Directory UMM :Data Elmu:ppt:
Part I: Organization of a Business
Business Ethics and
Social Responsibility
Copyright © 2004 South-Western. All rights reserved.
Introduction to
J eff Madura
Business
3e
3
Learning Goals
• Describe
responsibilities of firms to:
– Customers
– Employees
– Stockholders and creditors
– The environment
– Their communities
• Explain
the costs that firms incur in
fulfilling their social responsibilities.
Copyright © 2004 South-
3–2
Impact of Ethical Values and
Acceptance
of Social Responsibilities on a Firm
Copyright © 2004 South-
3–3
Business Decisions
• Recognize
how business decisions
affect society.
• Follow a set of ethical principles
when making business decisions.
Copyright © 2004 South-
3–4
Rationale for Business
Decisions
• Unethical
business decisions usually
result in a benefit to one or more
employees but have an adverse
impact on other stakeholders or on
the environment.
Copyright © 2004 South-
3–5
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
employees.
Copyright © 2004 South-
3–6
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
penalties imposed by the government.
Copyright © 2004 South-
3–7
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
the stock price down
Copyright © 2004 South-
3–8
Columbia’s Stock Price after
Overbilling
Copyright © 2004 South-
Exhibit 3.2
3–9
Sunbeam’s Stock Price after It Was
Accused of Overstating Its
Revenues
Copyright © 2004 South-
Exhibit 3.3
3–10
Responsibility to
Customers
• Responsible
production practices
– Ensure customer safety
– Proper warning labels
• Responsible
sales practices
– Discourage overly aggressive sales tactics
– Discourage deceptive advertising
– Use customer satisfaction surveys
Copyright © 2004 South-
3–11
Ensure Responsibility
• Establish
a code of responsibilities
– Guidelines for product quality
– Guidelines about how to treat employees,
customers, owners
• Monitor
complaints
• Obtain and utilize customer
feedback
Copyright © 2004 South-
3–12
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
Monopolies and anti-trust
Copyright © 2004 South-
3–13
Key Antitrust Laws
• Sherman
Antitrust Act (1890)
• Clayton Act (1914)
• Federal Trade Commission Act
(1914)
• Robinson-Patman Act (1936)
• Celler-Kefauver Act (1950)
Copyright © 2004 South-
Exhibit 3.5
3–14
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
– Improve quality of life
Copyright © 2004 South-
3–15
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
Applies to hiring, promotion, raises
Copyright © 2004 South-
3–16
Proportion of Women and
Minorities
in Various Occupations
Copyright © 2004 South-
Exhibit 3.6
3–17
Ensure Responsibility to
Employees
• Code
of Responsibility
– Hiring decisions made without bias
– Hire most qualified person
• Grievance
Policy
– Mediation process
• Conflict
With Employee Layoffs
Copyright © 2004 South-
3–18
Responsibility to
Stockholders
• Make
decisions that are in the best
interest of the owners
– Tie employee compensation to firm
performance
– Release accurate information about financial
condition
Copyright © 2004 South-
3–19
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
– Managers may be more willing to listen to
these large investors.
Copyright © 2004 South-
3–20
Impact of Executive Salaries
on a Firm’s Performance
Copyright © 2004 South-
Exhibit 3.7
3–21
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
– 2000: 500 times the average compensation
of employees
Copyright © 2004 South-
3–22
Responsibility to Creditors
• Meeting
financial obligations to
creditors
– Inform creditors if firm is having difficulty
meeting obligations
– If firm does not pay creditors what it owes
them–may have to file for bankruptcy
Copyright © 2004 South-
3–23
Copyright © 2004 South-
e-business
business online
3–24
Violations of Responsibility
• Providing
misleading financial
information that exaggerates
financial condition
– Enron
– Oracle
– Global Crossing
– ImClone
Copyright © 2004 South-
3–25
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
Recycle
Copyright © 2004 South-
3–26
Monsanto’s Stock Price after Receiving
Bad Publicity about Its Effects on the
Environment
Copyright © 2004 South-
Exhibit 3.8
3–27
Responsibility to the
Community
• Maximizing
social responsibility may
conflict with maximizing firm value
– May reduce firm’s ability to provide products
at reasonable prices
• Support
for charitable organizations
can improve company image
Copyright © 2004 South-
3–28
Expenses
on Business Performance
Copyright © 2004 South-
Exhibit 3.9
3–29
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
– Sponsors Boys and Girls Clubs
Copyright © 2004 South-
3–30
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
New art center in West Virginia
Copyright © 2004 South-
3–31
Responsibilities in
International Environment
• Be
aware of cultural differences
• Avoid unethical payoffs to suppliers
or customers
• Establish global reputation for
running an ethical business
Copyright © 2004 South-
3–32
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
Sponsoring community activities
Copyright © 2004 South-
3–33
Lawsuits
•
Common Lawsuits
– Product defects
– Deceptive advertising
– Employee discrimination
•
Cost of Lawsuits
–
–
–
–
Court imposed fines
Out-of-court settlements
Hiring attorney to defend firm
Decline in demand for product because of bad
publicity
Copyright © 2004 South-
3–34
as a Result of Social
Responsibilities
Copyright © 2004 South-
Exhibit 3.10
3–35
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
– Maintain a clean environment
Copyright © 2004 South-
3–36
Business Ethics and
Social Responsibility
Copyright © 2004 South-Western. All rights reserved.
