Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-1
chapter
.
Demanding Ethical and
Socially Responsible
Behavior
what’s new in this edition 4.3
brief chapter outline and learning objectives 4.5
lecture outline and lecture notes 4.7
PowerPoint slide notes 4.39
lecture enhancers 4.54
lecture enhancer 4-1: IMPRISONED ENRON CEO GETS SENTENCE SHORTENED 4.54
lecture enhancer 4-2: CHINA CONFRONTS ITS ETHICAL DEMONS 4.55
lecture enhancer 4-3: SELECTED CODES OF ETHICS 4.55
lecture enhancer 4-4: APPROACHES TO SOCIAL RESPONSIBILITY 4.57
lecture enhancer 4-5: HELPING VETERANS ADJUST THROUGH PUBLIC SERVICE 4.57
lecture enhancer 4-6: CORPORATE RESPONSIBILITY IN THE CLASSROOM 4.58
lecture enhancer 4-7: PHARMACEUTICAL OR FOOD? 4.58
lecture enhancer 4-8: APP-GATE AT UNIVERSITY OF MISSOURI 4.59
lecture enhancer 4-9: KEEPING THE NFL GREEN IN SUSTAINABLE STADIUMS 4.60
4
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-2
critical thinking exercises 4.61
critical thinking exercise 4-1: EXPLORING COMMUNITY SERVICE 4.61
critical thinking exercise 4-2: ETHICAL DILEMMAS 4.62
critical thinking exercise 4-3: RESEARCHING CODES OF ETHICS 4.65
critical thinking exercise 4-4: SOCIAL RESPONSIBILITY SUCCESSES 4.66
AND FAILURES
critical thinking exercise 4-5: SURVEYING PUBLIC INTEREST 4.66
ORGANIZATIONS
bonus case 4.70
bonus case 4–1: CORPORATIONS FILL FOREIGN AID VOID 4.70
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-3
what’s new in
this edition
additions to the 11th edition:
• Getting to Know Patty Stonesifer of Martha’s Table
• Name That Company: Costco
• Making Ethical Decisions: Bernie Madoff’s Ponzi Scheme
• Spotlight on Small Business: Turning Ex-Cons into Entrepreneurs
• Seeking Sustainability: Sustainability’s in the Bag
• Video Case: Warby Parker/VisionSpring
revisions to the 11th edition:
• Statistical data and examples throughout the chapter were updated to reflect current information.
• Reaching Beyond Our Borders: Going by a Different Standard
deletions from the 10th edition:
• Getting to Know Black Mycoskie
• Name That Company: Xerox
• Thinking Green
• Making Ethical Decisions
• Legal Briefcase
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-4
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-5
brief chapter outline
and learning objectives
CHAPTER 4
DEMANDING ETHICAL AND SOCIALLY RESPONSIBLE
BEHAVIOR
Getting to Know PATTY STONESIFER, CEO of MARTHA’S TABLE
LEARNING OBJECTIVE 1
Explain why obeying the law is only the first step in behaving ethically.
I. ETHICS IS MORE THAN LEGALITY.
A. Ethical Standards Are Fundamental.
LEARNING OBJECTIVE 2
Ask the three questions to answer when faced with a potentially un-
ethical action.
B. Ethics Begins with Each of Us
LEARNING OBJECTIVE 3
Describe management’s role in setting ethical standards.
II. MANAGING BUSINESSES ETHICALLY AND RESPONSIBLY
learning objective 4
Distinguish between compliance-based and integrity-based ethics
codes, and list the six steps in setting up a corporate ethics code.
A. Setting Corporate Ethical Standards
LEARNING OBJECTIVE 5
Define corporate social responsibility and compare corporations’ re-
sponsibility to various stakeholders.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-6
III. CORPORATE SOCIAL RESPONSIBILITY
A. Responsibility to Customers
B. Responsibility to Investors
C. Responsibility to Employees
D. Responsibility to Society and the Environment
E. Social Auditing
LEARNING OBJECTIVE 6
Analyze the role of U.S. businesses in influencing ethical behavior
and social responsibility in global markets.
