Chapter 3
Ethics and Social
Responsibility
What Would You Do?



PETA v. McDonald’s
Should McDonald’s assure that animals are
treated “humanely”?
What ethical guidelines are relevant in this
situation?
2
Learning Objectives
Ethics
After discussing this section
you should be able to:
1.
discuss how the nature of a management job
creates the possibility for ethical abuses,
2.
identify common kinds of workplace deviance,
3.
describe the 1991 U.S. Sentencing Commission
Guidelines and how its recommendations now
make ethical behavior much more important for
businesses.
3
Ethics and the Nature of
Management Jobs

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Ethical behavior follows accepted principles
of right and wrong
Intentional managerial unethical behaviors



company resources for personal use
mishandling information
encouraging others’ unethical behavior
4
Ethics and the Nature of Management
Jobs (Cont’d.)

Unintentional managerial unethical behavior


poorly constructed policies
unrealistic employee goals
5
Workplace Deviance


Behavior that violates organizational norms
about right and wrong
Two dimensions

Degree of deviance


minor to serious
Target of deviant behavior

the organization or particular people
6
Types of Workplace Deviance




Production
Property
Political
Personal Aggression
7
Production Deviance


Hurts the quality and/or quantity of work
Such as leaving early, taking excessively long
breaks, etc.
8
Property Deviance


Unethical behavior aimed at company
property
Such as sabotage, stealing, damaging
equipment, etc.
9
Political Deviance


Using one’s influence to harm others in the
company
Such as favoritism, spreading rumors, falsely
blaming others, etc.
10
Personal Aggression


Hostile or aggressive behavior toward others
Such as sexual harassment, verbal abuse,
threatening others, etc.
11
Workplace Deviance
ORGANIZATIONAL
Production Deviance
•leaving early
•excessive breaks
•working slow
•wasting resources
Property Deviance
•sabotaging equipment
•accepting kickbacks
•lying about hours worked
•stealing from the company
MINOR
SERIOUS
Political Deviance
•showing favoritism
•gossiping about co-workers
•blaming co-workers
•competing nonbeneficially
Adapted from
Exhibit 3.1
Personal Aggression
•sexual harassment
•verbal abuse
•stealing from co-workers
•endangering co-workers
INTERPERSONAL
12
U.S. Sentencing Commission
Guidelines



Companies can be prosecuted and punished
even if management didn’t know about the
unethical behavior
Who, What, and Why
Determining Punishment
13
Who, What, and Why



Nearly all businesses - profit and nonprofitare covered
Punishes a number of actions
Encourages businesses to be proactive on
employee crime
14
Determining Punishment


Smaller fines for companies that are
proactive
Steps in determining fine size




determine the base fine
compute a culpability score
multiply the base fine by the culpability score
Compliance programs are important
15
Compliance Program Steps for the
1991
U.S. Sentencing Guidelines
Establish standards and procedures to meet the company’s







business needs.
Put upper-level managers in charge of the compliance
program.
Don’t delegate decision-making authority to employees who
are likely to act illegally or unethically.
Use auditing, monitoring, and other methods to encourage
employees to report violations.
Use company publications and training to inform employees
about the company’s compliance standards and procedures.
Enforce compliance standards by fairly and consistently
disciplining violators.
After violations occur, find appropriate ways to improve the
compliance program.
Adapted from Exhibit 3.2
16
Learning Objectives
Making Ethical Decisions
After discussing this section
you should be able to:
4.
5.
describe what influences ethical decision
making,
explain what practical steps managers can
take to improve ethical decision making.
17
Influences on Ethical Decision
Making



Ethical Intensity of the Decision
Moral Development of the Manager
Ethical Principles Used to Solve the
Problem
18
Ethical Intensity of the Decision



Magnitude of
consequences
Social consensus
Probability of effect



Temporal immediacy
Proximity of effect
Concentration of effect
19
Moral Development of the Manager
Preconventional Level
Stage 1: Punishment & Obedience
Stage2: Instrumental Exchange
Conventional Level
Stage 3: Good Boy - Nice Girl
Stage 4: Law & Order
Post Conventional Level
Stage 5: Legal Contract
Stage 6: Universal Principle
Adapted from
Exhibit 3.3
Davidson & Worrell, Business & Society 34 (1995): 171-196
20
Principles of Ethical Decision
Making




Principle of Long-term
Self-interest
Principle of Personal
Virtue
Principle of Religious
Injunctions
Principle of
Government
Requirements



Principle of Utilitarian
Benefits
Principle of Individual
Rights
Principle of
Distributive Justice
21
Principle of Long-Term Self-Interest


