chapter 2

understanding business ethics and responsibility

I. Ethics in the Workplace

• Ethics: Beliefs about what’s right and wrong.
• Business ethics: Right vs. wrong in business decisions.
• Ethical behavior: Aligns with personal values and societal norms.
• Unethical behavior: Occurs when individual/company values conflict with society.
• Managerial influence: Leadership heavily affects company ethics.
  • Example: A manager who consistently prioritizes profit over employee well-being sets a tone that may lead employees to cut corners or overlook safety measures to meet targets.
• Whistle-blowers: Employees who report unethical behavior (protected by law).
  • Legal Protections: Whistleblower protection laws vary by country but generally aim to protect employees from retaliation, such as firing or demotion, for reporting illegal or unethical activities within their organization.

Common Causes of Unethical Behavior:

• Pressure to meet unrealistic goals
  • Impact: When employees feel immense pressure to achieve targets, they may engage in unethical behavior such as falsifying sales figures or manipulating data to create a false impression of success.
• Conflicting values (personal vs. corporate)
  • Example: An employee who values environmental conservation may feel conflicted when asked to dispose of waste improperly to save costs.
• Ambiguous or weak ethical standards
  • Clarity Needed: Companies must provide clear and specific guidelines on ethical conduct to avoid confusion and ensure employees understand what is expected of them.

II. Social Responsibility

• The concern businesses have for the welfare of society.
• Involves more than just making a profit—includes environmental care, consumer protection, and fair treatment of workers.
  • Expanded View: Social responsibility also includes contributing to community development, supporting educational programs, and promoting diversity and inclusion within the company.
    • Corporate Social Audit: A systematic assessment of a company's activities and their impact on society.

Key Areas:

• Responsibility to Customers: Safe products, honest marketing (e.g., avoiding false claims).
  • Elaboration: Ensuring product safety involves rigorous testing, transparent labeling, and a commitment to addressing consumer complaints promptly and effectively.
  • Consumerism: The protection or promotion of the interests of consumers.
• Responsibility to Employees: Fair pay, safe working conditions, equal opportunity.
  • Details: Fair pay includes not only competitive wages but also benefits such as health insurance, retirement plans, and paid time off. Safe working conditions involve implementing safety protocols, providing necessary equipment, and promoting a culture of safety awareness.
• Responsibility to Investors: Transparent financial reports, honest profit management.
  • Transparency: Providing investors with accurate and timely financial information is crucial for maintaining trust and confidence in the company.
  • Insider Trading: The illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information.
• Responsibility to the Environment: Pollution control, sustainability efforts.
  • Initiatives: Companies can reduce their environmental impact by implementing recycling programs, reducing energy consumption, and investing in renewable energy sources.

III. Implementing Social Responsibility

• Corporate Social Responsibility (CSR): Actions companies take to go beyond profit-making (e.g., donations, ethical sourcing).
  • Examples of CSR: Charitable donations, employee volunteer programs, and sourcing materials from suppliers who adhere to ethical and sustainable practices
    -Philanthropic Giving: Donating money, time, or resources to charitable causes.
• Organizational Stakeholders: All parties affected by business decisions (employees, customers, community, etc.)
  • Stakeholder Engagement: Engaging with stakeholders involves listening to their concerns, addressing their needs, and involving them in decision-making processes.
    • Accommodative Stance: A social responsibility approach where a company meets its legal and ethical requirements and sometimes goes beyond that.
    • Proactive Stance: A social responsibility approach where a company actively seeks opportunities to contribute to society.
    • Defensive Stance: A social responsibility approach where a company does the minimum required by law.
    • Obstructionist Stance: A social responsibility approach where a company actively tries to hide wrongdoing.

IV. Managing Ethical Behavior

• Code of Ethics: A formal document outlining ethical guidelines for the company.
  • Key Components: A code of ethics should include guidelines on conflicts of interest, confidentiality, and compliance with laws and regulations.
    • Ethical Compliance: Adhering to laws and regulations related to ethical conduct.
    • Legal compliance: Following all applicable laws and regulations.
• Ethical training programs: Teach employees how to handle tough choices.
  • Training Methods: Role-playing exercises, case studies, and group discussions can be used to help employees develop ethical decision-making skills.
• Managerial Ethics: Standards of behavior that guide managers in their actions
• Ethical leadership: Top managers set the ethical tone.
  • Leadership Qualities: Ethical leaders demonstrate integrity, transparency, and a commitment to doing what is right, even when it is difficult.

V. Watchdog Groups and Legal Influence

• Organizations monitor businesses (e.g., Better Business Bureau).
  • Functions:
    • Regulation: Government intervention in the marketplace to control or change business behavior.
    • Lobbying: Attempting to influence government decisions through advocacy.
    • Political Action Committees (PACS): Organizations that raise money to elect and defeat candidates.
      -Government laws (EPA, OSHA, FTC) regulate ethical behavior and protect rights. taking company public = selling