1. Chapter 6 Ethics and Social Responsibility

2. Learning Objectives
Explain ethics as they relate to the five domains of individuals, organizations, stakeholders, government, and the global community
Demonstrate processes and practices for managing organizational ethics
Describe how businesses approach social responsibility
Explain how organizations seek to prosper through social responsibility
Summarize management’s role in building responsible businesses based on ethical decision making
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3. What Are Ethics? (p. 144) Ethics
The moral principles, values, and beliefs that govern group or individual behavior according to what is right or wrong and what contributes to the balanced good of all stakeholders
Ethical dilemma – a situation in which no choice is entirely right
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4. What Are Ethics? (cont.) Domains of ethical decision making Figure 6.1
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5. What Are Ethics? (cont.) Individuals (p. 145)
Lawrence Kohlberg’s “stages of moral development”
Progression from interests in self to interest in others (p. 146)
Preconventional – moral decisions are based primarily on self-protection or self-interest
Conventional – moral decisions are based primarily on social norms
Societal norms – expectations about how people (and organizations) should behave
Postconventional – moral decisions are based primarily on what individual believes is good for society as a whole
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6. What Are Ethics? (cont.) Kohlberg’s stages of moral development
Figure 6.2
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7. What Are Ethics? (cont.)
Organizations - posture of the organization toward the local and global communities (p. 146)
Figure 6.3
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8. What Are Ethics? (cont.)
Value-based management - company’s culture impacts employee behavior in ways that are
consistent with the
organization’s mission
and values (p. 147)
Figure 6.4
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9. What Are Ethics? (cont.) Stakeholders (p. 148)
Internal and external constituents with a direct interest in the organization’s behavior
Experience the effects of company’s management decisions
Figure 6.5
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10. What Are Ethics? (cont.)
Externality – a cost (negative) or benefit (positive) that occurs beyond the direct exchange between an organization and its stakeholders (p. 148)
Escalation – an increase in an organization’s behavior as a direct response to a competitor’s behavior (p. 149)
CRITICAL
THINKING
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11. What Are Ethics? (cont.) Governments (p. 149)
Enact legal requirements to prevent unethical behavior
E.g., Sarbannes-Oxley Act (2002) – requires greater transparency in company accounting practices
Face “fundamental large-firm problem” stemming from:
Separation of ownership and control
Decentralized regulation system
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12. What Are Ethics? (cont.) Globe (p. 150)
Global-level of ethics – principles, values, and beliefs that are widely considered universal
United Nations’ - “The Global Compact”
Intended to guide decision making in the areas of human rights, labor, the environment, and anti-corruption
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13. Making Ethical Decisions (p. 151)
Principles of ethics (p. 152)
Legal principle – decisions that follow both the letter and spirit of the law
Individual rights principle – decisions that do not infringe upon the rights of other people
Virtuous principle – decisions of which you would be publicly proud
Long-term principle – decisions that support the long-term interests of yourself and your organization
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14. Making Ethical Decisions (cont.)
Principles of ethics (cont.)
Community principle – decisions that contribute to the strength and well-being of the community (p. 152)
Utilitarian principle – decisions that provide the greatest good to the greatest number (or the least harm to the fewest number)
Distributed justice principle – decisions that do not harm those who already are disadvantaged
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15. Making Ethical Decisions (cont.)
Codes of conduct - organization’s published guidelines of its expectations about ethical behavior (p. 153)
Typically address conduct in eight areas
Fiduciary
Dignity
Property
Transparency
Reliability
Fairness
Citizenship
Responsiveness
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16. Making Ethical Decisions (cont.)
Principle-based management (p. 153)
Organization proactively connects values and beliefs to behavior expectations
All stakeholders are continuously made aware of standards for behavior
Stakeholders become a vital component to decision making
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17. Social Responsibility (p. 154)
Proactive behaviors for the benefit of society
Corporate social responsibility (CSR)
Programs that coordinate the company’s efforts to address societal and community challenges as they emerge
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18. Social Responsibility (cont.)
Approaches to social responsibility (p. 155)
Proactive approach – organization goes beyond industry norms to solve and prevent problems
Begin by consulting the articles of incorporation
May change the legal structure to support socially responsible activities
B Lab – non-profit organization that certifies socially responsible companies
Accommodative approach – organization accepts responsibility and takes action in response to societal pressures (p. 156)
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19. Social Responsibility (cont.)
Approaches to social responsibility (cont.)
Defensive approach – organization accepts responsibility, but does only the minimum required (p. 156)
Reactive approach – organization denies responsibility for social problems and responds only when legally required
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20. How Does Social Responsibility Pay? (p. 157)
Social entrepreneurs - people who start a business for the dual purpose of profits and societal benefits
Consumers and investors becoming more active in supporting and investing in socially responsible companies
Social investing – e.g., Calvert Social Investment Fund screens companies on financial performance and: Environment Workplace
Human rights Indigenous peoples’ rights
Community relations Product safety and impact
Governance business ethics
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21. Managing Social Responsibility Today (p. 158)
Managers must make principle-based decisions informed by industry and societal standards
Internalizing an externality – management proactively addresses a negative externality for the benefit of its stakeholders
Building an ethical culture
Apply a framework for ethical decision making
Ethics training
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22. Managing Social Responsibility Today (cont.)
Ethical decision making framework (p. 158)
Duties (p. 159)
Perfect duties – clearly articulated moral obligations
Imperfect duties – moral obligations that can be interpreted in different ways
Rights –behaviors that can be expected from others, based on their duties
Standards of excellence – organization’s highest expectations of behavior
Commitments – self-defined principles unique to an individual or organization
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23. Managing Social Responsibility Today (cont.)
Ethical decision making framework (cont.)
Applying the framework (p. 159)
Understanding the situation
Connecting behaviors to standards
Impartial analysis
Visibility – the “newspaper test”
Generality – would all organizational members be comfortable with action taken
Legacy – would decision maker be comfortable being remembered for the action taken
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24. Managing Social Responsibility Today (cont.)
Ethics training (p. 159)
Intended to prevent unethical behavior from occurring
Figure 6.6
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25. Managing Social Responsibility Today (cont.)
Ethics training (cont.)
Audience for training
Training characteristics – trainees’ current moral profile
Audience’s assertiveness, cognitive ability, perspective on ethical behavior (p. 159)
Needs assessment – determine audience’s need for ethics training (p. 160)
Training transfer – steps to assure that what is learned about ethics will be used on the job
Evaluation – determine the effect of training on trainees’:
Reaction to the training Workplace behavior
Knowledge/skills tests Organizational performance
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26. Managing Social Responsibility Today (cont.)
In the interests of
self or others?
(p. 161)
Tragedy of
the commons
Figure 6.7
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27. Copyright
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