Chapter 4
Ethics and Social
Responsibility
Learning Outcomes
After reading this chapter, you should be
able to:
1. Identify common kinds of workplace
deviance.
2. Describe ethics guidelines and legislation in
North America.
3. Describe what influences ethical decision
making.
4. Explain what practical steps managers can
take to improve ethical decision making.
5. Explain to whom organizations are socially
responsible.
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Learning Outcomes
After reading this chapter, you should be
able to:
6. Explain for what organizations are socially
responsible.
7. Explain how organizations can choose to
respond to societal demands for social
responsibility.
8. Explain whether social responsibility hurts or
helps an organization’s economic performance.
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Ethical and Unethical
Workplace Behaviour
• Ethics:
set of moral
principles or values
that defines right
and wrong for a
person/group
• Ethical behaviour:
behaviour that
conforms to a
society’s accepted
principles of right
and wrong
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Ethics: Alarming Facts
• 45 percent of employees reported having observed
misconduct in the workplace during the previous
12 months.
• 74 percent of employees surveyed believed that it was
possible to damage a company’s reputation through social
media.
• 53 percent believed that their social networking pages
were none of their employers’ business.
• 50 percent of active social networkers believe it is
acceptable to keep copies of confidential work documents
for possible use in future jobs, compared with 15 percent
of non-active social networkers.
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Ethics: Alarming Facts
• 94 percent of respondents said it was either critical or
important that the company they work for be ethical.
• 82 percent of a group of employees surveyed said,
“They would work for less to be at a company that had
ethical business practices, and more than a third left a
job because they disagreed with the actions of fellow
employees or managers.”
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Workplace Deviance:
unethical behaviour that violates organizational norms
about right and wrong
Production deviance:
•unethical behaviour that hurts the quality and quantity
of work produced
Property deviance:
•unethical behaviour aimed at the organization’s
property or products
Employee shrinkage:
•employee theft of company merchandise
1
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Types of Workplace Deviance
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Political Deviance:
using one’s influence to harm others
in the company
Personal aggression
•hostile or aggressive behaviour toward others
1
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International Code of Ethics for
Canadian Business Principles
A. Concerning community participation and
environmental protection, we will:
• strive within our sphere of influence to ensure a
fair share of benefits to stakeholders impacted by
our activities;
• ensure meaningful and transparent consultation
with all stakeholders and attempt to integrate our
corporate activities with local communities as
good corporate citizens;
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International Code of Ethics for
Canadian Business Principles (cont’d)
• ensure our activities are consistent with
sound environmental management and
conservation practices; and
• provide meaningful opportunities for
technology cooperation, training, and capacity
building within the host nation.
B. Concerning human rights, we will:
•support and respect the protection of
international human rights within our sphere of
influence; and
•not be complicit in human rights abuses.
2
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International Code of Ethics for
Canadian Business Principles (cont’d)
C. Concerning business conduct, we will:
•not make illegal and improper payments and
bribes and will refrain from participating in any
corrupt business practices;
•comply with all applicable laws and conduct
business activities with integrity; and
•ensure contractors’, suppliers’, and agents’
activities are consistent with these principles.
2
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International Code of Ethics for
Canadian Business Principles (cont’d)
D. Concerning employee rights and health and
safety, we will:
•ensure health and safety of workers is
protected;
•strive for social justice and respect freedom of
association and expression in the workplace;
and
•ensure consistency with other universally
accepted labour standards related to
exploitation of child labour, forced labour, and
non-discrimination in employment.
2
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Six Factors that Contribute to
Ethical Intensity
Magnitude of consequences
Social consensus
Probability of effect
Temporal immediacy
Concentration of effect
Source: T.M. Jones, “Ethical Decision Making by Individuals in Organizations: An Issue-Contingent
Model,” Academy of Management Review 16 (1991): 366–95.
3.1
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Kohlberg’s Stages of
Moral Development
3.2
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Class Activity: Ethical Dilemmas
Beyond the Book
• You are consultant who has
just received a USB key that
has a copy of a proposal your
competitor submitted.
Should you copy it and use it
to make your proposal that
much better?
• In groups of four, what
would the consultant do at
each stage of moral
development?
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Principles of
Ethical Decision Making
3.3
Principle of:
long-term
self-interest
You should never:
do anything that is not in your or
your organization’s long-term
self-interest.
personal virtue
do anything that is not honest, open,
and truthful and that you would not
be glad to see reported in the
newspapers or on TV.
religious
injunctions
do anything that is not kind and that
does not build a sense of
community.
