Making Ethical

Decisions and

CHAPTER 2
© Workbook Stock / Jupiterimages

Managing a
Socially
Responsible
Business
The Future of Business
The Essentials 4th Edition
Gitman & McDaniel
Prepared by
Chapter 2
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
Deborah Baker
 Learning Goals

CHAPTER 2
1 What philosophies and concepts shape
personal ethical standards?

2 How can organizations encourage ethical

business behavior?

3 What is social responsibility?

4 How do businesses met their social

responsibilities to various stakeholders?

5 What are the trends in ethics and social

responsibility?

2
 Learning Goals Appendix

CHAPTER 2
6 How does the legal system govern business
transactions and settle business disputes?

7 What are the required elements of a valid

contract; and what are the key types of
business law?

8 What are the most common taxes paid by

businesses?

3
 Understanding Business Ethics

1 What philosophies and concepts shape

personal ethical standards?

4
1
 Understanding Business Ethics

ethics

A set of moral standards for judging whether

something is right or wrong.

5
1
 Factors Influencing Business Ethics

Justice

Utilitarianism

Deontology

Individual Rights

1 6
 Factors Influencing Business Ethics

deontology

The philosophy that says people should meet

their obligations and duties when analyzing an
ethical dilemma.

7
1
 CONCEPT check

How are individuals’ business ethics formed?

What is utilitarianism?

How can you recognize unethical activities?

1 8
 How Organizations Influence Ethical Conduct

2 How can organizations encourage

ethical business behavior?

9
2
How Organizations Influence Ethical Conduct

 Lead by example

 Offer ethics training programs

 Establish a formal code of ethics

 Conduct informal and formal programs

2 10
 Establishing a Formal Code of Ethics

code of ethics

A set of guidelines prepared by a firm

to provide its employees with the knowledge of what
the firm expects in terms of their responsibilities and
behavior toward fellow employees, customers, and
suppliers.

11
2
 Top Best Corporate Citizens

1. Green Mountain Coffee Roasters, Inc.

2. Advanced Micro Devices, Inc.
3. NIKE, Inc.
4. Motorola, Inc.
5. Intel Corporation
6. International Business Machines Corporation
7. Agilent Technologies, Inc,
8. Timberland Company (The)
9. Starbucks Corporation
10. General Mills Incorporated

12
2 Business Ethics Magazine 2007
 CONCEPT check

What is the role of top management

in organizational ethics?

What is a code of ethics?

2 13
 Managing a Socially Responsible Business

3 What is social responsibility?

14
3
 Managing a Socially Responsible Business

social responsibility

The concern of businesses for the welfare of

society as a whole. It consists of obligations
beyond those required by law or contracts.

1. Social responsibility is voluntary

2. Obligations of social responsibility are broad

15
3
 Social Responsibility

Philanthropic

Ethical

Legal

Economic

3 Exhibit 2.3 16
Social Responsibility

Legal and Responsible Behavior

Irresponsible but Legal Behavior

Illegal and Irresponsible Behavior

3 17
 CONCEPT check

What are the four components of

social responsibility?

Give an example of legal but

irresponsible behavior.

3 18
 Responsibilities to Stakeholders

4 How do businesses met their social

responsibilities to various stakeholders?

19
4
 Stakeholders

stakeholders Employees

Individuals or groups to whom a Customers

business has a responsibility.
General Public

Investors

20
4
 America’s Top Ten Best Places to Work
1. Google
2. Quicken Loans
3. Wegmans Food Markets
4. Edward Jones
5. Genentech
6. Cisco Systems
7. Starbucks
8. Qualcomm
9. Goldman Sachs
10. Methodist Hospital System
Exhibit 2.4
Source: Robert Levering and Milton Moskowitz,
“The 100 Best Companies to Work For,”
Fortune (February 4, 2008), p.75.

4 21
 Responsibility to Society

corporate philanthropy

The practice of charitable giving by corporations;

includes contributing cash, donating equipment
and products, and supporting the volunteer
efforts of company employees.

22
4
 Responsibilities to Investors

social investing

The practice of limiting investments to securities

of companies that behave in accordance with the
investor’s beliefs about ethical and social
responsibility.

23
4
 CONCEPT check

How do businesses carry out their social

responsibilities to consumers?