IV. INTERNATIONAL ETHICS AND SOCIAL RESPONSIBILITY
V. SUMMARY
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-7
Getting to Know PATTY STONESIFER, of MARTHA’S TABLE
Whether she’s leading a multi-billion dollar foundation or a small nonprofit, Patty
Stonesifer’s first priority is the needs of others.
learning objective 1
Explain why obeying the law is only the first step in behaving ethically.
I. ETHICS IS MORE THAN LEGALITY.
A. HISTORY OF SCANDALS
1. In the early 2000s scandals at WorldCom, Tyco,
and ImClone focused attention on the subject of
ETHICS.
2. In recent years, greedy borrowers and lenders
helped precipitate a worldwide financial crisis.
3. What can be done to restore trust in the free-
market system?
a. Those who have broken the law need to be
PUNISHED ACCORDINGLY.
b. Also helpful are new laws making accounting
records more transparent and more laws
making businesspeople more accountable.
c. Laws alone don’t make people honest, relia-
ble, or truthful.
4. Ethical behavior is not the same as following the
law.
The wage and benefit packages offered by this company are among the best in hourly retail.
Even part-time workers are covered by its health plan. Increased benefits reduce employee
turnover to less than a third of the industry average. Name that company.
(Students should read the chapter before guessing the company’s name: Costco.)
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-8
PPT 4-1
Chapter Title
McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights r eserved.
Demanding
Ethical and
Socially
Responsible
Behavior
CHAPTER 4
PPT 4-2
Learning Objectives
LEARNING OBJECTIVES
4-2
1. Explain why obeying the law is only the first step in
behaving ethically.
2. Ask the three questions you need to answer when
faced with a potentially unethical action.
3. Describe management’s role in setting ethical
standards.
PPT 4-3
Learning Objectives
LEARNING OBJECTIVES
4-3
4. Distinguish between compliance-based and integrity-
based ethics codes, and list the six steps in setting
up a corporate ethics code.
5. Define corporate social responsibility and compare
corporations’ responsibilities to various
stakeholders.
6. Analyze the role of U.S. businesses in influencing
ethical behavior and social responsibility in global
markets.
PPT 4-4
Brenda Palms Barber
PATTY STONESIFER
Martha’s Table
4-4
• Held high-level positions
with the Gates
Foundation and the
White House.
• Founded Martha’s Table
in 2013 with the goal of
providing healthy food,
affordable clothing and
quality education to
D.C.’s locals.
PPT 4-5
Name That Company
NAME that COMPANY
4-5
The wage and benefit packages offered by this
company are among the best in hourly retail.
Even part-time workers are covered by its
health plan. Increased benefits reduce
employee turnover to less than a third of the
industry average.
Name that company!
PPT 4-6
Life after Scandal
LIFE AFTER SCANDAL
4-6
LO 4-1
• Scandals have shaken the real estate, mortgage
and banking industries.
• How do we restore trust in the free market
system?
– Punish those who have broken the law.
– Make accounting records more transparent.
– Consider what is ethical, not just what is legal.
lecture enhancer 4-1
IMPRISONED ENRON CEO GETS
SENTENCE SHORTENED
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-9
a. Ethical behavior goes BEYOND the law.
b. ETHICS deals with the proper relations with
and responsibilities toward other people.
c. LEGALITY deals with much narrower is-
sues.
d. It refers only to laws we have written to pro-
tect ourselves⎯many UNETHICAL ACTS
FALL WITHIN OUR LAWS.
B. ETHICAL STANDARDS ARE FUNDAMENTAL.
1. ETHICS are the standards of moral behavior;
that is, behavior that is accepted by society as
right versus wrong.
2. Many Americans have few moral absolutes and
make DECISIONS SITUATIONALLY.
