Ethics, Corporate Responsibility, and Sustainability CHAPTER FIVE Copyright zlikovec/Shutterstock.com RF ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Chapter Introduction Quote “are you ethical?” Senzo Ngcobo ©McGraw-Hill Education. ETHICAL STANCE p155 Calling In sick when you really are not Cheating on a test (online assessments) Trying to flirt your way out of a speeding ticket or “giving cold drink money” Turning in someone for cheating on a test or paper Surfing the net on company time Lying (exaggerating) about yourself to influence someone of the opposite sex Lying about your education on a job application Illegally downloading music ©McGraw-Hill Education. Learning Objectives 1 Describe how different ethical perspectives guide decision making. 2 Explain how companies influence their ethics environment. 3 Outline a process for making ethical decisions. 4 Summarize the important issues surrounding corporate social responsibility. 5 Discuss reasons for businesses’ growing interest in the natural environment. 6 Identify actions managers can take to manage with the environment in mind. ©McGraw-Hill Education. Ethics Ethics are the system of rules that governs the ordering of values. Most people have unconscious biases that favour themselves and their own group. Managers often: • Hire people who are like them • Think they are immune to conflicts of interest • Take more credit than they deserve • Blame others when they deserve some blame themselves ©McGraw-Hill Education. It’s a Personal Issue If you could take someone’s property and get away with it, would you? If the employer pays for the computer and the time you spend sitting in front of it, is it ethical for you to use the computer to do tasks unrelated to your work? Are these scenarios different? ©McGraw-Hill Education. Copyright allesalltag/Alamy Stock Photo Telling the Truth and Lying: Possible Outcomes Reason for the Lie Results of Lying Results of Telling the Truth Negotiation • Short-term gain and economically positive • Harms long-term relationship • Must rationalize to oneself • Supports high-quality, long-term relationship • Develops reputation of integrity • Models behavior to others Keeping a confidence (that may require at least a lie of omission) • Maintains relationship with the party for whom confidence is kept • May project deceitfulness to the deceived party • Violates a trust to the confiding party • Makes one appear deceitful to all parties in the long run ©McGraw-Hill Education. Ethical Issues and Business Ethics Ethical issue Situation, problem, or opportunity in which an individual must choose among several actions that must be evaluated as morally right or wrong Business ethics Moral principles and standards that guide behavior in the world of business ©McGraw-Hill Education. Ethical Systems Moral philosophy Principles, rules, and values people use in deciding what is right or wrong System Example Universalism An organization treats all of its employees who work in different countries with fairness and dignity. Egoism An entrepreneur builds a company for financial gain and ultimately employs thousands. Utilitarianism Employees accept a 10-percent reduction in salary so no one has to be laid off. Relativism A student refuses to share answers during an exam because none of her peers would engage in such behavior. Virtue ethics A manager believes it is critical to stand up for what is right and not be unduly influenced by organizational pressure. Universalism The ethical system stating that all people should uphold certain values that society needs to function ©McGraw-Hill Education. Egoism and Utilitarianism Egoism An ethical system defining acceptable behavior as that which maximizes consequences for the individual ©McGraw-Hill Education. Utilitarianism An ethical system stating that the greatest good for the greatest number should be the overriding concern Relativism and Virtue Ethics Relativism Philosophy that bases ethical behavior on the opinions and behaviors of relevant other people Virtue ethics Goes beyond the conventional rules, suggesting that what is moral must also come from what a mature person with good “moral character” would deem right :Kohlberg’s model of cognitive moral development: Preconventional (self-interest) – Conventional (acceptable behaviour) – Principled (self chosen principles) ©McGraw-Hill Education. Current Ethical Issues in Business Topic Issue CEO Pay What is a fair level of pay for a top executive? Twenty times what the average company worker earns? Whatever other companies want to pay their top executives. Globalization When a company operates in countries with lower costs, what are its obligations, if any, to the workers in those countries? What standards should it meet for pay rates? Health care With health care costs outpacing inflation, employers struggle to cover the cost of health insurance for workers. Are they ethically obligated to provide this benefit? Social media What ethical obligations do employees have in commenting about their employer on social media? What ethical obligations do employers have concerning their employees’ privacy on social media? ©McGraw-Hill Education. The Ethics Environment: Climate and Leadership Ethical climate In an organization, the processes by which decisions are evaluated and made on the basis of right and wrong ©McGraw-Hill Education. Ethical leader Both a moral person and a moral manager influencing others to behave ethically Seven Danger Signs of Unethical Behavior at Your Organization 1. Excessive emphasis on short-term revenues over longerterm considerations. 2. Failure to establish a written code of ethics. 3. A desire for simple, “quick fix” solutions to ethical problems. 4. An unwillingness to take an ethical stand that may impose financial costs. 5. Consideration of ethics solely as a legal issue or a public relations tool. 6. Lack of clear procedures for handling ethical problems. 7. Responding to the demands of shareholders at the expense of other stakeholders. ©McGraw-Hill Education. Ethics Programs Compliance-based ethics programs Company mechanisms typically designed by corporate counsel to prevent, detect, and punish legal violations ©McGraw-Hill Education. Integrity-based ethics programs Company mechanisms designed to instill in people a personal responsibility for ethical behavior Exhibit 5.6 A Process for Ethical Decision Making Jump to Appendix 1 for long description of image. ©McGraw-Hill Education. SOURCE: Hosmer, L. T., The Ethics of Management, 4th ed. New York: McGraw-Hill/Irwin, 2003, p. 32. Fig. 5.1A. Ethical Decision Making Making ethical decisions takes: Moral awareness • Realizing the issue has ethical implications Moral judgment • Knowing what actions are morally defensible ©McGraw-Hill Education. Behaving ethically requires not just moral awareness and moral judgment but also moral character, including the courage to take actions consistent with your ethical decisions. Corporate Social Responsibility Corporate social responsibility (CSR) Obligation toward society assumed by business Triple bottom line • Economic • Social • Environmental ©McGraw-Hill Education. Copyright Nature and Science/Alamy Stock Photo In Review 1 Describe how different ethical perspectives guide decision making. 2 Explain how companies influence their ethics environment. 3 Outline a process for making ethical decisions. 4 Summarize the important issues surrounding corporate social responsibility. 5 Discuss reasons for businesses’ growing interest in the natural environment. 6 Identify actions managers can take to manage with the environment in mind. ©McGraw-Hill Education.