What is corporate philanthropy?

Is a company’s only responsibility to its

investors to make a profit? Why or why not?

4 24
 Trends in Ethics and Social Responsibility

5 What are the trends in ethics and

social responsibility?

25
5
 Trends in Ethics and Social Responsibility

Corporate philanthropy

New social contract between

employers and employees

Growth of global ethics

and social responsibility

© Digital Vision / Getty Images

26
5
 Changes in Corporate Philanthropy

strategic giving

The practice of tying philanthropy closely to the

corporate mission or goals and targeting
donations to regions where a company operates.

27
5
 Changes in Corporate Philanthropy

cause-related marketing

The cooperative efforts of a “for-profit” firm and a

“nonprofit organization” for mutual benefit. Used
as any marketing effort for social or other
charitable causes.

28
5
 Global Ethics and Social Responsibility

Responsibilities of a Multinational Corporation

 Respect local practices and customs

 Ensure harmony between staff and host population
 Provide management leadership
 Develop local managers who will be a
credit to the community
 Commit to a long-term relationship by involving
stakeholders
 Implement ethical guidelines within the organization
in the host country
 Balance conflicting interests, such as human rights
5 29
 CONCEPT check

Describe strategic giving.

What role do employees have in improving

their job security?

How do multinational corporations

demonstrate social responsibility in a
foreign country?

5 30
 Appendix:
Understanding the Legal and Tax Environment

6 How does the legal system govern

business transactions and settle
business disputes?

31
6
 The Legal System

laws

The rules governing a society’s conduct that are

created and enforced by a controlling authority,
usually the government.

32
6
 Business Law

business law

The body of law that governs commercial dealings.

33
6
 Business Law

Uniform Commercial Code (UCC)

A model set of rules that apply to commercial

transactions between businesses and between
businesses and individuals.

It covers the sale of goods, bank deposits and

collections, letters of credit, documents of title,
and investment securities.

34
6
 The Court System

Federal and State Courts

Trial courts Appellate courts Supreme Court

Nonjudicial methods

Arbitration Mediation

6 35
 Nonjudicial Methods

arbitration
A method of settling disputes in which the parties
agree to present their case to an impartial third party
and are required to accept the arbitrator’s decision.

mediation
A method of settling disputes in which the parties
submit their case to an impartial third party but are not
required to accept the mediator’s decision.

36
6
 Appendix:
Contracts and Business Law

7 What are the required elements of a valid

contract; and what are the key types of
business law?

37
7
 Contracts

express contract
Specifies the terms of the agreement in either
written or spoken words

implied contract
Depends on the acts and conduct of the parties to
show agreement

38
7
 The Elements of a Contract

Mutual assent

Capacity

Consideration

Legal purpose

Legal form

7 39
 Remedies for Breach of Contract

Payment of Damages

Specific Performance

Restitution

7 40
 Warranties

express warranties
Specific statements of fact or promises about a
product by the seller.

implied warranties
Guarantees that are imposed on sales
transactions by statute or court decision.
Neither written nor oral.

41
7
 Patents, Copyrights, and Trademarks

patent
A form of protection established for inventors; gives an
inventor the exclusive right to manufacture, use, and
sell an invention for 17 years.

copyright
A form of protection for creators of works of art, music,
literature, or intellectual property; gives the creator the
exclusive right to use, produce, and sell the creation
during the creator’s lifetime and for 50 years thereafter.

42
7
 Patents, Copyrights, and Trademarks

trademark
A design, name, or other distinctive mark that a
manufacturer uses to identify its goods in the
marketplace.

servicemark
A symbol, name, or design that identifies a service
rather than a tangible object.

43
7
 Tort Law

tort law

Settles disputes involving civil acts that harm

people or their property.

Torts include physical injury, mental anguish, and

defamation.

44
7
Other Laws
 Product liability law

 Bankruptcy law

 Fair competition laws

 Consumer protection laws

 Deregulation of industries

 Regulation of the Internet

7 45
 Appendix:
Taxation of Business

8 What are the most common taxes

paid by businesses?

46
8
 Common Taxes

Income Taxes

Property Taxes

Payroll Taxes

Sales Taxes

Excise Taxes

8 47