Human Resource Management

10th Edition
Chapter 2
Business Ethics and Corporate
Social Responsibility

2008 by Prentice Hall 2-1

Developing an Ethical Culture At
Tyco International
Changing Tycos corporate image has to
rank as one of toughest jobs in recent
history
Framework for managing that
accountability had to be established
By 2006, scandal left by Tycos now-
jailed former CEO, had been cleaned up

2008 by Prentice Hall 2-2

 Ethics
Discipline of dealing
with what is good
and bad, or right
and wrong, or with
moral duty and
obligation

2008 by Prentice Hall 2-3

 Unethical Examples
Enron, Arthur Andersen, WorldCom,
Global Crossing, Adelphia
Communications, Tyco International, and
others
Ruthless self-interest that motivates the
leaders of some large corporations has
been revealed
To have served on the Enron board
literally has become a badge of shame
2008 by Prentice Hall 2-4
 Many Example of Unethical
Corporate Behavior
Headlines have exposed the far-from-ethical
exploits of Enron, Arthur Andersen, WorldCom,
Global Crossing, Adelphia Communications,
Tyco International, and others
Enrons stated values, respect, integrity,
communication, and excellence, were once
proudly etched on Enrons paperweights
Ruthless self-interest that motivated the leaders
of some large corporations has been revealed

2008 by Prentice Hall 2-5

 Not Just Corporations
Virtually no occupation has not had its own
painful ethical crises in recent years
Even so, business ethics scandals continue to
be headline news stories today. Lying on
resumes, obstruction of justice, destruction of
records, stock price manipulation, cutting
corners to meet Wall Streets expectations,
fraud, waste, and abuse, unfortunately, are
occurring all too often when those in business
go ethically wrong
2008 by Prentice Hall 2-6
Trends & Innovation: One Persons
Ethical Stand
Everyone is not as ethical as Leonard
Roberts
Quit over promises made at Arbys
Another ethical problem at Shoneys
Said You cannot fake it. You must stand
up for what is right regardless. You cannot
maintain your integrity 90 percent and be a
leader. Its got to be one hundred percent.
2008 by Prentice Hall 2-7
 A MODEL OF ETHICS

Sources of Our beliefs

Lead to Determine Our actions
ethical about what is
guidance right or wrong

Type I Ethics Type II Ethics

2008 by Prentice Hall 2-8

 Sources of Ethical Guidance
Number of sources to determine what is right or
wrong, good or bad, moral or immoral
Bible and other holy books
Conscience
Significant others
Codes of Ethics
Sources of ethical guidance should lead to our
beliefs or convictions about what is right or
wrong
2008 by Prentice Hall 2-9
 Type I Ethics
Strength of relationship between what
individual or organization believes to be
moral and correct and what available
sources of guidance suggest is morally
correct
Example: HR manager believes it is
acceptable not to hire minorities, despite
fact that almost everyone condemns this
practice

2008 by Prentice Hall 2-10

Type II Ethics
Strength of relationship
between what one
believes and how one
behaves
Example: Manager
knows it is wrong to
discriminate, but does
so anyway
2008 by Prentice Hall 2-11
 Legislating Ethics
Procurement Integrity Act
Federal Sentencing Guidelines for
Organizations (FSGO)
Corporate and Auditing
Accountability, Responsibility and
Transparency Act

2008 by Prentice Hall 2-12

Procurement Integrity Act of 1988
Prohibits release of source selection
and contractor bid or proposal
information
Restrictions on former employees
Passed after reports of military
contracts for $500 toilet seats
Also $5,000 hammer

2008 by Prentice Hall 2-13

 Federal Sentencing Guidelines for
Organizations (FSGO) of 1992
Outlined effective ethics training program
Promised softer punishments for wayward
corporations that had ethics programs in
place
Executives needed to be proactive
Organizations responded by creating
ethics officer positions, installing ethics
hotlines, and developing codes of conduct
2008 by Prentice Hall 2-14
Corporate and Auditing Accountability,
Responsibility and Transparency Act of
2002
Known as Sarbanes Oxley Act, primary
focus to redress accounting and financial
reporting abuses in light of recent
corporate scandals
Criminalized many corporate acts
Whistle-blower protections
Prohibits loans to executives and directors
2008 by Prentice Hall 2-15
HR and Sarbanes Oxley Act
Nonretaliation provisions
HR professional must understand
where Acts corporate mandates
intersect with existing HR policies
and practices so they can fit them
together with corporate
compliance efforts

2008 by Prentice Hall 2-16

Human Resource Ethics
Application of ethical
principles to HR
relationships and
activities
Code of Ethics
Many companies
have a code of ethics

2008 by Prentice Hall 2-17

 Code of Ethics
Statement of values adopted by company,
its employees and directors and sets
official tone of top management regarding
expected behavior
Code of ethics establishes rules by which
organization lives and becomes part of
organizations corporate culture

2008 by Prentice Hall 2-18

Ethics Officer
Larger firms appoint
ethics officer
Keeps code on front
burner for
employees
Ethics committee
often established
2008 by Prentice Hall 2-19
Baldrige National Quality Award
Increased emphasis
on ethics in
leadership
Criteria: Senior
leaders should
serve as role
models to rest of
organization
2008 by Prentice Hall 2-20
 Human Resource Ethics
Application of ethical principles to HR
relationships and activities
Some ethical lapses of recent years
occurred in HR management
Some believe HR should have questioned
salaries, stock options, and related perks
received by some corporate executives

