Managerial Ethics and Corporate Social responsibility 4 MNG200 Dr. Salma Chad

What is managerial ethics? Ethics is a code of moral principles and values that governs the behaviours of a person or group with respect to what is right or wrong. Ethics sets standards as to what is good or bad in conduct or decision-making. Ethical issues occur when the action of a person may harm or benefit others.

Views of ethics Utilitarian approach Individualism Moral rights view approach Justice approach

Utilitarian approach Utilitarian approach – the ethical concept that moral behaviours produce the greatest good for the greatest number. This approach views decision-making as selecting alternatives that optimizes the satisfaction for the greatest number of people.

Individual approach This view contends that acts are moral and ethical when they promote the individual’s long-term interest, which leads to the greatest good.

Moral-rights approach The ethical concept or rights view is concerned with respecting and protecting individual liberties, and privileges, including the right to privacy, freedom of conscience, free speech, and due process.

Justice approach The ethical concept that moral decisions must be based on standards of equity, fairness, and impartiality.

Factor affecting ethical choices Managers Ethical choices of a manager are determined by the manager’s level of moral development. There are three level of moral development:- Preconventional level – concerned with external rewards and punishment and obeying authority to avoid detrimental personal consequences. Conventional level – focus is on good behaviour as defined by colleagues, family, friends, and society. Postconvetional level – concerned with individual set of values and standards to the point of disregarding rules or laws that violate principles .

Factor affecting ethical choices The organization The corporate culture of the organization can establish and engender ethical behaviour. Culture is a major force that defines the company’s values. If ethical behaviour is encouraged, it becomes routine.

Ethics: Overall The code of moral principles and values that govern the behaviors of a person or group with respect to what is right or wrong. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Managerial Ethics Ethics can be difficult to define Ethics can be difficult to define Ethical issues are exceedingly complex Managers face a variety of difficult situations Ethics fall between law and free choice Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Ethical Dilemmas: What Would You Do? An ethical dilemma arises in a situation concerning right or wrong when values are in conflict Managers and employees are the moral agents who must make ethical choices Decisions about advertising, operations, and Internet usage are all dilemmas YOU might face Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Back to the Criteria for Ethical Decision Making Utilitarian approach – moral behaviors should produce the greatest good for the greatest number Individualism approach – acts are moral when they promote the individual’s best long-term interests Moral Rights Approach – moral decisions are those that best maintains the rights of those affected Justice Approach – decisions must be based on standards of equity, fairness, and impartiality Distributive Approach – different treatment of people should not be based on arbitrary characteristics Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Defining Justice Distributive Justice – different treatment of people should not be based on arbitrary characteristics. Compensatory Justice – individuals should be compensated for the cost of their injuries by the party responsible. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Manager Ethical Choices An important personal trait that mangers poses is their stage of moral development Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Globalization and Ethics Globalization makes ethical issues more complex Bribes are common practice in many countries Transparency International ranks countries based on Bribe Payers Index Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

What is Corporate Responsibility? Corporate Social Responsibility (CSR) is the obligation of organization management to make decisions and take actions that will enhance the welfare and interests of society as well as the organization Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Organizational Stakeholders Stakeholders are any group within or outside the organization that has a stake in the organization’s performance. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Bottom of the Pyramid (BOP) Sometimes called base of the pyramid Alleviate poverty and social ills while making profits Selling to the world’s poorest people 4 Billion people make up the lowest level of the world’s economic pyramid These people have traditionally been underserved Companies can make money while addressing global poverty, environmental destruction, social decay and political instability Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Ethic of Sustainability Sustainable Development Economic Development that generates wealth Meets the needs of current generation Saving the environment for future generations Managers are weaving sustainability into strategic decisions Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Evaluating Corporate Responsibility Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Managing Company Ethics and Social Responsibility Code of Ethics – formal statement of the organization’s values regarding ethics and social issues Ethical Structures – systems, positions and programs to implement ethical behavior Whistle-Blowing – employee disclosure of illegal, immoral, or illegitimate practices Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Ethical Organization Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Business Case for Ethics and Social Responsibility Paying attention to ethics and social responsibility is as important as profits and costs Ethical and social actions impact financial performance Companies are beginning to measure nonfinancial factors that create value Customers pay attention to a company’s ethics and social responsibility Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Social responsibility What is social responsibility?

Social responsibility A firm’s obligation, beyond that required by law and economics, to pursue long-term goals that will enhance the welfare and interest of the society and the organization as well.

Levels of social responsibility Discretionary responsibilities Ethical responsibilities Legal responsibilities Economic responsibilities

Economic responsibility A business is first an economic unit in society, its economic responsibility is to make a profit.

Legal responsibility Businesses must play by the rules and obey government laws. Government can affect businesses through legislation, judicial action, and agency administration.

Ethical responsibility Demonstrating behaviour that fit within the norms of society, the organization, the individual, and the profession that have not been made by law.

Discretionary responsibilities Discretional responsibilities are the highest form of social responsibilities because they are voluntary. Discretionary responsibilities are those for which there are no societal laws, rules, or ethical statements, but for which expectations might exist.