MIE 201, Chapter 4 Book Notes
MIE 201, Chapter 4 Book Notes MIE 201
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This 7 page Class Notes was uploaded by Jenna Loehrer on Wednesday September 21, 2016. The Class Notes belongs to MIE 201 at North Carolina State University taught by M.K. Ward in Fall 2016. Since its upload, it has received 6 views. For similar materials see Intro to Management in Management at North Carolina State University.
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Chapter 4 Notes: Business Ethics and Corporate Social Responsibility Learning Objectives 1. Discuss what it means to practice good business ethics, and highlight three factors that influence ethical decision making. a. Three essential components of good business ethics: i. Competing fairly and honestly ii. Communicating truthfully iii. Not causing harm to others b. Three major influences on ethical decision making: i. Culture ii. Knowledge iii. Organizational behavior c. When facing ethical dilemma, you can find clarity by starting with universal standards of justice, concerning rights of everyone involved, being as objective as possible, not assuming that others think the same way you do, and avoiding conflicts of interest d. Key Terms: Ethics, insider trading, transparency, code of ethics, whistleblowing, ethical lapse, ethical dilemma, conflicts of interest 2. Define corporate social responsibility (CSR), and explain the difference between philanthropy and strategic CSR. a. Corporate Social Responsibility notion that business has obligations to society beyond pursuits of profits i. No general agreement over what those responsibilities are or which elements of society should determine those obligations or benefit from them 1. Philanthropy: donating time, money, or other resources, without regard for any direct business benefits 2. Strategic CSR: contributions that are aligned with the company’s business needs and strategies b. Key Terms: Corporate Social Responsibility, Philanthropy, Strategic CSR 3. Distinguish among the four perspectives on corporate social responsibility. a. Minimalist: business’s only obligation is to compete to the best of its abilities without deception or fraud b. Defensive: businesses engage in CSR efforts only in response to social pressure c. Cynical: businesses engage in CSR as a public relations ploy) d. Proactive: businesses contribute to society out of a belief that they have an obligation to do so e. Key Terms: Nongovernmental Organizations (NGOs) 4. Discuss the role of business in protecting the natural environment, and define sustainable development. Chapter 4 Notes: Business Ethics and Corporate Social Responsibility a. Many businesses are making an effort to reduce, reuse, and recycle, and governments are trying marketbased approaches such as: i. Cap and trade: encourage businesses to reduce emissions ii. Sustainable Development: meeting the needs of the present without compromising the ability of future generations to meet their own needs b. Key Terms: Cap and Trade, sustainable development 5. Identify four fundamental consumer rights and the responsibility of business to respect them. 1. Right to be informed 2. Right to choose 3. Right to be heard 4. Right to safe products b. Responsibility of business to respect these rights → many specific aspects of these rights are now embodied in government regulations, but others rely on business professionals to practice ethical and responsible recision making c. Key Terms: Consumerism, identity theft 6. Explain the responsibilities businesses have toward their employees. a. CSR has impact on external stakeholders b. Also applies within company i. Way employees are treated 1. Affirmative Action programs and regulations to protect the rights of people with disabilities, and occupational safety and health ● Ethics in Contemporary Business ○ What is ethical behavior? ■ Ethics: the principles and standards of moral behavior that are accepted by society as right and wrong ■ Competing fairly and and honestly ■ Communicating truthfully ■ Being transparent ● Transparency: the degree to which information flows freely within an organization, among managers and employees, and outward ■ Not causing harm to others ● EX: insider trading: company insiders use confidential information to gain an advantage in stock market trading (harms investors) ○ Factors influencing ethical behavior ■ Cultural differences: one culture may accept different practices than another Chapter 4 Notes: Business Ethics and Corporate Social Responsibility ● Managers may need to consider a wide range of issues, including acceptable working conditions, minimum wage levels, product safety issues, and environmental protection ■ Knowledge: the more you know, the better you understand the situation, the better your chances of making an ethical decision ■ Organizational behavior ● Develop programs to improve ethical conduct, typically combining training, communication, and a code of ethics (defines the values and principles that should be used to guide decisions) ● Whistleblowing: expressing concerns internally through formal reporting mechanisms or externally to the news media or government regulators ○ 80% of whistleblowers in one survey said they were punished in some way ○ Ethical decision making ■ Choose the wrong course > commit an ethical lapse (choices were clear and you made the wrong one) ■ Ethical dilemma: choices aren’t very clear ● Situation in which you must choose between conflicting but arguably valid options or even situations which all options are unpleasant ■ Points for ethical dilemmas: ● Frame the situation accurately ● Identify all parties who might be affected by your decision ● Be as objective as possible ● Don’t assume that other people think the way you do ● Watch out for conflicts of interest: situations in which competing loyalties can lead to ethical lapses ● Corporate Social Responsibility: (CSR) is the notion that business has obligation to society beyond the pursuit of profits ○ The relationship between business and society ■ Consumers in contemporary societies enjoy and expect a wide range of benefits ● Require money ■ Profitseeking companies are the economic engine that powers modern society ■ Much of what we consider when assessing a society’s standard of living involves goods and services created by profitseeking companies Chapter 4 Notes: Business Ethics and Corporate Social Responsibility ■ Companies cannot hope to operate profitably without the many benefits provided by a stable, functioning society ■ Businesses and society clearly need each other ○ Philanthropy versus strategic CSR ■ Philanthropy: donating money, employee time, or other resources to various causes without regard for any