CyberSummary

BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

Business ethics refers to principles and standards that define acceptable conduct in the world of business. The acceptability of behavior in business is determined by customers, competitors, government regulators, interest groups, and the public, as well as by each individual's personal moral principles and values. Social responsibility is a business's obligation to maximize its positive impact and minimize its negative impact on society. Although they are often used interchangeably, the terms social responsibility and ethics do not mean the same thing. Business ethics relates to an individual's or work group's decisions that society evaluates as right or wrong; social responsibility is a broader concept that concerns the impact of an entire business's activities on society. The most basic ethical and responsibility concerns have been codified as laws and regulations that encourage businesses to conform to society's standards, values, and attitudes. Business ethics, social responsibility and laws together act as a compliance system that requires that businesses and employees act responsibly in society.

THE ROLE OF ETHICS IN BUSINESS

Your superiors, coworkers, and family will make judgments about the ethics of your actions and decisions. Learning how to recognize and resolve ethical issues is a crucial step in evaluating ethical decisions in business. It is important to realize that business ethics goes beyond legal issues. Ethical conduct builds trust among individuals and in business relationships, which validates and promotes confidence in business relationships. Well-publicized incidents of unethical activity strengthen the public's perception that ethical standards and the level of trust in business need to be raised.

RECOGNIZING ETHICAL ISSUES IN BUSINESS

Learning to recognize ethical issues is the most important step in understanding business ethics. An ethical issue is an identifiable problem, situation, or opportunity that requires a person or organization to choose from among several actions that may be evaluated as right or wrong, ethical or unethical. The best way to judge the ethics of a decision is to look at it from a customer's or competitor's viewpoint. Although many business issues seem straightforward and easy to resolve, a person often needs several years of business experience to understand what is acceptable or ethical. Whether an activity is ethical also depends on the culture in which a business operates.

Business ethics issues can be categorized in the context of their relation to conflicts of interest, fairness and honesty, communications, and business relationships. A conflict of interest exists when a person must choose whether to advance his or her own personal interests or those of others. Bribes--payments, gifts, or special favors intended to influence the outcome of a decision--are one potential source of conflict of interest. Fairness and honesty relate to the general values of decision makers. Businesspersons are expected to obey all applicable laws and regulations and not knowingly to harm customers, clients, or competitors through deception, misrepresentation, or coercion. In the area of communications, false and misleading advertising, deceptive personal selling tactics, lying, and product labeling may be ethical issues. In the area of business relationships, ethical businesspeople strive to keep company secrets, meet obligations and responsibilities, and avoid undue pressure that forces others to behave unethically. Plagiarism--taking someone else's work and presenting it as your own--is another issue related to business relationships.

It can be difficult to recognize specific ethical issues in practice. Whether a decision maker recognizes an issue as an ethical one often depends on the issue itself. Open discussion of ethical issues promotes trust and learning.

IMPROVING ETHICAL BEHAVIOR IN BUSINESS

Understanding how people make ethical choices and what prompts a person to act unethically may reverse the current trend toward unethical behavior in business. Ethical decisions in an organization are influenced by three factors: individual moral standards, the influence of managers and coworkers, and the opportunity to engage in misconduct. Consequently, the activities and examples set by coworkers, as well as the rules and policies established by the firm, are critical in gaining consistent ethical compliance. It is difficult for employees to determine what conduct is acceptable within a company if the firm does not have ethics policies and standards. Professional codes of ethics are formalized rules and standards that describe what the company expects of its employees. Codes of ethics, policies on ethics, and ethics training programs advance ethical behavior because they prescribe which activities are acceptable and which are not, and they limit the opportunity for misconduct by providing punishments for violations of the rules and standards. Enforcement of ethics policies by companies is a common way of dealing with ethical problems. Individuals also play a key role in promoting ethical decisions in the workplace. Whistleblowing occurs when an employee exposes an employer's wrongdoing to outsiders, such as the media or government regulatory agencies.

THE NATURE OF SOCIAL RESPONSIBILITY

Social responsibility has four dimensions: economic, legal, ethical, and voluntary (including philanthropic). Earning profits is the economic foundation and complying with the law is the next step of social responsibility. Voluntary responsibilities are additional activities that may not be required but which promote human welfare or goodwill. Corporate citizenship is the extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their various stakeholders. Companies today view social responsibility as another cost of doing business.

SOCIAL RESPONSIBILITY ISSUES

As with ethics, managers consider social responsibility on a daily basis as they deal with real issues. Among the many social issues that managers must consider are their firm's relations with owners and stockholders, employees, consumers, the environment, and the community.

A business must first be responsible to its owners and investors by striving to maximize their investment in the firm. A business's responsibilities in this area include maintaining proper accounting procedures, providing all relevant information about the current and projected performance of the firm, and protecting the owners' rights and investments.

Employees expect businesses to provide a safe workplace, pay them adequately for their work, tell them what is happening within their company, listen to their grievances, and treat them fairly. Major social responsibility issues in this area relate to safety, compensation, and equality.

Consumerism refers to activities undertaken by independent individuals, groups, and organizations to protect their rights as consumers. Many of their desires were spelled out in John F. Kennedy's 1962 consumer bill of rights, which includes: (1) the right to safety, which means that businesses must not knowingly sell anything that could result in personal injury or harm; (2) the right to be informed, which gives consumers the freedom to review complete information about a product; (3) the right to choose, which gives consumers a variety of products and services at competitive prices; and (4) the right to be heard, which assures consumers that their interests will receive full and sympathetic consideration when the government formulates policy and assures the fair treatment of consumers who voice complaints.

One area of environmental responsibility concerns the rights of animals and the preservation of animal species and their habitats. Other environmental responsibilities deal with pollution. Water pollution results from the dumping of toxic chemicals and sewage into rivers and oceans; the burial of industrial waste in the ground, where it can filter into water supplies, and chemical spills. Air pollution--caused by smoke and other pollutants emitted by manufacturing facilities, as well as carbon monoxide and hydrocarbons emitted by motor vehicles--causes acid rain and may contribute to global warming. Land pollution issues include deforestation--especially of the rain forests--as well as issues related to waste disposal. Businesses have responded to these issues by trying to eliminate wasteful practices and harmful emissions, reducing packaging, and recycling. Environmental responsibility requires tradeoffs.

A final area of social responsibility concerns businesses' responsibilities to the general welfare of the communities in which they operate. Social responsibility Issues in this area relate to charitable contributions to national and local organizations, donations of resources to educational programs, and programs dealing with the hard-core unemployed and homeless.