This action might not be possible to undo. Are you sure you want to continue?
1. Definitions of Ethics, Business Ethics, Professional Ethics 2. Five (5) Factors that Form Individual Ethics 3. Normative Philosophy and Ethical Relativism 4. Five (5) Major Ethical Systems that Relevance to Managerial Decisions 5. Two (2) Ethical Perspectives: Golden Rule and Kantian Rights
1.0 Introduction Ethical problems are complex because of its characteristics (will be discussed further in Topic 3): Extended consequences Multiple alternatives Mixed outcomes Uncertain consequences Personal implications
Ethical problems are pervasive because when managers make a decision or take an action, it will affect other people such as employees, customers, shareholders, local communities and other stakeholders directly or indirectly.
1.1 Definition of Ethics Two definitions of ethics: a) Principles of morally acceptable conducts of individuals
b) Individual‟s personal beliefs about wrong or right behaviors Three keys additional considerations to define ethics: Ethics is individually defined. Perspectives of ethical behaviors vary from one person to another. Ethics is relative, not absolute. The relativism of ethics implies that ethical behaviors are in the eye of beholder and must be generally acceptable social norms by the specific communities.
Business ethics is defined as an application of ethical values and ideas on issues that related with business context (Lawrence& Weber, 2011). It is the application of general ethics. For example, lying is considers as an unethical behavior, for instance when a financial manager is l ying about the organization‟s performances to the shareholder, therefore he is acting unethically. Reasons for a business to be ethical: It has significance influences on environmental and stakeholders Enhancing business performance Professional ethics is defined as moral values of a group of similarly trained people to control their task performance or use of resources. Professional ethics is usually constructed by people who internalize the rules and values it as a professional culture. It helps a professional choose what to do when faced with a problem at work that raises a moral issue. You are not a professional until you are a member of a group of colleagues who have articulated a set of standards and values and can enforce them. The examples of professional employees are lawyers, nurses, doctors and accountants. Benefits of professional ethics: Shape the organization‟s culture Determine the value of its members in dealing with other stakeholders
1.2 Five Factors that Form Individual Ethics There are five major factors that form individual ethics which are: Family influences: The earliest, yet the strongest ethical influences are coming from our family that includes parents and siblings and it starts as early as at our childhood stage. The daily observations on our family tend to shape a child‟s behaviors; positively or negatively. A child who experienced a high standard of moral values through his family tends to act ethically and he will be punished by his parents whenever he failed to follow their taught. Peer influences: Interactions between our peers can influence us to conduct our behaviors in a good or a bad manner. Our friends might lead us to be a better person such as forming a group study to be successful in academic. But, there are friends that might be a negative influence for us and teach us many unethical behaviors such as vandalism and absenteeism. Life experience: Most important events that happened in our life, whether positive or negative will shape our behaviors and ethical beliefs. It is part of growing up and maturing ourselves by learns from the past experiences
to guide our life. A thief who caught by the police and had been punished for his mistakes might think to change his life as a way to repent, but if the thief are failed to be captured by the police and still doing his activities, he will never felt guilty to steal people‟s belongings. Personal values and morals: Our own values and morals also influence our ethical standards. For example, if we value family as the main priority among the other things, we will protect, improve their life and always feeling responsible to make them happy. Besides that, if we value monetary more than anything else, we will work for it and sometimes we do something that breach our belief and moral just to achieve the success and gain the money.
1.3 Normative Philosophy and Ethical Relativism Normative philosophy: Study of proper conduct and thought on how we should behave. Normally, people will determine something according to these principles: a) Right or wrong
b) Good or evil c) Fair or unfair
Ethical relativism: According to the ethical relativist, moral standards of behavior are different between groups, within a single culture, or between times. For example: it is right to say that modern American women have the right to fight for their workplace inequality. But, in the early 19‟s, the American women could not stand their right because it is not their culture, particularly at that time. 1.4 Five Major Ethical Systems that Relevance to Managerial Decisions Eternal Law (Natural Law) Usually, it is interpreted by the religious leaders or normative philosophers. Based on wide perspectives, each religion provides different moral standards for their members. For example, according to Christian theology through the Golden Rule stated that, „do unto others as you would have others do unto you‟. Classical Teleological Ethical theory (Utilitarianism) Teleological= outcome/result It focuses on the consequences rather than individual intentions. From Utilitarianism theory, the term refers to our perception of the net benefits and costs associated with a given act. The act or decision is right if it benefits people. Objective of the theory is to create the greatest degree of benefits for the largest number of people while incurring the least amount of damage and harm.
