Directory UMM :Data Elmu:ppt:

(1)

Copyright © 2004 South-Western. All rights reserved.

Part I: Organization of a Business

J eff Madura

Introduction to

Business

3e

Introduction to

Business

3e

3

Business Ethics and

Social Responsibility

Business Ethics and

Social Responsibility

(2)

3–2

Learning Goals

•

Describe responsibilities of firms to:

–

Customers

–

Employees

–

Stockholders and creditors

–

The environment

–

Their communities

(3)

3–3

Impact of Ethical Values and

Acceptance

of Social Responsibilities on a Firm

(4)

3–4

Business Decisions

•

Recognize how business decisions

affect society.

(5)

3–5

Rationale for Business

Decisions

•

Unethical business decisions usually

result in a benefit to one or more

employees but have an adverse

(6)

3–6

Common Unethical

Decisions

•

Car dealer tries to sell car at sticker

price–receives high commission.

•

Computer salesperson sells more

expensive computer than customer

needs.

•

Manager hires friend who is not the

most qualified.

•

Manager tries to avoid paying

(7)

3–7

Impact of Unethical

Decisions

•

Customers may avoid buying firm’s

products in the future.

•

Firm may have difficulty hiring new

employees.

•

Firm may be unable to obtain funding

in the future.

•

Firm possibly subject to severe

(8)

3–8

Impact on Firm Value

•

Columbia Hospital

–

Overbilled for services

–

Numerous employee resignations

–

Value of stock declined substantially

•

Sunbeam

–

Overstated earnings to enhance

compensation of top managers

–

Many stockholders sold their shares–drove

(9)

3–9

Columbia’s Stock Price after

Overbilling

(10)

3–10

Sunbeam’s Stock Price after It Was

Accused of Overstating Its

Revenues

(11)

3–11

Responsibility to

Customers

•

Responsible production practices

–

Ensure customer safety

–

Proper warning labels

•

Responsible sales practices

–

Discourage overly aggressive sales tactics

–

Discourage deceptive advertising

(12)

3–12

Ensure Responsibility

•

Establish a code of responsibilities

–

Guidelines for product quality

–

Guidelines about how to treat employees,

customers, owners

•

Monitor complaints

(13)

3–13

Factors Impacting

Responsibility

•

Role of Consumerism

–

Collective demand by consumers that

businesses satisfy their needs

•

Role of Government

–

Regulation of product safety

–

Regulation of advertising

–

Regulation of industry competition

(14)

3–14

Key Antitrust Laws

•

Sherman Antitrust Act (1890)

•

Clayton Act (1914)

•

Federal Trade Commission Act

(1914)

•

Robinson-Patman Act (1936)

•

Celler-Kefauver Act (1950)

(15)

3–15

Responsibility to

Employees

•

Employee Safety

–

Check machinery and equipment

–

Require safety glasses or other equipment to

prevent injury

–

Emphasize safety precautions in training

–

Reduce accidents

(16)

3–16

Responsibility to

Employees

•

Proper Treatment of Employees

–

Diversity training

–

Prevention of sexual harassment

 Unwelcome comments or actions of a sexual nature

–

Equal opportunity

 Prohibit discrimination based on national origin,

race, gender, or religion

(17)

3–17

Proportion of Women and

Minorities

in Various Occupations

(18)

3–18

Ensure Responsibility to

Employees

•

Code of Responsibility

–

Hiring decisions made without bias

–

Hire most qualified person

•

Grievance Policy

–

Mediation process

(19)

3–19

Responsibility to

Stockholders

•

Make decisions that are in the best

interest of the owners

–

Tie employee compensation to firm

performance

(20)

3–20

Ensure Responsibility

to Stockholders

•

Shareholder Activism

–

Active efforts by shareholders to influence a

firm’s management policies

•

Institutional Investors

–

Financial institutions that purchase large

amounts of stock

(21)

3–21

Impact of Executive Salaries

on a Firm’s Performance

(22)

3–22

Conflict With Excessive

Executive Compensation

•

Compensation of executives has

increased dramatically

–

1980: 42 times the average compensation of

employees

–

1990: 85 times the average compensation of

employees

(23)

3–23

Responsibility to Creditors

•

Meeting financial obligations to

creditors

–

Inform creditors if firm is having difficulty

meeting obligations

(24)

3–24

business online

e

-

e

-bu

sin

es

s

bu

sin

es

(25)

3–25

Violations of Responsibility

•

Providing misleading financial

information that exaggerates

financial condition

–

Enron

–

Oracle

(26)

3–26

Responsibility to

the Environment

•

Production processes, as well as

products, can harm the environment

–

Air Pollution

 Change production processes

–

Land Pollution

 Revise production and packaging processes to

reduce waste

(27)

3–27

Monsanto’s Stock Price after Receiving

Bad Publicity about Its Effects on the

Environment

(28)

3–28

Responsibility to the

Community

•

Maximizing social responsibility may

conflict with maximizing firm value

–

May reduce firm’s ability to provide products

at reasonable prices

(29)

3–29

Effect of Environmental

Expenses

on Business Performance

(30)

3–30

Social Responsibility:

Examples

•

Apple and IBM

– Invest in education programs

•

Home Depot

– Donates to community programs for housing projects

– Provided supplies and equipment to 9/11 rescue efforts

•

Checkers

– Provides jobs for inner-city residents

•

Coca-Cola

(31)

3–31

Social Responsibility:

Examples

•

Ace Hardware

– Foundation has donated more than $20 million to communities it serves

– _{9/11 donated three tractor-trailer loads of equipment}

•

Dow Chemical Corporation

– Created Community Advisory Panel

– Funds education programs in South America

– Habitat for Humanity project in Korea

(32)

3–32

Responsibilities in

International Environment

•

Be aware of cultural differences

•

Avoid unethical payoffs to suppliers

or customers

(33)

3–33

Cost of Social

Responsibility

•

Complaint resolution process

•

Customer and employee satisfaction

surveys

•

Product liability lawsuits

•

Change production techniques to comply

with government regulations about

environmental impact

•

Periodic disclosure of financial

information

(34)

3–34

Lawsuits

•

Common Lawsuits

– Product defects

– Deceptive advertising

– Employee discrimination

•

Cost of Lawsuits

– Court imposed fines

– Out-of-court settlements

– Hiring attorney to defend firm

(35)

3–35

Possible Expenses Incurred

as a Result of Social

Responsibilities

(36)

3–36

Summary

•

Business ethics influence decisions

•

Firms have basic responsibilities

–

Provide safe working conditions

–

Treat work workers properly

–

Provide equal opportunity for employees

–

Make decisions in best interest of

stockholders