CONDUCTING BUSINESS ETHICALLY AND RESPONSIBLY CHAPTER 2

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CONDUCTING BUSINESS ETHICALLY AND
RESPONSIBLYCHAPTER 2

• Department of Business Administration
• EMU

This slide set is prepared for use with Ebert and
Griffin, Business Essentials. Fifth Edition.
Prentice Hall, New Jersey, 2005. Limited use has
been made of some slides that are part of the
slide set by the publisher.
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Topics Summary

• Ethics in the Workplace
• Social Responsibility
• Areas of Social Responsibility
• Implementing Social Responsibility Programs

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What Is Ethical Behavior?
Ethics Right and wrong, good and bad, in
actions that affect others Ethical Behavior
Conforming to generally accepted ethical norms
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ETHICS IN THE WORKPLACE

• Individual Ethics
• What is ethics?
• Ethics beliefs (inanç) about what is right and
  wrong or good and bad in our actions that affect
  other people or organizations (ahlak)
• Ethical Behavior behavior conforming to
  generally accepted social norms concerning
  beneficial and harmful actions
• Unethical Behavior behavior that does not
  conform to generally accepted social norms
• Business Ethics ethical or unethical behaviors
  by a manager or employer of an organization

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ETHICS IN THE WORKPLACE

• Ethics are based on social concepts and
  individual beliefs
• change from person to person
• change from situation to situation
• change from culture to culture

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ETHICS IN THE WORKPLACE

• Business and Managerial Ethics
• Managerial ethics standards of behavior that
  guide individual managers in their work
• Three categories of managerial ethics
• Behavior toward employees
• hiring and firing
• wages and working conditions
• privacy and respect

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ETHICS IN THE WORKPLACE

• Behavior toward the organization
• conflict of interest (çikar çatismasi)
• when an activity may benefit the individual
  employee to the detriment (zarar, kayip) of his
  or her employer
• confidentiality (gizlilik)
• honesty (dürüstlük)
• Behavior toward other economic agents
• economic agents customers, competitors,
  stockholders (hissedarlar), suppliers
  (tedarikçiler), dealers (bayiler), and unions
  (sendikalar)
• price of drugs, wages paid to employees, quality
  of goods/services, financial reporting to
  stockholders business practices in other
  countries bribery (rüsvet), gifts, etc.

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ETHICS IN THE WORKPLACE

• Assessing Ethical Behavior
• What is ethical and nonethical behavior? This is
  often a highly subjective issue. People have
  different opinions about what is ethical and what
  is not..
• A three-step model
• 1. Gather relevant factual information
• 2. Analyze the facts to determine the most
  appropriate moral values
• 3. make an ethical judgement on the rightness or
  wrongness of the proposed activity or policy
• Example expense accounts for managers

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ETHICS IN THE WORKPLACE

• Company Practices in Business Ethics
• company influences individual ethical behavior
• many companies take steps to encourage ethical
  behavior in the workplace
• firms establish codes of conduct concerning the
  workplace (davranis kurallari)

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ETHICS IN THE WORKPLACE

• Demonstrating Commitment to ethical and legal
  behavior
• Show by your actions that your company is
  committed to ethical behavior
• Example Tylenol pain reliever(agri kesici)
  with cyanide in 1982 (Johnson Johnson Company
  in the U.S.)
• Honesty and openness about the whole incident

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ETHICS IN THE WORKPLACE

• Adopting Written Codes
• increase public confidence in the firm or
  industry
• to prevent government regulation
• to improve internal operations by providing
  consistent standards of ethical and legal conduct
• to respond to problems that arise as a result of
  unethical or illegal behavior
• Instituting Ethics Programs
• educate employees about ethical and legal behavior

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SOCIAL RESPONSIBILITY

• Social Responsibility
• Ethics affect individual behavior in the
  workplace
• Social Responsibility (Kamuya karsi sorumluluk)
  the attempt of a business to balance its
  commitments to groups and individuals in its
  environment, including customers, other
  businesses, employees, investors (owners), and
  local communities.

