This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

Two Chapter Concern for Ethical and Societal Issues An organization that wants to prosper over the long term cannot do so without considering business ethics, the standards of conduct and moral values governing actions and decisions in the work environment. In business, as in life, deciding what is right or wrong in a given situation does not always involve a clear-cut choice. Firms have many responsibilities--to customers, to employees, to investors, and to society as a whole. Business ethics are also shaped by the ethical climate within an organization. Codes of conduct and ethical standards play increasingly significant roles in businesses in which doing the right thing is both supported and applauded. The New Ethical Environment Business ethics are now in the spotlight as never before. High-profile investigations, lawsuits, arrests, and convictions, as well as business failures due to fraud and corruption, have created a long string of headline news. Most business owners and managers have built and maintained enduring companies without breaking the rules. Many CEOs personify the best in management practices and are highly respected for their integrity, honestly, and business ethics. Jeff Immelt, GE's CEO: o Virtue first, followed by execution, growth, and great people Not all companies set and meet high ethical standards. o Greed and poor values had led many companies astray from their moral bearings, and that a major ethical priority or businesses should be preserving jobs. Individuals Make a Difference In today's business environment, individuals can make the difference in ethical expectations and behavior Although ethical behavior can be difficult to track or even define in all circumstances, evidence suggests that some individuals act unethically or illegally on the job. Technology seems to have expanded the range and impact of unethical behavior. Nearly every employee, at every level, wrestles with ethical questions at some point or another. Development of Individual Ethics Preconventional o Individual is mainly looking out for his or her own interests. Rules are followed only out of fear of punishment or hope of reward. Conventional o Individual considers the interests and expectations of others in making decisions. Rules are followed because it is a part of belonging to the group. Postconventional o Individual follows personal principles for resolving ethical dilemmas. He or she considers personal, group, and societal interests. An individual's stage in moral and ethical development is determined by a huge number of factors. Experiences help shape responses to different situations. On-the-Job Ethical Dilemmas It's not always easy to distinguish between what is right and wrong in many business situations, especially when the needs and concerns of various parties conflict. Many manufacturers that utilize factories overseas have faced criticism at home over the poor working conditions found there. Concerned that pulling their business from overseas suppliers often leaves workers in developing countries without employment, some firms have turned instead to efforts to improve working conditions abroad. Conflict of interest o A conflict of interest exists when a businessperson is faced with a situation in which an action benefiting one person or group has the potential to harm another o Ethical ways to handle conflicts of interest: Avoiding them Disclosing them o An employee with integrity goes beyond truthfulness. Having integrity means adhering to deeply felt ethical principles in business situations. It includes doing what you say you will do and accepting responsibility for mistakes. Loyalty versus Truth o Individuals may have to decide between loyalty to the company and truthfulness in business relationships. Whistle-blowing o Whistle blowing is an employee's disclosure to company officials, government authorities, or the media of illegal, immoral, or unethical practices. o A whistle-blower must weight a number of issues in deciding whether to come forward. o In some cases, people resort to whistle blowing because they believe the unethical behavior is causing significant damage that outweighs the risk that the company will retaliate against the whistle-blower o Not all whistle blowing cases are straightforward o Obviously, whistle blowing and other ethical issues arise relatively infrequently in firms with strong organizational climates of ethical behavior. How Organizations shape ethical conduct o Ethical awareness A code of conduct is a formal statement that defines how the organization expects employees to resolve ethical questions At the most basic level, a code of conduct may simply specify ground rules for acceptable behavior, such as identifying the laws and regulations that employees must obey. Employees are expected to treat one another with respect, including respect for individual and cultural differences; protect the company's assets; and fulfill whatever commitments they make The code of conduct also states that each employee is responsible for behaving consistently with its standards and for reporting possible violations of the code o Ethical reasoning Although a code of conduct can provide an overall framework, it cannot detail a solution for every ethical situation. Some ethical questions have black-and-white answers, but others do not. Businesses must provide the tools employees need to evaluate the options and arrive to suitable decisions. Many firms have instituted ethics training programs. Many authorities debate whether ethics can actually be taught, but training can give employees an opportunity to practice applying ethical values to hypothetical situations as a prelude to applying the same standards to real-world situations. o Ethical action Codes of conduct and ethics training help employees recognize and reason through ethical problems. Goals set for