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in chapter 4 we will discuss the demanding ethical and social responsibility of businesses in the world the learning objectives in chapter 4 are one to explain why obeying the laws is only the first step to behaving ethically two ask the three questions you need to answer when faced with politically unethical actions number three describe management's role in setting ethical standards four distinguish between compliance-based and integrity-based ethics codes and list the six steps in setting up a corporate ethics code five define corporate social responsibility and compare corporations responsibilities to various stakeholders and finally number six analyze the role of u.s businesses and influencing ethical behavior and social responsibility in the global markets you will often find that celebrities help develop ways to fund problems in the world in order to help developing countries where well-being and economic growth suffers as noted on the slide actor matt damon who's an engineer and entrepreneur as well as gary white founded the organization called water.org it helps families access micro loans to fund their own water operations they also formed water equity to invest in various enterprises giving the profits to underprivileged people it's a pretty significant amount of people that water.org helps it's 4.6 million so they help people with clean water and sanitation for the past seven years let's get this chapter started with a trivia question name the company that's helping reverse the decline in the environmental health of our planet by donating time services and at least one percent of its sales to environmental groups all over the world do you know the name of this company if you answer patagonia you're correct given the ethical lapses prevalent today how can we restore trust in the free market system and leaders in general first those who have broken the law should be punished ingly new laws making accounting records more transparent easy to read and understand and business people and others more accountable for their actions may also help but laws alone don't make people honest reliable or truthful if they did crime would disappear this slide is an interesting slide when we think about ethics and scandals in 2016 the consumer financial protection bureau fined wells fargo 185 million dollars for creating more than 1.5 million accounts and 500 000 fraudulent credit cards and customers names without their knowledge this brought widespread attention to a number of other scandals associated with financial services firms which has resulted in wells fargo paying out billions of dollars in lawsuits and settlements now i read about this scandal i don't know um in my undergrad studying um and just recently i received a letter from wells fargo telling me that they weren't able to open up an account in my name without any kind of identification so knowing about the scandal i immediately called wells fargo and they said yes ma'am we understand you know that you didn't open this because we actually put a stop to it being open in a second time so we're well aware that this is a problem and so when i brought up the case they immediately apologized and tried to reassure me that it had nothing to do with the accounts that were created but still makes you wonder the next two slides are going to be some details about some of the largest corporate scandals probably in the last 20 years maybe more the big one on here on this slide is in regards to enron corporation um in a nutshell the former ceo the current cfo and the current ceo were found guilty of committing accounting fraud by moving billions of dollars of debt off their balance sheet that artificially inflated the company's stock and bond prices so that's a big time no no the executives sold millions of dollars worth of stock just before the fraud became public while the company's pension regulations prohibited regular employees from selling their stock so the result of that was the executives who bankrupt the company made millions why employees and other small investors lost 74 billion dollars we're talking pensions and and everything so people that have worked a lifetime for enron lost their pensions um so one of the the former ceo died prior to sentencing but the cfo served four years and skilling who was the current ceo received a 24-year sentence but in 2013 he struck a deal to reduce his sentence by 10 years for giving 42 million dollars back to the victims of enron skilling was released in 2019 so and i'm not sure when he was sentenced but still 42 million dollars did it even cover all these people who worked a lifetime for these pensions that were never able to retire so that was a huge scandal and then there's more in the following slide moving on to more of the largest corporate scandals is the big one that comes to mind here is the bernie madoff investment security scandal so i've actually watched a movie on this and granted it it was a lot of hollywood but it still kind of gives you an idea in a nutshell what happened here so bernie madoff tricked investors at a 64.8 billion dollars one of the largest ponzi schemes madoff paid investors returns out of their own money or the money of investors instead of out of profits it was said at one time um he was i want to say worth over 120 million dollars um and no actually it was 823 million dollars he was sentenced to 150 years plus had to pay 170 billion in restitution which in as you know even when he did get caught and his net worth was discovered he never had you know that much money to pay them back his wife his kids they all suffered as a result and i mean when we talk about the madoff investment scandal there were tons of movie stars like kevin bacon if you ever watched the original footloose movie and his wife and i mean tons and tons of people from all different walks of life from the rich to the poor to the you know the super rich got caught up in this scandal so it's important to really make sure that um when you are investing that um sometimes when something seems too good to be true sometimes there's a reason because it is so always trust your gut and make sure you do your research and educate yourself on on you know potentials of a ponzi scheme or other things [Music] the reputations of american businesses have been under assault due to numerous scandals over the past 20 years following the law is only the first