Ethics and Corporate Social Responsibility Chapter 4 . Fundamentals of Business

Study Question 1: What is ethical behavior? Ethics Code of moral principles. Set standards of “good” and “bad” as opposed to “right” and “wrong.” Ethical behavior What is accepted as good and right in the context of the governing moral code.

Study Question 1: What is ethical behavior? Law, values, and ethical behavior: Legal behavior is not necessarily ethical behavior. Many unethical behaviors lead to legislation Unsafe working conditions such as sweatshops OSHA (Occupational Safety and Health Administration) – enforces health and safety in the workplace Discrimination Consumers Truthfulness in financial reporting

Study Question 1: What is ethical behavior? Utilitarian view — greatest good to the greatest number of people. Individualism view — primary commitment is to one’s long-term self-interests. Moral-rights view — respects and protects the fundamental rights of all people. Justice view — fair and impartial treatment of people according to legal rules and standards.

Figure 3.1 Four views of ethical behavior.

Study Question 1: What is ethical behavior? How businesses can respect core or universal values: Respect for human dignity Create culture that values employees, customers, and suppliers. Keep a safe workplace. Produce safe products and services. Respect for basic rights Protect rights of employees, customers, and communities. Avoid anything that threatening safety, health, education, and living standards. Be good citizens Support social institutions, including economic and educational systems. Work with local government and institutions to protect environment.

Management Fundamentals - Chapter 3 Group Activity Two Approaches to Promoting Ethical Behavior in the Workplace 1. Compliance Based Approach Uses legal terms, training, rules of conduct, and penalties for non-compliance Focuses on what not to do 2. Values Based Approach Relies of self-policing and motivation, rather than coercion Encouraging good behavior rather than punishing bad behavior Management Fundamentals - Chapter 3

Management Fundamentals - Chapter 3 Group Activity Two groups will be formed Each group will examine one of the different approaches to promoting ethical behavior in the workplace Compliance vs Values Based 1. Determine the advantages of your approach 2. After hearing the response from the other group, determine a major disadvantage of the other approach. Management Fundamentals - Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? An ethical dilemma occurs when choices, although having potential for personal and/or organizational benefit, may be considered unethical. Ethical dilemmas include: Discrimination Sexual harassment Conflicts of interest Customer confidence Organizational resources

Study Question 2: How do ethical dilemmas complicate the workplace? Ethical behavior can be rationalized by convincing yourself that: Behavior is not really illegal. Behavior is really in everyone’s best interests. Nobody will ever find out. The organization will “protect” you.

Study Question 2: How do ethical dilemmas complicate the workplace? Factors influencing ethical behavior include: The person Family influences, religious values, personal standards, and personal needs. The organization Supervisory behavior, peer group norms and behavior, and policy statements and written rules. The environment Government laws and regulations, societal norms and values, and competitive climate in an industry.

Figure 3.3 Factors influencing ethical managerial behavior—the person, organization, and environment.

Class Activity Break into the groups determined by your card Address the following ethical dilemma as a group: A lifeboat is overflowing with survivors. There isn’t room for everyone. If someone is not thrown overboard, the lifeboat will sink. What will you do? Support your answer.

Study Question 3: How can high ethical standards be maintained? Checklist for dealing with ethical dilemmas Step 1: Identify the ethical dilemma Step 2: Get the facts and identify your options Step 3: Determine who will be affected Step 4: List the effects of the alternatives Step 5: Choose the best option Double-check decision by asking the “spotlight” questions: “How would I feel if my family found out about my decision?” “How would I feel about this if my decision were printed in the local newspaper?”

Management Fundamentals - Chapter 3 Ethical Scenarios With a partner, address the ethical dilemmas handed out to you. Write your responses using the 5 steps learned today Management Fundamentals - Chapter 3

Study Question 3: How can high ethical standards be maintained? Ethics training: Structured programs that help participants to understand ethical aspects of decision making. Helps people incorporate high ethical standards into daily life. Helps people deal with ethical issues under pressure.

