Chapter 2

Conducting Business Ethically and Responsibly

Chapter Overview

Individual ethics – people’s beliefs about right and wrong, good and bad – are heavily shaped by personal values and morals, as well as social and cultural influences. Ethical behavior is behavior that conforms to generally accepted standards about beneficial and harmful actions. Since the ethical behavior of individual employees has a direct effect on their companies, many organizations are adopting formal statement of ethics.

Social responsibility refers to how a company meets the needs of its stakeholders: those groups that are directly affected by an organization’s practices, and therefore, have a stake in its performance.

Firms typically confront four dimensions of social responsibility. Responsibility toward the environment means minimizing air, water, and land pollution. Responsibility toward consumers means respecting consumer rights, pricing products fairly, and maintaining ethics in advertising. Responsibility toward employees means meeting the needs and concerns of workers, without vindictiveness toward whistleblowers. Responsibility toward investors means managing resources honestly, without misrepresentation of financial status.

The four most common approaches to social responsibility include the obstructionist stance (doing as little as possible), the defensive stance (complying with minimum legal requirements), the accommodative stance (going beyond the minimum when asked), and the proactive stance (actively seeking opportunities to contribute).

Small businesses face many of the same issues of ethics and social responsibility as their larger counterparts. The differences are primarily of scale.

Chapter Objectives

1. Explain how individuals develop their personal code of ethics and why ethics are important in the workplace. 2. Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 3. Show how the concept of social responsibility applies both to environmental issues and to a firm’s relationships with customers, employees, and investors. 4. Identify four general approaches to social responsibility and describe the four steps that a firm must take to implement a social responsibility program. 5. Explain how issues of social responsibility and ethics affect small business.

REFERENCE OUTLINE

Opening Case: The Rules of Tipping

I. Ethics in the Workplace A. Individual Ethics 1. Ambiguity, the Law, and the Real World 2. Individual Values and Codes B. Business and Managerial Ethics 1. Behavior Toward Employees 2. Behavior Toward the Organization 3. Behavior Toward Other Economic Agents C. Assessing Ethical Behavior D. Company Practices and Business Ethics 1. Adopting Written Codes 2. Instituting Ethics Programs

II. Social Responsibility A. The Stakeholder Model of Responsibility 1. Customers 2. Employees 3. Investors 4. Suppliers 5. Local Communities B. Contemporary Social Consciousness

III. Areas of Social Responsibility A. Responsibility Toward the Environment 1. Air Pollution 2. Water Pollution 3. Land Pollution B. Responsibility Toward Customers 1. Consumer Rights 2. Unfair Pricing 3. Ethics in Advertising C. Responsibility Toward Employees D. Responsibility Toward Investors

IV. Implementing Social Responsibility Programs A. Approaches to Social Responsibility 1. Obstructionist Stance 2. Defensive Stance 3. Accommodative Stance 4. Proactive