1. SOCIAL RESPONSIBILITY AND MANAGERIAL ETHICS
Chapter 5
SOCIAL RESPONSIBILITY
AND MANAGERIAL
ETHICS
© 2003 Pearson Education Canada Inc.
5.1 1

2. LEARNING OBJECTIVES You should be able to:
Explain the classical and socioeconomic views of social responsibility
List the arguments for and against business’s being socially responsible
Differentiate among social obligation, social responsiveness, and social responsibility
Explain the relationship between corporate social responsibility and economic performance
Describe values-based management and how it is related to organizational culture
5.2 2

3. LEARNING OBJECTIVES (continued)
You should be able to:
Explain what the “greening” of management is and how organizations are “going green”
Differentiate among the four views of ethics
Identify the factors that affect ethical behaviour
Discuss various ways organizations can improve the ethical behaviour of their employees
5.3 3

4. WHAT IS SOCIAL RESPONSIBILITY?
Two Opposing Views of Social Responsibility
Classical view - management’s only social responsibility is to maximize profits
doing “social good” adds to the cost of doing business
costs have to be passed on to consumers
5.4 4

5. WHAT IS SOCIAL RESPONSIBILITY? (continued)
Two Opposing Views of Social Responsibility (continued)
Socioeconomic view - businesses are not just economic institutions
management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare
businesses have responsibility to a society
more organizations around the world have increased their social responsibility
5.5 5

6. WHAT IS SOCIAL RESPONSIBILITY? (continued)
From Obligations to Responsiveness
Social responsibility - a business’s obligation to pursue long-term goals that help society
Social obligation - obligation of a business to meet its economic and legal responsibilities
Social responsiveness - capacity of a firm to adapt to changing societal conditions
5.6 6

7. LEVELS OF SOCIAL INVOLVEMENT (Exhibit 5.2)
Social Obligation
Social
Responsibility
Responsiveness
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8. SOCIAL RESPONSIBILITY vs. SOCIAL RESPONSIVENESS (Exhibit 5.3)
Ethical
Ends
Obligation
Long term
Social
Responsiveness
Pragmatic
Means
Responses
Medium and
short term
Major consideration
Focus
Emphasis
Decision framework
5.8 8

9. SOCIAL RESPONSIBILITY AND ECONOMIC PERFORMANCE
Most Research Shows a Positive Relationship
Evaluation of Socially Conscious Mutual Stock Funds
social screening - applying social criteria to investment
Conclusion
a company’s socially responsible actions do not hurt its long-term economic performance
5.9 9

10. VALUES-BASED MANAGEMENT
Definition
An approach to managing in which managers establish, promote, and practice an organization’s shared values
Purposes of Shared Values
Act as guideposts for managerial decisions and actions
Influence marketing efforts
Build team spirit
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11. © 2003 Pearson Education Canada Inc.
PURPOSES OF SHARED VALUES (Exhibit 5.4)
Shared
Organizational
Values
Guide Managers’
Decisions and Actions
Shape
Employee
Behaviour
Influence
Marketing
Efforts
Build
Team
Spirit
© 2003 Pearson Education Canada Inc.
5.11 11

12. VALUES-BASED MANAGEMENT (continued)
Developing Shared Values
It is difficult to establish shared values
Managers are responsible for shaping the organization so that its values, norms, and ideals appeal strongly to employees
Companies that practice values-based management have broad commitment to being socially responsible and socially responsive
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13. SUGGESTIONS FOR CREATING A GOOD CORPORATE VALUES STATEMENT (Exhibit 5
5.13 13

14. THE “GREENING” OF MANAGEMENT
Definition
Recognition of the close link between an organization’s decisions and activities and its impact on the natural environment
Global Environmental Problems
There are many global environmental problems
Economically developed nations are blamed for the problems
Problems expected to increase as emerging countries become more developed
5.14

15. THE “GREENING” OF MANAGEMENT (continued)
How Organizations Go Green
Products and production processes have become cleaner
Shades of green - describe different approaches that organizations may take
legal approach - follow legal obligations
market approach - organizations respond to the environmental preferences of customers
stakeholder approach - organization chooses to respond to multiple demands made by stakeholders
activist approach - looks for ways to respect and preserve the earth and its natural resources
5.15

16. © 2003 Pearson Education Canada Inc.
APPROACHES TO BEING GREEN (Exhibit 5.6)
Legal
Approach
(Light Green)
Market
Stakeholder
Activism
(Dark Green)
Low
High
Environmental Sensitivity
© 2003 Pearson Education Canada Inc.
5.16 14