Study Question 3: How can high ethical standards be maintained? Whistleblowers Expose misdeeds of others to: Preserve ethical standards Protect against wasteful, harmful, or illegal acts Laws protecting whistleblowers vary

Study Question 3: How can high ethical standards be maintained? Barriers to whistleblowing include: Strict chain of command Strong work group identities Ambiguous priorities Organizational methods for overcoming whistleblowing barriers: Ethics staff units who serve as ethics advocates Moral quality circles

Study Question 3: How can high ethical standards be maintained? Ethical role models: Top managers serve as ethical role models. All managers can influence the ethical behavior of people who work for and with them. Excessive pressure can foster unethical behavior. Managers should be realistic in setting performance goals for others.

Study Question 3: How can high ethical standards be maintained? Codes of ethics: Formal statement of an organization’s values and ethical principles regarding how to behave in situations susceptible to the creation of ethical dilemmas. Areas often covered by codes of ethics: Bribes and kickbacks Political contributions Honesty of books or records Customer/supplier relationships Confidentiality of corporate information

Study Question 4: What is corporate social responsibility? Looks at ethical issues on the organization level. Obligates organizations to act in ways that serve both its own interests and the interests of society at large.

Study Question 4: What is corporate social responsibility? Organizational stakeholders Those persons, groups, and other organizations directly affected by the behavior of the organization and holding a stake in its performance. Typical organizational stakeholders Employees Customers Suppliers Owners Competitors Regulators Interest groups

Figure 3.4 Multiple stakeholders in the environment of an organization.

Study Question 4: What is corporate social responsibility? Beliefs that guide socially responsible business practices: People do their best with a balance of work and family life. Organizations perform best in healthy communities. Organizations gain by respecting the natural environment. Organizations must be managed and led for long-term success. Organizations must protect their reputations.

Study Question 4: What is corporate social responsibility? Perspectives on corporate social responsibility: Classical view Management’s only responsibility is to maximize profits. Socioeconomic view Management must be concerned for the broader social welfare, not just profits.

Study Question 4: What is corporate social responsibility? Arguments against social responsibility: Reduced business profits Higher business costs Dilution of business purpose Too much social power for business Lack of public accountability Arguments in favor of social responsibility: Adds long-run profits Improved public image Avoids more government regulation Businesses have resources and ethical obligation

Study Question 4: What is corporate social responsibility? Criteria for evaluating corporate social performance: Is the organization’s … Economic responsibility met? Legal responsibility met? Ethical responsibility met? Discretionary responsibility met?

Figure 3.5 Criteria for evaluating corporate social performance.

Study Question 4: What is corporate social responsibility? Strategies for pursuing social responsibility: Obstructionist — meets economic responsibilities. Defensive — meets economic and legal responsibilities. Accommodative — meets economic, legal, and ethical responsibilities. Proactive — meets economic, legal, ethical, and discretionary responsibilities.

Figure 3.6 Four strategies of corporate social responsibility—from obstructionist to proactive behavior.

Companies “Doing it Right” Tom’s Founder on Ellen https://www.youtube.com/watch?v=57TOTx5UEpA Management Fundamentals - Chapter 3

Study Question 5: How do organizations and governments work together in society? How government influences organizations: Common areas of government regulation of business affairs: Occupational safety and health Fair labor practices Consumer protection Environmental protection

Study Question 5: How do organizations and governments work together in society? How organizations influence governments: Personal contacts and networks Public relations campaigns Lobbying Political action committees Sometimes by illegal acts, such as bribery or illegal financial contributions to political campaigns

Figure 3.7 Centrality of ethics and social responsibility in leadership and the managerial role.

Study Question 5: How do organizations and governments work together in society? Corporate governance: The oversight of the top management of an organization by a board of directors. Corporate governance involves: Hiring, firing, and compensating the CEO. Assessing strategy. Verifying financial records.

Culture and Diversity in Business Chapter 16 . Fundamentals of Business