Part 1

Business in a
Changing
World

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CHAPTER 1

The Dynamics of Business and Economics

APPENDIX A

Guidelines for the Development of the

Business Plan

CHAPTER 2

Business Ethics and Social Responsibility

APPENDIX B

The Legal and Regulatory Environment

CHAPTER 3

Business in a Borderless World

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Learning Objectives
LO 2-1 Define business ethics and social responsibility and
examine their importance.
LO 2-2 Detect some of the ethical issues that may arise in
business.
LO 2-3

Specify how businesses can promote ethical behavior.

LO 2-4

Explain the four dimensions of social responsibility.

LO 2-5
Debate an organizations social responsibilities to
owners, employees, consumers, the environment and the
community.
LO 2-6 Evaluate the ethics of a businesss decision.
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Business Ethics
Business Ethics
Principles and standards that determine
acceptable conduct in business
Acceptable behavior is determined by:

The organization
Stakeholders and interest groups
Competitors
Government regulators
The public
The individuals personal principles

New York Yankees 3rd baseman

Alex Rodriguez was suspended
after evidence suggested he had
been using performanceenhancing drugs

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Trust
In business,
trust is the glue
that holds the
customer
relationship
together

Global Trust in Different Institutions

The recent
global financial
crisis took a toll
on consumer
trust of
financial
services duplicated, forwarded, distributed, or posted on a website, in whole or part.

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Tone from the Top

Managers must show a strong commitment to ethics and
compliance. This tone from the top requires top managers
to acknowledge their own role in supporting ethics and
compliance.

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Social Responsibility

Social responsibility
and ethics are not
the same

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Laws and Regulations

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The Role of Ethics in Business

Growing concerns about legal and ethical issues in business
strengthen the publics perceptions that ethical standards and
the level of trust in business need to be raised
Learning to
recognize and
resolve ethical
issues is a key
step in
evaluating
ethical decisions

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Recognizing Ethical Issues

Recognizing ethical issues is the most

important step in understanding business
ethics
Best way to judge the ethics of a decision is
to look at a situation from a customers or
competitors viewpoint
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Ralph Lauren Bribery

Between 2004-2009, Ralph
Laurens Argentinian subsidiary
bribed customs officials

The SEC and Justice

Department both praised the
companys response to the
misconduct

The clothing label will pay an

$882,000 penalty as a nonprosecution agreement with the
Justice Department, and will
give up roughly $735,000 in
illicit profits and interest as part
of a non-prosecution agreement
with the Securities and
Exchange Commission

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Bribery
Many business issues seem straightforward and easy to
resolve on the surface, but are in reality very complex

Experience with the culture in which a business operates

is critical to understanding what is ethical or unethical
One of the principal causes of unethical behavior in
organizations is overly aggressive financial or business
objectives
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Percentage of U.S. Workforce Observing

Specific Forms of Misconduct, 20112013

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Misuse of Company Time

Theft of time is a common
area of misconduct observed
in the workplace
Many employees spend an
average of 1 hour each day
using social media sites or
watching YouTube
Time theft costs are estimated to cost companies
hundreds of billions of dollars annually
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Abusive and Intimidating Behavior

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Actions Associated with Bullies

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Misuse of Company Resources

Misuse of company resources has been identified
as a leading issue in observed misconduct in
organizations

Issues might include:

Spending an excessive amount of time on personal emails

Submitting personal expenses on company expense

reports

Using the company copier for personal use

Many companies have implemented official policies

delineating acceptable use of company resources

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Conflict of Interest

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Fairness and Honesty for Employees

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Fairness and Honesty for Companies

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Fairness and Honesty

Trunitin is an Internet service that allows teachers to

determine if their students have plagiarized content
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Making Decisions about Ethical Issues

o

It can be difficult to recognize specific ethical issues and

people often need years of experience to accurately
recognize and react to ethical situations

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Factors that Influence Business Ethics

Three factors that influence business ethics

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General Motors Recall

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Code of Ethics
Employees must have established ethics policies if
employees are to determine what conduct is acceptable

