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Business Ethics and Social Responsibility
Chapter 2
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©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
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Learning Objectives
2-1 Define business ethics and social responsibility and examine their importance.
2-2 Detect some of the ethical issues that may arise in business.
2-3 Specify how businesses can promote ethical behavior.
2-4 Explain the four dimensions of social responsibility.
2-5 Debate an organization’s social responsibilities to owners, employees, consumers, the environment and the community.
2-6 Evaluate the ethics of a business’s decision.
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POLLING QUESTION
Xerox funds what it calls a “Community Involvement Program.” This program allows employees to donate time to a cause of their choosing. This type of program demonstrates the company’s _____.
Business ethics
Social responsibility
Corporate citizenship
Code of ethics
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Answer: B. Social responsibility
Social responsibility is a business’s obligation to maximize its positive impact and minimize its negative impact on society.
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Business Ethics and Social Responsibility 1
Business ethics versus personal ethics
Acceptable business behavior determined by:
The organization
Stakeholders: customers, suppliers, competitors, government regulators, interest groups, and the public
An individual’s personal principles and values
An organization’s culture influences its ethical behavior
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We define business ethics as the principles and standards that determine acceptable conduct in business organizations. Personal ethics, on the other hand, relates to an individual’s values, principles, and standards of conduct.
The acceptability of behavior in business is determined by not only the organization, but also stakeholders such as customers, competitors, government regulators, interest groups, and the public, as well as each individual’s personal principles and values.
Most unethical activities within organizations are supported by an organizational culture that encourages employees to bend the rules. Organizations that exhibit a high ethical culture encourage employees to act with integrity and adhere to business values.
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Figure 2.1 Global Trust in Different Industries
Source: Edelman, 2018 Edelman Trust Barometer Global Report, http://cms. edelman.com/sites/default/files/2018- 01/2018_Edelman_Trust_Barometer_ Global_Report_Jan.PDF (accessed January 27, 2018).
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Business Ethics and Social Responsibility 2
Social responsibility
Business’s obligation to maximize its positive impact and minimize its negative impact on society
Social responsibility and ethics differ
Ethics: decisions made by an individual or work group that society evaluates as right or wrong
Social responsibility: impact of the entire organization’s activities on society
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Many consumers and social advocates believe that businesses should not only make a profit but also consider the social implications of their activities. We define social responsibility as a business’s obligation to maximize its positive impact and minimize its negative impact on society.
Although many people use the terms social responsibility and ethics interchangeably, they do not mean the same thing.
Business ethics refer to an individual’s or a work group’s decisions that society evaluates as right or wrong
Social responsibility is a broader concept that concerns the impact of the entire business’s activities on society
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Business Ethics and Social Responsibility 3
Business law
Refers to the laws and regulations that govern the conduct of business
Many problems and conflict could be avoided if owners, managers, and employees knew more about business law and the legal system
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The most basic ethical and social responsibility concerns have been codified by laws and regulations that encourage businesses to conform to society’s standards, values, and attitudes. For example, the Dodd-Frank Act was passed to reform the financial industry and offer consumers protection against complex and/or deceptive financial products. At a minimum, managers are expected to obey all laws and regulations.
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Table 2.1 Timeline of Ethical and Socially Responsible Activities
| Timeline | Activities |
| 1960s | Social issues, Consumer Bill of Rights, disadvantaged consumer, environmental issues, product safety |
| 1970s | Business ethics, social responsibility, diversity, bribery, discrimination, identifying ethical issues |
| 1980s | Standards for ethical conduct, financial misconduct, self-regulation, codes of conduct, ethics training |
| 1990s | Corporate ethics programs, regulation to support business ethics, health issues, safe working conditions, detecting misconduct |
| 2000s | Transparency in financial markets, cyber security, intellectual property, regulation of accounting and finance, executive compensation, identity theft |
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The Role of Ethics in Business 1
Society’s judgment directly affects an organization’s ability to achieve its goals
Many firms are recognized for ethical conduct
Legal and ethical issues
Ethical conflicts can evolve into legal disputes
Business ethics goes beyond legal issues
Not limited to for-profit organizations
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Regardless of what an individual believes about a particular action, if society judges it to be unethical or wrong, whether correctly or not, that judgment directly affects the organization’s ability to achieve its business goals.