People should never take any action that is
not in their or their organization’s long-term
self-interest
The key is long-term, not short-term interests
22
Principle of Personal Virtue

People should never do anything that is not
honest, open, and truthful, and which they
would not be glad to see reported in the
newspapers or on TV
23
Principle of Religious Injunctions

People should never take an action that is
unkind or that harms a sense of community,
such as the positive feelings that come from
working together to accomplish a commonly
accepted goal.
24
Principle of Government
Requirements


The law represents the minimal moral
standards of society
People should never take any action that
violates the law.
25
Principle of Utilitarian Benefits


People should never take any action that
does not result in greater good for society
People should do whatever creates the
greatest good for the greatest number
26
Principle of Individual Rights

People should never take any action that
infringes on others’ agreed-on rights
27
Principle of Distributive Justice

People should never take any action that
harms the least among us in some way
28
Practical Steps to Ethical Decision
Making

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Selecting and Hiring Ethical Employees
Codes of Ethics
Ethics Training
Ethical Climate
29
Selecting and Hiring Ethical
Employees


Increase ethical behaviors by hiring more
ethical employees
Testing for ethics


Overt integrity tests
Personality-based integrity tests
30
What Really Works?
Workplace Deviance
(Counterproductive Behaviors)
Overt Integrity Tests & Workplace Deviance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
82%
Probability of success
Personality-Based Integrity Tests & Workplace
Deviance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
68%
31
What Really Works? (Cont’d.)
Job Performance
Overt Integrity Tests & Job Performance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
69%
Personality-Based Integrity Tests & Job
Performance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
70%
32
What Really Works? (Cont’d.)
Theft
Overt Integrity Tests & Job Performance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success 57%
33
Codes of Ethics


Corporate statements on ethics
The relationship between codes and
behavior depend on:


companies communicating the codes to others
both within and outside the company
companies developing practical ethical
standards and procedures specific to the
company’s line of business
34
Ethics Training



Develop employee awareness about ethics
Achieve credibility with employees
Teach employees a practical model of ethical
decision making
35
A Basic Model of Ethical Decision
Identify
Identify
the
Making
the
constituent
s
proble
m
Make
your
choice
Adapted from Exhibit 3.5
Analyze
your
options
Ac
t
Diagnose
the
situation
36
Ethical Climate
37
Learning Objectives
Social Responsibility
After discussing this section
you should be able to
explain:
6.
7.
8.
9.
to whom organizations are socially responsible,
for what organizations are socially responsible,
how organizations can choose to respond to societal
demands for social responsibility,
whether social responsibility hurts or helps an organization’s
economic performance.
38
To Whom Are Organizations
Socially Responsible?

Shareholders



managers must satisfy the owners
social responsibility is maximizing shareholder
wealth
Stakeholders


persons with a legitimate interest in the
company
social responsibility is satisfying the interests of
multiple stakeholders
39
Been There, Done That
Anita Roddick, founder and co-chair of The
Body Shop International PLC



Large multinational corporations are the cause of
many social problems
Businesses should be audited socially &
environmentally
She is an activist against corporate corruption
40
Shareholders Only - Friedman


Managers cannot act effectively as moral
agents for shareholders
Time, money, and attention diverted to social
causes undermine market efficiency
41
Stakeholder View
42
For What Are Organizations
Socially Responsible?
Legal
Responsibilities
Economic
Responsibilities
Adapted from
Exhibit 3.8
Discretionary
Responsibilities
Ethical
Responsibilities
Carroll, Academy of Management Review 4 (1979): 497-505
43
Blast From The Past
100 Years of Corporate Philanthropy


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1800s - doctrine of ultra vires
Benefits to employees allowed in late 19th
century
1940s corporate philanthropy took place
Now, U.S. companies donate
approximately $6 billion a year
44
Responses to Demands for Social
Responsibility
Reaction
Defense
Accommodation
Proaction
Fight all
the way
Do only what
is required
Be
Progressive
Lead the
industry
Withdrawal Public
Legal Bargaining Problem
Relations Approach
Solving
Approach
Do
Nothing
Adapted from
Exhibit 3.9
Do
Much
Carroll, Academy of Management Review 4 (1979): 497-505
45
Social Responsibility and Economic
Performance



Social responsibility can sometimes cost a
company significantly if it chooses to be
socially responsible
Sometimes it does pay to be socially
responsible
While socially responsible behavior may be
“the right thing to do,” it does not guarantee
profitability
46
What Really Happened?



McDonald’s formed the Animal Advisory
Council
Developed Animal Welfare Guiding Principles
McDonald’s changed their egg purchasing
practices
47