UBMM 1013 MANAGEMENT
PRINCIPLES
TOPIC 13
ETHICS AND SOCIAL
RESPONSIBILITY
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Outline:
1.
2.
3.
4.
5.
6.
What Is Managerial Ethics?
Criteria for Ethical Decision-making
Factors Affecting Ethical Choices
What Is Social Responsibility?
Organizational Stakeholders
The Ethic of Sustainability and the Natural
Environment
7. Evaluating Corporate Social Performance
8. Managing Company Ethics and Social
Responsibility
9. Ethical Challenges in Turbulent Times
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Outline:
1.What Is Managerial Ethics?
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1.0 What Is Managerial Ethics?
The code of moral principles and values that govern
the behaviors of a person or group with respect to
what is right or wrong
• Set standards as to what is good or bad in conduct
and decision making
• Deals with internal values that are a part of
corporate culture and shapes decisions concerning
social responsibility with respect to the external
environment
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Three Domains of Human Action
Domain of Codified Law
Domain of Ethics
Domain of Free Choice
(Legal Standard)
(Social Standard)
(Personal Standard)
Amount of
Explicit Control
High
Low
Exhibit 5.1
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1.1 Codified Law
• Values and standards are written into the legal system
and are enforceable into the courts
• Lawmakers have ruled that people and corporations
must behave in a certain way such as obtaining
licenses for cars or paying taxes
• Obedience is to laws prescribed by the legal system
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1.2 Domain of Ethics
• Ethics lies between the domains of codified law and
free choice
• This domain has no specific laws
• Ethics has standards of conduct based on shared
principles and values about moral conduct that guide
an individual or company
• Obedience is to unenforceable norms and standards
about which the individual or company is aware
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1.3 Domain of free choice
• The opposite of codified law
• Free choice pertains to behavior about which law
has no say and for which an individual or
organization enjoys complete freedom
• Obedience is strictly to oneself
• An individual’s choice of a marriage partner or
religion is an example of free choice
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1.4 Ethical Dilemma
• A situation that arises when all alternative choices or
behaviors have been deemed undesirable because of
potentially of negative ethical consequences, making it
difficult to distinguish right from wrong.
• The individual who must make an ethical choice in an
organization is the moral agent
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Outline:
2.0 Criteria for Ethical Decision-making
2.1
2.2
2.3
2.4
Utilitarian Approach
Individualism Approach
Moral-Rights Approach
Justice Approach
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2.0 Criteria For Ethical Decision Making
Most ethical dilemmas involve:
- Conflict between needs of the part & whole
- Individual versus the organization
- Organization versus society as a whole
- Managers benefit from a normative strategy to
guide their decision making - norms and
values
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2.1 Utilitarian Approach
● Moral behavior produces the greatest good for the greatest
number
● The decision maker is expected to consider the effect of each
decision alternative on all parties and select the one that will
optimize the satisfaction for the greatest number of people
● Example – recent trend among companies to monitor
employee use of the Internet
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2.2 Individualism Approach
● Acts are moral when they promote the individual's best longterm interests, which ultimately leads to the greater good
● Individual self-direction paramount
● Individualism is believed to lead to honesty & integrity since
that works best in the long run; lying and cheating causes
business associates to lie and cheat in return
● Examples: Top executives from WorldCom, Enron, Tyco
demonstrate flaws of approach
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2.3 Moral-Rights Approach
• Assets that human beings have fundamental rights
that cannot be taken away by an individual’s decision
• Moral decisions are those that best maintain the
rights of those people affected by them.
• An ethical decision is one that avoids interfering with
the fundamental rights of others
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Six Moral Rights
1. The right of free consent
•
individuals are to be treated only as they knowingly
and freely consent to be treated
2. The right to privacy
•
individuals can choose to do as they please away from
work and have control of information about their
private life
3. The right of freedom of conscience
•
individuals may refrain from carrying out any order that
violates their moral or religious norms
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Six Moral Rights
4. The right of free speech
•
5.
individuals may criticize truthfully the ethics
or legality of actions of others
The right to due process
•
6.
individuals have a right to an impartial
hearing and fair treatment
The right to life & safety
•
individuals have a right to live without
endangerment or violation of their health and
safety
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2.4 Justice Approach
• Moral Decisions must be based on standards of
equity, fairness, impartiality
Three types of Justice Approaches:
 Distributive Justice
 Procedural Justice
 Compensatory Justice
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2.4.1 Distributive Justice
• Different treatment of people should not be based on
arbitrary characteristics
• For example, men and women should not receive
different salaries if they are performing the same job
• In case of substantive differences, people should be
treated differently in proportion to the differences
among them
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2.4.2 Procedural Justice
• Rules should be clearly stated
• Rules should be consistently and impartially enforced
2.4.3 Compensatory Justice
●
Individuals should be compensated for the
cost of their injuries by the party responsible
●
Individuals should not be held responsible
for matters they have no control over
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Outline:
4.0 What Is Social
Responsibility?