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Social Responsibility Balancing Commitments to
Stakeholders
Stakeholders Groups, individuals, and
organizations that are directly affected by the
practices of an organization
CORPORATION
Stakeholder paydas in Turkish
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Major Stakeholders of A Company
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SOCIAL RESPONSIBILITY

• Stakeholder Model of Responsibility
• customers
• treat customers fairly and honestly
• charge fair prices honor warranties meet
  delivery commitments stand behind the quality of
  your products

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SOCIAL RESPONSIBILITY

• employees
• treat your workers fairly make them part of a
  team respect their dignity and basic human needs
• investors
• follow proper accounting procedures provide
  information to shareholders (hissedarlar) about
  financial performance manage the organization to
  protect shareholder rights and investments
• avoid insider trading, stock-price manipulation
• do not withold financial data from shareholders

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SOCIAL RESPONSIBILITY

• suppliers (tedarikciler)
• suppliers are organizations which sell you
  various goods, raw materials, components, etc.
• mutually beneficial partnership arrangements with
  suppliers
• keep them informed about your delivery (teslim)
  and production schedules
• in short, excellent relationships with suppliers
  helps both parties
• local communities
• contribute to social programs get involved in
  charitable activities (hayir isleri)
• be a good corporate citizen (kurumsal yurttas)

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The Evolution of Social Responsibility

• Entrepreneurial Era
• many new businesses
• powerful companies
• abuses of power led to backlash (güçlü tepki)
• labor problems
• The Great Depression (1929 )
• Era of Social Activism (1960s 70s)
• increased activism led to government intervention
  (health warnings on cigarettes, new safety
  features in autos, environmental protection laws,
  etc)

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SOCIAL RESPONSIBILITY

• Contemporary Social Consciousness
• greater social role for businesses
• many businesses are becoming more sensitive
  (duyarli) to their social responsibilities
• Sears (a large mail-order company in the U.S.))
  refuses to sell handguns
• many businesses try to sell products which are
  safe and environmentally friendly
• Example use ozone rather than chlorine (a
  water pollutant) in production
• recyclable (dönüsümlü geri kazanimli) products
  or parts

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AREAS OF SOCIAL RESPONSIBILITY

• Areas of Social Responsibility
• Four areas of social responsibility
• Environment
• Customers
• Employees
• Investors (i.e. owners)

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AREAS OF SOCIAL RESPONSIBILITY

• Responsibility toward the Environment
• Air pollution
• carbon monoxide, other chemicals
• problem of acid rain (sulphur mixes with moisture
  and falls as rain)
• laws are in effect in many countries including
  Turkey the problem is enforcement (uygulama)
• Water pollution
• oil spills, chemicals being dumped to rivers and
  lakes

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AREAS OF SOCIAL RESPONSIBILITY

• Land Pollution
• city waste dumps (çöplük), quarries (tas ve maden
  ocaklari), toxic wastes
• Two problems in dealing with land pollution
• how to restore land quality that has already been
  damaged
• how to prevent future pollution
• Toxic waste disposal (must be stored since it
  cannot be destroyed or processed. Examples
  mercury, uranium and plutonium)
• Recycling (geri kazanim) conversion of waste
  materials into useful products ( example -- paper
  products made from recycled paper)

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AREAS OF SOCIAL RESPONSIBILITY

• Noise pollution many of us living in Turkey and
  Cyprus (and some other countries) also suffer
  from extreme noise pollution. Do you agree?
  Examples?

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AREAS OF SOCIAL RESPONSIBILITY

• 2. Responsibility toward Customers
• Old concept was business had only one
  responsibility---to make a profit
• Caveat Emptor-- let the buyer beware (mali alan
  düsünsün) was the order of the day in other
  words buy the product, pay the price, and face
  the consequences.

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AREAS OF SOCIAL RESPONSIBILITY

• Social responsibility toward customers falls into
  two categories
• providing quality and safe products
• pricing products fairly
• In many countries, the government through its
  various agencies, tries to protect the customers
  from unethical business practices.
• U.S. -- Federal Trade Commission Food and Drug
  Administration Securities and Exchange
  Commission
• Turkey -- Sanayi ve Ticaret Bakanligi Rekabet
  Kurulu Sermaye Piyasasi Kurulu Saglik Bakanligi

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AREAS OF SOCIAL RESPONSIBILITY

• Consumer Rights and Consumerism
• Consumers have a right to
• safe products
• be informed about all relevant aspects of a
  product
• be heard
• choose what they buy
• be educated about purchases (medicines)
• courteous service
• Consumerism form of social activism dedicated
  to protecting the rights of consumers in their
  dealings with businesses (Consumers Union in the
  U.S.)

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AREAS OF SOCIAL RESPONSIBILITY

• Started in the 80s in Turkey growing stronger
• Consumers must be conscious of their rights and
  their power in the marketplace.