step to being ethical ethics are standards of moral behavior and are accepted by society as right versus wrong few americans have moral absolutes it's important just to think about the golden rule common standards of ethical behavior come from religion or the golden rule which means do unto others as you wish them to do to you ethics begins with all of us the opposite of ethical behavior is unethical behavior some examples of unethical behavior are listed on the slide for example when you're in the office instead of doing your work you're goofing off you're talking to your co-workers you're playing games on your computer that's a good example of unethical behavior from a personal standpoint not volunteering to help your community and help society grow just like you've had the chance or at school playing on the internet not doing your work plagiarizing work that you found on the internet all some real life examples of how unethical behavior affects your life this slide is really just to kind of emphasize how ethics really begins with you as you know when you go to work sometimes you're tempted to be on your phone playing games talking to friends texting or whatever you might do on your devices but think about how that makes you look from an ethical standpoint um some some say that when you're using your phone on personal time or playing on the internet you're stealing time from your manager or your the company for for all intensive purposes um you know and think about what the consequences of each thing that could happen to you you could get wrote up at work for not doing your work you could maybe eventually be fired for it but you don't do the right thing just because of that it's because you you really want to project yourself in a positive way you never know who you might meet later in life and if you've ever heard don't burn bridges this is an idea of how a bridge might get burned if you play a lot on your phone while you're at work or um or in other situations where you need to be paying attention you might run into that person that constantly might remind you you're not supposed to be on your devices so and later in life who knows when you might walk past that person or they might work at a company where you want to work and they you know with a hiring manager might say oh you know this person well you know what do you think of them and the only way they know you is from say working at mcdonald's and you were on your phone all the time and weren't ever doing your work so and that would be just one way that they could give a negative input towards a hiring manager and you could potentially not get the job so anyway just just think about how different ways that you can let ethics play a big part in your success in life it can be difficult to balance ethics and other goals such as pleasing stakeholders or advancing in your career when thinking about ethical dilemmas think ask yourself the following questions is my proposed action legal am i violating any law or company policy whether you're thinking about having a drink when driving home gathering marketing to intelligence or designing a product or just using a questionable nickname think about the legal implications second question is it balance am i acting fairly would i want to be treated this way win-lose situations often become lose-lose situations and generate retaliation from the loser an ethical business person has a win-win attitude and tries to make decisions that benefit all and third how will it make me feel about myself would i feel proud if my family learned of my decision my friends could i discuss the proposed situation or action with my supervisor has someone warned me not to disclose them individuals and companies that develop a strong ethics code and use these three questions have been have a better chance than most of behaving ethically the making ethical decision box gives you a chance to think about how you might make an ethical decision in the workplace ethics are society's accepted standards of behavior in other words behaviors accepted by society as right rather than wrong ethics reflect people's proper relationship with one another legality is narrower in that it refers to laws we have written to protect ourselves from fraud theft and violence it helps to ask the following questions when faced with an ethical dilemma is the proposed action legal is it balance would i want to be treated this way how what will it make me feel about myself leadership helps to instill corporate values and employees so like many aspects of business ethical behavior practiced and modeled by managers and executives will often trickle down to the employees at large trust between workers and managers must be based on fairness honesty openness and moral integrity overly ambitious goals and incentives can create an environment in which unethical actions can occur ethics begins with the individual but are often influenced by the organization and the environment in which the business operates so from an individual standpoint you think about the values that you were instilled with from your family your work background your personality and even your family status from an organizational standpoint think about the top level management philosophy so when you're looking to interview with a job that's a good question to ask is what is the company culture what is your management philosophy because if it doesn't agree with you know what you work best with or from an ethics and morals perspective you agree with then it might not be a good idea to work for that organization look at the firm's reward system is is are the goals too high and do is there potential for people to make unethical decisions in order to achieve those goals and ask about the job dimensions from an environmental perspective think about competition economic conditions and social cultural institutions on how um you know from an environmental standpoint how you feel about those items when it comes to your own personal and moral and ethical standards more and more companies are adopting written codes of ethics compliance-based ethic codes which emphasize preventing unlawful behavior by setting controls and penalizing wrongdoers so a good example at the company i work for the controls that we use are we have a quality assurance department that ensures quality within the company but they also establish what we call sops or standard operating procedures and if people are