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4.0 Social Responsibility
• Organization’s obligation to make choices and take
actions that will contribute to the welfare and interests
of society and organization
• Distinguishing right from wrong; being a good corporate
citizen
• Difficulty in understanding – issues can be ambiguous
with respect to right and wrong
• A company’s environment impact must also be taken in
consideration
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Outline:
5.0 Organizational
Stakeholders
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5.0 Organizational Stakeholders
• Any group within or outside the organization that
has a stake in the organization’s performance
• Each stakeholder
• Has a different criterion of responsiveness
• Has a different interest in the company
• Gap
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5.0 Organizational Stakeholders
• Important stakeholders and their expectations:
• Employees expect work satisfaction
• Investors, owners, and suppliers expect managerial efficiency
to achieve profits
• Customers expect quality and availability of goods and services
• Government expects compliance with the law
• Community, including local government, expects natural and
physical environment and quality of life for residents
• Special interest groups. Including trade associations and
political action committees
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5.0 Organizational Stakeholders
• Socially responsible organizations pay attention to all
stakeholders who are affected by their actions
• Today, special interest groups continue to be one of
the largest stakeholder concerns that companies face
• Environmental responsibility has become a primary
issue as both business and the public acknowledge the
damage that has been done to our natural
environment
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Outline:
7.0 Evaluating Corporate Social
Performance
7.1 Economic Responsibilities
7.2 Legal Responsibilities
7.3 Ethical Responsibilities
7.4 Discretionary Responsibilities
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Total Corporate Social Responsibility
Exhibit 5.7
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7.1 Economic Responsibility
Economic
Responsibility
• The first criterion of social responsibility
is
economic responsibility; the business institution is
the basic economic unit of society
• Its responsibility is to produce the goods and services
that society wants and to maximize profits for its
owners and shareholders
• Economic responsibility carried to extreme is called
the profit-maximizing view, advocated by Nobel
economist Milton Friedman
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7.1 Economic Responsibility
• This view argues that the corporation should be
operated on a profit-oriented basis, with its sole
mission to increase its profits so long as it stays within
the rules
• The purely profit-maximizing view is not considered and
adequate criterion of performance in Canada, the
United States, and Western Europe
• This approach means that economic benefit is the only
social responsibility and can lead companies into
trouble
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7.2 Legal Responsibility
Legal
Responsibility
• Defines what society deems important
with respect to appropriate corporate
behavior
• Businesses are expected to fulfill their economic
goals within the law
• Legal requirements are imposed by local
governments, state legislators, and fedeal regulatory
agencies
• Organizations that knowingly break the law are poor
performers in this category
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7.3 Ethical Responsibilities
• Includes behaviors that are not necessarily
codified into law and may
not serve the
firm’s direct economic interests
Ethical
Responsibility
• To be ethical, decision makers should act with
equity, fairness, and impartiality, respect the
rights of individuals, and treat individuals
differently only when relevant to the
organization’s goals
• Unethical behavior occurs when decisions
enable an individual or company to gain at the
expense of society
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7.4 Discretionary Responsibility
• Discretionary responsibility is voluntary and
guided by a company’s desire to make social
contributions not mandated by economics,
law, or ethics
Discretionary
Responsibility
• Discretionary activities include philanthropic
contributions that offer no paycheck to the
company and are not expected
• Discretionary responsibility goes beyond what
society expects a firm to contribute to the
community’s welfare
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Outline:
8.0 Managing Company Ethics
and Social Responsibility
8.1 Ethical Individuals
8.2 Ethical Leadership
8.3 Organizational
Structures and Systems
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The Ethical Organization
The Three Pillars of an Ethical Organization
Exhibit 5.9
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8.0 Managing Company Ethics and
Social Responsibility
8.1 Ethical individuals
● honest, have integrity, strive for a high level of moral
development
8.2 Ethical leadership
● provides the necessary actions, committed to ethical values
and helps others to embody those values
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8.0 Managing Company Ethics and
Social Responsibility
8.3 Organizational structures and systems
● set of tools that managers use to shape values and
promote ethical behavior throughout the organization
● Three of the tools are:
8.3.1 codes of ethics,
8.3.2 ethical structures
8.3.3 whistle-blowers
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8.3.1 Code of Ethics
• Code of Ethics - Is a formal statement of the company’s
values concerning ethics and social issues, it communicates
to employees what the company stands for
• Codes of ethics tend to exist in two types
Principle
• based statements designed to affect: corporate culture; define
fundamental values, company responsibilities, quality of products,
and treatment of employees
Policy
• based statements outline the procedures to be used in specific
ethical situations such as marketing, conflicts of interest,
observance of laws, proprietary information, political gifts, equal
opportunities
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8.3.2 Ethical Structures
• Ethical Structures - The systems, positions, and
programs a company can develop to implement
ethical behavior such as:
Ethics committee.
• A group of executives appointed to oversee the
organization’s ethics by ruling on questionable issues and
disciplining violators
Chief ethics officer.
• A company executive who oversees ethics and legal
compliance
Ethics training programs.
• Training programs to help employees deal with ethical
questions and values
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8.3.3 Whistle-blowing
• Whistle-blowing – the disclosure by an employee of
illegal, immoral, or illegitimate practices by the
organization
• Some firms have instituted innovative programs and
confidential hotlines to encourage and support internal
whistle-blowing
• Whistle-blowers must be protected if this is to be a
benefit to the company
• When there are no protective measures, whistleblowers suffers; it is risky because whistle-blowers can
lose their jobs, be ostracized, or be transferred
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