Business Ethics and Social Responsibility

Ethical Challenges

In both your personal and business life, you will sometimes be called on to weigh the ethics of decisions that can affect not just your own future but possibly the future of your fellow workers, your company, and its customers. As already noted, it's not always easy to distinguish between what is right and wrong in many business situations, especially when the needs and concerns of various parties conflict.

Solving ethical dilemmas is not easy. In many cases, each possible decision can have both unpleasant consequences and positive benefits that must be evaluated. The ethical issues that confront manufacturers with unsold merchandise are just one example of many different types of ethical questions encountered in the workplace. FIGURE 2.1 identifies the most common ethical challenges that business people face.

CONFLICT OF INTEREST

A conflict of interest occurs when a businessperson is faced with a situation in which an action benefiting one person or group has the potential to harm another. Conflicts of interest may pose ethical challenges when they involve the businessperson's own interests and those of someone to whom he or she has a duty or when they involve two parties to whom the businessperson has a duty. Lawyers, business consultants, or advertising agencies would face a conflict of interest if they represented two competing companies: a strategy that would benefit one of the client companies might harm the other client. A conflict of interest may also occur when one person holds two or more similar jobs in two different workplaces.

Ethical ways to handle conflicts of interest include (1) avoiding them and (2) disclosing them. Some companies have policies against taking on clients who are competitors of existing clients. Most businesses and government agencies have written policies prohibiting employees from accepting gifts or specifying a maximum gift value. Or a member of a board of directors or committee might abstain from voting on a decision in which he or she has a financial interest. In other situations, people state their potential conflict of interest so that the people affected can decide whether to get information or help they need from another source instead.

HONESTY AND INTEGRITY

Employers value honesty and integrity. An employee who is honest can be counted on to tell the truth. An employee with integrity goes beyond truthfulness. Having integrity means adhering to deeply felt ethical principles in business situations. It includes doing what you say you will do and accepting responsibility for mistakes. Behaving with honesty and integrity inspires trust, and as a result, it can help build long-term relationships with customers, employers, suppliers, and the public. Employees, in turn, want their managers and the company as a whole to treat them honestly and with integrity.

Unfortunately, violations of honesty and integrity are all too common. Some people misrepresent their academic credentials on their résumés or job applications. Reputable organizations take these violations very seriously and often terminate employees for their actions.² Others steal from their employers by taking home supplies or products without permission or by carrying out personal business during the time they are being paid to work. And many employees use company computers to surf the Web for personal shopping, e-mail, gaming, and social networking. This misuse costs U.S. companies an estimated $85 billion annually in lost productivity.³

LOYALTY VERSUS TRUTH

Businesspeople expect their employees to be loyal and to act in the best interests of the company. But when the truth about a company is not favorable, an ethical conflict can arise. Individuals may have to decide between loyalty to the company and truthfulness in business relationships. People resolve such dilemmas in various ways. Some place the highest value on loyalty, even at the expense of truth. Others avoid volunteering negative information but answer truthfully if someone asks them a specific question. People may emphasize truthfulness and actively disclose negative information, especially if the cost of silence is high, as in the case of operating a malfunctioning aircraft or selling tainted food items.

The Contemporary Ethical Environment

In today's business environment, individuals can make the difference in ethical expectations and behavior. As executives, managers, and employees demonstrate their personal ethical principles—or lack of ethical principles—the expectations and actions of those who work for and with them can change.

What is the current status of individual business ethics in the United States? Although ethical behavior can be difficult to track or define in all circumstances, evidence suggests that unfortunately some individuals act unethically or illegally on the job. And technology seems to have expanded the range and impact of unethical behavior. For example, anyone with computer access to data has the potential to steal or manipulate the data or to shut down the system, even from a remote location. Banks, insurance companies, and other financial institutions are often targeted for such attacks. Although some might shrug these occurrences away, in fact they have an impact on how investors, customers, and the general public view a firm. It is difficult to rebuild a tarnished image, and long-term customers may be lost.

