3 Learning ObjectivesExplain the relationship between ethics and the lawDiscuss why it is important to behave ethicallyDifferentiate between the claims of the different stakeholder groups that are affected by managers and their companies actions
4 Learning ObjectivesDescribe four rules that can be used to help companies and their managers act in ethical waysIdentify the four main sources of managerial ethicsDistinguish between the four main approaches toward social responsibility that a company can take
5 The Nature of Ethics Ethical Dilemma quandary people find themselves in when they have to decide if they should act in a way that might help another person even though doing so might go against their own self-interest
6 The Nature of Ethics Ethics The inner-guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the “right” or appropriate way to behave
7 Dealing with Ethical Issues There are no absolute or indisputable rules or principles that can be developed to decide if an action is ethical or unethical
8 Ethics and the LawNeither laws nor ethics are fixed principles
9 Ethics and the LawEthical beliefs lead to the development of laws and regulations to prevent certain behaviors or encourage others
10 Ethics and the LawLaws can change or disappear as ethical beliefs change
11 Changes in Ethics Over Time Managers must confront the need to decide what is appropriate and inappropriate as they use a company’s resources to produce goods and services
12 Question? Who has a claim on a company’s resources? Employees CustomersSuppliersStakeholdersThe correct answer is “D”, stakeholders. A, B, & C are types of stakeholders and are partially correct answers. See next slide for definition of stakeholder. Students should be able to discuss different types of stakeholders and why each has a claim on resources.
13 Stakeholders and Ethics people and groups affected by the way a company and its managers behavesupply a company with its productive resources and have a claim on its resources
14 Stakeholders and Ethics When the law does not specify how companies should behave, managers must decide what is the right or ethical way to behave toward the people and groups affected by their actions
16 StockholdersWant to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputationWant to maximize their return on investment
17 ManagersResponsible for using a company’s financial capital and human resources to increase its performanceHave the right to expect a good return or reward by investing their human capital to improve a company’s performanceFrequently juggle multiple interests
18 ManagersProblem has been that in many companies corrupt managers focus not on building the company’s capital and stockholder’s wealth but on maximizing their own personal capital and wealth
19 Discussion Question: Managers Is it ethical for managers to receive vast amounts of money from their companies?YesNoSometimesNeverThis question can be used to discuss basic compensation, severance packages, “golden parachutes”, and retirement benefits. Students may discuss what level of compensation is okay (or ethical). Retirement benefits received at GE by Jack Welch are appropriate to discuss. Did his success give him the right to more benefits than a retiring VP? Ask students if they were the recipient, would they turn down money/benefits if offered because of their ethical position.
20 EmployeesCompanies can act ethically toward employees by creating an occupational structure that fairly and equitably rewards employees for their contributions
21 Suppliers and Distributors Suppliers expect to be paid fairly and promptly for their inputsDistributors expect to receive quality products at agreed-upon prices
23 Customers Most critical stakeholder Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones
24 Community, Society, and Nation Physical locations like towns or cities in which companies are locatedA community provides a company with the physical and social infrastructure that allows it to operateA company contributes to the economy of the town or region through salaries, wages, and taxes
26 Question?Which ethical decision rule produces the greatest good for the greatest number?Utilitarian RuleMoral Rights RuleJustice RulePractical RuleThe correct answer is “A” – Utilitarian rule. See next slide for definition.
27 Ethical Decision Models Utilitarian RuleDecision that produces the greatest good for the greatest numberHow do you measure the benefits and harms that will be done to each stakeholder group?How do you evaluate the rights and importance of each group?
28 Effects of Ethical/Unethical Behavior Figure 4.4
29 Ethical Decision Models Moral Rights ruleDecision that best maintains and protects the fundamental or inalienable rights and privileges of the people affected by itJustice ruleDecision that distributes benefits and harms among people and groups in a fair, equitable, or impartial way
30 Ethical Decision Models Practical rule- Decision that a manager has no hesitation about communicating to people outside the company because the typical person would think it is acceptable
31 Practical Decision Model Does my decision fall within the acceptable standards that apply in business today?Am I willing to see the decision communicated to all people and groups affected by it?Would the people with whom I have a significant personal relationship approve of the decision?
32 Why should managers behave ethically? The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way
33 Trust and ReputationTrust – willingness of one person or group to have faith or confidence in the goodwill of another person
34 Trust and ReputationReputation – esteem or high repute that individuals or organizations gain when they behave ethically
36 Societal EthicsStandards that govern how members of a society should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individualPeople behave ethically because they have internalized certain values, beliefs, and norms
37 Occupational EthicsStandards that govern how members of a profession, trade, or craft should conduct themselves when performing work-related activitiesMedical & legal ethics
38 Individual EthicsPersonal standards and values that determine how people view their responsibilities to other people and groupsHow they should act in situations when their own self-interests are at stake
39 Organizational Ethics Guiding practices and beliefs through which a particular company and its managers view their responsibility toward their stakeholdersTop managers play a crucial role in determining a company’s ethics
40 Social Responsibility Way a company views its duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole
42 Approaches to Social Responsibility Obstructionist approach – Companies choose not to behave in a social responsible way and behave unethically and illegality
43 Approaches to Social Responsibility Defensive approach – companies and managers stay within the law and abide strictly with legal requirements but make no attempt to exercise social responsibility
44 Approaches to Social Responsibility Accommodative approach – Companies behave legally and ethically and try to balance the interests of different stakeholders against one another so that the claims of stockholders are seen in relation to the claims of other stakeholders
45 Approaches to Social Responsibility Proactive approach – Companies actively embrace socially responsible behavior, going out of their way to learn about the needs of different stakeholder groups and utilizing organizational resources to promote the interests of all stakeholders
46 Why Be Socially Responsible? Demonstrating its social responsibility helps a company build a good reputationIf all companies in a society act socially, the quality of life as a whole increases
47 Role of Organizational Culture Ethical values and norms help organizational members:Resist self-interested actionRealize they are part of something bigger than themselves
48 Ethics OmbudsmanResponsible for communicating ethical standards to all employeesDesigning systems to monitor employees conformity to those standardsTeaching managers and employees at all levels of the organization how to appropriately respond to ethical dilemmas
49 Johnson & Johnson Credo Source: Johnson & Johnson Annual Report.Figure 4.7
50 Movie Example: John QWhat should be the ethical standard in communicating job status changes and healthcare changes to employees?Leonard Maltin’s Video Guide describes John Q as “ a factory worker who’s struggling to make ends meet learns that his insurance will not cover his son’s heart transplant surgery. Assaulted by red tape and uncaring bureaucrats, he commandeers the hospital’s emergency room-willing to do anything to save his child’s life.”In this scene (Ch 6 Runaround), John Archibald (Denzel Washington) finds out that he has been changed to part-time status and that his healthcare coverage has changed. It is not known how the firm communicated this information to employees. Are company’s only bound by the legal requirements? Is a notice in a paycheck enough? Do employees with direct deposit even look at a payroll stub? Is an adequate? Should companies have a different standard for certain types of information?