Week 3 Business Ethics and Social Responsibility

1. A G C 4 5 0
W e e k 3
B u s i n e s s E t h i c s a n d S o c i a l R e s p o n s i b i l i t y
D R . R U S S E L L R O D R I G O

2. What is your
personal credo?
A credo
- is a virtue in action.
- defines you and your ethical boundaries.

3. How do I want to be remembered?
Your personal
credo with
introspection
on two areas
of questions:
1. Who are you?
2. What are the things that you
would never do to get a job? To keep
a job? To earn a bonus?

4. © 2 0 1 2 C e n g a g e L e a r n i n g . A l l R i g h t s R e s e r v e d . M a y n o t b e s c a n n e d , c o p i e d o r d u p l i c a t e d , o r p o s t e d t o a p u b l i c l y
a c c e s s i b l e w e b s i t e , i n w h o l e o r i n p a r t .
4
The Power of a
Credo
1. Who are you? Without your parents, the money, the
job title, the salary, the car, the house, who are you?
2. What things would you never do to be successful?
What lines would you never cross in order to get a
job? To get results? To meet goals?

5. Examples of Credos
• “I would never withhold evidence in a case.” (from a
prosecutor)
• “I would never sign a document that I know contains false
information.”
• “I would never compromise safety for staying on schedule.”
5
© 2 0 1 2 C e n g a g e L e a r n i n g . A l l R i g h t s R e s e r v e d . M a y n o t b e s c a n n e d , c o p i e d o r d u p l i c a t e d , o r p o s t e d t o a p u b l i c l y a c c e s s i b l e
w e b s i t e , i n w h o l e o r i n p a r t .

6. Our Legacy
“Fifteen years from now, my son will meet the son or
daughter of one of our people who died that day, and
I will be judged on what that kid tells my son about
what Sandler O’Neill did for his family.”
– Jimmy Dunne III
• Sole surviving senior partner from
9/11/01 WTC attacks
• One of 17 survivors out of a firm of 83
6
© 2 0 1 2 C e n g a g e L e a r n i n g . A l l R i g h t s R e s e r v e d . M a y n o t b e s c a n n e d , c o p i e d o r d u p l i c a t e d , o r p o s t e d t o a p u b l i c l y a c c e s s i b l e
w e b s i t e , i n w h o l e o r i n p a r t .

7. A r e E t h i c s & V a l u e s t h e S a m e ?
• Ethics is the code of conduct that helps determine
what is good, right, and proper.
• Values are the principles, goals, or standards held or
accepted by individuals, groups, and societies.

8. H o w D o E t h i c s R e l a t e t o B u s i n e s s ?
Good ethics = Good
business!
Business
legally
ethically
humanely

9. I m p o r t a n t E t h i c a l Q u e s t i o n s !
1. Is it against the law? Does it violate
company or professional policies?
2. What if everyone did this? How would I
feel if someone did this to me?
3. Am I sacrificing long-term benefits for short-term
gains?

10. Ethics as Good
Business
• fined, jailed,
fired, or even
lose license.
Unethical
business
/businessperso
n

11. How human beings
should properly live
their lives.
It will not change
your capacity to
think, but it could
stimulate your
choices of what to
think about.
Ethics Course?

12. S o , w h a t d o w e m e a n b y
“Ethics?”

13. E T H I C S I S N O T T H I S :

14. WHAT IS “ETHICS?”
At its most basic level, ethics is concerned with
how we act and how we live
our lives.

15. WHAT IS “ETHICS?”
ØPractical - having to do with how we act, choose, behave, do
things.
ØNormative - deals with our reasoning about how we should act.
HOW SHOULD WE LIVE?

16. Individually
How should I live my life
How should I act
What should I do
What kind of person I
should be
Morality
Value structures
Defined by our moral systems
Personal
Integrity
How should WE
live?

