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Being Ethical & Socially Responsible

Ethics is the study of right and wrong and of the morality of choices individuals make. Business ethics is the application of moral standards to business situations. Ethical Issues Fairness and Honesty in business is important ethical concern. Businessmen must obey all laws and regulations as well as refrain from knowingly deceiving, misrepresenting, or intimidating others. Organizational Relationships: It may be tempting to place personal welfare above the welfare of others or of the organization. Relationships with customers and coworkers often create ethical problems because confidential information is expected to be kept secret and all obligations are expected to be honored. Conflict of Interest: Conflict of interest results when a businessperson takes advantage of a situation for his or her own personal interest rather than for the employer's interest. Communications: Business communications, especially advertising, can present ethical questions. Advertisers must take precautions to guard against deception.

Factors Affecting Ethical Behavior The factors that influence the ethicalness of behavior in organizations are individual, social, and opportunity. Several individual factors influence the level of ethical behavior in an organization. o With a greater quantum of knowledge regarding an object or situation, a decision-maker may take steps to avoid ethical problems, while a less informed person may unknowingly takes actions that lead to an ethical dilemma. o One's moral values and attitudes (that are associated with these values) clearly influence his or her business behavior.

A person's behavior in the workplace is, to some degree, determined by cultural norms that vary from one culture to another. o The actions and decisions of coworkers is another social factor that is believed to shape one's sense of business ethics. o The moral values and attitudes of significant others can affect an employee's perception of what is ethical and unethical behavior in the workplace.

Opportunity refers to the amount of latitude that exists in an organization that allows an employee to behave unethically.

o In some organizations, company policies and procedures are used to reduce opportunity to be unethical. o The existence of an ethical code and the importance placed on this code is another determinant of opportunity. o The degree of enforcement of company policies, procedures, and ethical codes is a major force affecting opportunity. Encouraging Ethical Behavior Most managers consent that there is room for improvement in business ethics. o A more problematic issue is whether business can be made more ethical in the real world. o The majority of viewpoints on this issue suggest that government, trade associations, and individual firms can establish acceptable levels of behavior. o The government can establish acceptable levels of behavior by passing more stringent regulations. (But regulations require enforcement.) o Trade associations can provide and often do provide ethical guidelines for their members to follow. o These associations are in a position to exert pressure on members who stoop to questionable business practices. o Enforcement varies from association to association. o Employees can more easily determine acceptable behavior if their company provides them with a code of ethics. o A code of ethics is a written guide to acceptable and ethical behavior (as defined by an organization) that outlines uniform policies, standards, and punishments for violations. o However, codes cannot possibly cover every situation. o Companies must also create an environment in which employees recognize the importance of following the written code. o Managers must provide direction by fostering communication, actively encouraging ethical decision making, and training employees to make ethical decisions.

o Assigning an ethics officer who coordinates ethical conduct gives employees someone to go to if they aren't sure of the right thing to do. o An ethics officer meets with employees and top management to provide ethical advice; creates and maintains an anonymous confidential service to answer questions about ethical issues; and takes actions on ethics code violations. o Even employees who want to act ethically may find it difficult to do. o Unethical practices often become ingrained in an organization. o Employees with high personal ethics may take a controversial step called whistle blowinginforming the press or government officials about unethical practices within one's organization. o Whistle blowing can have serious repercussions for an employee. o When firms set up anonymous ethical hotlines to handle ethically questionable situations, employees may be less reluctant to speak. o When firms create an environment that educates employees and nurtures ethical behavior, less whistle blowing is needed because fewer ethical problems arise. Social Responsibility Social responsibility is the recognition that business activities have an impact in decision-making. o Social responsibility costs money. o It is also good business. Examples of socially responsible organizations in US. o AT&T has established foundation grants. o Phillips Petroleum Company protects wildlife and their habitats. o The Dow Chemical Company cleans coastlines, rivers, and lakes. o Mutual of Omaha employees paint homes of elderly citizens. o Occidental Petroleum Corporation conducts health, environment, and safety self-assessment audits.

