Chapter 04 – Demanding Ethical and Socially Responsible Behavior
71. Since most ethics violations are small and rather insignificant in nature, employees need
to understand that addressing these issues is secondary to making profits. CEOs may be
justified in putting these on the back-burner, waiting for more convenient moments to
address them.
Feedback: Ethics violations should be addressed in a timely manner, and with timely action.
By enforcing the ethics code with timely action, leadership impresses upon all employees that
the code is serious.
72. America’s business ethics can improve simply by requiring written contracts with
employees, customers, and owners. This alone will do the job!
Feedback: Six steps can help improve America’s business ethics: (1) top management must
adopt and unconditionally support an explicit corporate code of conduct; (2) employees must
understand that expectations for ethical behavior begin at the top and that senior management
expects all employees to act accordingly; (3) managers and others must be trained to consider
the ethical implications of all business decisions; (4) an ethics office must be set up; (5)
outsiders must be told about the ethics program; (6) the ethics code must be enforced. Written
contracts alone will not improve America’s business ethics.
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94. Insider trading provides the information needed for the securities markets to operate fairly
and efficiently.
95. Businesses have a social responsibility to create jobs.
96. Promoting social justice is a responsibility of society, but not business.
97. In the long run, a firm’s loyalty to their employees can pay off financially.
98. Getting even is one of the most powerful incentives for good people to do bad things.
99.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
A recent study revealed that employee fraud causes 30% of all business failures.
100. The green movement has turned the heads of very few firms.
101. A social audit is a systematic evaluation of an organization’s progress toward
implementing programs that are profitable.
102. The green movement has resulted in a positive impact on U.S. jobs.
103. “Greenwashed” companies have taken the green movement to the next level. These
firms are so green, the U.S. government gives them a special designation.
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117. Often it is the threat of negative publicity that pressures businesses to enforce their
corporate code of ethics.
Feedback: One important thing to remember is that it isn’t enough for a company to be right
when it comes to ethics and social responsibility. It also has to convince its customers that it’s
right.
118. Although the green movement is a social trend, it is difficult to predict its future
contributions to society.
Feedback: Currently renewable-energy and energy-efficiency industries account for 9 million
jobs and by 2030, the prediction is that this figure will jump to 40 million more jobs in
engineering, manufacturing, construction, accounting, and management.
119. Out-Tel, a computer chip manufacturer, knowingly sold defective chips and failed to
notify customers of the potential problems. When the problem became public knowledge,
the firm’s stock price fell dramatically. This illustrates the value that investors place on the
ethical behavior of businesses.
Feedback: The perception of unethical business practices will cause profit seeking, socially
conscious investors to react to ethically unfavorable circumstances.
120.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
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At a recent town hall meeting, citizens expressed concern regarding the impact of a
proposed new gambling casino. The owner of the proposed casino responded, “I don’t
know what all of this fuss is about. I’m just a businessman trying to earn a profit, provide
new jobs, and pay taxes.” His response reflects an overall commitment to corporate social
responsibility.
Feedback: Corporate social responsibility is the concern businesses have for the welfare of
society. While a firm’s primary orientation may be toward the interests of investors, the
welfare of all stakeholders should be considered.
121. Recently, a large insurance company in the Midwest made a public commitment
toward corporate philanthropy when it dedicated 3% of its profits toward the cultural and
environmental concerns of the large metropolitan area that houses its corporate
headquarters. The CEO stated, “In honor of several hundred employees that come to work
here everyday, we want to give something back.” In light of the fact that this is only
helping one metropolitan area, the donation falls outside the realm of corporate social
responsibility.
Feedback: This is clearly “corporate philanthropy”, a form of corporate social responsibility.
The firm is committed toward acting responsibly within society. These acts have no physical
or political boundaries.
122.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
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Fresh Walls Paint Company promotes its products as nontoxic and made from natural,
organic substances that are safe for all persons including those with asthma and other lung
conditions. In order to live up to customer expectations, it must walk the walk and not just
talk the talk! If consumers learn that Fresh Walls’ paints do not meet their expectations,
their reaction is likely to tarnish the company’s image.
Feedback: It’s not enough for companies to brag about their social responsibility efforts. They
must live up to the expectations they raise or face the consequences. Customers want to do
business with companies they can trust.
123. About 10 years ago, there were several bank mergers. Shortly after Big Bucks Bank
bid on The Bank of Plenty, a story hit the local newspapers about the investigation into the
purchase of several thousand shares of stock of the Bank of Plenty by three of its top
executives, just prior to the announcement that Big Bucks Bank planned to buy Bank of
Plenty. Upon close examination by the SEC (Securities and Exchange Commission) it was
determined that the stock purchases were an illegal maneuver on the part of these
executives. This is an example of insider trading. The executives were “banking” on the
stock price rising sharply when the purchase announcement was made public.
Feedback: Insider trading uses private company information to further insiders’ own fortunes
or those of family and friends. Regulation FD, the fair disclosure rule now stipulates that
companies must provide the same information to everyone.
124.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
Abby is a stockbroker for a large financial services company. A client who works at Sixth
Generation Software, Ltd., just called to purchase several thousand shares of his
company’s stock. He reveals to her that the company is about to announce the appointment
of a new CEO. Abby asks her client if this information is public knowledge. The reason
she asks is to make certain that her client, her company, and she remain in compliance
with Regulation FD, the Fair Disclosure rule.
Feedback: The SEC (Securities and Exchange Commission), the organization that monitors
all publicly traded companies created Regulation FD, the fair disclosure rule, which says that
companies that release any information must share it with everyone, and not just a few.
Everyone has the same opportunity to use the information to make financial decisions.
125. Recently, Bob was trying to choose between three mutual fund investments for his
retirement account. As a socially conscious investor, he will prefer to invest in funds that
hold the stocks of oil and coal companies, as opposed to wind-turbine and renewable
energy companies.
Feedback: Socially conscious investors make an effort to invest in companies who show high
levels of social responsibility. One aspect of social responsibility deals with being green, or
environmentally conscious. Companies involved with new and renewable energy sources,
including the use of wind and solar energy are considered green companies.
126. U.S. businesses claim that unethical business practices are common outside the U.S.
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131. The International Organization for Standardization (ISO) plans to publish a standard
on social responsibility called ISO 26000.
132. U.S. businesses consider The Foreign Corrupt Practices Act as legislation that has
helped increase their profits abroad.
133. All U.S. companies practice the same ethical standards when dealing with suppliers
and contract manufacturers abroad.
134. Due to their significant economic power, large multinational firms can ignore the
ethical standards of a society without consequences.
Feedback: Nike and McDonald’s are both international firms that have been criticized for
actions that some view as unethical.
135.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
U.S. businesses have little influence over the behavior of businesses from other countries.
Feedback: American businesses are demanding socially responsible behavior of their
international suppliers.
136. Applying the ethical standards of the U.S. to foreign firms is a difficult process for
U.S. firms.
Feedback: Requiring international suppliers to adhere to American ethical standards is not as
clear-cut as you might think. Is it always ethical for American companies to demand
compliance with our moral standards? What about countries where child labor is an accepted
part of their society?
137. “Hear no evil, see no evil, speak no evil” is the best policy for U.S. firms to follow in
their dealings with corrupt foreign suppliers.
Feedback: American businesses will be judged by the company they keep. Sears, for
example, will not import products made by Chinese prison labor. To do so would tarnish the
corporate image of Sears.
138.