Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 1 Chapter 6 Ethics and Stakeholder Social Responsibility

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 2 Learning Objectives State the importance of ethics for individual employees and organizations. Describe four forces that influence the ethical behavior of individuals and organizations. Describe three approaches that people use when making ethical judgments. Explain stakeholder social responsibility and how it influences managers’ ethical decisions.

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 3 Shaping Ethical Conduct (adapted from Figure 6.1) Cultural Forces Fundamental American personal values include:  honesty  integrity  trustworthiness  respect for other people  self-respect  family  achievement  reliability  fairness  loyalty

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 4 Shaping Ethical Conduct (adapted from Figure 6.1) Laws are society’s values and standards that are enforceable in the courts. Cultural Forces Legal and Regulatory Forces

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 5 Examples of Lawful and Unlawful Reasons for Dismissing Employees (adapted from Table 6.1) Some Permissible Reasons Incompetence in performance that does not respond to training or to accommodation Gross or repeated insubordination Civil rights violations such as engaging in harassment Illegal behavior such as theft or physical violence Repeated lateness or unexcused absences Drug activity or drunkenness on the job Some Unacceptable Reasons Blowing the whistle about illegal conduct by the employer Reporting OSHA violations Filing discrimination charges with the EEOC or a state or municipal fair employment agency Filing unfair labor practice charges with the NLRB or a state agency Engaging in union activities, provided there is no violence or unlawful behavior Complaining or testifying about violations of equal pay, wage, or hour law

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 6 Shaping Ethical Conduct (adapted from Figure 6.1) A code of ethics states the principles that employees are expected to follow when acting on behalf of the organization. Cultural Forces Legal and Regulatory Forces Organizational Forces Some recommended actions include  Create a formal ethics system  Communicate ethical expectations  Include ethical conduct as a measure of performance evaluations  Make it acceptable to talk about ethics

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 7 Shaping Ethical Conduct (adapted from Figure 6.1)  Moral Development  Whistle Blowing Cultural Forces Legal and Regulatory Forces Organizational Forces Individual Forces

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 8 Whistle-Blowing Anyone considering whistle-blowing should consider the following –Is this the only way? –Do I have the evidence? –Why am I doing this? –Am I ready?

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 9 Shaping Ethical Conduct (adapted from Figure 6.1) Ethical Conduct Individual Organization Cultural Forces Legal and Regulatory Forces Organizational Forces Individual Forces

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 10 Making Ethical Judgments The utilitarian approach focuses on behaviors and their results, not on the motives for such actions. –Achieving organizational goals –Efficiency –Conflicts of interest

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 11 Making Ethical Judgments The moral rights approach holds that decisions should be consistent with fundamental rights and privileges. –Life and safety –Truthfulness –Privacy –Freedom of conscience and speech

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 12 Making Ethical Judgments The justice approach involves evaluating decisions and behavior with regard to how equitably they distribute the benefits and costs among individuals and groups. –Distributive Justice Principle –Fairness Principle –Natural Duty Principle

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 13 Stakeholder Social Responsibility Stakeholder social responsibility holds that managers and other employees have obligations to identifiable groups that are affected by, or can affect the achievement of an organizations goals. Stakeholders are individuals or groups that have interests, rights, or ownership in an organization and its activities.

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 14 Common Stakeholders of Organizations (adapted from Figure 6.2) Media Governments (Regulatory Agencies) Secondary Stakeholders Political Action Groups/ Activists Unions Nongovernmental Organizations Primary Stakeholders Suppliers Customers Shareholders Employees The Organization

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 15 Examples of Types of Pressures from Primary Stakeholders (adapted from Table 6.3) Employees –Pay and benefits –Safety and health –Rights at work/global labor standards –Fair/ethical treatment in hiring, reviews, promotion, and related areas Shareholders –Demands for efficiency/profitability –Viability (sustainability) –Growth of investment –Ethical disclosure of financial information

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 16 Examples of Types of Pressures from Primary Stakeholders (cont.) (adapted from Table 6.3) Customers –Competitive prices –Quality and safe products –Respect for customers’ privacy –Concern for environment –Truthful/ethical advertising and sales practices Suppliers –Meet commitments –Repeat business –Fair trade practices/ethical treatment

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 17 Evaluating Social Performance Proactive Responsibility –Broad performance criteria –Ethical norms –Operation strategy –Response to social pressures –Legislative and political activities Social Audits