1. Effective Management, by Williams South-Western College Publishing Copyright © 2002 Chapter 3 Ethics and Social Responsibility

2. Effective Management, by Williams South-Western College Publishing Copyright © 2002 2 What Would You Do? 4Should you offer domestic- partner benefits? 4Whose interests take precedence? 4What is the ethical thing to do?

3. Effective Management, by Williams South-Western College Publishing Copyright © 2002 3 After discussing this section, you should be able to: Learning Objectives Ethics ¬discuss how the nature of a management job creates the possibility for ethical abuses. ­identify common kinds of workplace deviance. ®describe the 1991 U.S. Sentencing Commission Guidelines and how its recommendations now make ethical behavior much more important for businesses.

4. Effective Management, by Williams South-Western College Publishing Copyright © 2002 4 Ethics and the Nature of Management Jobs 4Ethical behavior follows accepted principles of right and wrong 4Intentional managerial unethical behaviors Tcompany resources for personal use Tmishandling information Tencouraging others’ unethical behavior

5. Effective Management, by Williams South-Western College Publishing Copyright © 2002 5 Ethics and the Nature of Management Jobs (Cont’d.) 4Unintentional managerial unethical behavior Tpoorly constructed policies Tunrealistic employee goals

6. Effective Management, by Williams South-Western College Publishing Copyright © 2002 6 U.S. Sentencing Commission Guidelines 4Companies can be prosecuted and punished even if management didn’t know about the unethical behavior 4Who, What, and Why 4Determining Punishment

7. Effective Management, by Williams South-Western College Publishing Copyright © 2002 7 Who, What, and Why 4Nearly all businesses - profit and nonprofit- are covered 4Punishes a number of actions 4Encourages businesses to be proactive on employee crime

8. Effective Management, by Williams South-Western College Publishing Copyright © 2002 8 Determining Punishment 4Smaller fines for companies that are proactive 4Steps in determining fine size Tdetermine the base fine Tcompute a culpability score Tmultiply the base fine by the culpability score 4Compliance programs are important

9. Effective Management, by Williams South-Western College Publishing Copyright © 2002 9 Compliance Program Steps for the 1991 U.S. Sentencing Guidelines 4Establish standards and procedures to meet the company’s business needs. 4Put upper-level managers in charge of the compliance program. 4Don’t delegate decision-making authority to employees who are likely to act illegally or unethically. 4Use auditing, monitoring, and other methods to encourage employees to report violations. 4Use company publications and training to inform employees about the company’s compliance standards and procedures. 4Enforce compliance standards by fairly and consistently disciplining violators. 4After violations occur, find appropriate ways to improve the compliance program. Adapted from Table 3.1

10. Effective Management, by Williams South-Western College Publishing Copyright © 2002 10 After discussing this section, you should be able to: Learning Objectives Making Ethical Decisions ¯describe what influences ethical decision making. °explain what practical steps managers can take to improve ethical decision making.

11. Effective Management, by Williams South-Western College Publishing Copyright © 2002 11 Influences on Ethical Decision Making 4Ethical Intensity of the Decision 4Moral Development of the Manager 4Ethical Principles Used to Solve the Problem

12. Effective Management, by Williams South-Western College Publishing Copyright © 2002 12 Ethical Intensity of the Decision 4Magnitude of consequences 4Social consensus 4Probability of effect 4Temporal immediacy 4Proximity of effect 4Concentration of effect

13. Effective Management, by Williams South-Western College Publishing Copyright © 2002 13 Moral Development of the Manager Preconventional Level Stage 1: Punishment & Obedience Stage2: Instrumental Exchange Conventional Level Stage 3: Good Boy - Nice Girl Stage 4: Law & Order Post Conventional Level Stage 5: Legal Contract Stage 6: Universal Principle Adapted from Table 3.2 Davidson & Worrell, Business & Society 34 (1995): 171-196

14. Effective Management, by Williams South-Western College Publishing Copyright © 2002 14 Principles of Ethical Decision Making 4Principle of Long- term Self-interest 4Principle of Personal Virtue 4Principle of Religious Injunctions 4Principle of Government Requirements 4Principle of Utilitarian Benefits 4Principle of Individual Rights 4Principle of Distributive Justice

15. Effective Management, by Williams South-Western College Publishing Copyright © 2002 15 Principle of Long-term Self-interest 4People should never take any action that is not in their or their organization’s long-term self-interest 4The key is long-term, not short-term interests

16. Effective Management, by Williams South-Western College Publishing Copyright © 2002 16 Principle of Personal Virtue 4People should never do anything that is not honest, open, and truthful, and which they would not be glad to see reported in the newspapers or on TV

17. Effective Management, by Williams South-Western College Publishing Copyright © 2002 17 Principle of Religious Injunctions 4People should never take an action that is unkind or that harms a sense of community, such as the positive feelings that come from working together to accomplish a commonly accepted goal.