Many firms are recognized for their ethical conduct. The mass media frequently report about firms that engage in misconduct related to bribery, fraud, and unsafe products. However, the good ethical conduct of the vast majority of firms is not reported as often. Therefore, the public often gets the impression that misconduct is more widespread than it is in reality.
Often, misconduct starts as ethical conflicts but evolves into legal disputes when cooperative conflict resolution cannot be accomplished. However, it is important to understand that business ethics goes beyond legal issues. Ethical conduct builds trust among individuals and in business relationships, which validates and promotes confidence in business relationships. Establishing trust and confidence is much more difficult in organizations that have reputations for acting unethically.
Ethical issues are not limited to for-profit organizations either. Ethical issues include all areas of organizational activities. Whether made in science, politics, sports, or business, most decisions are judged as right or wrong, ethical or unethical. Negative judgments can affect an organization’s ability to build relationships with customers and suppliers, attract investors, and retain employees.
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POLLING QUESTION
You are an account manager and forgot to submit a purchase order last week for Lotzadoe Construction, your largest client. The company’s administrative assistant, Heeso, calls to check on the status of the order. What do you do?
Apologize for your lapse in memory and immediately place the order.
Let Heeso know the order is on its way and charge a significant sum of money to overhead in order to have expedited shipping.
Explain that your department manager has not yet authorized the purchase order but is expected to do so this afternoon.
Apologize to the customer for the delay and explain the requested items are backordered and will not be received for another two weeks.
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Student answers will vary. Encourage students to consider the stakeholders in this scenario. Who will be impacted? Students should consider the following potential issues with each answer.
A. Apologize: Lotzadoe Construction may lose confidence in your ability to service them.
B. Expediated shipping:
Charging to overhead will decrease your departments’ profit margin, which may adversely affect you.
Lotzadoe Construction may find out you lied to them.
If you forego your integrity to solve the issue in this manner, you are setting the groundwork for do so in the future.
C. Not authorized yet:
Your department manager may find out you “threw him under the bus.”
Same issues as those mentioned in Answer “B.”
D. Backordered: Same issues as previously discussed.
Option A might be the best-case scenario. You may have to work hard to win back your trust with Lotzadoe Construction, but it is better in the long run to be honest.
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The Role of Ethics in Business 2
Recognizing Ethical Issues in Business
An ethical issue is an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical
Bribery: payments, gifts, or special favors intended to influence the outcome of a decision
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Recognizing ethical issues is the most important step in understanding business ethics. An ethical issue is an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical.
Many business issues seem straightforward and easy to resolve on the surface, but are, in reality, very complex. A person often needs several years of experience in business to understand what is acceptable or ethical. For example, it is considered improper to give or accept bribes, which are payments, gifts, or special favors intended to influence the outcome of a decision.
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Bribery
A former Siemens executive plead guilty in a $100 million Argentina bribery case. The engineering firm itself was involved in a decades long legal investigation.
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Table 2.2 Organizational Misconduct in the United States
| Misconduct Facts | Percentage |
| Observed misconduct | 47% |
| Abusive behavior | 26% |
| Lying to stakeholders | 22% |
| Conflict of interest | 15% |
| Internet abuse | 16% |
| Health violations | 15% |
| Pressure to compromise standards | 16% |
| Report observed misconduct | 69% |
| Experience retaliation for reporting | 44% |
Source: Ethics and Compliance Initiative, 2018 Global Business Ethics Survey™: The State of Ethics and Compliance in the Workplace (Arlington, VA: Ethics and Compliance Initiative, 2018).
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The Role of Ethics in Business 3
Recognizing Ethical Issues in Business continued
Misuse of company time
Misuse of company time through personal social media use and online shopping is very costly to businesses.
