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

m a n a g e m e n t 2e
Hitt/Black/Porter
Chapter 2:
Social Responsibility and
Managerial Ethics
PowerPoint slides by
Susan A. Peterson, Scottsdale Community College
Learning Objectives
After studying this chapter, you should be able to:
Describe why an understanding of basic
approaches to ethical decision making and
corporate social responsibility is important
Compare and contrast the efficiency and social
responsibility perspectives
Explain the strategic corporate social responsibility
approach
Explain the basic approaches to ethical decision
making
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Learning Objectives
Explain the aspects of moral intensity
Describe the actions that can foster a high degree
of ethical behavior in an organization
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Corporate Social Responsibility
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
Efficiency perspective:
maximize profits for the owners of the business
MANAGERS AS OWNERS
MANAGERS AS AGENTS
Self-interests of the
manager-owner are best
achieved by serving the
needs of society
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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
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
Efficiency Versus Social Responsibility
Perspective
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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Corporate Responses
Defenders
Belief
Focus
We must fight against
efforts to restrict or
regulate our activities
and profitmaking potential.
Maximize profits.
Find legal loopholes.
Fight new restrictions
and regulations.
Accommodators
We will change when
legally compelled to
do so.
Maximize profits.
Abide by
the letter of the law.
Change when
legally compelled to
do so.
Adapted from Exhibit 2.2
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Corporate Responses (cont.)
Reactors
Belief
Focus
We should respond to
significant pressure even
if we are not legally
required to.
Protect profits. Abide
by the law. React to
pressure that could
affect business results.
Anticipators
We owe it to society to
anticipate and avoid
actions with harmful
consequences, even if
we are not pressured or
legally required to do so.
Obtain profits, Abide
by the law. Anticipate
harmful consequences
independent of
pressures and laws.
Adapted from Exhibit 2.2
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Strategic Corporate Social Responsibility
Perspective
Three fundamental criteria guide managers:
Inside-Out
Approach
Look inside
company at
issues
that are
important
to the
company
Outside-In
Approach
Outside-Out
Approach
Look outside
company at
issues
that
company has
an impact
upon
Look at social
issues in
general in
terms of the
extent to
which they
are
problematic
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Strategic Corporate Social Responsibility
Problem
in Society
Low
High
Prime
Focus
High
Affected
by the
Company
Low
Worthy
Cause
(for someone
else)
Low
High
Critical to the Company
Adapted from Exhibit 2.3
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The Development of Individual Ethics
Family
Life
Experiences
Friends
Individual
Ethics
Job
Experiences
Religion
Peers
Teachers
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Basic Approaches to Ethics
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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Basic Approaches to Ethics:
Utilitarian Approach
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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Basic Approaches to Ethics:
Moral Rights Approach
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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Basic Approaches to Ethics:
Universal Approach
“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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Basic Approaches to Ethics:
Justice Approach
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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Basic Approaches to Ethics:
Justice Approach
Procedural justice
Ensure that people consent to
the decision-making process
Ensure that the process is
administered impartially
Compensatory justice
If distributive and procedural
justice fail, those hurt by
inequitable distribution of
rewards are compensated
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Moral Intensity in Ethical Decision Making
Social
Consequences
Moral
Intensity
Proximity
Moral intensity
The degree to which
people see an issue
as an ethical one
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Moral Intensity in Ethical Decision Making
Magnitude of the
consequences
Level of impact
anticipated
Impact is
independent of
whether
consequences are
positive or negative
Moral
Intensity
Adapted from Exhibit 2.4
Adapted from Exhibit 5.2: Factors of Moral Intensity
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Moral Intensity in Ethical Decision
Making
Social
Consequences
Social consequences
The extent to which
members of a
society agree that
an act is either good
or bad
Population diversity
weakens social
consensus
Moral
Intensity
Adapted from Exhibit 2.4
Adapted from Exhibit 5.2: Factors of Moral Intensity
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Moral Intensity in Ethical Decision
Making
How likely people
think the
consequences are
The higher the
probability of the
consequence, the
more intense the
sense of ethical
obligation
Social
Consequences
Probability of effect
Moral
Intensity
Adapted from Exhibit 2.4
Adapted from Exhibit 5.2: Factors of Moral Intensity
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Moral Intensity in Ethical Decision
Making
Interval between the
time the action
occurs and the onset
of its consequences
The greater the time
interval, the less
intensity people
typically feel toward
the issue
Social
Consequences
Temporal immediacy
Moral
Intensity
Adapted from Exhibit 2.4
Adapted from Exhibit 5.2: Factors of Moral Intensity
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Moral Intensity in Ethical Decision
Making
Closeness leads to
more consideration of
the consequences
Closeness increases
feeling that it has
ethical implications
Moral
Intensity
Proximity
The closeness the
decision maker feels
to those affected
Social
Consequences
Proximity
Adapted from Exhibit 2.4
Adapted from Exhibit 5.2: Factors of Moral Intensity
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Moral Intensity in Ethical Decision
Making
Focus of effect on
only a few or
disbursed across
many individuals
Moral
Intensity
Proximity
Higher concentration
leads to feelings of
greater ethical
responsibility
Social
Consequences
Concentration of effect
Adapted from Exhibit 2.4
Adapted from Exhibit 5.2: Factors of Moral Intensity
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How Firms Make Better Ethical Decisions
Code of ethics: a formal one-tothree 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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Johnson & Johnson Credo
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.
Adapted from Exhibit 2.5
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Johnson & Johnson Credo (cont.)
• 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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Johnson & Johnson Credo (cont.)
• We are responsible to the communities in which we live and
work and to the world community as well.
• We must be good citizens – support good works and charities
and bear our fair share of taxes.
• We must encourage civic improvements and better health and
education.
• We must maintain in good order the property we are
privileged to use, protecting the environment and natural
resources.
Adapted from Exhibit 2.5
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Johnson & Johnson Credo (cont.)
• Our final responsibility is to our stockholders.
• Business must make a sound profit.
• We must experiment with new ideas.
• Research must be carried on, innovative programs developed
and mistakes paid for.
• New equipment must be purchased, new facilities provided
and new products launched.
• Reserves must be created to provide for adverse times.
• When we operate according to these principles,
the stockholders should realize a fair return.
Adapted from Exhibit 2.5
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Categories Found in Corporate Codes of
Ethics
Cluster 1
“Be a dependable
organizational citizen”
Cluster 2
“Don’t do anything
unlawful or improper
that will harm
the organization.”
Unclustered Items
Cluster 3
“Be good to our
customers.”
Adapted from Exhibit 2.6
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Adoption of Codes of Ethics
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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Subjects Addressed in Corporate Codes
of Ethics
Employee conduct
Most often used for
European firms
Community and environment
Most often used for
United States firms
Customers
Shareholders
Suppliers and contractors
Least often used for
European firms
Political interests
Innovation and technology
Least often used for
United States firms
Adapted from Exhibit 2.8
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Successfully Implementing Codes of
Ethics
Implementing
a Code
of Ethics
Communication
Training
Reward &
Recognition
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Whistleblowing
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The Government:
Foreign Corrupt Practices Act
Cannot corrupt actions of
foreign officials, politicians, or
candidates
Cannot make payments to any
person when they have "reason
to know" that the payments
might be used to corrupt the
behavior of officials
Must take steps to provide
"reasonable assurance" that
transactions are in compliance
with the law and to keep detailed
records of them
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