1. Management’s Social and Ethical Responsibilities
Chapter Five
Management’s Social and Ethical Responsibilities

2. Chapter Objectives
Define the term corporate social responsibility (CSR) and specify the four levels in Carroll’s global CSR pyramid.
Contrast the classical economic and socioeconomic models of business and summarize the arguments for and against CSR.
Identify and describe the four social responsibility strategies and explain the concept of enlightened self-interest.
Summarize the four practical lessons from business ethics research.

3. Chapter Objectives (cont’d)
Distinguish between instrumental and terminal values and explain their relationship to business ethics.
Identify and describe at least four of the ten general ethical principles.
Discuss what management can do to improve business ethics.

4. Social Responsibility: Definition and Perspectives
Corporate Social Responsibility (CSR)
The idea that business has:
Social obligations above and beyond making a profit
Social obligations to constituent groups in society other than stockholders and beyond that prescribed by law
Organizations include financial, environmental, and social responsibility in their core business strategies.

5. Figure 5.1: Carroll’s Corporate Global Social Responsibility Pyramid

6. Social Responsibility: Definition and Perspectives (cont’d)
What Does Social Responsibility Involve?
Voluntary action
Action is taken before lawsuits or other events force a firm to act on a matter.
An emphasis on means, not ends
Emphasis is on how the decision to act was reached, not on the decision itself.

7. What Is the Role of Business in Society?
The Classical Economic Model (Adam Smith)
An “invisible hand” (i.e., the efforts of competing entrepreneurs) promoted the public welfare when individuals tried to maximize short-run profits in pursuit of their own economic self-interests.
Equates short-run profitability to social responsibility

8. What Is the Role of Business in Society? (cont’d)
The Socioeconomic Model
Business has an obligation to meet the needs of the many groups in society besides stockholders in its pursuit of profit.
Stakeholder audit: Systematically identifying all the parties that could possibly be affected by the company’s performance

9. Figure 5.2: A Sample Stakeholder Audit for Wal-Mart, the World’s Largest Retailer

10. Arguments For and Against Corporate Social Responsibility
Business is unavoidably involved in social issues.
Business has the resources to tackle today’s complex societal problems.
A better society means a better environment for doing business.
Corporate social action will prevent government action.

11. Arguments For and Against Corporate Social Responsibility (cont’d)
Arguments Against
Profit maximization ensures the efficient use of society’s resources.
As an economic institution, business lacks the ability to pursue social goals.
Business already has enough power.
Because business managers are not elected, they are not directly accountable to society.

12. Toward Greater Social Responsibility
Iron Law of Responsibility
Those who do not use power in a socially responsible way will eventually lose it.
If business does not meet the challenge of social responsibility, then government reform legislation will force it to meet its obligations.

13. Social Responsibility Strategies
Reactive Strategy
Denying responsibility while striving to maintain the status quo by resisting change
Defensive Strategy
Resisting additional social responsibilities with legal and public relations tactics

14. Social Responsibility Strategies (cont’d)
Accommodation Strategy
Assuming social responsibility only in response to pressure from interest groups or the government
Proactive Strategy
Taking the initiative in formulating and putting in place new programs that serve as role models for industry

15. Figure 5.3: A Continuum of Social Responsibility Strategies

16. Who Benefits from Corporate Social Responsibility
Altruism
The unselfish devotion to the interests of others
Research Findings
There is a positive correlation between industry leadership on a socially responsible issue (pollution control) and profitability.
Corporate social responsibility is a competitive advantage in recruiting.

17. Who Benefits from Corporate Social Responsibility (cont’d)
Enlightened Self-Interest
A business ultimately helps itself by helping solve social problems.
An Array of Benefits for the Organization
Tax-free incentives to employees
Retention of talented employees
Help in recruiting the talented and socially conscious
Help in swaying public opinion
Improved community living standards
Attracting socially conscious investors
A nontaxable benefit for employees from company donations to charitable causes

18. The Ethical Dimension of Management
Ethics
The study of moral obligation involving the distinction between right and wrong
Business Ethics
The study of the complex business practices and behaviors that give rise to ethical issues in organizations

19. Practical Lessons from Business Ethics Research
Ethical Hot Spots
Balancing work and family
Poor internal communications
Poor leadership
Work hours, work load
Lack of management support
Need to meet sales, budget, or profit goals
Little or no recognition of achievements
Company politics
Personal financial worries
Insufficient resources

20. Practical Lessons from Business Ethics Research (cont’d)
Pressure from Above
The problem of superiors pressuring subordinates to achieve results is widespread.
Managers’ responses to pressure from above
Consciously avoid putting undue pressure on subordinates (who may act unethically to relieve the pressure).
Prepare to deal with excessive organizational pressure.

21. Practical Lessons from Business Ethics Research (cont’d)
Ambiguous Situations
Situations where there are no clear-cut ethical guidelines or ethical codes that can satisfy employees’ need for formal guidelines
Rationalization: How Good People End Up Doing Bad Things
Perceiving an objectively questionable action as normal and acceptable
A Call to Action
The deliberate and conscious action of a manager to do the right thing is an ethical and personal matter.

22. Table 5.1: How Employees Tend to Rationalize Unethical Conduct

23. Personal Values as Ethical Anchors
Abstract ideals that shape one’s thinking and behavior
Instrumental value: Enduring belief that a certain way (mode) of behaving is appropriate in all situations
Terminal value: Enduring belief that a certain end-state of existence (being admired) is worth striving for
Identifying Your Own Values
Basic personal values are taken for granted.
They are not arranged consciously in order of priority.

24. Managerial Ranking of Values
Terminal Values
Self-respect
Family security
Freedom
A sense of accomplishment
Happiness
Instrumental Values
Honesty
Responsibility
Capability
Ambition
Independence

25. General Ethical Principles
Self-interests
Personal virtues
Religious injunctions
Government requirements
Utilitarian benefits
Universal rules
Individual rights
Economic efficiency
Distributive justice
Contributive liberty

26. Encouraging Ethical Conduct
Ethics Training
Amoral managers: Managers who are neither moral nor immoral, but ethically lazy
Key features of effective ethics programs
Support of top management
Open discussion
A clear focus on ethical issues
Integration of ethics into the organization
A mechanism for anonymously reporting ethical violations
Rewarding of ethical conduct

27. Table 5.2: Twelve Questions for Examining the Ethics of a Business Decision

28. Encouraging Ethical Conduct (cont’d)
Ethical Advocate
An ethics specialist who plays a role in top management’s decision making
Code of Ethics
Requirements for an effective code
Describes specific events as unethical
Is supported and equitably enforced by top management
Whistle-Blowing
The reporting of perceived unethical matters

29. Summary
Corporate responsibility is the idea that management has broader responsibilities than just making a profit.
The debate over the basic purpose of the corporation is long-standing.
Management scholars who advocate greater corporate social responsibility cite the iron law of responsibility.

30. Summary (cont’d)
Ethics research indicates that many employees have acted unethically, have been pressured to act unethically, desire ethical standards, and engage in rationalization to defend their behaviors.
Managers must pay attention to the instrumental and terminal values that comprise employee’s personal value systems.
There are at least ten general ethical principles that guide behavior.
The typical manager is considered to be amoral.

31. Terms to Understand Social responsibility Stakeholder audit
Iron law of responsibility
Reactive social responsibility
Defensive social responsibility
Accommodative social responsibility
Proactive social responsibility strategy
Altruism
Enlightened self-interest
Corporate philanthropy
Ethics
Values
Instrumental value
Terminal value
Amoral managers
Ethical advocate
Whistle-blowing