not following these standard operating procedures they're going to find this out during a quality audit and the quality director answers directly to the president of the company so that way when there is a major quality or ethics violation we would go straight up into the president and and involve our general counsel so then we also have integrity based ethics codes that defines the organization's guiding values creating an environment that supports ethically sound behavior and stresses shared accountability among employees so that might be you know something that we talked about earlier in the slides of making sure you're coming to work on time um and if you leave early you clock out at the time you leave you don't go home and wait till it's time to clock out at home um you know your regular times five o'clock but you left at four which we've seen that happen before and sometimes it's obvious and other times um you catch that kind of thing because you know people are whistleblowers and they let management know so that would be a good integrity based ethic violation this slide gives you an example of a code of ethics for hershey's and if you wanted to read more about it you can always go to hershey's website and look for their code of conduct but as you can see on their code of ethics on the screen their code of ethics is in their commitment to their consumers to the marketplace to the stockholders and then to the global community so this is all the kind of things that you want to see when you're either looking to do business with a company or even working for a company you want to make sure that they have that commitment to all the stakeholders this slide shows strategies for ethics management there's features of compliance-based ethics codes and features of integrity-based ethics codes i'll let you review them integrity-based ethics codes move beyond legal compliance to create and do it right climate that emphasizes core values such as honesty fair play good service to customers commitment to diversity and involvement in the community these values are ethically desirable but not necessarily legally mandatory there are six steps that it is believed that can improve u.s business ethics the first one is top management must adopt and unconditionally support explicit corporate code of conduct and i've always said as long as you have buy-in from the top when you're trying to institute new rules or policies then people will listen peop most people will listen and will fall in line and do what they need to do employees must understand the senior management expects all employees to act ethically and if they aren't specifically saying this some people just won't listen managers and others must be trained to consider the ethical implications of all business decisions so for instance um this really i guess is kind of a business decision but also a personal decision so at the company i work with we deal with a lot of companies that are developing new drugs one ethic violation would be us knowing that a new drugs being developed to cure cancer hypothetically and we go and buy a bunch of stock from this particular pharmaceutical company that would be considered an ethics violation and considered insider trading which you can go to jail for moving on the number fourth ethical standard is an ethics office must be set up with which employees can communicate anonymously unethical business practices so this week this kind of office or hotline that can be developed so it goes directly to these office it's where whistleblowers can report that illegal or unethical behavior involve outsiders such as suppliers subcontractors and distributors and customers and with your ethical standards like we were talking about on that hershey's code of ethics the ethics code must be enforced with timely action if any rules are broken so within that ethics code there would be you know a stipulation on how quickly the executives would react when there are unethical codes of conduct broken so going back to the ponzi scheme with bernie madoff there was a whistleblower that actually um kind of warned the fbi that this ponzi scheme was going on um he frequently notified the securities and exchange commission about his findings he was a forensic accountant um and but they just never listened because bernie madoff was the superstar he was so popular and everyone loved him but until uh bernie manoff's own son let the fbi fbi know of the scam they did not act on it so think about what might make a whistleblower act to turn something somebody in we're going back to those questions that we asked earlier um if i found out that there was a scheme like that going on and i didn't say anything i could think about boy what would my family think how would i feel if somebody did that to me i mean those are just i mean some of the few questions you could be asking yourself but um a lot of times that's i mean just a highly ethical person would do in order to decide that they're going to be a whistleblower and make this man suffer for what he's doing to all these people if you are in a circumstance on where you have to become a whistleblower or know somebody that might need to be a whistleblower think about the items on the slide decide that you're going to do it and act quickly sometimes people get scared some pipe times people get anxiety and then decide not to blow the whistle make sure you have all your allegations filed with the right agencies so that's really important to do your research or talk to a lawyer ask a professional that would know how to make these allegations gather your information legally don't hack into a computer and get the files get it get it the right way and lastly stick with the facts only talk about the facts because if you exaggerate things it'll be discovered and could end up working against you compliance-based ethics codes emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers integrity-based ethics codes define the organization's guiding principles creates an environment that supports ethically sound behavior and stress shared accountability the six steps many believe will improve the us business ethics are top management must adopt and unconditionally support explicit corporate codes of conducts employees must understand the expectations for ethical behavior beginning at the top and that senior management expects all employees to act ingly next managers and others must be trained to consider the