2008 by Prentice Hall 2-21

 Ethics and HR
Management
2 areas where HR can have a major
impact on ethics
* Corporate Governance
* Executive Compensation

2008 by Prentice Hall 2-22

Professionalization Of
Human Resource
Management

2008 by Prentice Hall 2-23

Profession
A vocation
characterized by
existence of:
Common body of
knowledge
Procedure for
certifying
members of
profession
2008 by Prentice Hall 2-24
 HR Professional Groups

Society for Human Resource

Management - Largest national
professional organization for HR
management individuals
American Society for Training
and Development - Largest
specialized professional
organization in human resources

2008 by Prentice Hall 2-25

 HR Professional Groups (Cont.)
WorldatWork - Managerial and HR
professionals responsible for
establishment, execution, administration or
application of compensation practices and
policies
Human Resource Certification Institute -
Recognize HR professionals through
certification program

2008 by Prentice Hall 2-26

Corporate Social Responsibility

Implied, enforced, or felt obligation of

managers, acting in their official
capacity, to serve or protect interests of
groups other than themselves.
When corporation behaves as if it has a
conscience
How company as a whole behaves
toward society

2008 by Prentice Hall 2-27

Who Determines?

Organizations top
executives usually
determine
corporations
approach to social
responsibility

2008 by Prentice Hall 2-28

 Stakeholder Analysis and
Social Contract

Most
organizations
have large
number of
stakeholders

2008 by Prentice Hall 2-29

 Organizational Stakeholder
Individual or group whose interests are affected
by organizational activities
Society is increasingly holding corporate boards
of directors and management accountable for
putting the interest of stakeholders first
Some of the stakeholders for Crown Metal
Products, a fictitious manufacturer, are identified
Only a few, identified by bold arrows, are viewed
as constituencies

2008 by Prentice Hall 2-30

 STAKEHOLDERS OF CROWN METAL PRODUCTS

Stanley
Charitable Crow (Sole Employees
Organizations stockholder) and
Unemployed
Managers
Workers
Neighbors
(Potential
employees)

Guaranty
Customers
Crown Bank
Metal (Lender)
Products

Competitors Suppliers

Other Banks
Local Local in Area
U.S. Government Businesses (Prospective
Government Agencies lenders)

2008 by Prentice Hall 2-31

 Social Contract
Set of written and unwritten rules and
assumptions about acceptable
interrelationships among various elements
of society
Embedded in customs of society
Social contract often involves quid pro quo
Concerns relationships with individuals,
government, other organizations, and
society
2008 by Prentice Hall 2-32
 The Social Contract

Individuals

Other Organizations
The Organization

Government

Society
2008 by Prentice Hall 2-33
Obligations to Individuals

Certain obligations
to employees
Expect fair days
pay for fair days
work, and perhaps
much more
2008 by Prentice Hall 2-34
Obligations to Other Organizations

Must be concerned with relationships

involving other organizations
Commercial businesses are expected
to compete with one another on
honorable basis
Charities such as United Way expect
support from business
2008 by Prentice Hall 2-35
 Traditional View of Social
Responsibility

Businesses best meets obligations

through pursuit of their own interests
Some companies view social contract
mainly in terms of the companys
interests

2008 by Prentice Hall 2-36

 Obligations to Government
Under auspices of government, companies have
license to do business, along with patent rights,
and trademarks
Expected to recognize need for order rather than
anarchy
Expected to work with guidelines of
governmental organizations such as Equal
Employment Opportunity Commission and
Office of Federal Contract Compliance Programs

2008 by Prentice Hall 2-37

 Obligations to Society in General
Traditional view of business responsibility
has been businesses should produce and
distribute goods and services in return for
profit
Businesses operate by public consent with
basic purpose of satisfying needs of
society

2008 by Prentice Hall 2-38

 Sir Thomas More
Said in the 16th century, If virtue were
profitable, common sense would make us good
and greed would make us saintly. Moore knew
virtue is not profitable, so people must make
hard choices from time to time.
Corporate strategists are being held to a higher
standard than just pursuing their own interests,
or even those of stockholders; they must
consider the interests of other groups too.

2008 by Prentice Hall 2-39

 Social Audit

Systematic
assessment of a
companys
activities in terms
of its social impact

2008 by Prentice Hall 2-40

Possible Types of Social Audits
Simple inventory of activities
Compilation of socially relevant
expenditures
Determination of social impact
The ideal social audit would involve
determining the true benefits to society of
any socially-oriented business activity

2008 by Prentice Hall 2-41

 Steps for Establishing and
Implementing Corporate Social
Responsibility (CSR) Program
1. Person assigned responsibility for program;
structure developed
2. Review of what company is present doing
regarding CSR determined
3. Shareholders expectations and perspectives
determined
4. Write policy statements covering CSR areas
such as environmental, social and community
issues
2008 by Prentice Hall 2-42
 CSR Steps (Continued)
5. Develop set of corporate objectives and action
plan to implement policies
6. Create company quantitative and qualitative
targets and performance indicators over a 2-5
year period, along with measurement,
monitoring and auditing mechanisms
7. Communicate direction of CSR to stakeholders
and fund managers
8. Determine progress of CSR program
9. Report progress of CSR program
2008 by Prentice Hall 2-43
 A Global Perspective: When In
Rome, Do As the Romans Does Not
Work Today
The old adage once accepted in many
quarters, When in Rome, do as the
Romans do, has become unacceptable.
New CEO challenge is to act like an
ethical leader for society as a whole

2008 by Prentice Hall 2-44

 2008 by Prentice Hall 2-45