Codes and policies on ethics encourage the creation of an

ethical culture in the company
The enforcement of ethical codes and policies through rewards
and punishments increases the acceptance of ethical standards
by employees
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Whistleblowing
One of the most important components of an ethics
program is a means through which employees can report
observed misconduct anonymously

More companies are establishing programs to encourage

employees to report illegal or unethical practices internally
In 2010, Congress passed the Dodd-Frank Act, which includes a
whistleblower bounty program
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Improving Ethical Behavior in Business

The current trend is to move away from legally
based ethical programs to cultural or integrity-based
programs that make ethics a core organizational
value
Effective business ethics programs are good for
business performance
Firms that develop higher levels of trust function
more efficiently and effectively and avoid damaged
company reputations and product images

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Four Dimensions of Social Responsibility

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Corporate Citizenship

Commitment to corporate citizenship indicates

a strategic focus on fulfilling the social
responsibilities expected of it by it stakeholders
Involves action and measurement of the extent
to which a firm embraces corporate citizenship
philosophy and following through by
implementing appropriate initiatives
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The Nature of Social Responsibility

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PepsiCo and Social Responsibility

Managers consider social responsibility on a daily basis.
Among the many social issues that managers must
consider are their firms relations with owners and
stockholders, employees, consumers, the environment,
and the community. For example:

Indra Nooyi, CEO of PepsiCo, believes that companies

must embrace purpose, not just for financial results, but
also for the imprint they leave on society
She goes on to say that stakeholders, including employees,
consumers, and regulators:

Will leave no doubt that performance without purpose is not a

long-term sustainable formula

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Companys Responsibility to
Stockholders

Owners and

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Companys Responsibilities to Employees

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Consumerism

Write letters

Lobby government agencies

Make public service announcements
Boycott irresponsible companies

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Consumer Bill of Rights

John F. Kennedys 1962 Consumer Bill of Rights
* The right to safety
* The right to be informed
* The right to choose
* The right to be heard

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Sustainability

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The Home Depots Values

Home Depot has adopted eight core values as the
foundation for its ethical culture, including a strong
emphasis on sustainability
1.
2.
3.
4.
5.
6.
7.
8.

The Home Depots Values:

Taking care of our people
Giving back to our
communities
Doing the right thing
Excellent customer service
Creating shareholder value
Building strong relationships
Entrepreneurial spirit
Respect for all people

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Sustainability Issues

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Response to Environmental Issues

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There are two levels of greenwashing:

Greenwashing

When a company claims they are green because they have

a few green practices such as recycling but not water or
energy conservation

Hotel chains: Encouraging visitors on an extended stay

to not have their towels or bedclothes washed every day
in order to help the hotel save water, while at the same
time serving breakfast with Styrofoam cups and plastic
utensils

When a company puts a faade on their products/services

that looks and claims to be green, when in fact there is
nothing green about it

Beauty products: A lot of beauty products have

misleading words in their names such as natural,
herbal, pure, etc., when they actually contain
chemicals and harsh components that are not derived
from nature

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Companys Responsibility to
Their Communities

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Social Responsible Behavior

Many companies engage

in socially responsible
behavior to give back to
their communities
Home Depot partners with
Habitat for Humanity to
build homes for
disadvantaged families

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Social Responsibility Issues

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Solve the Dilemma

Customer Privacy
Checkers Pizza was one of the first to offer home delivery
service, with overwhelming success
Major pizza chains soon followed suit, taking away
checkerss competitive edge
Checkerss founder, Jon Barnard, needed a new
gimmick to beat the competition

Developed a computerized information database that

would make Checkers the most efficient competitor and
provide insight into consumer buying behavior

Telephone customers were asked their phone number, if

they had ordered before, their address and previous order
information came up on the computer screen

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Solve the Dilemma

Customer Privacy (cont.)

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Discussion

Define business ethics. Who determines

whether a business activity is ethical? Is
unethical conduct always illegal?

Do you think that business should regulate its

own activities or that the federal government
should establish and enforce ethical standards?

What is an ethical issue? What are some of the

ethical issues discussed in your text? Why are
they ethical issues?

Discuss the arguments for and against social

responsibility by business?

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