the business as a whole and for individual departments and employees can affect ethical behavior. A firm whose managers set unrealistic goals for employee performance may find an increase in cheating, lying, and other misdeeds, as employees attempt to protect themselves. In today's Internet economy, the high value placed on speed can create a climate in which ethical behavior is sometimes challenged. Ethical decisions often require careful and quite thought, a challenging task in a business moving in warp seed. Some companies encourage ethical action by providing support for employees faced with dilemmas. o Ethical leadership Executives must not only talk about ethical behavior but also demonstrate it in their actions. This principle requires employees to be personally committed to the company's core values and be willing to base their actions on them. One important way for business leaders to model ethical behavior is to admit when they are wrong and correct their organization's mistakes and problems. Ethical leadership should also go one step further and charge each employee at every level with the responsibility to be an ethical leader. Everyone should be aware of problems and be willing to defend the organization's standards. Unfortunately, not all organizations are able to build a solid framework of business ethics. Because the damage from ethical misconduct can powerfully affect a firm's stakeholders-- customers, investors, employees, and the public-- pressure is exerted on businesses to act in acceptable ways. Acting Responsibly to Satisfy Society A second major issue affecting business is the questions of social responsibility. Social responsibility is management's acceptance of the obligation to consider profit, consumer satisfaction, and societal well being of equal value in evaluating the firm's performance. o It is the recognition that business must be concerned with the qualitative dimensions of consumer, employee, and societal benefits, as well as the quantitative measures of sales and profits, by which business performance is traditionally measured. o Businesses may exercise social responsibility because law requires such behavior, because it enhances the company's image, or because management believes it is the ethical course of action. A business is also judged by its interactions with the community. Some firms measure social performance by conducting social audits, formal procedures that identify and evaluate all company activities that relate to social issues such as conservation, employment practices, environmental protection, and philanthropy. The social audit informs management about how well the company is performing in these areas. Based on this information, management may revise current programs or develop new ones. Outside groups may conduct their own evaluations of businesses. Various environmental, religious, and public interest groups have created standards of corporate performance. Reports on many of these evaluations are available to the general public. Responsibilities to the General Public o Public Health Issues One of the most complex issues facing business as it addresses its ethical and social responsibilities to the general public is public health. Central to the public-health debate is the question of what businesses should do about dangerous products such as tobacco and alcohol. Tobacco products represent a major health risk, contributing to heart disease, stroke, and cancer among smokers. Exposure to viruses is hard to control. Substance abuse is another serious public health problem worldwide. The recent revelations of the use of illegal steroids by many athletes highlight the difficulty of devising accurate tests for performance-enhancing and muscle-building drugs and fairly evaluating the results. o Protecting the Environment Businesses consume huge amounts of energy, which increases the use of fossil fuels such as coal and oil for energy production. This activity introduces carbon dioxide and sulfur into the earth's atmosphere. Some products themselves are difficult to reuse or recycle Few manufacturers are really equipped to deal with recycled materials; some refurbish junked products and sell them abroad-- where later recycling is even less likely. For many managers, finding ways to minimize pollution and other environmental damage caused by their products or operating processes has become an important economic, legal, and social issue. Another solution to the problems of pollutants is recycling-- reprocessing used materials for reuse. Recycling can sometimes provide much of the raw material that manufacturers need, thereby conserving the world's natural resources and reducing the need for landfills. Many consumers have favorable impressions of environmentally conscious businesses. To target these customers, companies often use green marketing, a marketing strategy that promotes environmentally safe products and production methods. o A business cannot simply claim that its goods or services are environmentally friendly. The FTC has issued guidelines for businesses to follow in making environmental claims. A firm must be able to prove that any environmental claim made about a product has been substantiated with reliable scientific evidence. . o Other environmental issues--such as finding renewable sources of clean energy--are the focus of many firms' efforts. o Developing the Quality of the Workforce In the past, a nation's wealth has often been based on its money, production equipment, and natural resources. A country's true wealth, however, lies in its people. An educated, skilled workforce provides the intellectual know-how required to develop new technology, improve productivity, and compete in the global marketplace. It is becoming increasingly clear that to remain competitive, U.S. business must assume more responsibility for enhancing the quality of its workforce, including encouraging diversity