ethical implications of all business decisions an ethics office must be set up with employees that can communicate anonymously outsiders such as suppliers subcontractors distributors customers must be told about this ethics program and finally the ethics code must be enforced with timely actions if rules are broken corporate social responsibility or csr is based on a commitment to such basic principles as integrity fairness and respect many for-profit companies have have philanthropic endeavors as a part of their mission communities often depend on companies to help with social programs that make the lives of people in the community better it stands to reason that businesses that strengthen their communities as proponents of csr argue will grow stronger as their communities improve there are different dimensions of companies social performance the first is corporate philanthropy which includes charitable donations corporate social initiative which includes enhanced forms of corporate philanthropy directly related to the company's competencies next corporal responsibility this includes everything from hiring minors working to make safe products and lastly corporate policy the position a firm takes on social and political issues this slide is a list of some very generous celebrities where you see george and amal clooney at the top who who established the clooney foundation for justice and the un messenger of peace or you think about oprah winfrey oprah winfrey earns well over 200 million dollars per year and donates nearly 50 million dollars the talk show host and entertainment mogul is the founder of the angel network the angel network is a charity that raises money for poverty-stricken children and she has raised money to open schools for girls in south africa i mean just that is just such a wonderful thing that these people that have more money that they could ever spend in a lifetime that they spend developing these organizations to help people that you know truly need it i mean even looking at matt damon this h2o for africa i mean that's really just giving healthy water supply to people in need in africa to where the population is so poverty stricken i mean just getting enough food to eat is a problem just the basic needs aren't met and being able to provide them with water not only gives them a way to you know have enough fluids but also to farm you know to to grow some of the basic needs which are food you would be surprised about the amount of money that very wealthy people donate to charities every year so not just in the previous slide talking about celebrities let's talk about million and billions um like warren buffett everybody's heard about warren buffett he um established the gates foundation and social justice initiatives and he is the boy he's the biggest donor by far by donating 3.45 billion dollars a year and then of course bill and melinda gates are you know 2.6 billion but even if we go to the very bottom of this list gordon and betty moore they're they're donating 298 million dollars for conservation and everybody else you know they have their own initiatives that they care highly about um you know you see conservation you see education you see climate change so it's it's all a a lot of times these million and billionaires they you know move towards social responsibility but in things that have really touched them in their life for one reason or another the problems corporations cause get so much news coverage that people tend to get a negative view of their impact on society but businesses do make positive contributions too many companies do allow their employees to volunteer their time and help social agencies for example the company i work for were allowed to use eight hours of leave time it's called volunteer leave time each year to a something of our choice so it whether it's volunteering at your daughter's school or volunteering for a homeless shelter you can use that eight hours in addition to that they also offer kind of like group teamwork kind of efforts where um they can go out and make a positive impact at a elementary school that's in our area that has a lot of homeless children that go to this school so they're i mean there's very positive ways that companies can make a good impact on their communities and you know through society in general [Music] the majority of millennials surveyed said they would take a reduced salary to work for a socially responsible company let's look at the concept of social responsibility through the eyes of stakeholders to whom businesses are responsible customers investors employees and society in general so if you take a look at the slide there's examples of companies social responsibilities efforts so the big one of course everybody knows starbucks when the south american coffee crops were dying from coffee leaf rust starbucks r d farm developed the rust resistant coffee plants the company by doing this improved the lives of coffee growers by giving them superior seeds to more than a million farmers and workers across seven countries and three continents other companies like harmless harvest zipline international pepsico panera mcdonald's and nestle there these are all examples of companies being socially responsible to their stakeholders this slide also continues to go through companies that have made social responsibility efforts through time so i'm just going to jump right in there with intel the technology giant is helping build a workplace capable of keeping up with the digital revolution the one thing i love about intel is that of its teach program that helps the k through 12 teachers integrate technology into their classrooms with things like stem the science technology and engineering math to make sure that people have the skills to move into the future president john f kennedy proposed four basic rights of consumers one the right to safety two the right to be informed three the right to choose and four the right to be heard these rights will be achieved only if businesses and consumers recognize them and take action in the marketplace the reoccurring theme that we see throughout this book is pleasing customers by offering something of real value since three of five new businesses fail we know this responsibility is not as easy to me as it seems one sure way of failing is to please customers is to be less than honest with them the payoff to please customers is to get new customers and increase business