1. Ethics and Corporate Social Responsibility
Chapter 6
Ethics and Corporate Social Responsibility

2. Ethics: A set of rules and values that define right and wrong conduct.
They indicate when behavior is acceptable and when it is unacceptable.

3. Moral Principles
Moral principles prescribe rules of acceptable behavior that are intended to be impartial.
Moral Principles dive the rules of ethics

4. Ethical vs. Unethical Decisions
Ethical decision – reasonable and acceptable because it aids stakeholders, organization, and society.
Unethical decision- decision that a manager would prefer to disguise or hide from other people because of individual gain is placed above others needs.
Rules of thumb

5. Ethical Perspectives for Evaluating Behavior
Societal
Organizational
Legal
Individual
Adapted from Figure 6.1

6. Societal Perspective
Societal Ethics – standards that govern how members of a society are to deal with each other on issues of fairness, justice, poverty, and individual rights.
-         The idea of what is ethical behavior is largely influenced by the society in which the behavior occurs.
Various public opinion surveys suggest a growing disenchantment with the lack of ethical behavior

7. Legal Perspective
Laws: society’s values and standards that are enforceable in the courts.
Employment-at-will: a traditional common-law concept holding that employers are free to discharge employees for any reason at any time and that employees are free to quit their jobs for any reason at any time.

8. Legal Perspective (Ctd.)
Ethics are not laws by any means, simply beliefs about what is right or wrong.
Legality of actions and decisions doesn’t make them ethical
Laws move with the current culture and moral principles
-         Lag behind because they are written and set
-         Do no ensure or even promote ethical behavior
Often laws and ethics are in conflict

9. Examples of Law/Ethical Difference
Students borrowing and investing money
Caveat emptor-buyer beware
Reputation-costs and benefits

10. Organizational Perspective
To provide guidance for employees, an organization can define ethical and unethical behaviors.
Organizations can also guide employee actions both formally and informally.

11. Individual Perspective
Despite prevalent societal, legal, and organizational interpretations of what is ethical, individuals have their own values and a sense of what is right or wrong.
Lawrence Kohlberg
-         Suggested people develop morally, much as they do physically, from early childhood to adulthood.
As they develop, their ethical criteria and patterns of moral reasoning go through stages of moral development

12. Individual Perspective (Ctd.)
Stages of moral development: according to Kohlberg, people develop morally by going through six stages of moral development: obedience and punishment, instrumental, interpersonal, law and order, social contract, and universal principles.

13. Kohlberg’s Stages of Moral Development
Universal Principles
Social Contract
Law & Order
Interpersonal
Instrumental
Obedience & Punishment
Childhood Through Adulthood
Adapted from Figure 6.2

14. Kohlberg’s Stages (Ctd.)
Obedience and punishment: person does the right thing mainly to avoid punishment or to obtain approval.
Instrumental: person becomes aware that others also have needs and begins to defer to them to get what the individual wants.
Interpersonal: person considers appropriate behavior as what pleases, helps, or is approved by friends or family.

15. Kohlberg’s Stages (Ctd.)
Law & Order: person recognizes that ethical behavior is not determined only by reference to friends, family, co-workers, or others whose opinions the individual might value.
Social Contract: person is aware that people hold a variety of conflicting personal views that go beyond the letter of the law.
Universal Principles: person views appropriate conduct as determined by a person’s conscience, based on universal ethical principles.

16. Ethical Models Utilitarian Justice Moral Rights IDEAL Outcome
Adapted from Fig 6.5

17. Utilitarian Model
Greatest good for the greatest number, but many hurt a few.
Milton Friedman is the best-known advocate of this approach.
All employees should strive to increase the company’s profits.

18. Parts to Utilitarian Model
(Organizational Goals): focusing on maximizing profits. Profits are seen as the reward for satisfying customers.
(Efficiency): achieved by both minimizing inputs (e.g. labor, land, and capital) and maximizing productive outputs.
(Conflicts of Interest): by having a financial interest in a supplier a purchasing agent might be more likely to buy from his supplier even if it’s not in the companies best interest.

19. Moral Rights Model
Judging decisions and behavior by their consistency with fundamental personal and group liberties and privileges.
(Life and Safety): Employees, customers, and public have the right not to have their lives and safety endangered.
(Truthfulness): They have the right not to be intentionally deceived on matters about which they should be informed.
(Privacy): Citizens have the right to control access to personal information.

20. Moral Rights Model (Ctd.)
(Free Speech): Employees have the right to criticize the ethics or legality of their employers actions.
(Private Property): This right allows people to acquire, use, and dispose of shelter and have life’s basic necessities.

