Transcript Chapter 5: Managerial Ethics & Corporate Social Responsibility

Chapter 4
Managing Ethics and
Social Responsibility
Three Domains of Human
Action
Domain of
Codified Law
Domain of
Ethics
Domain of
Free Choice
(Legal Standard)
(Social Standard)
(Personal Standard)
Amount of
Explicit Control
High
Low
Ethics
The code of moral principles and values that
govern the behaviors of a person or group
with respect to what is right or wrong.
Codified Law
Values and standards that are written into
the legal system.
Free Choice
Behavior about which law has no say
and for which an individual or
organization enjoys complete
freedom
Example: An individual's choice of a
marriage partner or religion.
Ethics
Obedience is to norms and standards levied
by self and/or others. These are
unenforceable in a legal sense, but are
often powerful.
Ethical Dilemma
When all choices have been deemed
undesirable because of potentially
negative ethical consequences, making it
difficult to distinguish right from wrong.
(The choices also have attractive
attributes.)
Common Ethical Dilemmas
Honesty in advertising and in
communications with superiors,
clients, and government.
Problems relating to special gifts,
entertainment, and kickbacks.
Overlooking wrong doings of others
Criteria for Ethical Decision
Making Approaches
Utilitarian
Individualism
Moral-Rights
Justice
Practical
Utilitarian Approach
Moral behaviors produce the greatest
good for the greatest number.
Individualism Approach
Acts are moral when they promote
the individual's best long-term
interests (e.g., the “golden rule”).
Moral-Rights Approach
Human beings have fundamental
rights (e.g., free consent, privacy, due
process)
Justice Approach
Standards of equity, fairness, and
impartiality.
Practical Approach
May include consideration of any of the
other four approaches and what actions
will please stakeholders most.
Factors Affecting Ethical
Choices
The Manager
Level or stage of moral
development
Learned Ethics
The Organization
Systems
Culture
Moral Development
Preconventional Level = concerned
with external rewards and
punishments
Conventional Level = conform to the
expectations of peers and society
(consistent with practical approach to
ethical decision making)
Postconventional (Principled) Level =
individuals develop a personal,
internal set of standards and values.
(About 20% of adults)
The Organization
Systems
Explicit rules and policies
Reward system
Culture
Common Values
Traditions
Guidelines for Dealing with
Ethical Dilemmas
Is it legal?
Is it right?
Is it beneficial? To whom? How much?
Is it harmful? To whom? How much?
Guidelines for Dealing with
Ethical Dilemmas (cont.)
Would you be willing to allow everyone
to do what you are considering?
Would you like your family to know?
Would you like your decision printed in
the newspaper?
Have you consulted others who are
objective and knowledgeable?
Social Responsibility
An Organization taking actions that
contribute to society
Being a good corporate citizen.
Stakeholder Model
The belief that a business should be
operated for the benefit of all who are
concerned with it (all “stakeholders”
not just the owners).
The foundation of Social
Responsibility.
Organizational Stakeholders
Owners, Investors
Employees
Suppliers
Customers
Government
Society
4 Views of Responsibilities of
Business
1- Economic
Responsibilities:
2- Legal
Responsibilities:
The only Social
Responsibility =
Profit-Maximizing.
Social Responsibility
= Obeying the Law
(as well as making
a profit)
3- Ethical Responsibilities
To be ethical, an organization should
seek a higher standard than merely
obeying the law:
e.g., Act with equity, fairness, and
impartiality
e.g., Respect the rights of individuals
e.g., Act for the common good
4 - Discretionary
Responsibilities
Purely voluntary, not mandated by
economics, law, or ethics
Goes beyond what society expects
This is true Social Responsibility
Social Responsibility Levels
Level of Concern---Likely Behavior
Discretionary-------------------Proaction
Ethical-------------------Accommodation
Legal------------------Defensive Behavior
Economic-------------Anything for profit
Why Social Responsibility?
Self-defense - If business is not
proactive, the public or government
will press for more regulation
Obligation - Business exists due to
being sanctioned by society - owes
debt to society
Self-interest - S.R. good for business in
long run
Arguments Against Social
Responsibility
Social expenditures amount to theft of
business owners’ equity.
Business lacks the ability to pursue
social goals.
Business would gain too much power if
involved in the social domain.
(Social issues should be left to those
accountable to the voters or religious
leaders, etc.)
Ethical Leadership By Example
Senior managers must be strongly
committed to ethical conduct.
Code of Ethics
A formal statement of the company's values
concerning ethics and social issues.
Principle-based:
Policy-based:
Designed to:
Outline how to act in
specific ethical
situations (reducing
the need for thinking
or shared values):
Enable the employee to
make ethical decisions
based on appropriate
values
e.g., “treat people fairly”
or “don’t be
dishonest”
Conflicts of interest
Proprietary information
Political gifts
Equal opportunities
Organizational Structures to
Promote Ethics
Ethics committee = group appointed to
monitor company ethics
Hot lines- employees can report
questionable behavior, possible fraud,
waste, or abuse( i.e., Blow the Whistle”)
Ethics training programs
Whistle-Blowing
Definition:
The disclosure by an
employee of illegal,
immoral, or
illegitimate
practices by the
organization.
Guidelines:
Be sure you are right
(keep accurate records)
Try to resolve the situation
in-house first
Consult an attorney before
contacting the media,
etc.
Realize you could be fired
Don’t expect to profit
financially