Nearly every employee, at every level, wrestles with ethical questions at some point or another. Some rationalize questionable behavior by saying, “Everybody's doing it.” Others act unethically because they feel pressured in their jobs or have to meet performance quotas. Yet some avoid unethical acts that don't mesh with their personal values and morals. To help you understand the differences in the ways individuals arrive at ethical choices, the next section focuses on how personal ethics and morals develop.

DEVELOPMENT OF PERSONAL ETHICS

An individual's stage in moral and ethical development is determined by a huge number of factors. Experiences help shape responses to different situations. A person's family, educational, cultural, and religious backgrounds can also play a role, as can the environment within the firm. Individuals can also have different styles of deciding ethical dilemmas, no matter what their stage of moral development.

Regardless of their ethical background, psychologist Lawrence Kohlberg identified that individuals typically develop ethical standards in the three stages shown in FIGURE 2.2: the pre-conventional, conventional, and post-conventional stages.⁴

In stage 1, the pre-conventional stage, individuals primarily consider their own needs and desires in making decisions. They obey external rules only because they are afraid of punishment or hope to receive rewards if they comply. For them, ethics is proscriptive in that they do not think about or evaluate unique ethical situations but rather just identify the rules and follow them (or not). A stage 1 ethical approach to taking something that doesn't belong to you—for example, food—would be saying that such an action is theft and is always wrong.

In stage 2, the conventional stage, individuals are aware of and act in response to their duty to others, including their obligations to family members, co-workers, and organizations. The expectations of these groups influence how they choose between what is acceptable and unacceptable in certain situations. In stage 2, individuals who take food without permission from a restaurant where they work could make the ethical argument that the need to feed their family was an overriding concern, and taking food in such circumstances is not unethical. Self-interest, however, continues to play a role in decisions.

Stage 3, the post-conventional stage, represents the highest level of ethical and moral behavior. Individuals are able to move beyond mere self-interest and duty and take the larger needs of society into account as well. They have developed personal ethical principles for determining what is right and can apply those principles in a wide variety of situations.

How Organizations Shape Ethical Conduct

Regardless of where a person is in terms of ethical development, it is important to remember that no one makes decisions in a vacuum. Choices are strongly influenced by the standards of conduct established within the organizations where people work. Unfortunately, not all organizations are able to build a solid framework of business ethics. Because the damage from ethical misconduct can powerfully affect a firm's stakeholders—customers, investors, employees, and the public—pressure is exerted on businesses to act in acceptable ways.

ETHICAL AWARENESS

The foundation of an ethical climate is ethical awareness. As we have already seen, ethical dilemmas occur frequently in the workplace. Employees need help identifying ethical problems when they occur and knowing how the firm expects them to respond.

One way for a firm to provide this support is to develop a code of conduct, a formal statement that defines how the organization expects employees to resolve ethical questions. Johnson & Johnson's credo, shown in FIGURE 2.3, is such a code. Recently Johnson & Johnson's CEO, Alex Gorsky, took the time at a shareholder's meeting to review the credo, pointing out along the way how each part illustrates how current Johnson & Johnson employees put the code into action each day.⁵

At the most basic level, a code of conduct may simply specify ground rules for acceptable behavior, such as identifying the laws and regulations that employees must obey. Other companies use their codes of conduct to identify key corporate values and provide frameworks that guide employees as they resolve moral and ethical dilemmas.

ETHICAL EDUCATION

Although a code of conduct can provide an overall framework, it cannot detail a solution for every ethical situation. Some ethical questions have black-and-white answers, but others do not. Businesses must provide employees the tools and training they need to evaluate the options and arrive at suitable decisions. Similar strategies are being used in many business school ethics programs, where case studies and practical scenarios work best. Convicted white-collar criminal Walter Pavlo, a former employee at telecommunications firm MCI, speaks at colleges and universities about his experiences in the firm and prison. Pavlo, who along with other MCI associates stashed money in offshore accounts, speaks about his actions in an effort to warn students of the consequences of cheating.⁶