with your existing customers given the value customers place on social efforts how do companies make customers aware of such efforts one tool that you all probably know of very well is social media the primary value of using social media to communicate corporate social responsibility efforts is that it allows companies to reach a broad and diverse group allows them to connect directly with the customer in a low cost but efficient way and enables them to interact with specific groups more easily than through the traditional efforts like gen z gen z is represents up to 40 percent of the global market and has estimated purchasing power of 44 billion dollars it's not enough for companies to brag about their social responsibility efforts they must walk the walk and talk the talk so if they aren't meeting up to the expectations of the consumers they will face consequences by losing consumers in business some do's and don'ts when thinking about social media customer contact say for instance by using twitter for business create discussions relevant to your industry but don't start political rants because there are some people when you start bringing politics into the situation that turns them off and they're going to go the opposite way and find another business to work with think about your message before you post it because as you know once you post it on the internet it never goes away so um just a note that those deleted tweets can be found so don't pulse it or don't post impulsively one thing that i learned very early on in my career is when you're mad or very passionate about something don't write an email and send it right away especially if you're upset type it out or even in your iphone get your notes type it you know on your notes and then come back a little later and re-read it because there's nothing worse than getting a wrong wrong word in your message having misspelling or grammar issues it just looks bad on you so always think about that first before you post offer new and engaging content don't let you know the post be about the same thing all the time because when you do um the account will lie dormant you'll have less views and less um you know likes on your posts create separate accounts for both business and personal use and make your announcements via your company accounts and for business and then use your personal accounts for your personal use so i mentioned earlier about unethical issues involved with insider trading so when you think about insider training from a company that say for instance the pharmaceutical company you want to be responsible to your investors so when you do enter into that insider trading activity it's it's using that private information to build your own fortune for whether it's for you or family and friends the sec can will investigate if they feel that there is some unethical violations and they will look at all avenues on how you as an employee may have impacted somebody else by giving them information about a new drug or a new product that's coming out that's going to be worth you know millions of dollars somehow they are able to trace whether it's you know through a spouse a cousin a brother they will interview all these people that may have somehow come into contact with somebody at a company that breached that ethical unethical way uh when i say that there are a lot of unethical dealings out there you know in in public i'm i'm not kidding what's important before we go over this slide is to make sure you're doing your homework if you hear any negative information go the other way that's why it's so important to make sure that you're as a as a trader or you know a stock broker that you are known for doing the right thing all the time you can't make those you know small mistakes because it could threaten your career so this insider trading was in 2014 a judge sentenced a former hedge fund trader and a hedge fund trader is really somebody that buys and sells different currencies and they might buy the currency when it's worth say the euro is worth a dollar ten and then later the value goes up say to a dollar fifty so they they um sentenced this former trader to nine years in prison for overseeing the largest trading scheme in history while working as a portfolio manager or also known as a stock broker at an sac capital he made a series of illegal trades that earned him 275 million dollars and and again when you're thinking about you know doing certain activities you always have to say is this legal you know what what my family think of me if they found out i did this wrong you know just remember it may seem like wow what a great idea but i mean you know this this guy knew he was doing illegal things um he that this guy managed to avoid jail but he was forced to pay 1.8 billion dollars in fines now how in the heck can you pay 1.8 billion dollars um if you only earn 275 million so i mean it makes me wonder how he could ever you know get to that point because once you have been convicted once you're a felon for doing things like this you can't work in that business ever again so it just makes me wonder how um a judge and would allow this kind of deal to go through but just an example of things that are out there so just make sure you're doing your homework and if especially when it comes to your retirement funds to money you're investing for you and your family for your long-term you know livelihood that you're doing your due diligence when you're looking to invest in and different companies or hedge funds and things like that next let's talk about corporate responsibility to employees businesses have a responsibility to create jobs if they want to grow once they've done so they must see to it that hard work and talent are fairly rewarded employees need realistic hope of a better future which comes only through a chance of upward mobility if a company treats employees with respect those employees usually will respect the company as well mutual respect can make a huge difference in a company's prime profit the companies with contented employees outgrow their counterparts by four to one for more than 10 years one way a company can demonstrate commitment and caring is to give employees salaries and benefits that help them reach their personal goals the wage and benefit packages offered by warehouse retailers like costco are among the best in hourly retail even part-time workers are covered by costco's health plan and the workers pay less