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INTRODUCTION TO BUSINESS. CHAPTER 2 Business Ethics and Social Responsibility. The Elevator “Pitch” Covering your bases. Management Marketing Accounting/Financing The “Pitch”. Sustainability. www.pdx.edu/ sustainability

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INTRODUCTION TO BUSINESS

CHAPTER 2

Business Ethics and Social Responsibility

Copyright by Paradigm Publishing, Inc.


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The Elevator “Pitch” Covering your bases

  • Management

  • Marketing

  • Accounting/Financing

  • The “Pitch”


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Sustainability

  • www.pdx.edu/sustainability

  • Sustainability means meeting the economic, social, and environmental needs of the present without compromising the similar needs of future generations.


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Ethical Question

You were in a hurry and stopped by Seattle’s Best for a coffee and muffin to eat for breakfast. You waited in line ten minutes. When you got your order you handed the clerk $10. You left, and it was not until a block away that you noticed the cashier gave you back change for $20.

  • Do you –

    • A. Go back and give the $10 back immediately

    • B. Plan on doing it later, or the next day

    • C. Keep the money

  • How do “ethic’s” and corporate responsibility overlap?


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Outline - Responsibilities of Firms

To their customers.

To their employees.

To their stockholders.

To their creditors.

To the environment.

To their communities.

Copyright by Paradigm Publishing, Inc.


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Responsibility to Customers

Responsible Production Practices

Social responsibility: a firm’s recognition of how its business decisions can affect society.

Responsible Sales Practices

How Firms Ensure Responsibility toward Customers

Business responsibilities: a set of obligations and duties regarding product quality and treatment of customers, employees, and owners that a firm should fulfill when conducting business.

Copyright by Paradigm Publishing, Inc.


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Responsibility to Customers

Copyright by Paradigm Publishing, Inc.


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Responsibility to Customers

Establish a Code of Responsibilities

Monitor Complaints

Obtain and Utilize Customer Feedback

Copyright by Paradigm Publishing, Inc.


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Responsibility to Customers

Role of Consumerism

Consumerism: The collective demand by consumers that businesses satisfy their needs.

Role of the Government

Regulation of product safety

Regulation of advertising

Regulation of industry competition

Monopoly: A firm that is the sole provider of goods or services.

Copyright by Paradigm Publishing, Inc.


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Responsibility to Employees

Employee Safety

Protected Classes

Proper Treatment by Other Employees

Starbucks has established a code of conduct for its employees.

Diversity

Prevention of Sexual Harassment

Sexual Harassment: Unwelcome comments or actions of a sexual nature.

Copyright by Paradigm Publishing, Inc.


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Responsibility to Employees

Proportion of Women and Minorities in Various Occupations

Copyright by Paradigm Publishing, Inc.


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Responsibility to Employees

How Firms Ensure Their Responsibility

Code of Responsibility

Grievance Policy

Job Satisfaction

Conflict with Employee Responsibility

How the Government Ensures Responsibility to Employees

Copyright by Paradigm Publishing, Inc.


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Responsibility to Stockholders

How Firms Ensure Responsibility to Stockholders

Align compensation with firm value

Conflict of interests

How the Government Ensures Responsibility

Sarbanes-Oxley Act

Copyright by Paradigm Publishing, Inc.


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Responsibility to Stockholders

Copyright by Paradigm Publishing, Inc.

Enron CEO Ken Lay is led away in handcuffs by FBI agents after Enron was charged with providing misleading information to its investors.


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Responsibility to Stockholders

How Stockholders Ensure Responsibility

Shareholder activism

Institutional investors

Conflict with excessive executive compensation

Copyright by Paradigm Publishing, Inc.


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Copyright by Paradigm Publishing, Inc.

Business executives are commonly required to meet with representatives of financial institutions that provided funding to the business. They are frequently asked to explain why their business performance was weaker than expected.


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Responsibility to Creditors

How Some Firms Violate Their Responsibility

Firms mislead creditors when they provide misleading financial information.

Copyright 2010 by Paradigm Publishing, Inc.


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Responsibility to the Environment

Air Pollution

Firms reduced air pollution by refining their production processes.

Government guidelines reduced air pollution.

Land Pollution

Conflict with Environment Responsibility

Firms incur expenses when they reduce pollution, which could reduce profits for the owners.

Copyright by Paradigm Publishing, Inc.


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Copyright by Paradigm Publishing, Inc.

Firms like the paper factory shown here are supposed to meet various emission standards so that they do not cause air pollution. They need to be monitored by the Environmental Protection Agency to ensure that they meet the standards.


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Responsibility to the Community

Serving the Community and Stockholders

Maximizing social responsibility may conflict with the goal of maximizing a firm’s profits for its owners. Firms seek a compromise in which they invest in the community in ways that may ultimately increase their reputation and, therefore, sales.

Copyright by Paradigm Publishing, Inc.


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Conflict Among Responsibilities

Customers

Communities

Employees

Environment

Stockholders

Creditors


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Activity

  • Not much RANGE for this Manager

  • Answer the three questions at the end of the case

  • List the Stakeholder groups –

    Employees, Owners, Customers, Government, Community


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