ETHICAL LEADERSHIP

Executives must not only talk about ethical behavior but also demonstrate it in their actions. This requires top managers to be personally committed to the company's core values and be willing to base their actions on them. The recent recession exposed executive-level misdeeds that damaged or even destroyed entire organizations and wiped out many people's life savings. In the aftermath, some organizations and business leaders have made a commitment to demonstrate ethical leadership and increased social responsibility. It is imperative that executives demonstrate high ethical standards in their words and actions. Put another way, they must “walk the talk” when it comes to ethics. Employees and middle managers look to senior managers as examples of acceptable behavior within a company. If the bosses are less than ethical, it is likely their workers will be as well.

The current ethical environment of business also includes the appointment of new corporate officers specifically charged with deterring wrongdoing and ensuring that ethical standards are met. Ethics compliance officers, whose numbers are rapidly rising, are responsible for conducting employee training programs that help spot potential fraud and abuse within the firm, investigating sexual harassment and discrimination charges, and monitoring any potential conflicts of interest.

WHISTLE-BLOWING

When individuals encounter unethical or illegal actions at work, they must decide what action to take. Sometimes it is possible to resolve the problem by working through channels within the organization. Resolving an ethical problem within the organization can be more effective than going outside of the organization—assuming, of course, that higher-level managers cooperate with the investigation. However, sometimes ethical violations involve an organization's management team; when this is the case, managers may not investigate the wrongdoing or, in extreme cases, suppress or cover up the allegations. When this happens, the individual should consider the potential damages to the company against the needs of the stakeholders to be informed as well as the greater public good. If the damage is significant, a person may conclude that the only solution is to blow the whistle. Whistle-blowing is an employee's disclosure to company officials, government authorities, or the media of illegal, immoral, or unethical practices.

State and federal laws protect whistle-blowers in certain situations, such as reports of discrimination, and the Sarbanes-Oxley Act of 2002 now requires that firms in the private sector provide procedures for anonymous reporting of accusations of fraud. Shortly after this act was passed, the wrongdoings of three high-profile organizations were exposed by internal whistle-blowers. Ethical violations as well as illegal acts at WorldCom and Enron were exposed by employees after they tried to resolve the issues internally. To encourage whistle-blowing, the Act makes it illegal for anyone to retaliate against an employee for taking concerns of unlawful conduct to a public official. In addition, whistle-blowers can seek protection under the False Claims Act, under which they can file a lawsuit on behalf of the government if they believe that a company has somehow defrauded the government. Charges against health care companies for fraudulent billing for Medicare or Medicaid are examples of this type of lawsuit.

Acting Responsibly to Satisfy Society

Companies that want to attract skilled and knowledgeable workers have wide-ranging responsibilities to their employees, both here and abroad. These include workplace safety, quality-of-life issues, ensuring equal opportunity on the job, avoiding age discrimination, and preventing sexual harassment and sexism.

WORKPLACE SAFETY

A century ago, few businesses paid much attention to the safety of their workers. In fact, most business owners viewed employees as mere cogs in the production process. Workers, some of them young children, toiled in frequently dangerous conditions. In 1911, a fire at the Triangle Shirtwaist Factory in New York City killed 146 people, mostly young girls. Contributing to the massive loss of life were the sweatshop working conditions at the factory, including overcrowding, blocked exits, and a lack of fire escapes. This tragedy forced businesses to begin to recognize their responsibility for workers' safety.

Workplace safety is now an important business responsibility. The Occupational Safety and Health Administration (OSHA) is the main federal regulatory force in setting safety and health standards. Its mandates range from broad guidelines on storing hazardous materials to specific safety standards in industries such as construction, manufacturing, and mining. OSHA tracks and investigates workplace accidents and has the authority to fine employers found liable for injuries and deaths on the job.

