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Ethics and Ethics and Corporate Corporate
ResponsibilityResponsibility
Chapter 05Chapter 05
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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Learning ObjectivesLearning Objectives
LO1 Describe how different ethical perspectives guide decision making
LO2 Explain how companies influence their ethics environment
LO3 Outline a process for making ethical decisionsLO4 Summarize the important issues surrounding corporate
social responsibilityLO5 Discuss reasons for businesses’ growing interest in the
natural environmentLO6 Identify actions managers can take to manage with the
environment in mind5-2
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EthicsEthics
Ethics The system of rules
that governs the ordering of values
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Telling the Truth and Lying: Possible Telling the Truth and Lying: Possible OutcomesOutcomes
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It’s a Personal IssueIt’s a Personal Issue
Most of us believe we are ethical but most have unconscious biases that favor ourselves and their own group
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It’s a Personal IssueIt’s a Personal Issue
Managers often: Hire people who are like them Think they are immune to conflicts of interest Take more credit than they deserve Blame others when they deserve some blame
themselves
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It’s a Personal IssueIt’s a Personal Issue
Is it ethical to: Shop online during company time? Using office equipment for personal use? Read personal emails while at work?
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It’s a Personal IssueIt’s a Personal Issue
One suggestion is to change your vocabulary The word “ethics” is too loaded Substitute “responsibility” or “decency” instead Act accordingly
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EthicsEthics
Ethical issue Situation, problem, or opportunity in which an
individual must choose among several actions that must be evaluated as morally right or wrong
Business ethics The moral principles and standards that guide
behavior in the world of business.
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Ethical SystemsEthical Systems
Moral philosophy Principles, rules, and values people use in deciding
what is right or wrong Universalism
The ethical system stating that all people should uphold certain values that society needs to function.
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Caux PrinciplesCaux Principles
Kyosei living and working
together for the common good, allowing cooperation and mutual prosperity to coexist with healthy and fair competition
Human dignity concerns the value of
each person as an end, not a means to the fulfillment of others’ purposes
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QuestionQuestion
Which ethical system bases ethical behavior on the opinions and behaviors of relevant other people?
A.EgoismB.Utilitarianism C.Relativism D.Virtue ethics
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Ethical SystemsEthical Systems
Egoism An ethical system defining acceptable behavior as
that which maximizes consequences for the individual
Utilitarianism An ethical system stating that the greatest good
for the greatest number should be the overriding concern of decision makers.
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Ethical SystemsEthical Systems
Relativism Philosophy that bases ethical behavior on the
opinions and behaviors of relevant other people Virtue ethics
Classification of people based on their level of moral judgment.
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Ethical SystemsEthical Systems
Kohlberg’s model of cognitive moral development Perspective that what is moral comes from what a
mature person with “good” moral character would deem right.
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QuestionQuestion
What act passed into law by Congress in 2002 established strict accounting and reporting rules?
A.Wagner ActB.Sarbanes-Oxley ActC.Chapin ActD.GAAP Act
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The Ethics EnvironmentThe Ethics Environment
Sarbanes-Oxley Act An act passed into law by Congress in 2002 to
establish strict accounting and reporting rules in order to make senior managers more accountable and to improve and maintain investor confidence
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Some Ethical Issues inSome Ethical Issues inBusinessBusiness
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Table 5.2
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Business EthicsBusiness Ethics
Ethical climate In an organization,
the processes by which decisions are evaluated and made on the basis of right and wrong
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Danger SignsDanger Signs
1. Excessive emphasis on short-term revenues over longer-term considerations.
2. Failure to establish a written code of ethics.3. A desire for simple, “quick fix” solutions to ethical
problems.4. An unwillingness to take an ethical stand that may
impose financial costs.
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Danger Signs (cont.)Danger Signs (cont.)
5. Consideration of ethics solely as a legal issue or a public relations tool
6. Lack of clear procedures for handling ethical problems.
7. Responding to the demands of shareholders at the expense of other constituencies
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Danger SignsDanger Signs
Ethical leader One who is both a moral person and a moral
manager influencing others to behave ethically.
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Ethics ProgramsEthics Programs
Compliance-based ethics programs Company mechanisms typically designed by
corporate counsel to prevent, detect, and punish legal violations.
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Ethics ProgramsEthics Programs
Integrity-based ethics programs Company
mechanisms designed to instill in people a personal responsibility for ethical behavior
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A Process for Ethical Decision MakingA Process for Ethical Decision Making
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Figure 5.1
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Ethical Decision MakingEthical Decision Making
Making ethical decisions takes: Moral awareness
realizing the issue has ethical implications Moral judgment
knowing what actions are morally defensible Moral character
the strength and persistence to act in accordance with your ethics despite the challenges
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CourageCourage
Why might employees lack courage in ethical issues? A belief that the company would not take
corrective action A fear that management would retaliate against
the employee for speaking up Doubt that the employee’s report would be kept
confidential
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The Business Costs of Ethical FailureThe Business Costs of Ethical Failure
5-28Figure 5.2
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Corporate Social ResponsibilityCorporate Social Responsibility
Corporate social responsibility (CSR) Obligation toward
society assumed by business.
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Corporate Social ResponsibilityCorporate Social Responsibility
Economic responsibilities To produce goods and
services that society wants at a price that perpetuates the business and satisfies its obligations to investors.
Legal responsibilities To obey local, state,
federal, and relevant international laws
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Corporate Social ResponsibilityCorporate Social Responsibility
Ethical responsibilities Meeting other social expectations, not written as
law.
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Corporate Social ResponsibilityCorporate Social Responsibility
Philanthropic responsibilities Additional behaviors
and activities that society finds desirable and that the values of the business support.
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Pyramid of Global Corporate SocialPyramid of Global Corporate SocialResponsibility and PerformanceResponsibility and Performance
5-33Figure 5.3
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Corporate Social ResponsibilityCorporate Social Responsibility
Transcendent education An education with five higher goals that balance
self-interest with responsibility to others Empathy, generativity, mutuality, civil aspiration,
intolerance of ineffective humanity
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Contrasting ViewsContrasting Views
First - holds that managers act as agents for shareholders and, as such, are obligated to maximize the present value of the firm
Second - managers should be motivated by principled moral reasoning
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Reconciliation Reconciliation
Profit maximization and corporate social responsibility used to be regarded as antagonistic, leading to opposing policies. But the two views can converge
Recent attention has also been centered on the possible competitive advantage of socially responsible actions
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Ecocentric ManagementEcocentric Management
Ecocentric management Goal is the creation of sustainable economic
development and improvement of quality of life worldwide for all organizational stakeholders.
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Ecocentric ManagementEcocentric Management
Sustainable growth Economic growth and development that meet
present needs without harming the needs of future generations
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Ecocentric ManagementEcocentric Management
Life-cycle analysis (LCA) A process of analyzing all inputs and outputs,
though the entire “cradle-to-grave” life of a product, to determine total environmental impact
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Destination CEO: Bank of AmericaDestination CEO: Bank of America
What communication pitfalls might exist at Bank of America?
Discuss the ethics of job cutting that result when mergers or acquisitions occur.
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