Cuyahoga Community College Western Campus – Online Course Summer Semester 2015 Instructor: Joseph J. Fell, Esq

Cuyahoga Community CollegeWestern Campus – Online Course

Summer Semester 2015

Instructor: Joseph J. Fell, Esq.

Chapter 2: Ethics and Business Decision-Making

By the end of this chapter and this presentation, you will:Understand the ways in which unethical conduct

has negatively affected American businesses and consumers in recent history

Understand the various theories of ethical behavior

Become familiar with decision-making processes and criteria that can be used to evaluate whether a business decision is ethical

Understand how ethical conduct can help a business succeed in the marketplace and attract talented employees

Understand the major pitfalls of acting unethically


Unfortunately, businesses have been engaging in illegal and unethical conduct for centuriesSlavery in 1800s, Child Labor in Industrial Revolution

Despite financial and legal consequences, far too many businesses still engage in unethical and illegal conductEnron, Wal-Mart

Media coverage of recent illegal conduct and ethical scandals by business leaders has been on the rise; this undermines confidence in free market capitalism and encourages cynicism amongst American consumersSocial media makes it easier to publicize unethical

conduct and to quickly spread information about it

Chapter 2: Ethics and Business Decision-MakingWhat are ethics?

Society’s accepted standards of moral behaviorYou don’t have to be religious to be ethical

What is ethical conduct?Behavior that complies with and is guided by ethics

Are ethics and legality two different things?YES; following the law is the FIRST step in being

ethicalA company’s or employee’s conduct can be totally

legal but still be unethical Examples:

Paying workers in other countries extremely low wages while giving executives multimillion-dollar bonuses

Repeatedly outsourcing jobs to overseas workers simply to raise profits


What are some examples of unethical conduct?Plagiarism and cheating Dishonesty on a resume or in an interviewFalsifying one’s hoursKnowingly using overseas suppliers who have

poor conditions in their factoriesFalse labeling on productsPresenting false data in corporate reports,

reports to shareholders, and public filings for securities

Using corporate funds for personal purposesRefusing to pay workers overtimeFiring workers who report corporate misdeeds


6 Crucial Steps Businesses Must Take To Promote Ethical Behavior

1) Adopt a code of ethics 2) Employees must know mgmt expects ethical conduct 3) Managers must consider ethics when making biz

decisions 4) People must be able to report unethical conduct

anonymously and whistleblowers must not be punished 5) Outside entities must be told about the ethical code

and the importance of following the code must be clearly stated

6) Ethics code MUST be CONSISTENTLY enforced, otherwise it is meaningless MOST CRITICAL STEP! Even Enron had an ethics code


More About Corporate Social Responsibility (CSR)21st Century Trend: Corporations should be “good

citizens” and invest in the communities in which they are located

CSR is the concern businesses have for welfare of society

Arguments In Favor of CSR Businesses owe their survival to societies that they serve and can’t

thrive in societies that fail Better communities produce more educated\happy potential

employees Good ethics and good social responsibility attracts employees and

consumers and retains employees

Arguments Against CSR This is spending other people’s (the shareholders) money Money that is spent on CSR should be invested into the company

and used to increase productivity\profitability Businesses are created to make a profit, not to serve society


More About Corporate Social Responsibility (CSR)What Are Some Things That Are Encompassed in

CSR? 1) Corporate Philanthropy

Donations of money and property to nonprofit organizations 2) Corporate Social Initiatives

“Philanthropy on steroids” Firms can engage in philanthropic and charitable programs that

are directly related to what the company does Example: Exxon Math and Science Initiative

3) Corporate Responsibility Firms can use their market power for positive change Example: Monitoring labor conditions and advocating for

improved labor conditions overseas 4) Corporate Policy

Firms can issue stances on social issues and the importance of acting ethically


More About Corporate Social ResponsibilityHow much CSR is too much CSR?

Some people say that wealthy corporations should do more to help the world around them

Many corporations could potentially increase wages, provide better benefits, etc in order to make their workers better off and can also donate MUCH more to local nonprofits\charities

HOWEVER! In a publicly held corporation, the money that is being used to engage in CSR is money that belongs to the shareholders and some believe that corporations are spending other people’s money when they engage in CSR

Utilizing additional corporate funds for CSR could potentially affect overall corporate profitability, result in less funds available for corporate expansion; this could potentially lower value of shares and anger shareholders

There is NO “right answer” – great minds disagree on this!

Chapter 2: Ethics and Business Decision-MakingWhy Should Businesses Act In An Ethical Manner?

It allows corporations to maintain a good reputation; a bad reputation & unethical conduct can drive some consumers AND fellow businesses away but a good reputation can attract customers Companies With Bad CSR: Lance Armstrong,Wal-Mart, BP, Sea

World Companies With Good CSR: TOMS, Google, Whole Foods Market

It helps ensure confidence in capitalism and the free market and prevent need\push for gov’t regulation of business operations; if corporations show that they can treat workers well and act ethically\legally without regulation, gov’t is less likely to act and regulate industries

Corporate waste due to unethical conduct hurts bottom line, which affects profitability, ability of company to expand, and value of shares Companies can use the money they would spend on attorney fees and

court-ordered damages related to lawsuits as well as money spent to repair bad publicity and use it to expand its operations


Unethical and illegal conduct can lead to costly, distracting lawsuits & bad publicity that may drive customers away Almost 25 years later, many Americans still link Exxon to

the Valdez oil spill in Alaska Illegal and unethical conduct at Enron, Lehman Brothers,

and Arthur Andersen resulted in a complete and total demise of these companies

Many consumers refuse to shop at Wal-Mart because of questionable labor practices even though their prices are low

BP has spent $42.2 billion in its efforts to resolve claims and restore its public image following the 2010 oil spill

Encourage high employee morale and retain employees


CSR and corporate activities that create a positive work culture that fosters respect for employees have positive effects for human resources as well Studies show that happy employees are more productive

employees; if employees believe that they are treated fairly and respected, they are more likely to work hard and be productive

Low turnover for employees means that companies need to spend less $ training new employees, and this $ can be used by the company to expand its operations and raise profitability

New job seekers tend to gravitate towards companies at which they know they will be treated fairly and respected; this helps ensure that corporations will be able to attract and retain talented employees


CSR and ethical conduct strengthen the communities in which a company is located; this helps corporations in many ways Corporate philanthropy can dramatically improve the quality of

life in the region in which a company is located Companies who invest in local education and nonprofit

organizations that work with youth are investing in the development of their future workforce; this helps ensure that companies will have an educated, talented pool of employees in the future

Educated employees require less on-the-job training Strong, vibrant, well-funded surrounding communities attract

young job seekers (especially young families) because they tend settle down in areas with a high quality of life; corporations get talented workers

CSR also supports nonprofit organizations such as Cleveland Orchestra, which improve quality of life in a region

Documents

Cuyahoga Community College Western Campus – Online Course Summer Semester 2015 Instructor: Joseph J. Fell, Esq