Although most businesses strive to make their operations safe for all employees and customers, in some cases a business's need for workplace health and safety can conflict with an individual worker's personal beliefs. Take for example the case of an Indiana hospital that fired eight workers for failing to take a flu shot. A hospital spokeswoman said, “The flu has the highest death rate of any vaccine-preventable disease, and it would be irresponsible from our perspective for health care providers to ignore that.” Many of the fired workers filed exemptions, claiming religious reasons for not taking the injections, but the hospital's need to provide a safe environment for their staff and patients outweighed these employees' concerns.⁸

QUALITY-OF-LIFE ISSUES

Balancing work and family is becoming harder for many employees. They find themselves squeezed between working long hours and handling child-care problems, caring for elderly parents, and solving other family crises.

Many employers offer family leave to employees who need to deal with family matters. Under the Family and Medical Leave Act of 1993, employers with 50 or more employees must provide unpaid leave annually for any eligible employee who wants time off for the birth or adoption of a child; to become a foster parent; or to care for a seriously ill relative, spouse, or self if he or she has a serious health condition or injury. The law requires employers to grant up to 12 weeks of leave each year, and leave may be taken intermittently as medical conditions necessitate.

ENSURING EQUAL OPPORTUNITY ON THE JOB

Businesspeople also face challenges managing an increasingly diverse workforce. Technological advances are expanding the ways people with physical disabilities can contribute in the workplace. Businesses need to find ways to responsibly recruit and manage older workers and workers with varying lifestyles. In addition to their direct employees, companies may offer benefits such as health insurance to family members and unmarried domestic partners. More than half of Fortune 500 companies currently offer domestic-partner benefits to their employees.⁹

To a great extent, efforts at managing diversity are regulated by law. The Civil Rights Act (1964) outlawed many kinds of discriminatory practices, and Title VII of the act specifically prohibits discrimination—biased treatment of a job candidate or employee—in the workplace. As shown in TABLE 2.1, other nondiscrimination laws include the Equal Pay Act (1963), the Age Discrimination in Employment Act (1967), the Equal Employment Opportunity Act (1972), the Pregnancy Discrimination Act (1978), the Civil Rights Act of 1991, and numerous executive orders. The Americans with Disabilities Act (1990) protects the rights of physically challenged people. The Vietnam Era Veterans Readjustment Act (1974) protects the employment of veterans of the Vietnam War. The Genetic Information Nondiscrimination Act (2008) prohibits discrimination on the basis of genetic tests or the medical history of an individual or that individual's family.

The Equal Employment Opportunity Commission (EEOC) was created to increase job opportunities for women and minorities and to help end discrimination based on race, color, religion, disability, gender, or national origin in any personnel action. To enforce fair-employment laws, it investigates charges of discrimination and harassment and files suit against violators. The EEOC can also help employers set up programs to increase job opportunities for women, minorities, people with disabilities, and people in other protected categories.

AGE DISCRIMINATION

With the average age of U.S. workers steadily rising, more than half of the workforce is projected to be age 40 or older in a few years. Yet some employers find it less expensive to hire and retain younger workers, who generally have lower medical bills as well as lower salary and benefits packages. At the same time, many older workers have training and skills that younger workers have yet to acquire. The Age Discrimination in Employment Act of 1967 (ADEA) protects individuals who are age 40 or older, prohibiting discrimination on the basis of age and denial of benefits to older employees.

Legal issues aside, employers might do well to consider not only the experience that older workers bring to the workplace but also their enthusiasm. Many surveys report that older workers who remain on the job by choice—not because they are forced to do so for economic reasons—are often happy with their employment. But other studies show that aging Baby Boomers are increasingly dissatisfied with the workplace due to the falling value of their retirement investments and diminishing options such as relocation. Still, employees with decades of work experience can be a valuable asset to any firm.¹⁰

SEXUAL HARASSMENT AND SEXISM

Every employer has a responsibility to ensure that all workers are treated fairly and are safe from sexual harassment. Sexual harassment refers to unwelcome and inappropriate actions of a sexual nature in the workplace. It is a form of sex discrimination that violates the Civil Rights Act of 1964, which gives both men and women the right to file lawsuits for intentional sexual harassment. About 11,000 sexual harassment complaints are filed with the EEOC each year, of which about 16 percent are filed by men.¹¹ Thousands of other cases are either handled internally by companies or never reported.