17. Refuse to lie
Personal
Integrity
Moral value of
honesty

18. • To know ‘How we should live’
• We, therefore, make a very real choice as to whether
we answer them deliberately or unconsciously.
Why study
Ethics?
‘The unexamined life is not worth living’.
– Socrates, 2000 years ago

19. W h y S t u d y E t h i c s ?
• The need a much sharper understanding of the difference between what is and isn’t
ethically acceptable.
• learn how to recognize and deal with the ethical challenges that will confront you.
• knowing right from wrong will make you more marketable as a job candidate.
• Asked what he looked for in a new hire, Warren Buffet, the world’s most successful
investor, replied: “I look for three things. The first is personal integrity, the second is
intelligence, and the third is a high energy level.” He paused and then added: “But if you
don’t have the first, the second two don’t matter.”4

20. How should ‘WE’
live?
Collectively
How we live together in a community
How corporations and institutions
ought to be structured
Questions justice,
policy, law, philosophy, etc.
Social Ethics
SOCIAL
RESPONSIBILITY

21. W h a t I s S o c i a l
R e s p o n s i b i l i t y ?
• Corporate social responsibility deals with
actions that affect a variety of parties in a
company’s environment. A socially
responsible company shows concern for
its stakeholders—anyone who, like
owners, employees, customers, and the
communities in which it does business, has
a “stake” or interest in it. We’ll discuss
corporate responsibility later in the
chapter. At this point, we’ll focus on
ethics.

22. S o c i a l R e s p o n s i b i l i t y
Businesses’
Obligations
do what is best for
the good of society.
provide safe
products
create jobs
protect the environment
contribute to
the overall
standard of
living in
society.
Conflict of interest is when a business is
tempted to put profits before social welfare.
safe working conditions
equal treatment
fair pay

23. R e s p o n s i b i l i t y t o C u s t o m e r s
• The Food & Drug
Administration (FDA)
protects consumers from
dangerous or falsely
advertised products.
• 1982 Johnson & Johnson
crisis

24. R e s p o n s i b i l i t y t o E m p l o y e e s
• The Equal Pay Act (passed in 1964)
requires that men and women be paid
the same wages for doing equal work.
• The Americans with Disabilities Act
bans discrimination against persons
with a physical or mental disability.
• 50 million workers are currently
covered by this law

25. Responsibility to Society
Environmental responsibility
• In 1970, the Environmental Protection
Agency (EPA) was created. It enforces
rules that protect the environment and
control pollution.
• Businesses who are environmentally
responsible have better public
relations.
• The Body Shop, The Los Angeles Times,
Honda, and Toyota incorporate
environmental policies into their business.

26. P e r s o n a l I n t e g r i t y V s .
S o c i a l Responsibility?
Responsibility to Customers
Responsibility to Employees
Responsibility to Society
What should I do?
How should I act?
VS

27. qThis aspect of business ethics asks us to examine business
institutions from a social rather than an individual
perspective.
qWe refer to this broader social aspect of ethics as decision-
making for social responsibility.
Personal Integrity Vs.
Social Responsibility?

28. H o w C a n Y o u R e c o g n i z e a n
E t h i c a l O r g a n i z a t i o n ?
• One goal of anyone engaged in business should be to foster ethical
behavior in the organizational environment. How do we know when an
organization is behaving ethically? Most lists of ethical organizational
activities include the following criteria:
• Treating employees, customers, investors, and the public fairly
• Making fairness a top priority
• Holding every member personally accountable for his or her action
• Communicating core values and principles to all members
• Demanding and rewarding integrity from all members in all situations
(Axelrod, 2004)

29. D i s c u s s i o n
Locate information on your school’s academic integrity policies
and answer the following questions:
1.What behaviors violate academic integrity?
2.What happens if you’re accused of academic dishonesty?
3.What should you do if you witness an incident of academic
dishonesty?

30. A d d r e s s i n g
E t h i c a l
D i l e m m a s
• An ethical dilemma is a morally
problematic situation: You have to
pick between two or more
acceptable but often opposing
alternatives that are important to
different groups. Experts often
frame this type of situation as a
“right-versus-right” decision.

31. H O W T O
FA C E A N
E T H I C A L
D I L E M M A

32. M A K I N G
E T H I C A L
D E C I S I O N S

33. K e y
Ta k e a w a y s
• Businesspeople face two types of ethical challenges:
ethical dilemmas and ethical decisions.
• An ethical dilemma is a morally problematic situation
in which you must choose between two or more
alternatives that aren’t equally acceptable to different
groups.
• Such a dilemma is often characterized as a “right-
versus-right” decision and is usually solved in a series
of five steps:
• Define the problem and collect the relevant facts.
• Identify feasible options.
• Assess the effect of each option
on stakeholders (owners, employees, customers,
communities).
• Establish criteria for determining the most
appropriate option.
• Select the best option, based on the established
criteria.

