BusinessEssentialsTwelfthEditionChapter2UnderstandingBusinessEthicsandSocialResponsibilityCopyright?2019,2016,2013PearsonEducation,Inc.AllRightsReserved.Introduction(1of2)70%oftheworld’scacaobeanscomefromsmallfarmsthroughouttheWestAfricannations.Fairtradereferstoprogramsdesignedtoensurethatexport-dependentfarmersindevelopingcountriesreceivefairpricesfortheircrops.Introduction(2of2)Inthischapter,we’lllookatethicsandsocialresponsibility—whattheymeanhowtheyapplytoenvironmentalissuesandtoafirm’srelationshipswithitscustomers,employees,andinvestorsapproachestosocialresponsibilitystepsbusinessesmusttaketoimplementsocialresponsibilityprogramsLearningObjectives(1of2)Explainhowindividualsdeveloptheirpersonalcodesofethicsandwhyethicsareimportantintheworkplace.Distinguishsocialresponsibilityfromethics,identifyorganizationalstakeholders,andcharacterizesocialconsciousnesstoday.Showhowtheconceptofsocialresponsibilityappliesbothtoenvironmentalissuesandtoafirm’srelationshipswithcustomers,employees,andinvestors.LearningObjectives(2of2)Identifyfourgeneralapproachestosocialresponsibilityandnotetheroleofsocialresponsibilityinsmallbusiness.Explaintheroleofgovernmentinsocialresponsibilityintermsofhowgovernmentsandbusinessesinfluenceeachother.Discusshowbusinessesmanagesocialresponsibilityintermsofbothformalandinformaldimensionsandhoworganizationscanevaluatetheirsocialresponsibility.EthicsintheWorkplace(1of2)EthicsbeliefsaboutwhatisrightandwrongorgoodandbadinactionsthataffectothersBusinessethicsreferstoethicalorunethicalbehaviorsbyemployeesinthecontextoftheirjobsEthicsintheWorkplace(2of2)Ethicalbehaviorbehaviorthatconformstoindividualbeliefsandsocialnormsaboutwhat’srightandgoodUnethicalbehaviorbehaviorthatconformstoindividualbeliefsandsocialnormsaboutwhatisdefinedaswrongandbadBusinessandManagerialEthicsManagerialEthicsstandardsofbehaviorthatguideindividualmanagersintheirworkBehaviortowardEmployeesBehaviortowardtheOrganizationBehaviortowardOtherEconomicAgentsAssessingEthicalBehaviorGathertherelevantfactualinformation.Analyzethefactstodeterminethemostappropriatemoralvalues.Makeanethicaljudgmentbasedonhowrightorwrongtheproposedactivityorpolicyis.EthicalNorms(1of2)UtilityDoesaparticularactoptimizethebenefitstothosewhoareaffectedbyit?(Thatis,doallrelevantpartiesreceive“fair”benefits?)RightsDoesitrespecttherightsofallindividualsinvolved?EthicalNorms(2of2)JusticeIsitconsistentwithwhat’sfair?CaringIsitconsistentwithpeople’sresponsibilitiestoeachother?ModelofEthicalJudgmentMakingCompanyPracticesandBusinessEthicsTwoofthemostcommonapproachestoformalizingtopmanagementcommitmenttoethicalbusinesspractices:AdoptingwrittencodesInstitutingethicsprogramsCorePrinciplesandOrganizationalValuesSocialResponsibility(1of2)SocialresponsibilityreferstotheoverallwayinwhichabusinessattemptstobalanceitscommitmentstorelevantgroupsandindividualsinitssocialenvironmentSocialResponsibility(2of2)OrganizationalStakeholdersthosegroups,individuals,andorganizationsthataredirectlyaffectedbythepracticesofanorganizationandwhothereforehaveastakeinitsperformanceMajorCorporateStakeholdersTheStakeholderModelofResponsibility(1of2)Mostcompaniesthatstrivetoberesponsibletotheirstakeholdersconcentratefirstandforemostonfivemaingroups:CustomersEmployeesInvestorsSuppliersLocalcommunitieswheretheydobusinessTheStakeholderModelofResponsibility(2of2)CustomersTreatcustomersfairlyandhonestlyEmployeesTreatemployeesfairlyandrespecttheirdignityandbasichumanneedsInvestorsFollowproperaccountingprocedures;provideinformationtoshareholdersaboutfinancialperformanceResponsibilitytowardCustomersConsumerrightsConsumerism–socialactivismdedicatedtoprotectingtherightsofconsumersintheirdealingswithbusinessesUnfairpricingCollusion–twoormorefirmscollaborateonsuchwrongfulactsaspricefixingPricegougingResponsibilitytowardEmployees(1of2)ProvideopportunitiestobalanceworkandlifepressuresandpreferencesHelpemployeesmaintainjobskillsTreatterminatedorlaid-offemployeeswithrespectandcompassionResponsibilitytowardEmployees(2of2)Acompanythatprovidesitsemployeeswithequalopportunitieswithoutregardtorace,sex,orotherirrelevantfactorsismeetingbothitslegalanditssocialresponsibilitiesTheStakeholderModelofResponsibilitySuppliersCreatemutuallybeneficialpartnershiparrangementswithsuppliersLocalandInternationalCommunitiesInvolvementinprogramsandcharitiesContemporarySocialConsciousnessTheConceptofAccountabilityTheexpectationofanexpandedroleforbusinessinprotectingandenhancingthegeneralwelfareofsocietyResponsibilitytowardtheEnvironmentAirpollutionWaterpollutionLandpollutionToxicwastedisposalRecyclingConsumerismConsumerismaformofsocialactivismdedicatedtoprotectingtherightsofconsumersintheirdealingswithbusinessesCollusionillegalagreementbetweentwoormorecompaniestocommitawrongfulactTheElementsofGreenMarketingTable2.1TheElementsofGreenMarketingProductionProcessesBusinesses,suchasFordMotorsandGeneralElectric,modifytheirproductionprocessestolimittheconsumptionofvaluableresourcessuchasfossilfuelsbyincreasingenergyefficiencyandreducingtheiroutputofwasteandpollutionbycuttinggreenhousegasemissions.ProductModificationProductscanbemodifiedtousemoreenvironmentallyfriendlymaterials,apracticeS.C.JohnsonencourageswithitsGreenlistofrawmaterialsclassifiedaccordingtotheirimpactonhealthandtheenvironment.Committedtoonlyusingthesafestmaterialsonthislist,S.C.Johnsoneliminated1.8millionpoundsofvolatileorganiccompoundsfromitsglasscleanerWindex.24CarbonOffsetsareusedbysomecompaniesthatarecommittedtoreplenishing,repairing,orrestoringthosepartsoftheenvironmentthataredamagedbytheiroperations,especiallythosethatproducecarbondioxide(CO2).In2007,Volkswagenbeganaprogramofplantingtreesintheso-calledVWForestintheLowerMississippiAlluvialValleytooffsettheCO2emissionsofeverycartheysell.25PackagingReduction,forexample,reducingandreusingmaterialsusedinpackagingproducts,isanotherimportantstrategyofgreenmarketing,whichStarbuckshaspioneered.In2004,theFDAgavethecoffeeretailerthefirst-everapprovaltouserecycledmaterialsinitsfoodandbeveragepackaging.Starbucksestimatesthatusingcupscomposedof10percentrecycledfibersreducesitspackagingwastebymorethan5millionpoundsperyear.26Sustainability,usingrenewableresourcesandmanaginglimitedresourcesresponsiblyandefficiently,isanimportantgoalforanybusinesspursuingagreenpolicy.Forexample,WholeFoodsMarketiscommittedtobuyingfoodfromfarmerswhousesustainableagriculturepracticesthatprotecttheenvironmentandagriculturalresources,suchaslandandwater.ConsumerBillofRightsResponsibilitytowardInvestorsInsidertradingusingconfidentialinformationtogainfromthepurchaseorsaleofstocksMisrepresentationoffinancesApproachestoSocialResponsibility(1of3)ApproachestoSocialResponsibility(2of3)ObstructionistStanceinvolvesdoingaslittleaspossibleandmayinvolveattemptstodenyorcoverupviolationsDefensiveStancecompanymeetsonlyminimumlegalrequirementsinitscommitmentstogroupsandindividualsinitssocialenvironmentApproachestoSocialResponsibility(3of3)AccommodativeStanceacompany,ifspecificallyaskedtodoso,exceedslegalminimumsinitscommitmentstogroupsProactiveStanceacompanyactivelyseeksopportunitiestocontributetothewell-beingofgroupsandindividualsinitssocialenvironmentSocialResponsibilityandtheSmallBusinessForsmallbusinesses,ethicalissuesarequestionsofindividualethicsButinquestionsofsocialresponsibility,theymustaskthemselvesiftheycanaffordasocialagendaTop25CorporateFoundations(1of3)RankName/(State)TotalGivingAsofFiscalYearEndDate1NovartisPatientAssistanceFoundation,Inc.(NJ)