Introduction to
J eff Madura
Business
3e
3
Learning Goals
• Describe
responsibilities of firms to:
– Customers
– Employees
– Stockholders and creditors
– The environment
– Their communities
• Explain
the costs that firms incur in
fulfilling their social responsibilities.
Copyright © 2004 South-
3–2
Impact of Ethical Values and
Acceptance
of Social Responsibilities on a Firm
Copyright © 2004 South-
3–3
Business Decisions
• Recognize
how business decisions
affect society.
• Follow a set of ethical principles
when making business decisions.
Copyright © 2004 South-
3–4
Rationale for Business
Decisions
• Unethical
business decisions usually
result in a benefit to one or more
employees but have an adverse
impact on other stakeholders or on
the environment.
Copyright © 2004 South-
3–5
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
employees.
Copyright © 2004 South-
3–6
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
penalties imposed by the government.
Copyright © 2004 South-
3–7
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
the stock price down
Copyright © 2004 South-
3–8
Columbia’s Stock Price after
Overbilling
Copyright © 2004 South-
Exhibit 3.2
3–9
Sunbeam’s Stock Price after It Was
Accused of Overstating Its
Revenues
Copyright © 2004 South-
Exhibit 3.3
3–10
Responsibility to
Customers
• Responsible
production practices
– Ensure customer safety
– Proper warning labels
• Responsible
sales practices
– Discourage overly aggressive sales tactics
– Discourage deceptive advertising
– Use customer satisfaction surveys
Copyright © 2004 South-
3–11
Ensure Responsibility
• Establish
a code of responsibilities
– Guidelines for product quality
– Guidelines about how to treat employees,
customers, owners
• Monitor
complaints
• Obtain and utilize customer
feedback
Copyright © 2004 South-
3–12
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
Monopolies and anti-trust
Copyright © 2004 South-
3–13
Key Antitrust Laws
• Sherman
Antitrust Act (1890)
• Clayton Act (1914)
• Federal Trade Commission Act
(1914)
• Robinson-Patman Act (1936)
• Celler-Kefauver Act (1950)
Copyright © 2004 South-
Exhibit 3.5
3–14
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
– Improve quality of life
Copyright © 2004 South-
3–15
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
Applies to hiring, promotion, raises
Copyright © 2004 South-
3–16
Proportion of Women and
Minorities
in Various Occupations
Copyright © 2004 South-
Exhibit 3.6
3–17
Ensure Responsibility to
Employees
• Code
of Responsibility
– Hiring decisions made without bias
– Hire most qualified person
• Grievance
Policy
– Mediation process
• Conflict
With Employee Layoffs
Copyright © 2004 South-
3–18
Responsibility to
Stockholders
• Make
decisions that are in the best
interest of the owners
– Tie employee compensation to firm
performance
– Release accurate information about financial
condition
Copyright © 2004 South-
3–19
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
– Managers may be more willing to listen to
these large investors.
Copyright © 2004 South-
3–20
Impact of Executive Salaries
on a Firm’s Performance
Copyright © 2004 South-
Exhibit 3.7
3–21
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
– 2000: 500 times the average compensation
of employees
Copyright © 2004 South-
3–22
Responsibility to Creditors
• Meeting
financial obligations to
creditors
– Inform creditors if firm is having difficulty
meeting obligations
– If firm does not pay creditors what it owes
them–may have to file for bankruptcy
Copyright © 2004 South-
3–23
Copyright © 2004 South-
e-business
business online
3–24
Violations of Responsibility
• Providing
misleading financial
information that exaggerates
financial condition
– Enron
– Oracle
– Global Crossing
– ImClone
Copyright © 2004 South-
3–25
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
Recycle
Copyright © 2004 South-
3–26
Monsanto’s Stock Price after Receiving
Bad Publicity about Its Effects on the
Environment
Copyright © 2004 South-
Exhibit 3.8
3–27
Responsibility to the
Community
• Maximizing
social responsibility may
conflict with maximizing firm value
– May reduce firm’s ability to provide products
at reasonable prices
• Support
for charitable organizations
can improve company image
Copyright © 2004 South-
3–28
Expenses
on Business Performance
Copyright © 2004 South-
Exhibit 3.9
3–29
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
– Sponsors Boys and Girls Clubs
Copyright © 2004 South-
3–30
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
New art center in West Virginia
Copyright © 2004 South-
3–31
Responsibilities in
International Environment
• Be
aware of cultural differences
• Avoid unethical payoffs to suppliers
or customers
• Establish global reputation for
running an ethical business
Copyright © 2004 South-
3–32
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
Sponsoring community activities
Copyright © 2004 South-
3–33
Lawsuits
•
Common Lawsuits
– Product defects
– Deceptive advertising
– Employee discrimination
•
Cost of Lawsuits
–
–
–
–
Court imposed fines
Out-of-court settlements
Hiring attorney to defend firm
Decline in demand for product because of bad
publicity
Copyright © 2004 South-
3–34
as a Result of Social
Responsibilities
Copyright © 2004 South-
Exhibit 3.10
3–35
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
– Maintain a clean environment
Copyright © 2004 South-
3–36