Being ethical and socially responsible Chapter-02

1. Being ethical and socially responsibleChapter-02 Dr. GehanShanmuganathan, (DBA)

2. Learning objectives • Understand what is meant by business ethics • Identify the types of ethical concerns that arise in the business world • Discuss the factors that affect the level of ethical behavior in organizations • Explain how ethical decision making can be encouraged • Describe how our current views on the social responsibility of business have evolved • Explain the two views on the social responsibility of business and understand the arguments for and against increased social responsibility

3. Learning objectives cont……. • Discuss the factors that led to the consumer movement and list some of its results • Analyze how present employment practices are being used to counteract past abuses • Describe the major steps of pollution, their causes, and their cures • Identify the steps a business must take to implement a program of social responsibility

4. Divine Chocolate’s Recipe for Sales and Social Responsibility

5. Divine Chocolate Social Responsibility • Government set the policy to collect cocoa beans from local producers in Ghana • Small farmers set up a cooperative society to focus on the quality factor through earth friendly production methods and complying with requirements for safe and healthy working conditions • They achieved fair trade certification and invested on social welfare (wells, daycare centers) • Started warehouse and trained farmers • Opened retail outlets in U.K. and U.S.A and gained profit share

6. Business Ethics Definition

7. Definition • Business Ethics is the study of right and wrong and of the morality of the choices individuals make. (Pride B.,Hughes B., Kapoor J., 2012) • An ethical decision or an action is one that is right according to some standard of behavior. Business ethics is duplication of moral standards to business situations.

8. Factors affecting ethical behavior

9. Factors affecting ethical behavior

10. Examples of unethical business conducted • Copley Pharmaceuticals falsifying drug manufactures’ reports to the Food and Drug Administration (paid $ 10.65 million fine) • Investor fraud by Bernard Madoff non-executive chairman of NASDAQ stock market in 2009 • TAP Pharmaceutical company sales representatives offered every Urologist in the United States a big-screen TV, computers, fax machines, and golf vacations if the doctors prescribed TAP’s new prostate cancer drug Lupron (Govt won $ 875 million from the law suite)

11. Ethical practices within supply chain

12. Ethical practices within supply chain

13. Ethical behavior is a cost or an investment ?

14. Cost/ Investment connotation

15. Impact of business ethics • Long terms profits and survival • High corporate image building • Positive corporate culture • Influence all the stakeholders

16. Ethical issues in business • Sales – pharmaceutical representatives using rewarding systems to promote their pharmaceutical products • Production – use of animal skin to produce winter cloths and jackets • Human Resources – use of child labor • Finance – providing inflated financial information to creditors • Marketing – promising undeliverable benefits through advertising

17. Fairness and honesty • Fairness and honesty in business are two important ethical concerns • Business people are expected to refrain from • Knowingly deceiving (Nutella – Hazelnut spread ,Lawsuit) • Misrepresenting (use of soap and becoming actors) • Intimidating others (reports on economic situation) • No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misinterpretation of material facts or any other unfair dealing practices

18. Organizational relationships • A business person may be tempted to place his or her personal welfare above the welfare of others or the welfare of the organization • Unethical behavior in this area are, • Taking credit for others’ ideas or work • Not meeting one’s commitments in a mutual agreement • Pressuring others to behave unethically

19. Conflict of interest • Conflict of interest results when a businessperson takes advantage of the situation for his or her own personal interest rather than for the organizational interest. These are common when payments and gifts make their way into business deals • Anything given to a person that might unfairly influence that person’s business decision is bribe and all bribes are unethical

20. Business communication • Business communications, especially advertising, can present ethical questions. False and misleading advertising is illegal and unethical, and it can infuriate customers. The most sensitive areas for advertising in this regard would be advertisements aimed at children, health related products. • Examples……….discuss….

21. Factors affecting ethical behavior

22. Factors affecting ethical behavior • Individual factors affecting ethics – Individual knowledge, personal values, personal goals (aspiration and persuasion) • Social factors affecting ethics – cultural norms, coworkers, significant others (spouses, friends, and relatives), use of the Internet

23. Opportunity as a factor affecting ethics • Presence of opportunity Opportunity refers to the amount of freedom an organization gives an employee to behave unethically if he or she makes that choice. In some organizations, certain company policies and procedures reduce the opportunity to be unethical (code of ethics). For example, if there are two employees involved in performing a task.