21. Justice Model
Judging decisions an behavior by their consistency with an equitable, fair, and impartial distribution of benefits (rewards) and costs among individuals and groups.
Distributive Justice Principle: moral requirement that individuals not be treated differently because of arbitrarily defined characteristics.

22. Justice Model (Ctd.)
Fairness Principle: moral requirement that employees support the rules of the organization when certain conditions are met.
Natural Duty Principle: moral requirement that decisions and behaviors be based on a variety of universal obligations.

23. Society and the Environment
Sustainable development: conducting business in a way that protects the natural environment while making economic progress.
This model of thought has increased environmental issues both internally and externally for corporations such as 3M, Kodak, and McDonalds.
Now include ethical principles of industrial ecology in their strategic plans.

24. Example from 3M
Solve its own pollution and conservation problems beyond compliance requirements.
Prevent pollution at the source, whenever possible
Conserve natural resources through waste reclamation and other methods
Assist regulatory and government agencies concerned with environment
Develop products that are ecologically friendlier

25. Stakeholder Theory
Stakeholders: individuals or groups that have interests, rights, or ownership in an organization or the activities.
A broad category that covers a lot of individuals and groups.
Some groups are more important to the organization and its success.

26. Stakeholders of the Organization
Customers
Employees
Owners
Unions
Suppliers
Government
Local
Community
Strategic
Partners
Society
Adapted from Figure 6.3

27. Stakeholders’ Concerns
Stakeholder Group
* Owners and Investors
Examples of Concerns
Financial Soundness
Consistency in meeting shareholder expectations
Sustained profitability
Average return on assets over five-year period
Timely and accurate disclosure of financial information

28. Stakeholders’ Concerns (Ctd.)
Examples of Concerns
* Product/service quality, innovativeness, and availability
*responsible management of defective or harmful products/services
*Safety records for products/services
*Pricing policies and practices
* Honest, accurate , and responsible advertising.
Stakeholder Group
* Customers

29. Stakeholders’ Concerns (Ctd.)
Stakeholder Group
* Employees
Examples of Concerns
Nondiscriminatory, merit-based hiring and promotion
Diversity of the workforce
Wage and salary levels and equitable distribution
Availability of training and development
Workplace safety and privacy

30. Stakeholders’ Concerns (Ctd.)
Stakeholder Group
* Community
Examples of Concerns
Environmental Issues
Environmental sensitivity in packaging and product design
Recycling efforts and use of recycled materials
Pollution prevention
Global applications of environmental standards

31. Stakeholders’ Concerns (Ctd.)
Examples of Concerns
Community Involvement
Percentage of profits designated for cash contributions
Innovation and creativity in philanthropic efforts
Product donations
Availability of facilities and other assets for community use
Support for employee volunteer efforts.
Stakeholder Group
* Community (Ctd.)

32. Evaluating Corporate Social Performance
Fortune magazine founded “Ron Brown Award for Corporate Leadership in Ethics”
Demonstrates corporate leadership in Employee and Community Relations (Ethics)

33. Affirmative Social Responsibility
Ron Brown Award wants corporations and their leaders to move away from traditional, utilitarian models of business and take a more proactive stance with regard to society.

34. Affirmative Social Responsibility (Ctd.)
5 steps:
1. Broad Performance Criteria
2. Ethical Norms
3. Operating Strategy
4. Response to Social Pressures
5. Legislative and Political Activities

35. Affirmative Social Responsibilities (Ctd.)
Taking this approach requires companies to implement five different an expensive behaviors:
1. Broad Performance Criteria: management and employees must recognize broader views to measure growth.
2. Ethical norms: managers and employees must take definite stands on issues of public concerns.
3. Operating strategy: managers and employees should maintain or improve current standards of the physical and social environment.

36. Ctd.
4. Response to social pressures: management and employees should accept responsibilities for solving current problems.
5. Legislative and Political Activities: Managers must show a willingness to work with outside stakeholders for enforcement.
Social audit: an attempt to identify and measure, evaluate, report on, and monitor the effects that an organization is having on its stakeholders and society.

37. Conflict Difficult to balance all stakeholder problems.
Owls vs. Lumber
Pollution vs. Jobs
Politics vs. Profits
Firms might not know of a stakeholder until there is a problem

38. Whistle-blowing Reporting unethical or illegal behavior.
Has many consequences/risks
When should you blow the whistle?
Table 6.3 (p. 208)

39. Whistle-blowing (Ctd.)
Will not happen if:
1. If allegation of wrongdoing has little or no merit.
2. Accusations are made to someone outside the company.
3. Whistle-blower has no help from middle or top management.

40. Sexual Harassment
Quid pro quo : asking for or forcing sexual contact with an employee in exchange for reward or to avoid punishment.
Hostile work environment: lewd jokes, pornography, sexually oriented remarks about one’s appearance making that person uncomfortable.