Business Chapter 2 Business Ethics and Social Responsibility

business ethics

the principles and standards that determine acceptable conduct in business organizations. important to stakeholders as well as organization itself. if high ethical culture: encourage employees to act with integrity

ex: An employee notices a customer was overcharged and fixes it instead of ignoring it.

social responsibility

a business's obligation to maximize its positive impact and minimize its negative impact on society

business ethics relates to an individual's or a work group's decisions that society values as right or wrong, but social responsibility is broader and concerns the entire business's impact on society

ex: A company reduces pollution and donates money to local schools.

Sarbanes-Oxley Act

criminalized securities fraud and stiffened penalties for corporate fraud

ex: Executives lie on financial reports and face serious penalties.

Dodd-Frank Act

reformed the financial industry and offers consumers protection against complex and/or deceptive financial products, encourages whistleblowers

ex: A bank must be clearer about a risky loan and a worker can report wrongdoing.

ethical issue

an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical

ex: An employee sees a coworker stealing and has to decide what to do.

bribes

payments, gifts, or special favors intended to influence the outcome of a decision

ex: A business gives an official an expensive gift to win a contract.

Examples of Unethical Behavior

Misuse of Company Time, Abusive and Intimidating Behavior, Misuse of Company Resources, Conflict of Interest

ex:

plagiarism

taking someone else's work and presenting it as your own without mentioning the source

ex: Someone copies another person’s report and turns it in as their own.

what managers are most concerned about ethically

issues that effect those close to them and issues that have immediate consequences

ex: A manager quickly handles unfair treatment happening to workers on their own team.

factors that influence ethical decisions in an organization

individual moral standards, the influence of managers and co-workers, and the opportunity to engage in misconduct

ex: A worker avoids stealing because they know it is wrong, their manager discourages it, and cameras are present.

codes of ethics

formalized rules and standards that describe what a company expects of its employees

ex: A company handbook says employees cannot accept expensive gifts from suppliers.

whistleblowing

the act of an employee exposing an employer's wrongdoing to outsiders, such as the media or government regulatory agencies

ex: A worker reports their company to the government for hiding illegal activity.

three factors for why turnover increases

loss of trust in the company, a lack of transparency among company leaders, and unfair employee treatment

ex: Employees quit because managers are dishonest, secretive, and treat workers unfairly.

four stages of social responsibility

financial, legal compliance, ethics, and philanthropy (also economic, legal, ethical, and voluntary, including philanthropic)

earning profits is the economic foundation and complying with the law is the next step

ex: A company earns money, follows laws, treats people fairly, and gives to charity.

corporate citizenship

the extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their various stakeholders

ex: A company pays taxes, treats employees fairly, follows laws, and supports the community.

Relations with Owners and Stockholders

businesses must be responsible to their owners-maintain proper accounting procedures, provide relevant info to investors, protect owners' rights (owners means stockholders)

ex: A company gives investors accurate information about profits and losses.

laws regarding safety in the workplace

Occupational Safety and Health Administration (OSHA)

ex: A factory has to provide safety equipment and fix dangerous machinery.

Equal Employment Opportunity Commission (EEOC)

filed a lawsuit for discriminating against older workers

ex: A company refuses to hire someone because of their age and gets investigated.

consumerism

the activities that independent individuals, groups, and organizations undertake to protect their rights as consumers

ex: A consumer group pressures a company to recall an unsafe product.

John F. Kennedy's 1962 consumer bill of rights

1. right to safety-can't knowingly sell anything that could result in harm to consumers

2. right to be informed-consumers can review complete info about a product before they buy it

3. right to choose-consumers have access to a variety of goods and services (not like in Soviet Russia)

4. right to be heard-assures consumers their interests have full consideration when the government formulates policy

Federal Trade Commission's Bureau of Consumer Protection

protects consumers against unfair, deceptive, or fraudulent practices, enforces a variety of consumer protection laws

ex: A company makes fake advertising claims and the government takes action.

sustainability

conducting activities in such a way as to provide for the long-term well-being of the natural environment, including all biological entities. Sustainability involves the interaction among nature and individuals, organizations, and business strategies and includes the assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles that they maintain the health of the natural environment

-pollution-alternative energy including solar, wind, nuclear

-response to environmental issues, some companies are greenwashing or creating a positive association with environmental issues for an unsuitable product, or recycling

-community relations-give donations

ex: A company uses solar energy and cuts down on waste.

business law

the rules and regulations that govern the conduct of business

ex: A restaurant follows wage laws, health codes, and safety rules.

unemployment

riots have occurred where unemployment is high

ex: A person wants a job and is actively looking but cannot find one.

Foreign Corrupt Practices Act

imposes heavy penalties on companies found guilty of bribery

ex: A U.S. company secretly pays a foreign official to win business and gets punished.

bullying

is associated with a hostile workplace when a person or group is targeted and is threatened, harassed, belittled, verbally abused, or overly criticized

can cause psychological damage

ex: A coworker repeatedly insults and embarrasses another employee.

Ethics Resource Center

identified misuse of company time as a leading issue in observed misconduct in organizations

ex: A worker clocks in but spends hours shopping online instead of working.

conflict of interest

an ethical issue, exists when a person must choose to advance his/her personal interests or those of others

ex: insider trading

credit rating industry

stakeholders and legislators pushed for reform of the credit rating industry after the 2008 Wall Street meltdown, conflict of interest was part of the reason

ex: A rating company gives a business a better rating because it does not want to lose that business as a customer.

communications

another area in which ethical concerns may arise, relates to product labeling

ex: A company makes a product label misleading so customers think it is healthier than it really is.

bank scandal

J.P. Morgan, Morgan Stanley, and Goldman Sachs collaborated to prevent exchanges from offering and trading in credit derivatives, violated laws giving fair competition

ex: Several banks secretly work together to stop other companies from competing.

ethical behavior within a business (business relationships)

involves keeping company secrets, meeting obligations and responsibilities, and avoiding undue pressure that may force others to act unethically

ex: An employee refuses to share company secrets with a competitor.

employees in organizations that have written codes of conduct and ethics training and systems for reporting

more likely to report misconduct when they see it

good to do it through rewards and punishments

relations with owners and stockholders

must be responsible to them

obligations include maintaining proper accounting procedures, providing all relevant information to investors about the current and projected performance of the firm, and protecting the owners' rights and investments