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Theft of time is a common area of misconduct observed in the workplace. One example of misusing time in the workplace is by engaging in activities that are not necessary for the job. For instance, many employees spend an average of one hour each day using social networking sites. Some companies have chosen to block certain sites such as Facebook, YouTube, or Pandora from employees.
Time theft costs can be difficult to measure but are estimated to cost companies hundreds of billions of dollars annually. It is widely believed that the average employee “steals” 4.5 hours a week with late arrivals, leaving early, long lunch breaks, inappropriate sick days, excessive socializing, and engaging in personal activities such as online shopping and watching sports while on the job.
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The Role of Ethics in Business 4
Recognizing Ethical Issues in Business continued
Abusive and intimidating behavior
Most common ethical problem for employees
Includes actions such as: physical threats, false accusations, profanity, insults, yelling, ignoring someone
Difficult to assess and manage
Intent must be considered
Bullying is associated with a hostile workplace
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Abusive or intimidating behavior is the most common ethical problem for employees. These concepts can mean anything from physical threats, false accusations, profanity, insults, yelling, harshness, and unreasonableness to ignoring someone or simply being annoying; and the meaning of these words can differ by person—you probably have some ideas of your own.
Abusive behavior is difficult to assess and manage because of diversity in culture and lifestyle. What does it mean to speak profanely? Is profanity only related to specific words or other such terms that are common in today’s business world? If you are using words that are normal in your language but that others consider to be profanity, have you just insulted, abused, or disrespected them?
Within the concept of abusive behavior, intent should be a consideration. If the employee was trying to convey a compliment but the comment was considered abusive, then it was probably a mistake. The way a word is said (voice inflection) can be important.
Bullying is associated with a hostile workplace when a person or group is targeted and is threatened, harassed, belittled, verbally abused, or overly criticized. Bullying may create what some consider a hostile environment, a term generally associated with sexual harassment. One may wonder why workers tolerate such activities. The problem is that 72 percent of bullies outrank their victims.
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Table 2.3 Actions Associated with Bullies
| Spreading rumors to damage others Blocking others’ communication in the workplace Flaunting status or authority to take advantage of others Discrediting others’ ideas and opinions Using e-mail to demean others Failing to communicate or return communication Insults, yelling, and shouting Using terminology to discriminate by gender, race, or age Using eye or body language to hurt others or their reputation Taking credit for others’ work or ideas |
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The Role of Ethics in Business 5
Recognizing Ethical Issues in Business continued
Misuse of company resources
Spending excessive time on personal e-mails
Submitting personal expenses on company reports
Using company copier for personal use
Many companies are implementing official policies delineating acceptable use of company resources
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Misuse of company resources has been identified by the Ethics Resource Center as a leading issue in observed misconduct in organizations. Issues might include spending an excessive amount of time on personal e-mails, submitting personal expenses on company expense reports, or using the company copier for personal use.
The most common way that employees abuse resources is by using company computers for personal use. Typical examples of using a computer for personal use include shopping on the Internet, downloading music, doing personal banking, surfing the Internet for entertainment purposes, or visiting Facebook. Some have instituted policies that allow for some personal computer use as long as the use does not detract significantly from the workday.
No matter what approach a business chooses to take, it must have policies in place to prevent company resource abuse. Because misuse of company resources is such a widespread problem, many companies have implemented official policies delineating acceptable use of company resources.
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The Role of Ethics in Business 6
Recognizing Ethical Issues in Business continued
Conflict of interest
When a person must choose whether to advance personal interests or those of others
To avoid, employees must separate personal financial interests from business dealings
Insider trading: the buying or selling of stocks by insiders who possess material information that is still not public
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A conflict of interest, one of the most common ethical issues identified by employees, exists when a person must choose whether to advance his or her own personal interests or those of others. To avoid conflicts of interest, employees must be able to separate their personal financial interests from their business dealings.
Insider trading is an example of a conflict of interest. Insider trading is the buying or selling of stocks by insiders who possess material that is still not public. Bribery can also be a conflict of interest. While bribery is an increasing issue in many countries, it is more prevalent in some countries than in others.
