1. Ethics and Social Responsibility
Chapter 4
Ethics and Social Responsibility

2. Learning Objectives
Define ethics and understand the relationship between law and ethics.
Identify the stakeholders of organizations and understand each group’s claims on the organization and how each is affected by the organization’s actions.
Explain four approaches (utilitarian, moral rights, justice and practical) to help organizations evaluate choices in ethical dilemmas.
Describe the four main sources of a manager’s ethics – societal, occupational, individual, organizational ethics
Define corporate social responsibility and the four approaches which organization’s may take regarding social responsibility.

3. What is Managerial Ethics?
What is Managerial Ethics?
The inner-guiding moral principles, values, and beliefs that people use to decide what is the “right” or appropriate way to behave.
Ethics is about making decisions.
Poor managerial ethics
Can generate negative publicity
Bring down company’s stock price
Put the company out of business.

4. Ethical Dilemma
An ethical dilemma is a quandary which people find themselves in when right and wrong cannot be clearly identified. Their actions might help one person at the expense of another or their own self-interest.
All choices have potentially negative consequences
Values are in conflict

5. Ethics and Law Ethics Law
Ethics and Law
Ethics
Unenforceable norms and values guide behavior
There are no specific laws
Law
Values are written into enforceable standards of behavior
Laws are enforced by the justice system
Ethics and laws change as norms and values of society changes

6. Stakeholders and Ethics
Stakeholders and Ethics
Organizational Stakeholders – people or groups that supply a company with its productive resources and have a claim on its resources.
Has a stake in the organization’s performance
When there are no laws to specify behavior, managers must decide what is the ethical way to behave toward organizational stakeholders

7. Stakeholders and Ethics
Stakeholders and Ethics

8. Stakeholders and Ethics
Stakeholders and Ethics
Stockholders
Want to maximize their return on investment
Want to be sure management is not engaging in actions which could hurt company’s reputation
Managers
Responsible for using resources to increase organization’s performance
Have the right to expect a reward for their use of resources to improve organization’s performance
Juggle multiple interests

9. Stakeholders and Ethics
Stakeholders and Ethics
Customers
Most critical stakeholder
Want quality product at low price – organization must create loyal customers and attract new ones
Community
Want success of organization for economic development (taxes and income of citizens)
Want good quality of life with safe environment for citizens

10. Stakeholders and Ethics
Stakeholders and Ethics
Employees
Organizations have a responsibility to create structure that rewards employees fairly for their contribution
Suppliers and Distributors
Suppliers expect to be paid fairly and promptly for their inputs
Distributors expect to receive quality products at agreed-upon prices.

11. Approaches For Ethical Decision Making
Approaches For Ethical Decision Making

12. Utilitarian Approach
Ethical dilemmas are resolved by making decisions which result in the greatest good for the greatest number.
In making decisions, consider the effect of each alternative on all parties
Select the alternative which satisfies the greatest number of people.
Decisions are based on outcomes or consequences
Problem: Adhering to the common good approach can result in ignoring the individual’s rights.

13. Moral Rights Approach
Ethical dilemmas are resolved by making decisions which maintain and protect the fundamental rights and privileges of people affected by the decision
Asserts human beings have fundamental rights and liberties.
Right to freedom, life and safety
Right to privacy
Right to free speech
Right to freedom of conscience
Focuses on “ethics” of decision independent of consequences

14. Justice Approach
Ethical dilemmas are resolved by basing decisions on standards of equity, fairness, and impartiality.
In making decisions, choose alternatives which result in fair and impartial treatment to the involved parties
Different treatment should not be based on arbitrary characteristics
Administer rules fairly
If harm done, injured party should be made whole

15. Practical Approach
Ethical dilemmas are resolved by making decisions based on whether the typical person in society would think it is acceptable.
A decision is ethical if the manager can answer yes to three questions
Is my decision within accepted values and standards of business today?
Are you willing to communicate the decision to all groups?
Would people I am closest to (family, friends) approve of the decision?

16. Determinants of Business Ethics
Determinants of Business Ethics
There are four main determinants of differences in ethics between people, employees, companies and countries
Societal Ethics
Occupational Ethics
Individual Ethics
Organizational Ethics

17. Individual Ethics: Three Levels of Personal Moral Development (based on L. Kohlberg)
Preconventional Level
Individual is concerned with concrete consequences – stick to rules to avoid punishment. Ethical actions are those that “follow the rules.”
At a higher stage within this level, individual follows rules when it is in his/her immediate interests. Ethical actions are those that result in an equal exchange or “fair deal.”
Managers at this level expect dependable accomplishment of tasks within the approved methods

18. Individual Ethics: Three Levels of Personal Moral Development
Individual Ethics: Three Levels of Personal Moral Development
Conventional Level
The individual conforms to expectations of what is good behavior. Expectations are defined by people closest to you, society, and groups.
Ethical actions are those that “live up” to what is expected by people close to you. Fulfill duties and obligations.
Managers at this level emphasize cooperation and collaboration to accomplish tasks.
Most adults operate at this level.

19. Individual Ethics: Three Levels of Personal Moral Development
Individual Ethics: Three Levels of Personal Moral Development
Postconventional or Principled Level
The individual is guided by own values and standards and will disobey rules which violate own principles.
Ethical actions are those which conform to an individual’s own principles and standards. May result in “civil disobedience.”
According to Kohlberg, less than 20 percent of American adults reach this level.
Managers at this level focus on the needs of employees and encourage them to think for themselves.

20. Organizational Ethics
Organizational Ethics
Most of us operate at the Conventional level of moral development, so …
The norms and values of your immediate work group, department and the organization will have great influence on ethical behavior.
Company culture lets people know what behaviors the company supports and those actions considered “unethical.”
The organization’s rules, policies and reward systems guide people’s actions

21. Organizational Structures
Organizational Structures
Develop a code of ethics or credo for the organization - A formal statement of the company’s values concerning ethics and social issues; it communicates to employees what the company stands for.
Creation of Ethics officers – a management position dedicated to monitoring organizational practices and teaching ethical practices to employees
The Sarbanes-Oxley Act passed in 2003 requires procedures for handling whistleblowers’ concerns regarding accounting complaints

22. Social Responsibility
Social Responsibility
The way a company’s managers and employees view their obligation to make decisions that protect, enhance and promote the welfare of society as well as the organization.
Does the organization have responsibilities beyond economic responsibilities (maximizing profits for owners and shareholders)?