17. THE “GREENING” OF MANAGEMENT (continued)
Summing Up Social Responsibility
Four-stage progression of an organization’s social responsibility
each stage implies an increasing level of managerial discretion
Stage 1 - promote stockholders’ interests by seeking to minimize costs and maximize profits
Stage 2 - managers accept their responsibility to employees and focus on human resource concerns
5.17

18. THE “GREENING” OF MANAGEMENT (continued)
Summing Up Social Responsibility (continued)
Four-stage progression (continued)
Stage 3 - expand responsibilities to other stakeholders
Stage 4 - managers feel responsibility to society as a whole
5.18

19. © 2003 Pearson Education Canada Inc.
TO WHOM IS MANAGEMENT RESPONSIBLE? (Exhibit 5.7)
Lesser
Greater
Social Responsibility
Stage 1
Owners and
Management
Stage 2
Employees
Stage 3
Constituents in the
Specific Environment
Stage 4
Broader
Society
© 2003 Pearson Education Canada Inc.
5.19 15

20. MANAGERIAL ETHICS Ethics
Rules and principles that define right and wrong conduct
Four Views of Ethics
Utilitarian view - ethical decisions are made on the basis of their outcomes or consequences
5.20

21. MANAGERIAL ETHICS (continued)
Four Views of Ethics (continued)
Rights view - respects and protects individual liberties and privileges
Theory of justice view - managers impose and enforce rules fairly and impartially
Integrative social contracts theory - decisions should be based on empirical and normative factors
5.21

22. © 2003 Pearson Education Canada Inc.
FACTORS THAT AFFECT ETHICAL AND UNETHICAL BEHAVIOUR (Exhibit 5.8)
Issue
Intensity
Individual
Characteristics
Moderators
Ethical
Dilemma
Stage of Moral
Development
Ethical/Unethical
Behaviour
Organizational
Culture
Structural
Variables
© 2003 Pearson Education Canada Inc.
5.22 18

23. © 2003 Pearson Education Canada Inc.
STAGES OF MORAL DEVELOPMENT (Exhibit 5.9)
© 2003 Pearson Education Canada Inc.
5.23 16

24. MANAGERIAL ETHICS (continued)
Factors That Affect Managerial Ethics (continued)
Individual characteristics
values - basic convictions about right and wrong
ego strength - strength of a person’s convictions
locus of control - degree to which people believe that they control their own fate
5.24

25. MANAGERIAL ETHICS (continued)
Factors That Affect Managerial Ethics (continued)
Structural variables
design of organization affects ethical behaviour
rules and regulations
behaviour of superiors
performance appraisal systems that focus on means as well as ends
reward systems that punish failure to achieve ends is likely to compromise ethics
5.25

26. MANAGERIAL ETHICS (continued)
Factors That Affect Managerial Ethics (continued)
Organizational culture
strong culture more influential than a weak culture
high ethical standards result from a culture that is high in risk tolerance, control, and conflict tolerance
Issue intensity
importance of an ethical issue
more intense issues prompt greater ethical behaviour
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27. © 2003 Pearson Education Canada Inc.
DETERMINANTS OF ISSUE INTENSITY (Exhibit 5.10)
© 2003 Pearson Education Canada Inc.
5.27 17

28. MANAGERIAL ETHICS (continued)
Ethics in an International Context
social and cultural differences determine ethical and unethical behaviour
Global Compact - United Nations document containing principles for doing business globally in the areas of human rights, labour, and environment
5.28

29. THE GLOBAL COMPACT Human Rights
Principle 1:support and respect the protection of international human rights within their sphere of influence; and
Principle 2: make sure their own corporations are not complicit in human rights abuses.
Labour
Principle 3: freedom of association and the effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.
Environment
Principle 7: support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies.
5.29

30. MANAGERIAL ETHICS (continued)
Toward Improving Ethical Behaviour
Comprehensive ethics programs have the potential to improve an organization’s ethical climate
Employee selection - eliminate ethically questionable applicants
Codes of ethics - formal statement of an organization’s primary values and ethical rules
5.30

31. MANAGERIAL ETHICS (continued)
Toward Improving Ethical Behaviour (continued)
Top management’s leadership - what they do is far more important than what they say
Job goals and performance appraisal - goals should be clear and realistic and must focus on ethical standards
Ethics training - an increasing number of organizations use training to encourage ethical behaviour
Independent social audits - evaluation of decisions in relation to code of ethics
Formal protective mechanisms - protect employees who face ethical dilemmas
5.31