for their coverage than other retailers like walmart getting even is one of the most powerful incentives for good people to do bad things few excuse me few disgruntled workers are desperate enough to commit violence in the workplace but a great number relieve their frustrations in subtle ways like blaming mistakes on others not accepting responsibility manipulating budgets and expenses and so on the loss of employee commitment confidence and trust in the company and its man management can be costly and it's like the owner of the company we work for is the best advertising for a company is the employees the more they are happy with the job and are have the buy-in of the company the more they can tell other people about it so for instance um you know me i love the company i work for so i'm going to tell people about it and those people might want to come to work because it's fair wages they have great benefits and you know they've been named you know one of the top employers in the united states to work for so that is the best advertising you can get for a company the next corporate social responsibility is the responsibility to society and the environment more than 10 percent of u.s workers in the private sector receive salaries from non-profit organizations that receives fundings from others that in turn receive their money from businesses foundations universities and other organizations own billions of shares and publicly held companies as stock prices of those firms increase businesses create more wealth to benefit society businesses are also partly responsible for promoting social justice many companies believe they have a role in building communities that goes well beyond simply giving back to them cherry just isn't enough their social contributions include cleaning up the environment building community toilets providing computer lessons etc the carbon footprint of a package of say frozen corn includes not only the carbon released by the fertilizer to grow the corn but also carbon in the fertilizer itself the gas used to run the farm equipment and transport the corn to the market the electricity to make the plastic packages and freezers and so on so as you can imagine you know this the green movement is really pushing companies to lessen that carbon footprint the green movement has provided consumers with lots of product choices however making those choices meanings have sorting through many and confusing claims by manufacturers the noise in the marketplace challenges even the most dedicated green activists but taking the easy route of buying what's most readily available violates the principles of the green movement environmental efforts may increase a company's costs but they also allow the company to charge higher prices increase market share or both ninety percent of millennials say they are willing to pay more for products with environmentally friendly ingredients green products have been steadily increasing in the market from 19 percent in 2014 to 25 percent in 2021 the green movement can have a positive impact on the u.s labor force emerging renewable energy and energy efficient industries currently account for 9 million jobs by the time 2030 comes around there will be 40 million more in engineering manufacturing construction and so on environmental quality is a public good that is everyone gets to enjoy it regardless of who pays for it so the challenge for companies is really to find the public goods that will appeal to their customers an example of a business that is socially responsible is a business like patagonia they were established back in 1973 and they sell outdoor apparel and their their mission is to make quality goods in an ethical manner they do this by vetting their suppliers and you know all the stakeholders that are involved with their business in order to make that positive impact on the world so knowing this that they're trying to do the socially responsible thing from a corporation standpoint would you pay more to buy something at patagonia knowing that they're doing the right thing for society the way we measure whether or not an organization is being socially responsible is by doing a social audit a social audit is a systematic evaluation of an organization's progress towards implementing social responsibility and responsive programs one of the major problems of of conducting a social audit is establishing procedures for measuring the firm's activities and their effects on societies should the social audit measure well there are five types of ways of doing the social auditing by using what's called is watchdogs first socially conscious investors insist that a company extend in its own high standards to its suppliers since social responsibility investing is on the rise about 12 trillion dollars is invested in sri funds in the united states already two socially conscious research organizations analyze and report on corporate social responsibility efforts three environmentalists apply pressure by naming companies that don't abide by environmentalist standards an example of one of these might be you may have heard of protests regarding san francisco-based rainforests action network or jpmorgan chasing company adopting guidelines that restrict its lending and underwriting practices for industrial projects that might have an impact on the environment fourth union officials union officials hunt down violations and force companies to comply to avoid negative publicity and finally customers customers make buying decisions based on social conscience many companies surveyed are adjusting their environmental and social responsibility strategies because the number of customers that factor these into their buying decisions this slide represents the most admired companies of 2020 for corporate social responsibility corporate social responsibility is the concern businesses have for the welfare of society not just their owners the vast majority of the companies listed on the slide are not only admired but they're financially successful so just one more proof that being social responsibility does affect your bottom line in a positive way let's review corporate social responsibility or csr is the concern businesses have for the welfare of society not just for their owners csr defenders believe that businesses owe their existence to the societies they serve and cannot succeed in societies that fail csr must be responsible to all stakeholders not just investors in