lindros $5 Million

Lance Armstrong $5 Million

*Donations made in 2007

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http://www.parade.com/

http://www.parade.com/

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Source: Conde Nast Portfolio, www.portfolio.com, January 2008.

1. California – 12.1%

2. New Jersey – 8.9%

3. Pennsylvania – 5.2%

4. Washington – 5%

5. New York – 5%

Corporate

Social

Responsibility WHO GIVES?

Five States Contribute More Thana Third of the Nation’s Donations LG5

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http://www.portfolio.com/

http://www.portfolio.com/

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Source: Fast Company, www.fastcompany.com, May 2008.

Corporate

Social

Responsibility GENEROUS AMERICANS

Americans Donated $295,020,000,000 in 2006 LG5

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http://www.fastcompany.com/

http://www.fastcompany.com/

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*Responsibility

to Customers

• The Right to Safety

•

The Right to be Informed

• The Right to Choose

• The Right to be Heard

PRESIDENT KENNEDY’S BASIC

RIGHTS of CONSUMERS LG5

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*Responsibility

to Investors

• Insider Trading -- Insiders using

private company information to

further their own fortunes or thoseof their family and friends.

• Unethical behavior does

financial damage to a companyand investors are cheated.

INSIDER TRADING

LG5

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*Responsibility

to Employees

• Create jobs and provide a chance for upwardmobility.

• Treat employees with respect.

• Offer salaries and benefits that help employeesreach their personal goals.

RESPONSIBILITY toEMPLOYEES

LG5

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Source: Fortune, www.fortune.com, March, 2009.

1. Apple2. Berkshire Hathaway3. Toyota

4. Google5. Johnson & Johnson6. Proctor & Gamble7. FedEx8. Southwest Airlines9. General Electric10. Microsoft

11. Wal-Mart12. Coca-Cola13. Walt Disney

14. Wells Fargo15. Goldman Sachs16. McDonald’s 17. IBM18. 3M19. Target20. J.P. Morgan Chase

Responsibility

to EmployeesAMERICA’S MOST ADMIRED

COMPANIESLG5

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http://www.forbes.com/


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*Responsibility

to Society and

the Environment

• Over one-third of working Americans receivetheir salaries from nonprofits – who aredependent on funding from others.

• The green movement emerged as concern aboutglobal warming increased.

•

Many companies are trying to minimize theircarbon footprints – the amount of carbonreleased during an item’s production, distribution,

consumption and disposal.

SOCIETY andthe ENVIRONMENT

LG5

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*Responsibility

to Society and

the Environment

• Environmental efforts may increase costs butcan offer good opportunities.

•

The emerging renewable-energy and energy-efficiency industries account for 8.5 million U.S. jobs.

RESPONSIBILITY to theENVIRONMENT

LG5

• By 2030, as many as 40million “Green” jobs will

be created.

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• With public concern over the environment,companies are finding greener ways of doingbusiness.

• Some companies are claiming they are moreenvironmentally responsible than they actuallyare, a practice called “greenwashing”.

• Web sites such as Greener Choices andGreenwashing Index screen ads forgreenwashing.

GREEN GREED (Thinking Green)

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http://www.greenerchoices.org/

http://www.greenwashingindex.com/

http://www.greenwashingindex.com/

http://www.greenerchoices.org/

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*Social Auditing

• Social Audit -- A systematic evaluation of an

organization’s progress toward implementing

programs that are socially responsible and

responsive.

• Four Types of Social Audit Watchdogs

- Socially conscious investors

- Environmentalists

- Union officials

- Customers

SOCIAL AUDITING

LG5

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*Progress

Assessment

• What’s corporate social responsibility, and how

does it relate to each of a business’s major

stakeholders?

• What’s a social audit, and what kinds of activities

does it monitor?

PROGRESS ASSESSMENT

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* International

Ethics and

Social

Responsibility

• Many businesses want socially responsiblebehavior from their international suppliers.

• The Joint Initiative on Corporate Accountabilityand Workers’ Rights was designed to make

creating a single set of labor standards andinspecting factories easier.

•

In the 1970s, the Foreign Corrupt Practices Actcriminalized the act of paying foreignbusinesses or government leaders in order toget business.

INTERNATIONAL ETHICS

LG6

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Source: Forbes, www.forbes.com, March 24, 2008.

International

Ethics and

Social

Responsibility

GIVERS AROUND the WORLDShare of GDP

LG6

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• Almost half of Motorola’s employees live

outside the U.S.

• A Motorola employee returns to his home

country to work and the company reimbursesliving expenses so he can live in a safe area.The employee is trying to do the honorable thingfor his family and the company is trying to keep

the employee safe.• If the employee uses the money to help his

family instead, is it right for the company to stoppayment?

ETHICAL CULTURE CLASH(Reaching Beyond Our Borders)

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*Progress

Assessment

• How are U.S. businesses demanding sociallyresponsible behavior from their international

suppliers?

• Why is it unlikely that there will be a single set ofinternational rules governing multinational

companies soon?

PROGRESS ASSESSMENT

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J0712 Pert03

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