3. Even in today’s diverse culture, there are still
COMMON STANDARDS OF ETHICAL BE-
HAVIOR.
a. Integrity, respect for human life, self-control,
honesty, courage, and self-sacrifice are
RIGHT.
b. Cheating, cowardice, and cruelty are
WRONG.
4. All major religions support a version of the
GOLDEN RULE: “Do unto others as you would
have them do unto you.”
learning objective 2
Ask the three questions one should answer when faced with a potentially unethi-
cal action.
C. ETHICS BEGINS WITH EACH OF US.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-10
MAKING
ethical
decisions
PPT 4-7
Bernie Madoff’s
Ponzi Scheme
• Bernie Madoff is serving 150
years behind bars.
• His exclusive wealth
management firm was a
gigantic Ponzi scheme.
• Though exact amounts are
uncertain, it is believed he
stole about $65 billion from
his investors.
BERNIE MADOFF’S
PONZI SCHEME
4-7
PPT 4-8
What Is a Ponzi Scheme?
WHAT is a PONZI SCHEME?
Source:Securi esandExchangeCommission,www.sec.gov,accessedNovember2014. 4-8
LO 4-1
• A fraud by paying returns to existing investors from
funds contributed by new investors.
• New investors are promised opportunities claimed
to generate high returns with little or no risk.
• Fraudsters focus on attracting new money to make
promised payments.
PPT 4-9
What Are Ethics?
• Ethics — The standards of moral behavior.
Behaviors that are accepted by society as right
versus wrong.
WHAT are ETHICS?
4-9
LO 4-1
PPT 4-10
Basic Moral Values
Wrong:
• Cheating
• Cowardice
• Cruelty
BASIC MORAL VALUES
4-10
LO 4-1
Right:
• Integrity
• Respect for human life
• Self-control
• Honesty
• Courage
• Self-sacrifice
critical thinking
exercise 4-1
EXPLORING COMMUNITY SERVICE
This exercise encourages students to use the Internet to ex-
plore opportunities for community service. (See the complete
exercise on page 4.61 of this manual.)
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-11
1. Americans in general are not always honest and
honorable.
a. A recent study identified low managerial eth-
ics as a major factor in America’s competi-
tive problems.
b. Another survey revealed that 3/4 of the pop-
ulation NEVER GAVE TIME to their com-
munities.
c. The most common form of cheating is pla-
giarizing material from the Internet.
d. In a recent study, 51% of high school stu-
dents have cheated on tests in the last year.
e. Many schools now require a certain number
of hours of community service to graduate.
2. It is important to KEEP ETHICS IN MIND when
making a business decision.
a. There is not always an easy choice.
b. Sometimes the obvious solution from an eth-
ical point of view has drawbacks from a per-
sonal or professional point of view.
c. Sometimes there is no desirable alternative,
a situation referred to as an ETHICAL DI-
LEMMA.
3. Three “ETHICS CHECK QUESTIONS” can
help individuals and organizations be sure their
decisions are ethical:
a. Is my proposed action LEGAL?
b. Is it BALANCED?
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-12
PPT 4-11
Ethics and You
ETHICS and YOU
4-11
LO 4-2
• Plagiarizing from online
materials is the most
common form of cheating
in schools today.
• Studies found a strong
relationship between
academic dishonesty and
dishonesty at work.
lecture enhancer 4-2
CHINA CONFRONTS ITS ETHICAL
DEMONS
critical thinking
exercise 4-2
ETHICAL DILEMMAS
TEXT FIGURE 4.1
Ethical Orientation Questionnaire
PPT 4-12
Facing Ethical Dilemmas
FACING ETHICAL DILEMMAS
4-12
LO 4-2
• Ask yourself these
questions:
– Is it legal?
– Is it balanced?
– How will it make me
feel about myself?
PPT 4-13
Bribery Bad Boys
BRIBERY BAD BOYS
Five FCPA Investigations
Company Case
Smith and Wesson Improper payments to foreign officials.