the company a social audit is a systematic evaluation of an organization's progress towards implementing social responsible and responsive programs many feel a social audit should measure workplace issues the environment product safety community relations military weapons contracting international operations and human rights and respect the rights of local people ethical problems and issues of social responsibility are not unique to united states influence peddling or bribery charges have been brought against top officials and many other countries like japan south korea china brazil etc many u.s businesses also demand social responsible behavior from their international suppliers making sure they don't violate u.s human rights and environmental standards in contrast are companies that are criticized for exploiting their workers so one company is nike um apple also was criticized for violating rights of the workers so those are a couple things that you can look up if you're interested in learning more about it the fairness of requiring international suppliers to adhere to u.s ethical standards is not clear-cut as you might think it is for example a gift in one culture can be a bribe in another is it always ethical for companies to demand compliance with the standards of their own countries what about countries where child labor is acceptable because families need everybody to work in order to support the household none of these questions are easy to answer but they suggest the complexity of social responsibility in international markets in the 1970s the foreign corrupt practices act sent a chill throughout the u.s business community by criminalizing the act of paying foreign businesses or government leaders to get business many u.s executives complain that this law put their business at a competitive disadvantage when bidding against non-us companies since foreign companies don't have to abide by it to identify some form of common global ethics and fight corruptions in global markets partnership partners in the organization of american states signed the inter-american convention against corruption the united nations adopted a formal condemnation of a corporate bribery as did the european union and the organization for economic corporation cooperation and development the international organization for standardization or iso published a standard on social responsibility called the iso 26000 which guidelines on products and manufacturing fair pay rights appropriate employee treatment and hiring practices these standards are advisory only and will not be used for a certification process the formation of a single set of international rules governing multinational corporations is really unlikely in the future to fight corruption as i mentioned in the last slide there's been many companies that have tried to overcome you know their ethical errors one of them was nike where they had outsourced their manufacturing of its products over street seas and had a lot of criticisms because in the nations where they did produce their product it was very low wages and they were using child labor it was very common to use child labor they've taken corrective measures including working with the companies that they're um making their products as well as having advocacy groups in order to set the standards for labor practices and the factories if they want their business so you know everybody in the class probably knows who nike is and you know it's obviously that if you do the right thing you can overcome your errors but at what cost what did it cost them over the years so just a few things to think about and sometimes the the unethical behavior is so great that there's no coming back from it so do a little research and see if you can think of other companies or find other companies that may have gone through you know similar issues the one i had mentioned in the previous slide was apple products they used foxconn to develop their products and i know there is a youtube video out there that's pretty interesting um to see uh these people that made the apple ipads don't even have them but they're producing you know at a rate so fast and they're given very little time to sleep or eat or even go home to see their families so um i think you know since the original video was shared and i mean it was several years ago they have made you know corrective actions in order to ensure that people are being paid a fair wage and um you know just from a labor standpoint given you know more rest but you know just a lot of there's more than just one of these stories out there but do a little research and you know just so you can understand some of the ethical concerns about doing business internationally if you want to read more about ethical culture clashes there's a whole article about reaching beyond our borders in the text it's on page 106 of the text talks about how somebody from south america moved to the us for college and worked for a large company but while he was here he was given a two month or a two thousand dollar stipend for housing expenses instead of using it all for himself he was sending part of it back to help support his family so with that in mind think about how this could become an ethical dilemma here in the u.s but maybe not so much for his home country in south america i mean we find this all the time i mean especially you know bordering mexico where a lot of mexican citizens come into the us because they can make more money here and they live on very little i mean a lot of them you know are housed together to keep their living expenses cheap so they can send money back to their families in mexico or wherever they're from i mean we see this all the time but think about you know you got two different countries two different cultures and and might what might be an ethical dilemma for one country isn't necessarily for their home country let's review many businesses now demand that international suppliers do not violate u.s human rights and environmental standards it's unlikely there will be a single set of international rules governing multinational companies because of the widespread disparity among global nations as to what constitutes ethical behavior for example a gift in one culture can be a bribe in another in some nations child labor is expected and an important part of a family standard of living the fairness of adhering to u.s standards of ethical behavior is not easy as you may think