Chapter 3

Ethics and Social

Responsibility

©2004 by Nelson, a division of Thomson Canada Limited

1
What Would You Do?

 Should
McDonald’s bow
to pressure from
PETA?
 Where do the egg
farmers fit in this
situation?
 What is the
ethical thing to
do?
©2004 by Nelson, a division of Thomson Canada Limited 2
What is Ethical and
Unethical Workplace
Behaviour?
After reading the next two
sections, 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 behaviour

©2004 by Nelson, a division of Thomson Canada Limited 3

Ethics and the Nature
of Management Jobs
 Ethical behaviour follows accepted
principles of right and wrong
 Intentional managerial unethical
behaviours
 company resources for personal use
 mishandling information
 encouraging others’ unethical
behaviour
©2004 by Nelson, a division of Thomson Canada Limited 4
Ethics and the Nature
of Management Jobs
 Unintentional managerial unethical
behaviour
 poorly constructed policies
 unrealistic employee goals

©2004 by Nelson, a division of Thomson Canada Limited 5

Workplace Deviance

 Property deviance
 Production deviance
 Political deviance
 Personal aggression

©2004 by Nelson, a division of Thomson Canada Limited 6

Types of Workplace
Deviance
Production deviance
 leaving early
 taking excessively long breaks
 purposely working slower
 intentionally wasting resources
Property deviance
 sabotaging, stealing
 damaging equipment
©2004 by Nelson, a division of Thomson Canada Limited 7
Types of Workplace
Deviance
Political deviance
 using favouritism
 spreading rumours
 falsely blaming others for mistakes
Personal aggression
 sexual harassment
 verbal abuse
 threatening co-workers

©2004 by Nelson, a division of Thomson Canada Limited 8

How Do You
Make Ethical Decisions?
After reading this section, you
should be able to:

3. describe what influences ethical

decision-making
4. explain what practical steps
managers can take to improve
ethical decision- making

©2004 by Nelson, a division of Thomson Canada Limited 9

Influences on Ethical
Decision-Making

 Ethical intensity of the decision

 Moral development
 Principles of ethical decision-
making

©2004 by Nelson, a division of Thomson Canada Limited 10

Ethical Intensity
of the Decision
 Magnitude of  Temporal
consequences immediacy

 Social consensus  Proximity of effect

 Probability of  Concentration of
effect effect

©2004 by Nelson, a division of Thomson Canada Limited 11

Kohlberg’s Stages
of Moral Development
Preconventional Level
Stage 1: Punishment and Obedience
Stage 2: Instrumental Exchange
Conventional Level
Stage 3: Good Boy — Nice Girl
Stage 4: Law and Order
Post Conventional Level
Stage 5: Legal Contract
Stage 6: Universal Principle
Adapted from Exhibit 3.2

©2004 by Nelson, a division of Thomson Canada Limited 12

Principles of
Ethical Decision-Making
 Principle of long-  Principle of
term interest utilitarian benefits
 Principle of  Principle of
personal virtue individual rights
 Principle of  Principle of
religious distributive justice
injunctions
 Principle of
government
requirements
©2004 by Nelson, a division of Thomson Canada Limited 13
Principle of
Long-term Self-interest
 People should never take
any action that’s is not you
or your organization’s long-
term self-interest

©2004 by Nelson, a division of Thomson Canada Limited 14

Principle of
Personal Virtue
 People should never do
anything that is not
honest, open, and truthful,
and which you would not
be glad to see reported in
the newspapers or on TV

©2004 by Nelson, a division of Thomson Canada Limited 15

Principle of
Religious Injunctions
 People should never take any
action that is not kind and that
does not build a sense of
community; a sense of everyone
working together for a commonly
accepted goal

©2004 by Nelson, a division of Thomson Canada Limited 16

Principle of
Government
Requirements
 People should never take
any action that violates the
law, for the law represents
the minimum moral
standard

©2004 by Nelson, a division of Thomson Canada Limited 17

Principle of
Utilitarian Benefits
 People should never take any
action that does not result in
greater good for society. Instead,
do whatever creates the greatest
good for the greatest number.