Stryker
Corporation
Bribing doctors and government officials in five
countries.
Hewlett-Packard Improper payments for contracts.
Bio-Rad
Laboratories
Subsidiaries made improper payments to officials in
Russia, Vietnam, and Thailand.
Diebold Bribed officials at government-owned banks.
Source:SEC,www.sec.gov,accessedNovember2014. 4-13
LO 4-2
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-13
c. How will it make me FEEL ABOUT MY-
SELF?
4. Individuals and companies that develop a strong
ethics code tend to behave more ethically than
others.
learning objective 3
Describe management’s role in setting ethical standards.
II. MANAGING BUSINESSES ETHICALLY AND
RESPONSIBLY
A. ORGANIZATIONAL ETHICS BEGINS AT THE
TOP.
1. People learn their standards and values from
observing what others do, not what they say.
2. Corporate values are instilled by the leadership
and example of strong top managers.
3. Any trust and cooperation between workers and
managers must be based on FAIRNESS, HON-
ESTY, OPENNESS, AND MORAL INTEGRITY.
4. Some managers think ethics is a personal mat-
ter⎯that they are not responsible for an individ-
ual’s misdeeds.
a. Individuals do not usually act alone⎯they
need the implied, if not the direct, coopera-
tion of others to behave unethically in a cor-
poration.
b. The text uses the example of cell phone
sales reps who unethically pressure cus-
tomers.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-14
SPOTLIGHT ON
small business
PPT 4-14
Turning Ex-Cons into Entrepre-
neurs
TURNING EX-CONS into
ENTREPRENEURS
• Life after prison can be very
difficult for those with criminal
records.
• Catherine Rohr started
Defy Ventures to help ex-cons
launch their own businesses.
• Defy and Rohr’s other
organizations have helped create
60 startups and many ex-cons
find employment.
test
prep
PPT 4-15
Progress Assessment
TEST PREP
4-15
• What are ethics?
• How do ethics differ from legality?
• When faced with ethical dilemmas, what
questions can you ask yourself that might help
you make ethical decisions?
PPT 4-16
Ethics Start at the Top
ETHICS START at the TOP
4-16
LO 4-3
• Organizational ethics begin at
the top.
• Managers can help instill
corporate values in
employees.
• Trust between workers and
managers must be based on
fairness, honesty, openness
and moral integrity.
PPT 4-17
Factors Influencing Managerial
Ethics
FACTORS INFLUENCING
MANAGERIAL ETHICS
Individual Organizational Environmental
• Values
• Work
Background
• Family Status
• Personality
• Top Level
Management
Philosophy
• Firm’s Reward
System
• Job Dimensions
• Competition
• Economic
Conditions
• Social/Cultural
Institutions
4-17
LO 4-3
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-15
5. In some corporations, corporate standards may
ENCOURAGE DISHONESTY.
learning objective 4
Distinguish between compliance-based and integrity-based ethics codes, and
list the six-steps in setting up a corporate ethics code.
B. SETTING CORPORATE ETHICAL STANDARDS
1. Most corporations have WRITTEN CODES OF
ETHICS.
2. Although ethics codes vary greatly, they can be
classified into TWO MAJOR CATEGORIES:
compliance-based and integrity–based.
a. COMPLIANCE-BASED ETHICS CODES
are ethical standards that emphasize pre-
venting unlawful behavior by increasing con-
trol and by penalizing wrongdoers.
b. INTEGRITY-BASED ETHICS CODES are
ethical standards that define the organiza-
tion’s guiding values, create an environment
that supports ethically sound behavior, and
stress a shared accountability among em-
ployees.
3. A 6-STEP PROCESS can help improve Ameri-
ca’s business ethics.
a. Step 1: TOP MANAGEMENT must adopt
and unconditionally support an explicit code
of conduct.
b. Step 2: EMPLOYEES must understand that
expectations for ethical behavior begin at the
top and all employees are expected to act
ethically.