Transcript Hitt/Black/Porter: Management 1st ed.

Chapter 3:
Ethics and Social
Responsibility
© 2008 Prentice-Hall Business Publishing
After studying this chapter, you should be
able to answer the following:
 Who do corporations have a responsibility
to ?
 What is the best way to solve an ethical
dilemma?
 How should companies demonstrate
corporate social responsibility?
 What is the government’s role in corporate
social responsibility?
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


Obligation corporations
have to constituencies and
the nature and extent of
those obligations
Constituencies include
shareholders, customers,
employees, specific
communities, society at
large, governments
Issue: constituencies may
not share same expectations
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Efficiency perspective:
maximize profits for the owners of the business
MANAGERS AS OWNERS
Self-interests of the
manager-owner are best
achieved by serving the
needs of society
MANAGERS AS AGENTS
Managers have no
obligation to act
on behalf of society
if it does not
maximize value for
the shareholders
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Social responsibility perspective:
firms have responsibilities and obligations to
society as a whole, not just shareholders
Key Stakeholders
Employees
Suppliers
Shareholders
FIRM
Communities
Society
Financiers
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Yes
No
Action
harms
other
shareholders
Efficiency Perspective
Managerially Irresponsible
Efficiency Perspective
Managerially Irresponsible
Social Responsibility
Perspective
Managerially Responsible
Social Responsibility
Perspective
Managerially Irresponsible
Efficiency Perspective
Managerially Responsible
Efficiency Perspective
Managerially Responsible
Social Responsibility
Perspective
Managerially Responsible
Social Responsibility
Perspective
Managerially Irresponsible
No
Yes
Action harms other stakeholders
Adapted from Exhibit 2.1
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Family
Life
Experiences
Friends
Individual
Ethics
Job
Experiences
Religion
Peers
Teachers
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 Stealing
from your employer
 Lying about your hours worked
 Falsifying documents
Examples
 Sexual harassment
 “Cooking the books”
For the above situations termination is likely.
But…

What about…using the internet at work, taking personal
calls at work, dating the boss, starting rumors?
 Sometimes
the
course of action that
you would take as a
manager is not clear
 See
how you would
handle the following
situations.
1. Your boss informs you confidentially that one of your
friends is going to be fired. Your friend is about to buy a
house. Should you warn your friend that he is about to be
fired, even though you promised your boss that you would
not?
Ones
2. Your colleague has been violating your company’s code
of ethics by accepting expensive gifts from sales person
who does business with your company. Should you notify
your supervisor?
Threes
Twos
3. One of your employees has been having serious personal
problems, and you have tried to be understanding. However,
your entire staff is suffering because of poor performance by
this key team member. What should you do?
BUSINESS ETHICS TENSIONS



Profit vs. higher wages
Production vs. pollution
Supplier benefits vs.
consumer prices/lower
costs
ETHICAL DILEMMAS


Having to make a choice
between 2 competing but
arguable valid options
Ethical Lapses: decisions
that are contrary to an
individuals stated beliefs
and the policies of the
company
STEPS…
1.
Accurately identify the
problem
2.
List facts that have most
bearing on decision
3.
Consider who your
decision could injure/harm
4.
Explain what each affected
person would want you to
do about the issue
5.
List 3 alternative actions
6.
Determine your course of
action
COCA COLA CASE STUDY


Problem: Coca-Cola
bottling plant in India has
some negative externalities
See article
12
Day 2 Notes
© 2008 Prentice-Hall Business Publishing
Ethical dilemmas
 The choice between two
competing but arguably
valid options
Frameworks for ethical
decision making:
 Utilitarian approach
 Moral rights approach
 Universalism approach
 Justice approach
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 Focused
on the
consequences of an
action
 What
is the “greatest
good?”
 Different
people may
see the outcome
differently in terms of
good or bad
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Focused on moral standing of
actions, independent of their
consequences


Some things are simply
“right” or “wrong”
When two actions have moral
standing, then the positive or
negative consequences of
each will determine the more
ethical
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“Do unto others as you would have them do
unto everyone, including yourself.”
 Choose
a course of action you believe can
apply to all people under all situations
 The
issue of rights
 Rights
stem from freedom and autonomy
 Actions
that limit freedom and autonomy
generally lack moral justification
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Costs and benefits of
actions:
 Costs and benefits should
be equitably distributed
 Rules should be impartially
applied
 Those damaged should be
compensated
Distributive justice
 Equitable distribution is
based on performance
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 Page
72
 Apply each approach to this Nike case
• What would the Efficiency Perspective Say?
• What would the Social Responsibility Perp. Say?
• What would the Utilitarian approach say?
• What would the Moral Rights approach say?
• What would the Universalism approach say?
• What would the Justice approach say?
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Code of ethics: a formal oneto-three page statement
outlining the types of
behavior that are and are
not acceptable
Codes generally stress:
 Being a good “organization
citizen”
 Guiding employee behavior
away from unlawful or
improper acts that could
harm the organization
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Our Credo
• We believe our first
responsibility is to the doctors,
nurses and patients, to mothers
and fathers and all others who
use our products and services.
• In meeting their needs
everything we do must be of high
quality.
• We must constantly strive to
reduce our costs in order to
maintain reasonable prices.
• Customers' orders must be
serviced promptly and
accurately.
• Our suppliers and distributors
must have an opportunity
to make a fair profit.

We are responsible to our employees,
the men and women who work with us
throughout the world.
• Everyone must be considered as an
individual.
• We must respect their dignity and
recognize their merit.
• They must have a sense of security in
their jobs.
• Compensation must be fair and
adequate, and working conditions clean,
orderly and safe.
• We must be mindful of ways to help
our employees fulfill
their family responsibilities.
• Employees must feel free to make
suggestions and complaints.
• There must be equal opportunity for
employment, development and
advancement for those qualified.
• We must provide competent
management, and their actions must be
just and ethical.
Adapted from Exhibit 2.5
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With codes
69%
United Kingdom
France
Germany
Without codes
31%
82%
18%
53%
47%
Percentage of Firms
Adapted from Exhibit 2.7
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Implementing
a Code
of Ethics
Communication
Training
Reward &
Recognition
Whistleblowing
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 Print
notes –2 days worth
 Team Exercise p. 82, “The Limits of
Privacy”
 Video Clips
• St. Elizabeth College, “Business Ethics
Scenarios”
• The Office, “Business Ethics”
 P. 81
Review Questions #1-9
 HW: Read Ch 4: Law & The Legal
Environment of Business
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