of all kinds. In developed like economies that of the United States, most new jobs require college-educated workers. With demand greatest for workers with advanced skills, the difference between the highestpaid and lowest-paid workers has been increasing. Education is essential to the well-being of the workforce. Businesses must encourage students to stay in school, continue their education, and sharpen their skills. Organizations also face enormous responsibilities for helping women, members of various cultural groups, and those who are physically challenged to contribute fully to the economy. Failure to do so is not only a waste of more than half the nation's workforce but also devastating to a firm's public image. Some socially responsible firms also encourage diversity in their business suppliers. o Corporate philanthropy Not-for-profit organizations provide the human resources that enhance the quality of life in communities around the world. To fulfill this mission, many not-for-profit organizations rely on financial contributions from the business community. Firms respond by donating billions of dollars each year to not-forprofit organizations. This corporate philanthropy includes cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees. Recipients include cultural organizations, adopt-a-school programs, community development agencies, and housing and job training programs. Corporate philanthropy can have many positive benefits beyond the purely "feel-good" rewards of giving, such as higher employee morale, enhanced company image, and improved customer relationships. Companies often seek to align their marketing efforts with their charitable giving. Many contribute to the Olympics and create advertising that features the company's sponsorship. This is known as cause-related marketing. Another form of corporate philanthropy is volunteerism. In their roles as corporate citizens, thousands of businesses encourage their employees to contribute their efforts to projects as diverse as Habitat for Humanity, the United Way, and Red Cross blood drives. Responsibilities to Customers Consumerism--the public demands that a business consider the wants and needs of its customers in making decisions--has gained widespread acceptance. The right to be safe o Consumers should feel assured that the products they purchase will not cause injuries in normal use. o Product liability refers to the responsibility of manufacturers for injuries and damages caused by their products. Items that lead to injuries, either directly or indirectly, can have disastrous consequences for their makers. o Many companies put their products through rigorous testing to avoid safety problems. Still, testing alone cannot foresee every eventuality. Companies must try to consider all possibilities and provide adequate warning of potential dangers. The right to be informed o Consumers should have access to enough education and product information to make responsible buying decisions. o False or misleading advertising is a violation of the Wheeler-Lea Act, a federal law enacted in 1938. The FTC and other federal and state agencies have established rules and regulations that govern advertising truthfulness. These rules prohibit businesses from making unsubstantiated claims about the performance or superiority of their goods or services. They also require businesses to avoid misleading consumers. Businesses that fail to comply face scrutiny from the FTC and consumer protection organizations. o The Food and Drug Administration (FDA), which sets standards for advertising conducted by drug manufacturers, eased restrictions for prescription drug advertising on television. o The responsibility of business to preserve consumers' right to be informed extends beyond avoiding misleading advertising. All communications with customers--from salespeople's comments to warranties and invoices-- must be controlled to clearly and accurately inform customers. Most packaged-good firms, personal-computer makers, and other makers of products bought for personal use by consumers include toll-free customer service numbers on their product labels so that consumers can get answers when they have questions about a product. The right to choose o Consumers should have the right to choose which goods and services they need and want to purchase. Socially responsible firms attempt to preserve this right, even if they reduce their own sales and profits in the process. The right to be heard o Consumers should be able to express legitimate complaints to appropriate parties. Many companies expend considerable effort to ensure full hearings for consumer complaints. Responsibilities to Employees Workplace safety o The safety and health of workers on the job is now an important business responsibility. The Occupational Safety and Health Administration (OSHA) is the main federal regulatory force in setting workplace safety and health standards. These mandates range from broad guidelines on storing hazardous materials to specific standards for worker safety in industries such as construction, manufacturing, and mining. OSHA tracks and investigates workplace accidents and has the authority to fine employers who are found liable for injuries and deaths that occur on the job. o Ultimately management must set standards and implement programs to ensure that workers are safe in the workplace. Quality of Life Issues o A sandwich generation of households, those caring for two generations-- their children and their aging parents--have arisen. As the population ages, the share of American households providing some type of care to a relative or friend age 50 or older has grown dramatically in the early years of the 21st century. o Helping workers find solutions to quality-of-life issues has become an important concern of many businesses, but finding answers isn't always easy. Some companies offer flexible work arrangements to support