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The Role of Ethics in Business 7
Fairness and Honesty
Communications
False and misleading advertising
Deceptive personal-selling tactics
Product labeling
Business relationships
Keep company secrets
Meet obligations and responsibilities
Avoid undue pressure forcing others to act unethically
Plagiarism
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Fairness and honesty are at the heart of business ethics and relate to the general values of decision makers. At a minimum, businesspersons are expected to follow all applicable laws and regulations. But beyond obeying the law, they are expected not to harm customers, employees, clients, or competitors knowingly through deception, misrepresentation, coercion, or discrimination.
Communications is an area in which ethical concerns may arise. False and misleading advertising, as well as deceptive personal-selling tactics, anger consumers and can lead to the failure of a business. Truthfulness about product safety and quality are also important to consumers. Another important aspect of communications that may raise ethical concerns relates to product labeling.
Ethical behavior within a business involves keeping company secrets, meeting obligations and responsibilities, and avoiding undue pressure that may force others to act unethically. It is the responsibility of managers to create a work environment that helps the organization achieve its objectives and fulfill its responsibilities.
Plagiarism is taking someone else’s work and presenting it as your own without mentioning the source.
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The Role of Ethics in Business 8
Making Decisions about Ethical Issues
Questions to consider:
Are there potential legal restrictions or violations that could result from the action?
Does your company have specific code of ethics or policy on the action?
Is this activity customary in your industry? Are there any industry trade groups that provide guidelines or codes of conduct that address this issue?
Would this activity be accepted by your co-workers? Will your decision or action withstand open discussion with co-workers and managers and survive untarnished?
How does this activity fit with your own beliefs and values?
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The Role of Ethics in Business 9
Improving Ethical Behavior in Business
Ethical decisions in organizations are influenced by three key factors:
Individual moral standards and values
Influence of managers and co-workers
Opportunity to engage in misconduct
Professional codes of ethics
Whistleblowing
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Understanding how people make ethical choices and what prompts a person to act unethically may result in better ethical decisions.
Because ethical issues often emerge from conflict, it is useful to examine the causes of ethical conflict. Business managers and employees often experience some tension between their own ethical beliefs and their obligations to the organizations in which they work. Many employees utilize different ethical standards at work than they do at home. This conflict increases when employees feel that their company is encouraging unethical conduct or exerting pressure on them to engage in it.
Professional codes of ethics are formalized rules and standards that describe what the company expects of its employees. Codes of ethics, policies on ethics, and ethics training programs advance ethical behavior because they prescribe which activities are acceptable and which are not, and they limit the opportunity for misconduct by providing punishments for violations of the rules and standards.
Whistleblowing occurs when an employee exposes an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies. Unfortunately, whistleblowers are often treated negatively in organizations. The government, therefore, tries to encourage employees to report observed misconduct. Congress has also taken steps to close a legislative loophole in whistleblowing legislation that has led to the dismissal of many whistleblowers.
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Table 2.6 Why a Code of Ethics Is Important
| Alerts employees about important issues and risks to address Provides values such as integrity, transparency, honesty, and fairness that give the foundation for building an ethical culture Gives guidance to employees when facing gray or ambiguous situations or ethical issues that they have never faced before Alerts employees to systems for reporting or places to go for advice when facing an ethical issue Helps establish uniform ethical conduct and values that provides a shared approach to dealing with ethical decisions Serves as an important document for communicating to the public, suppliers, and regulatory authorities about the company’s values and compliance Provides the foundation for evaluation and improvement of ethical decision making |
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POLLING QUESTION
Many firms are recognized for their ethical conduct. 3M has been placed on the World’s Most Ethical Companies list five year in a row. 3M’s ethical conduct can be seen as a(n) _____.
Competitive advantage
Opportunity for the company
Philanthropic gesture
Weakness of the company
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Answer: A. Competitive advantage
As discussed in the text, 3M acknowledges the importance of the ethical conduct of the company and views this as an advantage they have over their competition.