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AREAS OF SOCIAL RESPONSIBILITY

• Unfair Pricing as a result of collusion
• Collusion illegal agreement between two or
  more companies to commit a wrongful act (such as
  charging a very high price)
• Price Fixing agreement between companies to
  charge the same price
• Price Gouging increasing prices heavily in the
  face of increased demand

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AREAS OF SOCIAL RESPONSIBILITY

• Ethics in Advertising
• giving false or misleading information to the
  public through advertising
• an example from Turkey some years ago -- potato
  chips that do not cause you to gain weight
• low fat foods
• orange juice vs. orange drink -- a recent example
  from Turkey
• using morally objectionable practices in
  advertising
• tobacco products advertising (especially
  targeting young people)
• alcoholic drinks advertising
• use of children in objectionable roles

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AREAS OF SOCIAL RESPONSIBILITY

• 3. Responsibility toward Employees
• Activities such as
• recruiting (eleman arama)
• hiring (ise alma)
• training (egitim)
• promoting (yükseltme)
• compensating (ödeme)
• are the basis for responsibility toward employees.

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AREAS OF SOCIAL RESPONSIBILITY

• A company should provide its employees with equal
  opportunities for rewards and advancement without
  regard to
• sex
• race
• color
• national origin
• religion
• Laws in many countries protect employees from
  discrimination (ayirim) on the basis of the above.

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AREAS OF SOCIAL RESPONSIBILITY

• Other issues such as
• safety at the workplace
• healthy work environment
• sexual harassment (cinsel taciz) at the workplace
  -- this is a big problem many cases go
  unreported.

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AREAS OF SOCIAL RESPONSIBILITY

• Ethical Commitments The Case of Whistleblowers
• A whistleblower (muhbir ihbar eden kimse) is an
  employee who finds out and tries to put an end to
  a companys unethical, illegal, or socially
  irresponsible actions by publicizing them
• In the U.S. there are laws that enable a
  whistleblower to receive a percentage (as high as
  25-30 ) of the money that the government gets

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AREAS OF SOCIAL RESPONSIBILITY

• 4. Responsibility toward Investors Managers can
  abuse their responsibilities to investors
  (owners) in a number of ways. Chief among them is
  the abuse (kötüye kullanmak) of a firms
  financial resources.
• Improper financial management -- many ways of
  doing this (bad management, stealing funds, using
  financial resources for personal gains, etc)

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AREAS OF SOCIAL RESPONSIBILITY

• Check Kiting illegal practice of writing checks
  against money that has not yet been credited at
  the bank on which checks are drawn (karsiliksiz
  çek yazmak)
• Insider Trading using confidential information
  to gain from the purchase or sale of stocks
  (kamuya açiklanmamis bilgiden yararlanarak hisse
  senedi almak veya satmak)

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AREAS OF SOCIAL RESPONSIBILITY

• Misrepresentation of Finances
• Reporting financial information by
  misrepresenting (çarpitarak) facts.
• Example A company preparing three balance
  sheets -- one for the stockholders, one for
  borrowing from banks, and one for tax purposes

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IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS

• There is disagreement among business about social
  responsibility.
• one group -- profits as business goal
• another group -- social responsibility comes
  before profits
• Approaches to Social responsibility
• Obstructionist Stance approach to social
  responsibility that involves doing as little as
  possible it may involve attempts to deny or
  cover up violations (engelleyici tavir)

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IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS

• Defensive Stance company meets only minimum
  legal requirements in its commitment to groups
  and individuals in its social environment
  (savunmaci tavir)
• tobacco industry is a good example
• Accommodative Stance exceeds minimum legal
  requirements in its commitments to groups and
  individuals, if specifically asked to do so
  (katilimci/isbirlikci tavir)
• banks and GSM operators in North Cyprus and
  Turkey are good examples

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IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS

• Proactive Stance company actively seeks
  opportunities to contribute to the well-being of
  groups and individuals in its social environment
  (önceden istekli tavir)
• set up foundations to provide direct financial
  support for social programs
• SABANCI Foundation (VAKSA) and Turkish Education
  Foundation (TEV) belonging to KOÇ Holding are two
  good examples of proactive stance

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Approaches to Social Responsibility
Highest
Lowest
Obstructionist Stance
Proactive Stance
Defensive Stance
Accommodative Stance
Actively Avoids Responsibility
Does Legal Minimum
Responds to Requests
Actively Seeks Opportunities to Contribute
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IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS

• Managing Social Responsibility Programs
• Social responsibility must start at the top
• A plan detailing level of management support
• An executive must be put in charge of the program
• Occasional social audits must be conducted
• Social audit systematic analysis of a firms
  success in using funds set aside for meeting
  social responsibility goals

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IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS

• Social Responsibility and the Small Business
• individual ethics
• social responsibility