34. • An ethical decision entails a “right-versus-wrong” decision—one in which there’s a
right (ethical) choice and a wrong (unethical or downright illegal) choice.
• When you make a decision that’s unmistakably unethical or illegal, you’ve committed
an ethical lapse.
• If you’re presented with what appears to be an ethical decision, asking yourself the
following questions will improve your odds of making an ethical choice:
• Is the action illegal?
• Is it unfair to some parties?
• If I take it, will I feel bad about it?
• Will I be ashamed to tell my family, friends, coworkers, or boss about my action?
• Would I want my decision written up in the local newspaper?
• If you answer yes to any one of these five questions, you’re probably about to do
something that you shouldn’t.

35. I d e n t i f y i n g
E t h i c a l
I s s u e s
• Make no mistake about it: When you enter the
business world, you’ll find yourself in situations in
which you’ll have to choose the appropriate
behavior. How, for example, would you answer
questions like the following?
• Is it OK to accept a pair of sports tickets from a
supplier?
• Can I buy office supplies from my brother-in-
law?
• Is it appropriate to donate company funds to my
local community center?
• If I find out that a friend is about to be fired,
can I warn her?
• Will I have to lie about the quality of the goods
I’m selling?
• Can I take personal e-mails and phone calls at
work?
• What do I do if I discover that a coworker is
committing fraud?

36. B r i b e s
v e r s u s
G i f t s
But when is a
gift
unacceptable?
When is it
really a bribe?

37. C o n f l i c t s o f I n t e r e s t
• Conflicts of interest occur when individuals must choose
between taking actions that promote their personal interests
over the interests of others or taking actions that don’t. A
conflict can exist, for example, when an employee’s own
interests interfere with, or have the potential to interfere
with, the best interests of the company’s stakeholders
(management, customers, owners).
• You’ll encounter situations that give rise to a conflict of
interest—situations in which you’ll have to choose between
taking action that promotes your personal interest and action
that favors the interest of others.

38. I s s u e s o f
H o n e s t y
a n d
I n t e g r i t y
Master investor Warren Buffet once told a
group of business students the following:
“I cannot tell you that honesty is the best policy. I
can’t tell you that if you behave with perfect honesty
and integrity somebody somewhere won’t behave the
other way and make more money. But honesty is a
good policy. You’ll do fine, you’ll sleep well at night
and you’ll feel good about the example you are
setting for your coworkers and the other people who
care about you” (Gostick & Telford, 2003).

39. • If you work for a company that settles for its employees’ merely obeying the law
and following a few internal regulations, you might think about moving on. If
you’re being asked to deceive customers about the quality or value of your
product, you’re in an ethically unhealthy environment.
• Think about this story:
“A chef put two frogs in a pot of warm soup water. The first frog smelled the
onions, recognized the danger, and immediately jumped out. The second frog
hesitated: The water felt good, and he decided to stay and relax for a minute.
After all, he could always jump out when things got too hot (so to speak). As the
water got hotter, however, the frog adapted to it, hardly noticing the change.
Before long, of course, he was the main ingredient in frog-leg soup” (Gostick &
Telford, 2003).

41. W h i s t l e -
B l o w i n g
• At some point in your career, you might become
aware of wrongdoing on the part of others and
will have to decide whether to report the
incident and become a whistle-blower—an
individual who exposes illegal or unethical
behavior in an organization.
• Despite all the good arguments in favor of doing
the right thing, some businesspeople still act
unethically (at least at times). Sometimes they
use one of the following rationalizations to
justify their conduct:
• The behavior isn’t really illegal or immoral.
• The action is in everyone’s best interests.
• No one will find out what I’ve done.
• The company will condone my action and
protect me.