employees. Other firms offer benefits such as subsidized childcare or onsite education and shopping to assist workers trying to balance work and family. o Another solution has been to offer family leave to employees who need to deal with family matters. Under the Family and Medical Leave Act of 1993, businesses with 50 or more employees must provide unpaid leave annually for any employee who wants time off for the birth or adoption of a child, to become a foster parent, or to care for a seriously ill relative or spouse. Ensuring Equal opportunity on the Job o Technological advances are expanding in ways people with physical disabilities can contribute in the workplace. Businesses also need to find ways to responsibly recruit and manage older workers and workers with varying lifestyles. o The Civil Right Act (1964) outlawed many kinds of discriminatory practices. Other nondiscrimination laws include the Equal Pay Act (1963), the Age Discrimination in Employment Act (1967), the Equal Employment Opportunity Act (1972), the Pregnancy Discrimination Act (1978), the Civil Rights Act of 1991, and numerous executive orders. The Americans with Disabilities Act (1990) protects the rights of the physically challenged people. The Vietnam Era Veterans Readjustment Act (1974) protects the employment of veterans of the Vietnam War. o The Equal Employment Opportunity Commission (EEOC) was created to increase job opportunities for women and minorities and to help end discrimination based on race, color, religion, disability, gender, or national origin in any personnel action. To enforce fair-employment laws, it investigates charges of discrimination and harassment and files suit against violators. The EEOC can also help employers set up programs to increase job opportunities for women, minorities, people with disabilities, and people in other protected categories. o Fair treatment of employees is more than a matter of complying with EEOC regulations. Like white male employees, women and people of color want opportunities to excel and rewards for excellence. They also want to be treated with respect. A minority employee who misses out on a plum assignment may miss out on the big raise that goes with it. Age Discrimination o With the average age of US workers steadily rising, the government expects more than half the workforce to be age 40 or older by 2010. o Some employees find that it is less expensive to hire and retain younger workers, who generally have lower medical bills as well as lower salary and benefits packages. o However, many older workers have training and skills hat younger workers have yet to acquire. o The Age Discrimination in Employment Act of 1967 (ADEA) protects individuals who are age 40 or older, prohibiting discrimination on the basis of age and denial of benefits to older employees. o Ruling in a recent lawsuit brought under ADEA, the Supreme Court determined that employers can be held liable for age discrimination against older workers even if they intended no harm. At the same time, the court allowed employers to use "reasonable" factors such as cost cutting to defend business practices that might have more severe impacts on older than on younger workers. Sexual Harassment and Sexism o Every employer has a responsibility to ensure that all workers are treated fairly and are safe from sexual harassment. o Sexual harassment refers to unwelcome and inappropriate actions of a sexual nature in the workplace. It is a form of sex discrimination that violates the Civil Rights Act of 1964, which gives both men and women the right to file lawsuits for intentional sexual harassment. o Two types of sexual harassment exist. The first type occurs when an employee is pressured to comply with unwelcome advances and requests for sexual favors in return for job security, promotions, and raises The second type results from a hostile work environment in which an employee feels hassled or degraded because of unwelcome flirting, lewd comments, or obscene jokes. o The courts have ruled that allowing sexually oriented materials in the workplace can create a hostile atmosphere that interferes with an employee's ability to do the job. o Employers are responsible to protect employees from sexual harassment by customers and clients. o Preventing sexual harassment can be difficult because it involves regulating the conduct of individual employees. o To avoid sexual harassment problems, many firms have established policies and employee education programs. An effective harassment prevention program should include the following measures: Issue a specific policy statement prohibiting sexual harassment Develop a complain procedure for employees to follow Create a work atmosphere that encourages sexually harassed staffers to come forward Investigate and resolve complaints quickly and take disciplinary action against harassers o Unless top management supports the previous components, sexual harassment is difficult to eliminate. o Sexual harassment is often part of the broader problem of sexism-- discrimination against members of either sex, but primarily affecting women. On average, US women earn 76 cents for every dollar earned by men In the course of a working lifetime, this disparity adds up to a gap of almost $426,000 Responsibilities to Investors and the financial Community o Investors and the financial community demand that businesses behave ethically as well as legally. o State and Federal government agencies are responsible for protecting investors from financial misdeeds. o At the federal level, the Securities and Exchange Commission (SEC) investigates and suspicions of unethical or illegal behavior by publicly traded firms. It investigates accusations that a business is using faulty accounting practices to inaccurately portray its financial resources and profits to investors. ... View Full Document

End of Preview

Sign up now to access the rest of the document