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The Nature of Social Responsibility 1
Corporate citizenship
For example, companies introducing eco-friendly products and marketing efforts
Social Responsibility Issues
Relations with owners and stockholders
Maintain proper accounting procedures
Provide investors will all relevant information
Protect owners’ rights and investments
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Corporate citizenship is the extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their various stakeholders. It involves the activities and organizational processes adopted by businesses to meet their social responsibilities. A commitment to corporate citizenship by a firm indicates a strategic focus on fulfilling the social responsibilities expected of it by its stakeholders.
Businesses must first be responsible to their owners, who are primarily concerned with earning a profit or a return on their investment in a company. In short, the business must maximize the owners’ investments in the firm.
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Table 2.7 Social Responsibility Requirements
| Stages | Examples |
| Stage 1: Financial and economic viability | Starbucks offers investors a healthy return on investment, including paying dividends. |
| Stage 2: Compliance with legal and regulatory requirements | Starbucks specifies in its code of conduct that payments made to foreign government officials must be lawful according to the laws of the United States and the foreign country. |
| Stage 3: Ethics, principles, and values | Starbucks’ mission and values create ethical culture with ethical leaders. |
| Stage 4: Philanthropic activities | Starbucks created the Starbucks College Achievement Plan that offers eligible employees full tuition to earn a bachelor’s degree in partnership with Arizona State University. |
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The four dimensions of social responsibility are illustrated using Table 2.7 in your text and here on this slide. Earning profits is the economic foundation, and complying with the law is the next step.
However, a business whose sole objective is to maximize profits is not likely to consider its social responsibility, although its activities will probably be legal. Finally, voluntary responsibilities are additional activities that may not be required but which promote human welfare or goodwill. Legal and economic concerns have long been acknowledged in business, but voluntary and ethical issues are more recent concerns.
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Table 2.9a The Argument For and Against Social Responsibility
| For: |
| Social responsibility rests on stakeholder engagement and results in benefits to society and improved firm performance. Businesses are responsible because they have the financial and technical resources to address sustainability, health, and education. As members of society, businesses and their employees should support society through taxes and contributions to social causes. Socially responsible decision making by businesses can prevent increased government regulation. Social responsibility is necessary to ensure economic survival: If businesses want educated and healthy employees, customers with money to spend, and suppliers with quality goods and services in years to come, they must take steps to help solve the social and environmental problems that exist today. |
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Table 2.9b The Argument For and Against Social Responsibility
| Against: |
| It sidetracks managers from the primary goal of business—earning profit. The responsibility of business to society is to earn profits and create jobs. Participation in social programs gives businesses greater power, perhaps at the expense of concerned stakeholders. Does business have the expertise needed to assess and make decisions about social and economic issues? Social problems are the responsibility of the government agencies and officials, who can be held accountable by voters. Creation of nonprofits and contributions to them are the best ways to implement social responsibility. |
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The Nature of Social Responsibility 2
Social Responsibility Issues continued
Employee relations
Provide a safe workplace
Pay them adequately
Keep employees informed of what is happening in their company
Listen to their grievances and treat them fairly
Provide equal opportunities for all employees
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Another issue of importance to a business is its responsibilities to employees. Without employees, a business cannot carry out its goals. Employees expect businesses to provide a safe workplace, pay them adequately for their work, and keep them informed of what is happening in their company. They want employers to listen to their grievances and treat them fairly. A major social responsibility for business is providing equal opportunities for all employees regardless of their sex, age, race, religion, or nationality. Diversity is also helpful to a firm financially.
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The Nature of Social Responsibility 3
Social Responsibility Issues continued
Consumer relations
Consumerism
John F. Kennedy’s 1962 consumer bill of rights
Right to safety
Right to be informed
Right to choose
Right to be heard
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The activities that independent individuals, groups, and organizations undertake to protect their rights as consumers are known as consumerism. To achieve their objectives, consumers and their advocates write letters to companies, lobby government agencies, make public service announcements, and boycott companies whose activities they deem irresponsible.
Many of the desires of those involved in the consumer movement have a foundation in John F. Kennedy’s 1962 consumer bill of rights, which highlighted four rights.
The right to safety means that a business must not knowingly sell anything that could result in personal injury or harm to consumers.