Classical Deontological Ethical theory (Universalism) It depends on intentions of the person who makes the decision or performing the acts. For a universalism, moral cannot be dependent on the outcome because it is indefinite and uncertain. In addition, they must treat others as “ends” and not “means”. Therefore, from Universalism views, we cannot treat people as a subject. Distributive Justice theory It is a modern ethical system that based on values rather than principles. It is based on “justice”. The theory proposed two elements: a) Collaboration: Individual recognizes the benefits of collective actions than the individual efforts.
b) Conflicts: There will be problems or issues that surely will be arise Personal Liberty theory Based on single value: liberty. According to this theory, anything that violates individual liberty has to be rejected even it may benefit others.
1.5 Two Ethical Perspectives: Golden Rule and Kantian Rights Golden rule: Do unto others as you would have them do unto you. Treat others as the way you would want to be treated. Kantian right: It was proposed by Immanuel Kant. It is focusing on the basic rights of human which are: a) Free consent- Right to be treated only as they knowingly and willingly to be treated.
b) Privacy- Right to do what they want in their private lives, and they have the right to reveal the extent of their private activities. c) Freedom of conscience- Right to refuse to do what violates their moral beliefs. d) Freedom of criticizing- Right to criticize an organization‟s ethics, as long as their criticizing does not violates the right of individuals in the organization. e) Fairness- People have the right to voice out their feeling of being violated or treated unfairly.
Normative and Instrumental 4. Responsibilities of the firm toward its stakeholders 6. Three stakeholder theory arguments: Descriptive. 2. creditors. policies. shareholders.1 Classification of stakeholders There are two categories of stakeholders in the organization: Market stakeholders Non-market stakeholders 2. Examples of market stakeholders: employees. practices or goals of an organization.market stakeholders/ Secondary stakeholders Individual or groups that not engage with economic transactions but may be affected or can affect decision of organization.2 Non. customers. stakeholder is defined as individuals or groups who can affect or is affected by the actions.1. business groups. competitors.Chapter 2: Stakeholder Relationships Let’s Understand: 1. communities. suppliers 2.1 Market stakeholders/ Primary stakeholders Definition: individual or group that has interest in organization and engaged in economic transactions in producing goods and services. Managing stakeholder relationships 2. decisions.0 Stakeholder concept Stake is defined as an interest. claim or share in an undertaking or enterprise. In business. government. Examples of non-market stakeholders: media. Stakeholder management 5. Classifications of Stakeholders 3.1. general public 5 . Stakeholder concept 2.
1 Identify the firm’s relevant stakeholders For a firm to identify the relevant stakeholders for their business.3. there are three elements that the manager must considers: Stakeholder power. insurance for employees.3 Stakeholder Management Definition: Process of managing the expectations of individuals or groups that have interest in organization or will be affected by organization activities. Instrumental argument: Describes stakeholder theory as an effective corporate strategy. Example: Corporate social responsibility. Examples: producing safe and innovative product to the customers. volunteerism 2.Refers to whether stakeholder claims are justified or proper within a given context. Organization which concerns about the stakeholders are ensure to have a better performance compared to the others that neglecting it. Coercive power: uses force or violence Example.ability to use resources to make an event happens or to secure the desired outcomes. 3.2. 2.2 Three arguments to support stakeholder concept Descriptive argument: Describes how organizations manage or interact with stakeholders. Example: A TNB worker wears the TNB corporate‟s shirt as a way to show the sense of belongingness Stakeholder legitimacy. Example: Shareholders have the right to claim of ownership because they are owners of the organization. follow the government‟s regulation Normative argument: Describes on how organization taking care of its stakeholders. Examples: Warranty for customers. 6 . Utilitarian power: Power to control of resources such as financial or materials Example: Shareholders have the biggest control over their investments towards the company. There are three types of stakeholder power: 1.Protest for disagreement on firm‟s policies 2. Claims are legitimate when it is considered reasonable by other stakeholders. and generate local investments for the country. Symbolic power: Have access or able to use symbol or prestige.