42. T h e
O r g a n i z a t i o n a l
A p p r o a c h t o
E t h i c s
Organizations have unique cultures—ways of doing things that evolve
through shared values and beliefs.
An organization’s culture is strongly influenced by top managers, who
are responsible for letting members of the organization know what’s
considered acceptable behavior and what happens if it’s violated.
Subordinates look to their supervisors as role models of ethical
behavior. If managers act ethically, subordinates will probably do the
same.
Those in positions of leadership should hold subordinates accountable
for their conduct and take appropriate action.
Many organizations have a formal code of conduct that describes the
principles and guidelines that all members must follow in the course of
job-related activities.

43. Group Discussion
Should AARON FEUERSTEIN
rebuild in Malden and Pay His
employees in the meantime?
https://www.haaretz.com/jewish/.premium-1995-malden-mills-
burns-down-1.5435757

44. On December 11, 1995, the core buildings of the Malden Mills textile plant, in Lawrence,
Massachusetts, burned to the ground, in what has been described as the worst fire in the 20th-century
history of that state. At the time, Malden, which patented and produced the synthetic fleece Polartec,
among other products, employed some 3,000 people. It was one of the largest employers in this town,
once a center of the American textile industry, some 25 miles (40 kms) north of Boston.
Malden Mills owner Aaron Feuerstein, who, as it happened, turned 70 on the day of the fire, was
fully covered for the loss by insurance. Conventional business logic would have supported him had he
decided to shutter the plant. But, as a colleague in the plant’s management recalled, "He said, I'm not
throwing 3,000 people out of work two weeks before Christmas."
Feuerstein, an Orthodox Jew whose grandfather had started Malden Mills in 1906, not only to
decided to rebuild. He also resolved to continue paying the 1,400 workers left idle during the
construction works their salaries for the next three months, and to cover their health insurance for
180 days.
Feuerstein’s altruism made him a national hero – at least, at the time. Although he was by nature
publicity-shy, he quickly adapted to being in the spotlight, even accepting an invitation from
President Bill Clinton to attend his State of the Union Address in Washington the following month.

45. D e c i s i o n P o i n t : A A R O N
F E U E R S T E I N
Group Discussion
1.Should Aaron Feuerstein rebuild in Malden and pay his employees in the meantime?
2.What facts would be helpful as you make your judgments about Feuerstein?
3.How many different ethical values are involved in this situation?
4.What kind of man is Feuerstein? How would you describe his actions after the fire?
Can you describe the man and his actions without using ethical or evaluative words?
5.Whose interests should Feuerstein consider in making this decision? How many
different people were affected by the fire and the decision?
6.What other options were available for Feuerstein? How would these alternatives have
affected the other people involved?
7.Were Feuerstein’s actions charitable, or was this something he had a duty or obligation
to do? What is the difference between acts of charity and obligatory acts?
8.What do you think of Feuerstein’s decision? What would you have done had you been in
his position?

46. SOME FACTS:
Ø 2003 Malden Mills lost customers while the new mill was being
built, and three warm winters have hurt sales of Polartec. The
company is also $140 million dollars in debt.
Ø In January 2007, current CEO Michael Spillane announced that
Malden Mills would file for bankruptcy again and would be
sold to the Gordon Brothers Group of Boston.[2][3]
Ø However, in February 2007, the assets of Malden Mills were
purchased by a newly formed company called Polartec, LLC
which is owned by Chrysalis Capital Partners of Philadelphia,
Pennsylvania.[4]
Ø June 28, 2007, the federal Pension Benefit Guaranty
Corporation said it would take over the underfunded (by 49%)
Malden Mills pension plan, which covers about 1500
employees. PBGC said the sale of Malden Mills assets meant
that the pension plan would be abandoned because the
company missed a $1.7 million pension payment.[7]

47. D e c i s i o n
P o i n t :
A A R O N
F E U E R S T E I N
1. Should Aaron Feuerstein rebuild in Malden and pay his
employees in the meantime?
Sample Answer:
Malden Mills was the last major textile manufacturer in town
and, with 2,400 employees, it supplied the economic lifeblood
for its surrounding communities. Considering both its payroll
and taxes, Malden Mills contributed approximately $100
million a year into the local economy. Feuerstein could have
used the fire as an opportunity to follow his local competitors
and to relocate to a more economically attractive area or he
could have simply taken the insurance money and decided not
to reopen the business at all. Feuerstein opted to rebuild the
plant at the same location and to retain the jobs in the local
community. He also committed to continue paying his
employees and extended their medical coverage until such
time as they could return to work.