The right to be informed gives consumers the freedom to review complete information about a product before they buy it.
The right to choose ensures that consumers have access to a variety of products and services at competitive prices.
The right to be heard assures consumers that their interests will receive full and sympathetic consideration when the government formulates policy.
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The Nature of Social Responsibility 4
Social Responsibility Issues continued
Sustainability issues
Pollution
Water
Air
Land
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Sustainability is defined as conducting activities in such a way as to provide for the long-term well-being of the natural environment, including all biological entities. Sustainability involves the interaction among nature and individuals, organizations, and business strategies and includes the assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles so that they maintain the health of the natural environment.
A major issue in the area of environmental responsibility is pollution. Water pollution results from dumping toxic chemicals and raw sewage into rivers and oceans, oil spills, and the burial of industrial waste in the ground where it may filter into underground water supplies.
Air pollution is usually the result of smoke and other pollutants emitted by manufacturing facilities, as well as carbon monoxide and hydrocarbons emitted by motor vehicles.
Land pollution is tied directly to water pollution because many of the chemicals and toxic wastes that are dumped on the land eventually work their way into the water supply.
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Figure 2.3 Consumer Likelihood to Personally Address Social Responsibility Issues
Source: Cone Communications and Ebiquity, “2017 Cone Communications CSR Study,” http://www.conecomm.com/2017-cone-communications-csr-study-pdf (accessed March 28, 2018).
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The Nature of Social Responsibility 5
Social Responsibility Issues continued
Alternative energy
Fossil fuels are problematic
Sources include wind power, solar power, nuclear power, biofuels, electric cars, and hydro- and geothermal power
Will likely require government subsidies
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With ongoing plans to reduce global carbon emissions, countries and companies alike are looking toward alternative energy sources. The U.S. government has begun to recognize the need to look toward alternative forms of energy as a source of fuel and electricity. There have been many different ideas as to which form of alternative energy would best suit the United States’ energy needs. These sources include wind power, solar power, nuclear power, biofuels, electric cars, and hydro- and geothermal power. As of yet, no “best” form of alternative fuel has been selected to replace gasoline.
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POLLING QUESTION
You are a member of a five person executive committee debating whether to install solar panels on your facility, Needmore Manufacturing. It will be a significant capital expenditure for your company, which is facing a workforce strike due to stagnant wages and paltry benefits. Two committee members believe this will raise morale and ingratiate Needmore Manufacturing with the local community. The other two members believe these financial resources could be put to better use. You are the swing vote. How will you vote and justify your decision?
Yes, community support is vitally important to the long-term success of Needmore Manufacturing.
No, the funds should instead go to increasing employee’s pay and benefits.
Yes, solar panels will decrease Needmore Manufacturing’s environmental footprint.
No, it is not worth the cost since the power generation is dependent on the weather, and cloudy skies and winter will decrease the amount of sunlight received.
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Student answers will vary depending on their own perspectives. They should be able to justify their arguments.
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The Nature of Social Responsibility 6
Social Responsibility Issues continued
Response to environmental issues
Greenwashing
Recycling
Green business
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Many firms are trying to eliminate wasteful practices, the emission of pollutants, and/or the use of harmful chemicals from their manufacturing processes. Other companies are seeking ways to improve their products. Environmentalists are concerned that some companies are merely greenwashing, or “creating a positive association with environmental issues for an unsuitable product, service, or practice.”
Many businesses have turned to recycling, the reprocessing of materials—aluminum, paper, glass, and some plastic—for reuse. Such efforts to make products, packaging, and processes more environmentally friendly have been labeled “green” business or marketing by the public and media.
Another significant issue for businesses are their responsibilities to the general welfare of the communities and societies in which they operate. Many businesses simply want to make their communities better places for everyone to live and work. The most common way that businesses exercise their community responsibility is through donations to local and national charitable organizations.
