Managing Business Ethics

1. Managing Business Ethics Chapter 9 Treviño & Nelson – 5th Edition

2. Chapter 9 Overview • Introduction • Why Corporate Social Responsibility? • Types of Corporate Responsibility • Triple Bottom Line and Environmental Sustainability • Is Socially Responsible Business Good Business? • Conclusion

3. Corporate Social Responsibility • Responsibility beyond economic and legal obligations – to act ethically and to contribute in a positive way to society

4. Why Corporate Social Responsibility? • Pragmatic • To maintain legitimacy, protect reputation, viability • We must use power responsibly or risk losing it • Ethical • As a part of society, we have the responsibility to behave ethically and to contribute to the greater good • Strategic • Being socially responsible creates shared value and can differentiate one from competitors • When society prospers, business prospers – they are partners

5. Stakeholder Perspective Government Competitors Owners Suppliers Organization Customers Employees Financial Institutions/ Analysts Community/ Interest Groups/ Media

6. Types of Corporate Social Responsibility Philanthropic Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities

7. Triple Bottom Line Economic Social Environmental

8. The Merck Case Economic Responsibility • In the Merck case, how might we think about the firm’s economic responsibility? • The potential costs/benefits of the investment? • Must Merck justify the investment to shareholders? Financially, Ethically?

9. Legal Responsibility • Companies have a responsibility to obey the law. • Is there any legal responsibility for Merck here? • Any legal penalty for not doing so?

10. Ethical Responsibility • Does Merck have an ethical responsibility to develop the drug? • Think stakeholders, harms and benefits, greater good • Think duties, obligations, ethical values

11. Do Merck’s Philosophy/Values Play a Role? “We try never to forget that medicine is for people. It is not for profits. The profits follow, and if we have remembered that, they have never failed to appear” George W. Merck & www.merck.com

12. Stakeholder Perspective Government Competitors Owners Suppliers Organization Customers Employees Financial Institutions/ Analysts Community/ Interest Groups/ Media

13. Duties, obligations? Do ethical duties differ by industry? Does it matter that it is a pharmaceutical company?

14. Philanthropic Responsibility Is philanthropy a social “responsibility” of business?

15. Executive Decision-Making • If you were CEO, what would you decide? • What would be the major bases for your decision?

16. Case Takeaways • Decisions are not single events • Decision to pursue research led to…decision to provide drug for free forever…to decision to develop logistics plans…to expertise in providing drugs in developing world (currently used in AIDS drugs) • Organizational values can and should guide social responsibility decisions • Employees’ values should be taken into account. • Organizations can be ethical leaders and other firms will often follow

17. Case You have a long-standing consulting relationship with a large consumer products company. This company represents 50 percent of your consulting revenues and is clearly your most important client. The CEO has called to ask you to commit a significant amount of time over the next couple of months to assist with a large merger project. The company is merging with a large conglomerate whose primary business is the sale and distribution of tobacco products. The CEO is relying on you to assist in facilitating a smooth integration of the two companies. You promised yourself that because your father died of lung cancer, you would never work for a tobacco company. Is there a way that you can accept the consulting assignment and still keep your promise to yourself? How will you handle this dilemma if you decide that you cannot work for the tobacco company?