48. 2. What facts would be helpful as you make your
judgments about Feuerstein?
Sample answer:
It would be helpful to know;
• the business’ financial situation before the fire
• Feuerstein’s management style prior to the fire
• any contractual obligations the company had to its
employees what alternatives were available and how
feasible each would be.
• Did the firm have a mission statement
• What are other possible sources of “obligations?”

49. 3. How many different ethical values are involved in this situation?
Sample Answer:
There are a number of different ethical values involved in this situation.
• What Feuerstein should consider as CEO of the company
• what are his contractual obligations
• his social responsibilities, his rights/duties and the rights/duties of the employees
• What is the fair thing to do, what is the loyal and kind thing to do in this situation
• and what might a person of “virtue” do under these circumstances?

50. 4 . W h a t k i n d o f
m a n i s F e u e r s t e i n ?
H o w w o u l d y o u
d e s c r i b e h i s
a c t i o n s a f t e r t h e
f i r e ? C a n y o u
d e s c r i b e t h e m a n
a n d h i s a c t i o n s
w i t h o u t u s i n g
e t h i c a l o r
e v a l u a t i v e w o r d s ?
Sample Answer:
• Feuerstein seems to be a loyal man, dedicated to his
employees and his company,
• He is compassionate toward others. After the fire,
Feuerstein displayed his compassion by promising to pay
his employees and extend their medical benefits until the
mill could be reopened.
• He demonstrated courage in deciding to undertake a
massive rebuilding effort for the mill.
• He also showed personal integrity by keeping the jobs in
the community instead of moving them somewhere else
just to save some money, and offering to continue to pay
for medical coverage made him seem extremely caring
and generous in spirit. He is aware of the needs of the
people in the area and is willing to do whatever it takes
to make sure their needs are attended to, to the extent
possible.

51. 5. Whose interests should Feuerstein consider in making this decision?
How many different people were affected by the fire and the decision?
Sample Answer:
Feuerstein considered the business interests of the company (which
decision made the most financial sense) and its stockholders, as well as
consider the interests of the employees, the managers, the community,
the apparel companies to whom Malden Mills supplied Polartec fabric,
and even the end-use customers who purchased clothing made of
Polartec fabric. Ultimately, there were many different groups of
people affected by the fire and the decision - stakeholders at every
level would feel the effects.

52. 6. What other options were available for Feuerstein? How would these
alternatives have affected the other people involved?
Answer:
i. He could have relocated the company to a location with cheaper taxes and cheaper labor;
ii. He could have simply taken the insurance money and chosen not to reopen the business;
iii. He could have vowed to rebuild the company and allowed all current employees to keep their
jobs;
iv. He could have reopened the business but not have paid his workers in the interim and simply
hired available workers at the time of the reopening.

53. 7. Were Feuerstein’s actions charitable, or was this something he had a duty or
obligation to do? What is the difference between acts of charity and obligatory
acts?
Answer:
Feuerstein’s actions were considered by society to be charitable, since he did not
have any contractual or other legal obligation or duty to keep the factory open in
Malden or to pay the employees’ salaries until it had reopened. He had several
other options that he could have taken which might have still been considered to
have been reasonable choices; but his choice was to do what he thought was
appropriate, equitable, and a demonstration of his loyalty to his employees.

54. 8. What do you think of Feuerstein’s
decision? What would you have done
had you been in his position?
Decision-making:
• What options are available to Feuerstein?
• How would he decide?
• What factors are relevant to the decision?
• What is a rational decision?
Perspectives of ethics:
• What is the difference between doing something
ethically required and doing something heroic
and charitable? On what grounds do you reach
your own opinion about Feuerstein?
Sample Answer:
His decision remarked that what he did
is what he considered to be “right” for
his employees and for the community as
a whole. Knowing the mill was the hub
of the community’s economy, he
considered that, without these jobs, his
employees would have no way of
supporting themselves. It was important
for him to keep the business going and
keep it in the local community.