direct business benefits for the company ■ Strategic CSR: social contributions that are directly aligned with a company’s overall business strategy (company helps itself and society at the same time) ● Makes more sense than general philanthropy because: business and society are mutually dependent, investments that benefit the company are more likely to be sustained over time, and making sizable investments in a few strategically focused areas will yield greater benefits to society ● Perspectives on corporate social responsibility ○ Minimalist CSR ■ Minimalist view: the only social responsibility of business is to pay taxes and obey the law ■ Any business that operates ethically and legally provides society with beneficial goods and services at fair prices ■ Should businesses be in the business of making social policy and spending the public’s money? ○ Defensive CSR ■ Many companies receive pressure from activists and nongovernmental organizations (NGOs): nonprofit groups that provide charitable services or that promote causes ■ Company may take positive steps to address an issue only because it was embarrassed into action by negative publicity ○ Cynical CSR: a company accused of irresponsible behavior promotes itself as being socially responsible without making substantial improvements in its business practices ○ Proactive CSR: company leaders believe they have responsibilities beyond making a profit, and they back up their beliefs and proclamations with actions taken on their own initiative ■ Benefit corporation: builds proactive CSR into a company’s very foundation and legally obligates it to pursue a social/environmental goal Chapter 4 Notes: Business Ethics and Corporate Social Responsibility ○ Resolving the CSR dilemma ■ Eliminate cynical approach because it’s dishonest, therefore unethical ■ Some say minimalist is related to collectivism ● Collectivism: suggests socialism/communism ■ Twotiered approach to CSR can yield an answer ● 1) “do no harm” and it is not a matter of choice ● 2) moving beyond “do no harm”, becomes a matter of choice ● CSR: the natural environment ○ Three important points in mind ■ The creation, delivery, use and disposal of products that society values virtually always generate pollution and consume natural resources ■ “Environmental” issues are often as much about human health and safety as they are about the environment ■ These issues aren’t simple: they often require tradeoffs, occasional sacrifice, disruptive change, and decision making in the face of uncertainty ○ Efforts to conserve resources and reduce pollution ■ Ecology: the study of the relationship between organisms and the natural environment ■ Cap and trade: programs try to balance freemarket economics with government intervention ● Maximum allowable amount of a particular pollutant that a designated group of companies or industries is allowed to emit (“the cap”) and then distribute individual emission allowances to all the companies in that group. If a company lowers its emissions enough to stay under its limit → “trade” or save allowances ○ Company exceeds allowances → buy/trade enough to cover excess emissions ○ The trend toward sustainability ■ Sustainability/sustainable development: development that “meets the needs of the present without compromising the ability of future generations to meet their own needs” ■ Reduce consumption and pollution → can end up saving money for companies down the road ■ CEOs now view sustainability as a business opportunity, a viewpoint firmly in line with the concept of strategic CSR Chapter 4 Notes: Business Ethics and Corporate Social Responsibility ● CSR: consumers ○ Consumerism: a movement that put pressure on businesses to consider consumer needs and interests ■ Promoted many businesses to create consumer affairs departments to handle customer complaints ■ Promoted state/local agencies to set up bureaus to offer consumer info and assistance ○ The right to buy safe products and buy them safely ■ Goal: to ensure the safety of the products sold within borders ■ Identity theft: criminals steal personal info and use it for loans, request gov documents and tax refunds, medical procedures, and other fraud ■ Any company that collects personal info has a clear ethical obligation to keep it safe ● Number of massive security breaches shows how poorly companies are meeting this obligation ○ The right to be informed ■ Consumers have a right to know what they’re buying, how to use it, if there are risks, true price of goods/services, and details of purchase contracts ■ Social commerce: buyers help educate one another ● Shifts power from sellers → buyers ● Social media ○ Right to choose which products to buy ■ Should the government take measures to make products, like cigarettes, illegal or should consumers always be allowed to decide for themselves what to buy? ○ Right to be heard ■ Social media gives consumers numerous ways to ask questions ● Choose businesses that are more tech savvy/embrace new media environment ● CSR: Employees ○ The push for equality in employment ■ Discrimination: being relegated to lowpaying, menial jobs and prevented from taking advantage of many opportunities solely on the basis of their race, gender, disability, or religion ■ Civil Rights Act of 1964 established Equal Employment Opportunity Commission (EEOC): regulatory agency that addresses job discrimination ● Has power to file legal charges against discrimination and force companies to compensate individuals/groups Chapter 4 Notes: Business Ethics and Corporate Social Responsibility ● Civil Rights Act of 1991 amended original act: limited amount of damage rewards, made it easier to sue, gave right to trial, extended to overseas employees of US companies ■ Affirmative action: encourage organizations to recruit and promote members of groups whose past economic progress has been hindered through legal barriers or established practices ● Usually refers to programs based on race ● Many Claims: ○ Doublestandard ○ Crucial to ensure equal opportunities ■ Americans with Disabilities Act (ADA): guarantees equal opportunities in housing, transportation, education, employment, etc. for those with disabilities ● Employers required to make accommodations to meet needs of disabled employees ○ Occupational safety and health ■ Occupational Safety and Health Act of 1970: set mandatory standards for safety and health and also established the Occupational Safety and Health Administration (OSHA) t o enforce them ■ Ergonomics: the study of how people interact with computers and other machines ■ Sweatshops: production facilities that treat workers poorly ● Nearly 200 schools joined fair labor association to help ensure that schoollogo products are manufactured in an ethical manner