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Chapter 2

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Chapter 2. Business Ethics and Social Responsibility.

Initial Postings: Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.

Also, provide a graduate-level response to each of the following questions:

1. Marco Manager supervises three employees at a bank. Several times over the last three months, money has been missing from a specific employee’s till at the end of the shift. Marco Manager has worked with this employee for five years and considers this employee a friend. What ethical dilemmas does this present for Marco Manager?
2. Cash Right Now, LLC provides very high interest loans to people with poor credit scores that have a high probability of defaulting on the loan. Many people do in fact default on these loans; however, Cash Right Now, LLC does make a substantial profit overall, even considering these defaults. The people that borrow from Cash Right Now, LLC are unlikely to obtain credit elsewhere. Discuss if Cash Right Now, LLC’s business practices are ethical considering it charges much higher interest rates than traditional banks.

Marianne M. Jennings BUSINESS Its Legal, Ethical, and Global Environment 11th Ed. Chapter 2 Business Ethics and Social Responsibility ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. What Is Ethics? • Examples: – Underinflated football issue in the NFL – Turing increases drug price by 5000% – Uber’s billing policies • Definition: normative standards, generally accepted rules of conduct that govern society ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-1 What Is Ethics? • What is “fair”? • What if something “just doesn’t seem right” or “That’s just not fair”? – Discuss seeing two movies for the price of one – Disclosing your salary cut after the loan application is submitted – Telling the clerk you received too much change ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-2 Normative Standards • Normative Standards – How we behave, on average – How we treat each other – Expectations on contracts beyond legal interpretation ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-3 Normative Standards • Applying Standards of Ethical Reasoning to Business Dilemmas – Ethical standard is established – Individual ethical standards differ – Debate over sources of ethical standards – Evaluate ethical standards and conflicts as new data appear ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-4 Normative Standards • There is no statute on cutting in line, but we do honor that normative standard • We refer to adultery as “cheating” because the normative standard is that such relationships breach the social norm • We refer to “cheating” on exams as well ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-5 Three Layers of Business Ethics • Basic values (honesty) • Notions of fairness (how we treat others) • Issues related to community and the environment ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-6 Ethical Standards: Positive Law • Codified law is followed • However, there can still be issues with fairness, disclosure, etc. even though there is compliance with the law, as with the verdicts in the 2008 financial markets cases ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-7 Ethical Standards: Natural Law and Ethics • Positive law is not the standard because some principles are inviolate • Slavery was wrong even though laws allowed it in the United States ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-8 Ethical Standards: Moral Relativism • Ethics standard is based on the situation you are dealing with • Depending on pressures, you make a decision without regard to positive law or normative law standards ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-9 Ethical Standards: Religion and Ethics • Tenets of faith are ethical standards • Even if the law allows you to disclaim liability for selling goods “as is,” the standards of religion might require them to do more ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-10 Ethical Dilemmas • Categories of Ethical Dilemmas – Taking things that don’t belong to you – Saying things you know are not true – Giving or allowing false impressions – Buying influence or engaging in conflict of interest – Hiding or divulging information – Taking unfair advantage ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-11 Ethical Dilemmas • Categories of Ethical Dilemmas – Committing acts of personal decadence – Perpetrating interpersonal abuse – Permitting organizational abuse – Violating rules – Condoning unethical actions – Balancing Ethical Dilemmas ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-12 Analyzing Ethical Dilemmas • Make sure you have a grasp of all the available facts. • List any information you would like to have but don’t and what assumptions you would have to make, if any, in resolving the dilemma. • Take each person involved in the dilemma and list the concerns they face or might have on what to do about a product and its safety issue. • Develop a list of resolutions for the problem. Apply the various models for reaching this resolution. • Evaluate the resolutions for costs, legalities, and impact. Try to determine how each of the parties will react to and be affected by each of the resolutions you have proposed. • Make a recommendation for the actions that should be taken. ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-13 Resolution of Dilemmas • Blanchard and Peale – Is it legal? – Is it balanced? – How does it make me feel? • The Front-Page-of-the-Newspaper Test – How would the story be reported? – Use an objective and informed reporter’s view ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-14 Resolution of Dilemmas • Laura Nash and Perspective – How would I view the problem if I sat on the other side of the fence? – Am I able to discuss my decision with my family, friends, and those closest to me? – What am I trying to accomplish? – Will I feel as comfortable over the long term as I do today? ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-15 Resolution of Dilemmas • The Wall Street Journal Model – Compliance: Are you violating any laws? – Contribution: What does this action contribute to my customers, shareholders, bondholders, employees, community, and suppliers? – Consequences: How will this action affect me, my company, my family, our employees, and our shareholders? ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-16 Resolution of Dilemmas • Immanuel Kant’s Categorical Imperative • The Golden Rule ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-17 Why We Fail to Reach Good Ethical Decisions • Rationalizations – “Everybody else does it” – “If we don’t do it, someone else will” – “That’s the way it has always been done” – “We’ll wait until the lawyers tell us it’s wrong” ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-18 Why We Fail to Reach Good Ethical Decisions • Rationalizations – “It doesn’t really hurt anyone” – “The system is unfair” – “I was just following orders” – “You think this is bad, you should have seen…” – “It’s a gray area” ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-19 Social Responsibility Whom Should Shareholders Serve? Inherence Enlightened Self-Interest Invisible Hand Social responsibility Moral question: Whose interest should corporation serve? Policy question: Best way to serve interest is if the corporation is responsive to: Shareholders only Shareholders only Larger society Larger society Shareholders only Larger society Shareholders only Larger society ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-20 Social Responsibility • Inherence – Serve shareholders – Friedman view • Enlightened Self-Interest – Manager is responsible first to shareholders but serves them best by being responsible to larger society – Business value is enhanced if it is responsive to society needs ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-21 Social Responsibility • Invisible Hand –Best for society to guide itself • The Social Responsibility School –Manager should serve larger society –Become involved in all types of political and social issues –Encourage managers to be involved ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-22 Importance of Ethics • Ethics Resource Center Study – Firms with written codes of ethics did substantially better as an investment than the general Dow Jones Composite over a 30-year period – Executives feel ethical behavior strengthens a firm’s competitive edge – Johnson & Johnson recall of Tylenol earned it high respect and higher earnings in spite of cost as well as a type of immunity to scrutiny for decades ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-23 Why Business Ethics? • Costs of Unethical Behavior – BP and the refinery explosion and pipeline rupture and Deepwater Horizon – Nestlé and the infant formula – Beech-Nut and the fake apple juice – GM, the Malibu design, and the litigation – GM and the engine switch case ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-24 Why Business Ethics? • “The Tony Bennett Factor” – The Keys to Long-Term Survival ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-25 Why Business Ethics? • Ethics as a Strategy • Impact on Reputation of Ethical Missteps • Reputation’s Impact on Market Price and Capitalization: Johns-Manville and asbestos • Reputational Capital and Its Importance ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-26 Leadership and Ethics Leadership and Ethics: Making Choices Before Liability OPTIONS COST W ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-27 Ethics as a Strategy • The Subprime Mortgage Market – Lucrative area – Questions about fairness and disclosure – With collapse of the mortgages, new regulations, economic setbacks, financial downturns in companies that pushed the envelope on subprime loans – Companies that pulled back from subprimes are now doing well ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-28 Creating an Ethical Culture • The Tone at the Top • Sarbanes-Oxley Has Changed Corporate Governance, Reporting, and Operations ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-29 Creating an Ethical Culture • Sarbanes-Oxley and Culture – – – – – – – – – Code of ethics Training for employees Means for anonymous reporting Following up on employee reports Reporting up the ladder Action by the board in monitoring and following up Self-reporting by company Enforcement within company High-ranking officer in charge ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-30 Creating an Ethical Culture The Ethical Culture Leadership By Example Company Policies and Compensation Systems Reward Ethical and Moral Behavior Ethics Codes Ethics Training: Annual/Scenarios Investigations/Enforcement/Feedback ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-31 Creating an Ethical Culture • Developing an Ethics Stance – Setting parameters for personal and business behavior – Setting tone of tolerance or intolerance for behavior ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-32 Creating an Ethical Culture Your Ethics Stance: The Embezzling Employee Relativism ? Did she understand embezzlement is wrong? ? Why did she take the money? ? How long was she embezzling? ? Termination Absolutism Pragmatic ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Idealistic 2-33 Creating an Ethical Culture • Watch for Dangers of Unethical Environment – Intense competition and issues of survival (pressure) – Managers making poor judgments – Avoiding the “either/or conundrum” – Disparity in time devoted to ethics discussion vs. performance discussion ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-34 Creating an Ethical Culture • Being Careful About Pressure and Signals – Competition is so intense that business survival is threatened – Managers make poor judgments – Employees have few or no personal values – Employees respond only to earnings demands – Managers and executives are touting earnings ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-35 International Business • Businesses Must Decide Whether to Operate Under One Uniform Set of Standards • Cultures, Laws, and Standards Vary – Creates issues of bribes, grease payments, and culture-related gifts – Problems of economic development where bribery is common ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-36 Creating an Ethical Culture A Possible Uniform Standard for Ethical Choices – Categorical Imperative: How would you want to be treated? – Are you comfortable with a world with your standards? – Christian principle: The Golden Rule – And as ye would that men should do to you, do ye also to them likewise. Luke 6:31 – Thou shalt love…they neighbor as thyself. Luke 10:27 – Confucius: What you do not want done to yourself, do not do to others. – Aristotle: We should behave to our friends as we wish our friends to behave to us. ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-37 Creating an Ethical Culture A Possible Uniform Standard for Ethical Choices – Judaism: What you hate, do not do to anyone. – Buddhism: Hurt not others with that which pains thyself. – Islam: No one of you is a believer until he loves for his brother what he loves for himself. – Hinduism: Do nothing to thy neighbor which though wouldst not have him do to thee. – Sikhism: Treat others as you would be treated yourself. – Plato: May I do to others as I would that they should no unto me. ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2-38 Corruption Perceptions Index 2015 LEASE CORRUPT • Denmark • Finland • Sweden • New Zealand • Norway • Switzerland • Singapore • Canada • Germany • Luxembourg • United Kingdom • Australia • Iceland • Belgium • Austria • United States • Hong Kong • Ireland • Japan • Uruguay • Qatar ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. MOST CORRUPT • Somalia • Korea (North) • Afghanistan • Sudan • South Sudan • Angola • Libya • Iraq • Guinea Bissau • Venezuela • Haiti • Yemen • Turkmenistan • Syria • Eritrea • Uzbekistan • Zimbabwe • Cambodia • Burundi • Myanmar 2-39 International Business Interdependence of Trust, Business, and Government Fairness assumption Investors Regulation/Fairness Business Customers Government ©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.