24. Ethical codes The existence of an ethical code and the importance management places on this code are other determinants of opportunity

25. Enforcement as a controlling mechanism The degree of enforcement of company policies, procedures, and ethical codes is a major force affect the opportunity

26. encouraging ethical behavior

27. encouraging ethical behavior • Governments role in encouraging ethics – the government can encourage ethical behavior by legislating more stringent regulations. Eg- Health Insurance Portability and Accountability Act of 1996 (HIPPA) Privacy and security of health information rule • Trade associations role in encouraging ethics – trade associations can and often do provide ethical guidelines for their members • Individual companies’ role in encouraging ethics – codes of ethics that companies provide to the employees are perhaps the most effective way to encourage ethical behavior • Whistleblowing – informing the press or company officials about unethical practices within one’s organization

28. Ethics in different levels in an organization

29. Top-Level Mgrs. Middle-Level Mgrs. First-Level Mgrs. Individual Contributors (Operatives and Specialists) 1.2 Managerial Levels Chairman of the Board, CEO, president, executive vice president, vice president, group team leader, chancellor Chairman of the Board, Corporate culture (Stakeholder Ethics) Director, branch manager, department chairperson, chief of surgery, team leader Quality, information, employment, and so on (Functional Ethics) Setting corporate values (Ethical Values) Courtesy, politeness (Operational Ethics)

30. Social responsibility

31. Simple Business Operation Employment Social welfare Charity service Environmental concerns

32. Stake holders and their needs

33. Stake holders and their needs

34. Social responsibility • Social responsibility definition The recognition that business activities have an impact on society and the consideration of the impact and business decision-making • Eg- how Walmart delivered $ 20 million in cash, 100 truck loads of free merchandise, and food for 100,000 meals for those who affected by Hurricane Katrina in New Orleans • See for more examples in pages 47 through 50 in the text book

35. The evolution of social responsibility in business

36. Evolution of market structure and consumerism Market Structure Consumerism

37. Two views

38. two views of social responsibility • The economic model • This views that society will benefit most when business is left alone to produce and market profitable products that society needs • The socioeconomic model • According to this concept the business should emphasize not only profits but also the impact of its decisions on society

39. arguments forincreased social responsibility • 01 – Because business is a part of our society, it cannot ignore social issues • 02 – Business has the technical, financial, and managerial resources needed to tackle today's complex social issues • 03 – By helping resolve social issues, business can create more stable environment for long-term profitability • 04 – Socially responsible decision-making by firms can prevent increased government intervention, which would force business to do what they fail to do voluntarily

40. arguments against increased social responsibility • 01 – Business managers are responsible primarily to stakeholders, so management must be concerned with providing a return on owner's investments • 02 – Corporate time, money, and talent should be used to maximize profits, not to solve society's problems • 03 – Social problems affect society in general, so individual businesses should not be expected to solve these problems • 04 – Social issues are the responsibility of government officials who are elected for that purpose and are accountable to the voters for their decisions

41. Consumerism

42. Consumerism Consumerism is all activities undertaken to protect the rights of consumers • Fundamental issues pursued by consumer movement falls into three categories • Environmental protection • Product performance and safety • Information disclosure

43. the four basic rights of consumers • The right to safety of usage or consumption • The right to be informed on complete information • The right to choose from a variety of choice • The right to be heard of complaints to take actions Discuss with examples…….

44. Employment practices

45. employment practices • Equal treatments in the work place • Equal employment opportunity

46. Concern for environment

47. concern for environment • Pollution • Contamination of water, air, or land through the actions of people in an industrialized society

48. implementing a program of social responsibility • 01 – Commitment of top executives • 02 – Planning • 03 – Appointment of a Director • 04 – The social audit – a comprehensive report of what an organization has done and is doing with regard to social issues that affect it • 05 – Funding the program • 06 – Measure effectiveness of the program

49. Questions……..

50. weekly assignment – week 02 • Overall, would it be more profitable for a business to follow the economic model or the socioeconomic model of social responsibility? Discuss…