Two types of sexual harassment exist. The first type occurs when an employee is pressured to comply with unwelcome advances and requests for sexual favors in return for job security, promotions, and raises. The second type results from a hostile work environment in which an employee feels hassled or degraded because of unwelcome flirting, lewd comments, or obscene jokes. The courts have ruled that allowing sexually oriented materials in the workplace can create a hostile atmosphere that interferes with an employee's ability to do the job. Employers are also legally responsible to protect employees from sexual harassment by customers and clients. The EEOC's Web site informs employers and employees of criteria for identifying sexual harassment and how it should be handled in the workplace.

Sexual harassment is often part of the broader problem of sexism—discrimination against members of either sex, but primarily affecting women. One important sexism issue is equal pay for equal work.

U.S. Census statistics show that, overall, women still earn 77 cents for every 1 dollar earned by men. The number drops to 68 cents for African American women and 58 cents for Hispanic women. Education, occupation, work hours, and other factors don't seem to affect the gap, which remains unexplained other than the differences by gender.¹² In some extreme cases, differences in pay and advancement can become the basis for sex discrimination suits which, like sexual harassment suits, can be costly and time-consuming to settle. As in all business practices, it is better to act legally and ethically in the first place than to attempt to resolve these issues when they become the subject of litigation.

Ethical Responsibilities to the General Public

In a general sense, social responsibility is management's acceptance of the role that ethics plays in their business and their obligation to consider consumer satisfaction, and societal well-being of equal value to profit in evaluating the firm's performance. Businesses may exercise social responsibility because such behavior is required by law, because it enhances the company's image, or because management believes it is the ethical course of action.

Historically, a company's social performance has been measured by its contribution to the overall economy and the employment opportunities it provides. Variables such as total wages paid often indicate social performance. Although profits and employment remain crucial, today many factors contribute to an assessment of a firm's social performance, including providing equal employment opportunities; respecting the cultural diversity of employees; responding to environmental concerns; providing a safe, healthy workplace; and producing high-quality products that are safe to use. The responsibilities of business to the general public include dealing with public health issues, protecting the environment, and developing the quality of the workforce.

PUBLIC-HEALTH ISSUES

One of the most complex issues facing business as it addresses its ethical and social responsibilities to the general public is public health. Central to the public-health debate is the question of what businesses should do about dangerous products such as tobacco and alcohol. Tobacco products represent a major health risk, contributing to heart disease, stroke, and cancer among smokers. Families and co-workers of smokers share this danger as well, as their exposure to secondhand smoke increases their risks for cancer, asthma, and respiratory infections. Many cities have not only banned smoking in public places but also in commercial businesses, such as restaurants. Several states, including Arkansas, California, Louisiana, and Maine, have bans on smoking in cars when children under the age of 18 are present, depending on the specific state's law.¹³

Heart disease, diabetes, and obesity have become major public health issues as the rates of these three conditions have been rising. More than 5 million American children between the ages of 6 and 17 are said to be overweight. Three-quarters of obese teenagers will become obese adults at risk for diabetes and heart disease. Jared Fogle became famous for losing 245 pounds over a two-year period through exercise and a diet that included SUBWAY sandwiches. He has since set up the Jared Foundation with the goal of fighting childhood obesity by encouraging children to develop healthy diet and exercise habits. Spreading his message through speaking tours, grants to schools, and programs for children and their families, Fogle says, “My goal is to help children avoid the physical and emotional hardships I went through living with obesity.” SUBWAY's Web site lists the nutritional values of its menu items and sources of diet and nutrition advice. The Web site also features a linked page supporting the Jared Foundation and its mission.¹⁴