$456,825,17612/31/2014

2WellsFargoFoundation(CA)189,380,78012/31/20143TheBankofAmericaCharitableFoundation,Inc.(NC)

175,729,43012/31/2014

4TheWal-MartFoundation,Inc.(AR)168,582,621

01/31/20145TheJPMorganChaseFoundation(NY)130,855,48312/31/2013

6GEFoundation(CT)108,401,65212/31/2014

7TheCoca-ColaFoundation,Inc.(GA)90,518,70012/31/20148CitiFoundation(NY)78,000,00012/31/2014

9ExxonMobilFoundation(TX)975,212,56312/31/2014

Top25CorporateFoundations(2of3)RankName/(State)TotalGivingAsofFiscalYearEndDate10BayerU.S.PatientAssistanceFoundation(PA)

58,474,54711/30/2014

11GeorgeLucasFamilyFoundation(CA)55,486,65512/31/2014

12CaterpillarFoundation(IL)49,640,07512/31/201413ThePNCFoundation(PA)48,597,92712/31/201414Johnson&JohnsonFamilyofCompaniesFoundation(NJ)46,445,66912/31/2013

15TheUPSFoundation(GA)42,895,86012/31/2013

16MetLifeFoundation(NY)41,068,03412/31/201417IntelFoundation(OR)39,047,59712/31/2014

Top25CorporateFoundations(3of3)RankName/(State)TotalGivingAsofFiscalYearEndDate18PublixSuperMarketsCharities(FL)38,602,79112/31/2014

19TheGoldmanSachsFoundation(NY)37,245,80712/31/2014

20EmersonCharitableTrust(MO)36,181,74309/30/2014

21ThePrudentialFoundation(NJ)34,835,42312/31/201422GeneralMotorsFoundation,Inc.(MI)30,821,02612/31/201423TheMerckCompanyFoundation(NJ)30,691,38712/31/2014

24VerizonFoundation(NJ)30,628,91412/31/2014

25FordMotorCompanyFund(MI)30,222,38812/31/2014TheGovernmentandSocialResponsibilityRegulationtheestablishmentoflawsandrulesthatdictatewhatorganizationscanandcannotdoDirectIndirectHowOrganizationsInfluenceGovernmentPoliticalActionCommittees(PACs)specialorganizationscreatedtosolicitmoneyandthendistributeittopoliticalcandidatesLobbyingtheuseofpersonsorgroupstoformallyrepresentanorganizationorgroupoforganizationsbeforepoliticalbodiesFormalOrganizationalDimensions(1of2)LegalCompliancetheextenttowhichtheorganiz