©2004 by Nelson, a division of Thomson Canada Limited 18

Principle of
Individual Rights
 People should never take any
action that infringes on
others’ agreed-on rights

©2004 by Nelson, a division of Thomson Canada Limited 19

Principle of
Distributive Justice
 People should never take
any action that harms the
least among us: the poor,
the uneducated, the
unemployed

©2004 by Nelson, a division of Thomson Canada Limited 20

Practical Steps to
Ethical Decision-Making
 Selecting and hiring ethical
employees
 Codes of ethics
 Ethics training
 Ethical climate

©2004 by Nelson, a division of Thomson Canada Limited 21

Selecting and Hiring
Ethical Employees
 Increase ethical behaviours by
hiring more ethical employees
 Testing for ethics
 Overt-integrity tests
 Personality-based integrity tests

©2004 by Nelson, a division of Thomson Canada Limited 22

What Really Works
Integrity Tests

©2004 by Nelson, a division of Thomson Canada Limited 23

What Really Works

©2004 by Nelson, a division of Thomson Canada Limited 24

Codes of Ethics
Corporate statements on ethics
 To encourage ethical decision-

making and behaviour

 Companies must communicate the
codes to others both within and
outside the organization
 Management must also develop
practical ethical standards and
procedures specific to the company’s
line of business
©2004 by Nelson, a division of Thomson Canada Limited 25
Ethics Training
 Develop employee awareness
about ethics
 Achieve credibility with employees
 Teach employees a practical model
of ethical decision-making

©2004 by Nelson, a division of Thomson Canada Limited 26

Ethical Climate
 Managers act ethically
 Top managers are active in the in
the company ethics program
 An effective reporting system
 Fairly and consistently punish
those who violate the ethics code

©2004 by Nelson, a division of Thomson Canada Limited 27

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

Adapted from Exhibit 3.4

©2004 by Nelson, a division of Thomson Canada Limited 28

Learning Objectives:
What is Social
Responsibility?
After reading the next four sections, you
should be able to explain:

5. To whom organizations are responsible

6. For what organizations are socially responsible
7. How organizations can choose to respond to
societal demands for social responsibility
8. Whether social responsibility hurts or helps an
organization’s economic performance

©2004 by Nelson, a division of Thomson Canada Limited 29

To Whom Are
Organizations Socially
Responsible?
 Shareholders
 managers must satisfy the owners
 social responsibility is maximizing
shareholder wealth
 Stakeholders
 persons or groups with a legitimate
interest in a company’s actions
 Social responsibility is satisfying the
interests of multiple stakeholders
©2004 by Nelson, a division of Thomson Canada Limited 30
Shareholder Model:
Friedman
 Managers cannot act
effectively as moral agents
for shareholders
 Time, money, and attention
diverted to social causes
undermine market efficiency

©2004 by Nelson, a division of Thomson Canada Limited 31

Stakeholder Model of
Corporate Social
Responsibility
Firm’s
stakeholders:
 Communities
 Governments  Employees
 Investors  Trade
 Political groups associations
 Customers  Suppliers

Adapted from Exhibit 3.5

©2004 by Nelson, a division of Thomson Canada Limited 32

Primary Stakeholder
Issues
Company

Employees

Shareholders

Customers

Suppliers

Public stakeholders
Adapted from Exhibit 3.6

©2004 by Nelson, a division of Thomson Canada Limited 33

For What Are
Organizations Socially
Responsible
Total Social Responsibilities
 Economic
 Legal
 Ethical
 Discretionary

©2004 by Nelson, a division of Thomson Canada Limited 34

Responses to Demands
for Social
Responsibility
Social Responsiveness
 Reactive
 Fight all the way
 Defensive
 Do only what is required
 Accommodative
 Be progressive
 Proactive
 Lead the industry

©2004 by Nelson, a division of Thomson Canada Limited 35

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
behaviour may be “the right thing
to do,” it does not guarantee
profitability 36
©2004 by Nelson, a division of Thomson Canada Limited
What Really Happened?
 Treatment of hens was viewed as one of
“ethical intensity”
 McDonald’s developed a set of Animal
Welfare Guiding Principles
 McDonald’s decided it would no longer
buy eggs from suppliers who debeaked
hens or kept them in very small cages
 Shareholder Model versus Stakeholder
Model
©2004 by Nelson, a division of Thomson Canada Limited 37