PROTECTING THE ENVIRONMENT

Businesses affect the environment in a variety of ways—through the energy they consume, the waste they produce, the natural resources they use, and more. Today, many businesses have taken significant steps toward protecting the environment. Some have even launched sustainability initiatives—operating in such a way that the firm not only minimizes its impact on the environment but actually regenerates or replaces used resources. Procter & Gamble and Kaiser Permanente maintain sustainability assessments of their suppliers, rating them on energy and water use, recycling, waste production, greenhouse gases produced, and other factors.¹⁵

For many managers, finding ways to minimize pollution and other environmental damage caused by their products or operating processes has become an important economic and legal issue as well as a social one. Apple is one company that is working hard to reduce the environmental impact caused by the generation of energy they consume. The goal for Apple is to use renewable sources for power in their facilities—solar, wind, hydro, and geothermal. Investing in this effort is starting to pay off for the company. Apple's data centers now use 100 percent renewable energy. The corporate centers aren't far behind. They'll keep working at it until all they reach 100 percent renewable energy.¹⁶

Despite the efforts of companies like Procter & Gamble, Kaiser Permanente, Apple, and thousands of others, production and manufacturing methods still leave behind large quantities of waste materials that can further pollute the air, water, and soil. Some products themselves, such as electronics that contain lead and mercury, are difficult to recycle or reuse—although scientists and engineers are finding ways to do this. In other instances, the action (or lack of action) on the part of a firm results in an environmental disaster, as in the case of the explosion and large-scale spill from BP's offshore drilling rig in the Gulf of Mexico. The months-long spill not only affected the ocean and coastal environments but also the lives of residents and local economies.¹⁷ Despite the difficulty, however, companies are finding that they can be environmentally friendly and profitable, too.

Another solution to the problems of pollutants is recycling—reprocessing used materials for reuse. Recycling can sometimes provide much of the raw material that manufacturers need, thereby conserving the world's natural resources and reducing the need for landfills. Robert King founded King Diesel on the island of Maui in Hawaii. The company used conventional diesel fuel to run the generators at the Central Maui Landfill. After King became concerned at the large amounts of used cooking oil being dumped, he contacted Daryl Reece at the University of Idaho. Reece helped develop a process that converts used restaurant oils into biodiesel fuel. Together they founded Pacific Biodiesel, using biodiesel to run the generators at the landfill in one of America's first commercially viable, community-based biodiesel plants. Today, Robert King and his wife Kelly manage Pacific Biodiesel and its associated companies, producing and selling biodiesel and other biofuels and designing and building similar plants around the country.¹⁸

CORPORATE PHILANTHROPY

As Chapter 1 pointed out, not-for-profit organizations play an important role in society by serving the public good. They provide the human resources that enhance the quality of life in communities around the world. To fulfill this mission, many not-for-profit organizations rely on financial contributions from the business community. Firms respond by donating billions of dollars each year to not-for-profit organizations. This corporate philanthropy includes cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees. Recipients include cultural organizations, adopt-a-school programs, neighborhood sports programs, and housing and job training programs.

Corporate philanthropy can have many positive benefits beyond purely “feel-good” rewards, such as higher employee morale, enhanced company image, and improved customer relationships. General Mills, for instance, is a major contributor to Susan G. Komen for the Cure, a foundation dedicated to curing breast cancer, through its line of yogurt products marketed under the Yoplait brand name. Yoplait's target market is health-conscious women, the same group most likely to know of or become involved with the foundation's fund-raising efforts. Through its other brands, General Mills sponsors other nationwide initiatives that support education, families, and community improvement projects.¹⁹

RESPONSIBILITIES TO CUSTOMERS

Businesspeople share a social and ethical responsibility to treat their customers fairly and act in a manner that is not harmful to them. Consumerism—the public demand that a business consider the wants and needs of its customers in making decisions—has gained widespread acceptance. Consumerism is based on the belief that consumers have certain rights. A frequently quoted statement of consumer rights was made by President John F. Kennedy in 1962. FIGURE 2.4 summarizes these consumer rights. Numerous state and federal laws have been implemented since then to protect these rights.