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Principles of
Ethical Decision Making
Principle of:
You should never:
government
requirements
take any action that violates the law,
for the law represents the minimal
moral standard.
take any action that does not result
in greater good for society.
take any action that infringes on
others’ agreed-upon rights.
take any action that harms the least
fortunate among us in
some way.
utilitarian
benefits
individual rights
distributive
justice
3.3
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Practical Steps to
Ethical Decision Making
Ethical Decision Making
1. Hiring
2. Code of Ethics
3. Training
4. Climate
4
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1. Selecting and Hiring
Ethical Employees
If you found a wallet containing $50, would you return it
with the money?
Overt Integrity
Tests
4.1
PersonalityBased Integrity
Tests
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Class Activity: Can Ethics Be Taught?
Beyond the Book
• If you can’t hire entirely
ethical employees, can
you teach someone who is
unethical to act ethically in
spite of him- or herself?
• Discuss as a class.
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2. Code of Ethics
A. Communicate the code of ethics both inside and
outside the company.
B. Develop practical ethical standards and
procedures specific to business.
Canadian Tire Code of Conduct
4.2
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Class Activity: Code of Ethics
Beyond the Book
• In groups, write a code of ethics (five
elements minimum) for the class.
• As groups, report to the class.
• As a class, build a collective code of ethics.
• Identify which type of deviance is targeted by
each element of the collective code.
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Purchasing Managers
Received Kickbacks
•
•
•
Beyond the Book
Home Depot Inc. fired four purchasing managers
for receiving kickbacks from product vendors.
The managers received at least $1 million
to stock and display vendors’ products.
Home Depot is instituting a zero-tolerance policy
on gifts offered by vendors.
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3. Ethics Training
1. Develops employee awareness of ethics
2. Achieves credibility with employees
3. Teaches a practical model of ethical
decision making
4.3
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A Basic Model of
Ethical Decision Making
1. Identify the problem.
2. Identify the constituents.
3. Diagnose the situation.
4. Analyze your options.
5. Make your choice.
6. Act.
Source: L.A. Berger, “Train All Employees to Solve Ethical Dilemmas,” Best’s Review - Life Health Insurance
Edition 95 (1995): 70–80. © A.M. Best Company - used with permission.
4.3
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4. Ethical Climate
Managers:
1. act ethically
2. are active in company
ethics programs
3. report potential ethics violations
by putting in place a reporting
system that encourages
managers and employees to
report potential ethics violations
4.4
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Ethical Culture
• The Ethics Research Center cautions that when the
economic business environment improves, misconduct
may rise unless a strong ethical culture is in place.
• To achieve such a culture, management must set the
tone.
• Studies have found that the
two major drivers of ethics
culture are senior executives
and supervisors.
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Types of Retaliation
Experienced as a Result of
Reported Misconduct (2011)
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What Is Social Responsibility?
• A business’s obligation to pursue policies, make
decisions, and take actions that benefit society
• McKinsey & Co. study:
o Of 1,144 top global executives,
o79 percent said some responsibility …
would fall on corporations
o3 percent believe they do a good job of
dealing with issues
5
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To Whom Are Organizations
Socially Responsible?
5
Shareholder
Model
Maximize profits
Stakeholder
Model
Satisfy interests
of multiple stakeholders
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Stakeholder Model
Primary
Stakeholders
•
•
•
•
•
•
5
Shareholders
Employees
Customers
Suppliers
Governments
Local communities
Secondary Stakeholders
• Media
• Special interest
groups
• Trade associations
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Organization’s Social Responsibilities
Serve a social role.
6
Discretionary
Abide by principles
of right and wrong.
Ethical?
Obey laws and
regulations.
Legal
Be profitable.
Economic
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Triple Bottom Line
“Bottom line”: profit-and-loss
account
“People account”: a measure of how
socially responsible a company has
been throughout its operations
“Planet account”: a measure of how
environmentally responsible a
company has been
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Responses to Demands for
Social Responsibility
7
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Social Responsibility and
Economic Performance
Beyond the Book
Realities of Social Responsibility
•Can cost a company
•Sometimes it does pay
•Does not guarantee profitability
Timberland’s Social & Environmental
Performance
8
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Does It Pay to Be
Socially Responsible?
• There is a tradeoff
between economic
performance and being
socially responsible.
• There is a small, positive
relationship between
economic performance
and being socially
responsible that
strengthens with
corporate reputation.
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