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The Nature of Social Responsibility 7
Social Responsibility Issues continued
Community relations
Many businesses want to make their communities better places for everyone to live and work
Most common way is through donations to local and national charitable organizations
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A final, yet very significant, issue for businesses concerns their responsibilities to the general welfare of the communities and societies in which they operate. Many businesses simply want to make their communities better places for everyone to live and work. The most common way that businesses exercise their community responsibility is through donations to local and national charitable organizations.
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The Nature of Social Responsibility 8
Unemployment
While an economic issue, it carries ethical implications
Protesters say unemployment leads to growing gap between rich and poor
Factory closures are ethical issues because they contribute to unemployment
Employers accused of unreasonable hiring standards and not taking time to train employees
Some businesses are working to reduce unemployment through partnerships with organizations such as the Opportunity Network to develop and create Jobs for the USA
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Solve the Dilemma Customer Privacy 1
Checkers Pizza was one of first to offer home delivery service, with overwhelming success
Major pizza chains followed suit, taking away Checkers’ competitive edge
Needed a different strategy to beat competition
Developed computerized information database to make Checkers most efficient competitor and provide insight into consumer buying behavior
If customers calling in had ordered before, their address and previous order information came up on computer
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This Solve the Dilemma is taken from Chapter 2, Learning Objective 2-6.
Checkers Pizza was one of the first to offer home delivery service, with overwhelming success. However, the major pizza chains soon followed suit, taking away Checkers’ competitive edge. Jon Barnard, Checkers’ founder and co-owner, needed a new gimmick to beat the competition. He decided to develop a computerized information database that would make Checkers the most efficient competitor and provide insight into consumer buying behavior at the same time. Under the system, telephone customers were asked their phone number; if they had ordered from Checkers before, their address and previous order information came up on the computer screen.
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Solve the Dilemma Customer Privacy 2
New system was successful
After three months, founder and owner Jon Barnard wanted to give an award to the family who ate the most Checkers pizza
However, he began to think maybe the family might not want the attention and publicity
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After successfully testing the new system, Barnard put the computerized order network in place in all Checkers outlets. After three months of success, he decided to give an award to the family that ate the most Checkers pizza. Through the tracking system, the company identified the biggest customer, who had ordered a pizza every weekday for the past three months (63 pizzas). The company put together a program to surprise the family with an award, free-food certificates, and a news story announcing the award. As Barnard began to plan for the event, however, he began to think that maybe the family might not want all the attention and publicity.
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Solve the Dilemma Customer Privacy 3
Critical Thinking Questions
What are some of the ethical issues in giving customers an award for consumption behavior without notifying them first?
Do you see this as a potential violation of privacy? Explain.
How would you handle the situation if you were Barnard?
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Answers:
In such a situation, the consumption behavior of the rewarded customer is communicated to the public. It violates the right of the consumer to be informed. The company should know what the effect of this award might have on the winner: negative consequences may be as likely as positive ones.
The publicity given to the customer violates privacy: it reveals to the public some of his or her behaviors (here, pizza eating habits). However, the family might not mind the publicity or feel like it violates their privacy. Students might have different opinions regarding the seriousness of this issue.
Barnard should contact the family concerned and inform them that an award rewarding Checkers’ best customer may be given to them if the family accepts the award. The program of the award (especially the news story associated with it) should be described in detail. If the family refuses the award, the next best customer could be contacted.
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Accessibility Content: Text Alternatives for Images
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Figure 2.1 Global Trust in Different Industries, Text Alternative
The chart shows the percentage of trust in these business industries (all percentages are approximate):
Technology, 74 percent
Food and beverage, 63 percent
Consumer packaged goods, 60 percent
Telecommunications, 63 percent
Automotive, 62 percent
Energy, 63 percent
Health care, 64 percent
Financial services, 54 percent
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Figure 2.3 Consumer Likelihood to Personally Address Social Responsibility Issues, Text Alternative
86 percent are willing to buy a product with a social and or environmental benefit.
82 percent are willing to donate to a charity support by a company he or she trusts.
81 percent are willing to tell friends and family about a company’s social responsibility efforts.
74 percent are willing to volunteer for a cause supported by a company he or she trusts
69 percent are willing to voice his or her opinion to a company about its social responsibility efforts.
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