THE RIGHT TO BE SAFE

Contemporary businesspeople must recognize obligations, both moral and legal, to ensure the safe operation and sale of their products. Consumers should feel assured that the products they purchase will not cause injuries in normal use. Product liability refers to the responsibility of manufacturers and sellers of those products for injuries and damages caused by their products. Items that lead to injuries, either directly or indirectly, can have disastrous consequences for the manufacturer or seller of that product.

Many companies rigorously test their products to avoid safety problems. Still, testing alone cannot foresee every eventuality. Companies must try to consider all possibilities and provide adequate warning of potential dangers. When a product does pose a threat to customer safety, a responsible manufacturer responds quickly to correct the problem or recall the product. Although we take for granted that our food and our pets' food is safe, sometimes contamination occurs, which can cause illness or even death. A recent concern about salmonella, a microorganism that produces dangerous infections, caused Natura to voluntarily recall dry pet food. No illnesses or deaths were reported, but the company wanted to be certain its products were safe for pets.²⁰

THE RIGHT TO BE INFORMED

Consumers should have access to enough education and product information to make responsible buying decisions. In their efforts to promote and sell their goods and services, companies can easily neglect consumers' right to be fully informed. False or misleading advertising is a violation of the Wheeler-Lea Act, a federal law enacted in 1938. The Federal Trade Commission and other federal and state agencies have established rules and regulations that govern advertising truthfulness.

The Food and Drug Administration (FDA), which sets standards for advertising conducted by drug manufacturers, eased restrictions for prescription drug advertising on television. In print ads, drug makers are required to spell out potential side effects and the proper uses of prescription drugs. Because of the requirement to disclose this information, prescription drug television advertising was limited. Now, however, the FDA says drug ads on radio and television can directly promote a prescription drug's benefits if they provide a quick way, such as displaying a toll-free number or Internet address, for consumers to learn about side effects.

The responsibility of business to preserve consumers' right to be informed extends beyond avoiding misleading advertising. All communications with customers from salespeople's comments to warranties and invoices must be controlled to clearly and accurately inform customers. Most packaged-goods firms, personal computer makers, and makers of other products bought for personal use by consumers include toll-free customer service numbers on their product labels so that consumers can get answers to questions about a product.

THE RIGHT TO CHOOSE

Consumers should have the right to choose which goods and services they need and want to purchase. Socially responsible firms attempt to preserve this right, even if they reduce their own sales and profits in the process. Brand-name drug makers are engaged in a battle being waged by state governments, insurance companies, consumer groups, unions, and major employers such as General Motors and Verizon. These groups want to force down the rising price of prescription drugs by ensuring that consumers have the right and the opportunity to select cheaper, generic brands.

THE RIGHT TO BE HEARD

Consumers should be able to express legitimate complaints to appropriate parties. Many companies expend considerable effort to ensure full hearings for consumer complaints. Auction Web site eBay assists buyers and sellers who believe they were victimized in transactions conducted through the site, deploying employees to work with users and law enforcement agencies to combat fraud.²¹

Responsibilities to Investors and the Financial Community

Although a fundamental goal of any business is to make a profit for its shareholders, investors and the financial community demand that businesses behave ethically and legally. When firms fail in this responsibility, thousands of investors and consumers can suffer.

RIGHT TO FAIR ACCOUNTING

State and federal government agencies are responsible for protecting investors from financial misdeeds. At the federal level, the Securities and Exchange Commission (SEC) investigates suspicions of unethical or illegal behavior by publicly traded firms. It investigates accusations that a business is using faulty accounting practices to inaccurately portray its financial resources and profits to investors. Regulation FD (“Fair Disclosure”) is an SEC rule that requires publicly traded companies to announce major information to the general public, rather than first disclosing the information to selected major investors. The agency also operates an Office of Internet Enforcement to target fraud in online trading and online sales of stock by unlicensed sellers.