o Ford Motor Company has a leadership role in using recycled materials. o Lens Crafters pledges to give free vision care. The Evolution of Social Responsibility in Business Two Views of Social Responsibility o The Economic Model o The Socioeconomic Model o The Pros and Cons of Social Responsibility o Arguments for Increased Social Responsibility o Arguments Against Increased Social Responsibility Consumerism Consumerism consists of all those activities that are undertaken to protect the rights of consumers in their dealings with business. The Six Basic Rights of Consumers: The Right to Safety: The right to safety means that products purchased by consumers must (1) be safe for their intended use, (2) include thorough and explicit directions for proper use, and (3) have been tested by the manufacturer to ensure product quality and reliability. There are several reasons why American business firms must be concerned about product safety. o Federal agencies have the power to force businesses that make or sell defective products to take corrective actions. o Consumers and the government have been winning an increasing number of product-liability lawsuits against sellers of defective products. o The consumer is demanding safe products. o The Right to Be Informed o The Right to Choose o The Right to Be Heard o Additional Consumer Rights o Major Consumerism Forces Employment Practices

Everyone who works for a living should have the opportunity to land a job for which he or she is qualified and to be rewarded on the basis of ability and performance. Although this is an important issue for society, over the years this opportunity has been denied to members of various minority groups. Affirmative Action Programs: An affirmative action program is a plan designed to increase the number of minority employees at all levels within an organization. Training Programs for the Hard-Core Unemployed: Some firms have assumed the task of helping the hard-core unemployed: workers with little education or vocational training and a long history of unemployment. o Such workers require training; this training can be expensive and timeconsuming. o To share the costs, business and government have joined together in a number of cooperative programs. o Participating corporations, whose executives contribute their talents to do the actual training, sponsors the NAB. o The government's responsibilities include setting objectives, establishing priorities, offering the right incentives, and providing limited financing. Concern for the Environment Pollution is the contamination of water, air, or land through the actions of people in an industrialized society. Effects of Environmental Legislation o Water Pollution: The task of water cleanup has proved to be extremely complicated and costly because of pollution run-off and toxic contamination. Yet improved water quality is not only necessary, it is achievable. Today acid rain, which results from sulfur emitted by smokestacks in industrialized areas, is destroying many lakes and reservoirs. o Air Pollution: Usually two or three factors combine to form air pollution in any given location. o The first factor is large amounts of carbon monoxide and hydrocarbons emitted by many motor vehicles concentrated in a relatively small area. o The second factor is the smoke and other pollutants emitted by manufacturing facilities. o The third factor is the combination of weather and geography. o Most authorities agree that there has been progress in air pollution control since the mid-1970s.

o However, air levels of sulfur dioxide and nitrogen dioxidethe main elements that cause acid raincontinue to increase. o Land Pollution: Today, land pollution is a serious problem. The fundamental issues are basically twofold. o The first issue is how to restore damaged or contaminated land at a reasonable cost. o The second issue is how to protect unpolluted land from future damage. o The land pollution problem has been worsening over the past few years, as modern technology has continued to produce more and more chemical and radioactive wastes. o The Environmental Protection Agency (EPA) is charged with the responsibility of cleaning up land polluted with chemical and industrial wastes. o Noise Pollution o Who Should Pay for a Clean Environment? Implementing a Social Responsibility Program A firm's decision to be socially responsible is a step in the right directionbut only a first step. The firm must then develop and implement a tangible program to reach this goal. Developing a Social Responsibility Program: The following steps are required to implement a social responsibility program. o Commitment of Top Executives: Without the support of top executives, any program will soon falter and become ineffective. o Planning: A committee of managers should be appointed to plan the program. o Appointment of a Director: A top-level executive should be chosen to direct the organization's activities in implementing the plan. o The Social Audit: audit for the firm at specified intervals. A social audit is a comprehensive report of what an organization has done, and is doing, with regard to social issues that affect it. o Funding the Program: Like any other program, a program to improve social responsibility must be funded. Funding can come from three sources. o Management can pass the cost on to consumers in the form of higher prices.

o The corporation may be forced to absorb the cost of the program if, for example, the competitive situation does not permit a price increase. The central/state government may pay for all or part of the cost through special tax reductions or other incentives.