18. Effective Management, by Williams South-Western College Publishing Copyright © 2002 18 Principle of Government Requirements 4The law represents the minimal moral standards of society 4People should never take any action that violates the law.

19. Effective Management, by Williams South-Western College Publishing Copyright © 2002 19 Principle of Utilitarian Benefits 4People should never take any action that does not result in greater good for society 4People should do whatever creates the greatest good for the greatest number

20. Effective Management, by Williams South-Western College Publishing Copyright © 2002 20 Principle of Individual Rights 4People should never take any action that infringes on others’ agreed-on rights

21. Effective Management, by Williams South-Western College Publishing Copyright © 2002 21 Principle of Distributive Justice 4People should never take any action that harms the least among us in some way

22. Effective Management, by Williams South-Western College Publishing Copyright © 2002 22 Practical Steps to Ethical Decision Making 4Selecting and Hiring Ethical Employees 4Codes of Ethics 4Ethics Training 4Ethical Climate

23. Effective Management, by Williams South-Western College Publishing Copyright © 2002 23 Selecting and Hiring Ethical Employees 4Increase ethical behaviors by hiring more ethical employees 4Testing for ethics TOvert integrity tests TPersonality-based integrity tests

24. Effective Management, by Williams South-Western College Publishing Copyright © 2002 24 What Really Works? Workplace Deviance (Counterproductive Behaviors) Overt Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personality-Based Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 82% Probability of success68%

25. Effective Management, by Williams South-Western College Publishing Copyright © 2002 25 What Really Works? (Cont’d.) Job Performance Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personality-Based Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success70% Probability of success69%

26. Effective Management, by Williams South-Western College Publishing Copyright © 2002 26 What Really Works? (Cont’d.) Theft Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success57%

27. Effective Management, by Williams South-Western College Publishing Copyright © 2002 27 Codes of Ethics 4Corporate statements on ethics 4The relationship between codes and behavior depend on: Tcompanies communicating the codes to others both within and outside the company Tcompanies developing practical ethical standards and procedures specific to the company’s line of business

28. Effective Management, by Williams South-Western College Publishing Copyright © 2002 28 Ethics Training 4Develop employee awareness about ethics 4Achieve credibility with employees 4Teach employees a practical model of ethical decision making

29. Effective Management, by Williams South-Western College Publishing Copyright © 2002 29 A Basic Model of Ethical Decision Making Identify the proble m Identify the constituent s Diagnose the situation Analyze your options Make your choice Ac t Adapted from Table 3.4

30. Effective Management, by Williams South-Western College Publishing Copyright © 2002 30 Ethical Climate

31. Effective Management, by Williams South-Western College Publishing Copyright © 2002 31 After discussing this section, you should be able to explain: Learning Objectives Social Responsibility ±to whom organizations are socially responsible. ²for what organizations are socially responsible. ³how organizations can choose to respond to societal demands for social responsibility. ´whether social responsibility hurts or helps an organization’s economic performance.

32. Effective Management, by Williams South-Western College Publishing Copyright © 2002 32 Who are Organizations Socially Responsible to? 4Shareholders Tmanagers must satisfy the owners Tsocial responsibility is maximizing shareholder wealth 4Stakeholders Tpersons with a legitimate interest in the company Tsocial responsibility is satisfying the interests of multiple stakeholders

33. Effective Management, by Williams South-Western College Publishing Copyright © 2002 33 Shareholders Only - Friedman 4Managers cannot act effectively as moral agents for shareholders 4Time, money, and attention diverted to social causes undermine market efficiency

34. Effective Management, by Williams South-Western College Publishing Copyright © 2002 34 Stakeholder View

35. Effective Management, by Williams South-Western College Publishing Copyright © 2002 35 For What Are Organizations Socially Responsible? Economic Responsibilities Legal Responsibilities Ethical Responsibilities Discretionary Responsibilities Adapted from Figure 3.2 Carroll, Academy of Management Review 4 (1979): 497-505

36. Effective Management, by Williams South-Western College Publishing Copyright © 2002 36 Responses to Demands for Social Responsibility ReactionDefenseAccommodationProaction Fight all the way Do only what is requ ired Be Progressive Lead the industry Do Nothing Do Much Withdrawal Public Relations Approach Legal Approach BargainingProblem Solving Adapted from Figure 3.3 Carroll, Academy of Management Review 4 (1979): 497-505

37. Effective Management, by Williams South-Western College Publishing Copyright © 2002 37 Social Responsibility and Economic Performance 4Social responsibility can sometimes cost a company significantly if it chooses to be socially responsible 4Sometimes it does pay to be socially responsible 4While socially responsible behavior may be “the right thing to do,” it does not guarantee profitability

38. Effective Management, by Williams South-Western College Publishing Copyright © 2002 38 What Really Happened? 4Disney offered domestic-partner benefits to same-sex partners 4They did not offer these benefits to live- in partners of unmarried, heterosexual employees