Although pledges and codes of conduct are common in American business, not all organizations live up to them. In addition to provisions for protecting whistle-blowing, the Sarbanes-Oxley Act of 2002 established new rules and regulations for securities trading and accounting practices. Companies are now required to publish their code of ethics, if they have one, and inform the public of any changes made to it. The law may actually motivate even more firms to develop written codes and guidelines for ethical business behavior. The federal government also created the U.S. Sentencing Commission to institutionalize ethics compliance programs that would establish high ethical standards and end corporate misconduct.

NOTES

1. Company website, http://www.panerabread.com, accessed April 21, 2013; Stuart Elliott, “Selling Products by Selling Shared Values,” New York Times, February 13, 2013, http://www.nytimes.com; Kate Rogers, “Panera Opens Free-Food, Suggested-Donations-Only Cafes,” Fox Business, January 23, 2013, http://smallbusiness.foxbusiness.com; S. W. Hartley, “Café of Sharing,” July 2012, http://kerinmarketing.com.

2. Steve Strunsky, “Port Authority Manager Fired for Misrepresenting Academic Credentials,” Star-Ledger, September 19, 2012, http://www.nj.com.

3. “Internet Abuse at Work,” Memory Spy, January 15, 2012, http://memoryspy.com.

4. Robert N. Barger, “Summary of Lawrence Kohlberg's Stages of Moral Development,” University of Notre Dame, www.library.spscc.ctc.edu, accessed January 23, 2013.

5. Company Web site, http://www.jnj.com, accessed September 13, 2013; Susan Todd, “Johnson & Johnson's New CEO Emphasizes Company Credo at Shareholder's Meeting,” The Star-Ledger, April 27, 2012, http://blog.nj.com.

6. Walter Pavlo, “There Are No Nice Prosecutors When You Are a Defendant,” Forbes, January 21, 2013, http://blogs.forbes.com.

7. Company Web site, http://www.cynthiacooper.com, accessed January 30, 2013.

8. Associated Press, “Indiana Hospital Fires 8 Workers Who Refused Flu Shot,” Fox News, http://www.foxnews.com, January 1, 2013.

9. Organization Web site, Human Rights Campaign, http://www.hrc.org, accessed January 23, 2013.

10. “Conference Board Job Satisfaction Survey Finds Older Workers as Dissatisfied as Others,” Aging Workforce News, http://www.agingworkforcenews.com, accessed January 23, 2013.

11. U.S. Equal Employment Opportunity Commission, “Sexual Harassment Charges EEOC & FEPAs Combined: FY 1997-FY 2011,” http://www1.eeoc.gov, accessed January 23, 2013.

12. National Committee on Pay Equity, “Wage Gap Statistically Unchanged,” http://www.pay-equity.org, accessed January 23, 2013.

13. “Many U.S. Kids Still Exposed to Smoke in Cars: Study,” February 6, 2012, http://www.reuters.com.

14. Company Web site, http://www.subway.com, accessed January 23, 2013; Jared Foundation, http://www.jaredfoundation.org, accessed January 23, 2013.

15. Company Web site, http://www.pgscorecard.com, accessed March 31, 2013; Akhila Vijayaraghavan, “Kaiser Permanente Greens Its Supply Chain by Switching to Safer IV Equipment,” Triple Pundit, January 20, 2012, http://www.triplepundit.com.

16. Company Web site, http://www.apple.com, accessed March 31, 2013.

17. Company Web site, http://www.bp.com, accessed January 21, 2013.

18. Company Web site, http://www.biodiesel.com, accessed April 23, 2013; Melanie Stephens, “Pono Biofuels Agriculture Plan for Maui Pacific Biodiesel: VP Kelly King Looks at the Possibilities,” Maui Weekly, October 11, 2012.

19. Company Web site, “Brand Partnerships,” http://www.generalmills.com, accessed January 23, 2013.

20. U.S. Food and Drug Administration, “Natura Pet Issues Voluntary Recall of Specialized Dry Pet Foods Due to Possible Health Risk,” press release, March 18, 2013, http://www.fda.gov.

21. Company Web site, “Rules and Policies,” http://pages.ebay.com, accessed January 23, 2013.