integrated and monitored as stakeholder relations are improved. values and vision. Implement a stakeholder performance measurement‟s system. It must be auditable. Create vision statements or value statements that includes stakeholders Example: Now everyone can fly (Air Asia) 3. The social responsibilities are: Economic: Maximize profit. increase shareholder return Legal: Obey the law Ethical: Do the right things. The urgency of the issue will depend on two factors: 1. Example: key performance index (KPI) 7 .5 Managing Stakeholder Relationship There are 3 steps to manage stakeholder relationship: 1. Integrate stakeholder management into firm‟s philosophy. Time sensitivity: degree of managerial delay in attending to the claim Criticality: importance of claim 2. 2.The responds time for the organization towards the stakeholder‟s needs. provides support 2. Philanthropic: Be a good corporate and engage in volunteerism. Stakeholder urgency.4 Responsibilities of Firms toward its Stakeholder The firm‟s responsibilities can be considered as corporate social responsibility (CSR). 2.
a common thought by organization is when it produces a design with slightly unsafe product. Characteristics of Ethical Problems in Management 2. 3. Analysis of Ethical Problems in Management 4. unsafe products destroying people lives. but it does not accurately reflect the managerial dilemma.A dichotomous framework (yes or no) does presents the ethical issues in a sharp contrast. But. For example. Examples of Ethical Problems in Management 3.Decision or act of the manager give impacts to people within the organization and outside the organization such as public communities. but it reduces the material and labor costs of manufacture. it could give a bad image for them when customers or competitors are able to identify the lacking of the product.1 Characteristics of Ethical Problems in Management There are 5 characteristics of ethical problems in management: Extended consequences. Thus. Multiple alternatives. the dilemma faced by management of the organization is to balance the social and economic performance.0 Introduction Ethical problems are considered as managerial problems because they show a conflict between an organization‟s economic performance and social performance.Social benefits and costs as well as financial revenues or expenses are directly associated with most of the alternatives in ethical choices. 8 . should McDonald and other Jewish-related products banned by our government? Mixed outcomes. For example. For example.Chapter 3: The Nature of Ethics in Modern Business Let’s Understand: 1. Ethics in Islam 3. multiple alternatives has to be considered to make ethical choices. Therefore.
Personal implications.The effects of decisions or acts that being made by the organization is very uncertain and unpredictable. Uncertain consequences. Pricing level. Advertising messages. b) Advertise a totally untruthful television or magazine advertisement with exaggerated claims and might be equally ineffective to attract viewers. 9 . For example. The dilemmas faced by both parties which are the advertiser and the organization who pays to promote their product is whether to: a) Advertise a rigidly truthful television or magazine advertisement with each of the statements are supported by scientific study will be very ineffective and possibly unattractive for the viewers. a manager decided to place his employees in tight and compact offices that would affect their work performance. a large number of employees are retrenched and forced to leave their current job that gives bad impact for their life. 3. 3.2 Examples of Ethical Problems in Management 1. the employees might face some personal problems such as unable to fetch their children at the school or performing their prayers.It can give harmful effects on some customers. when a manager decides to reduce the resting hour of its organization. For example. kuih and etc. 4. the authority managed to detect the bribes transactions. most of buy one free one promotion will physically attractive to the customers to buy it. 5. A manager usually will think that the ethical issues such as paying the bribes are free of risk being published to the public.Most of advertisements are showing a mixed between false and truth of the products or services. Workforce reduction. when the price of sugar and flour are increased.Promotion of a product might face several issues of ethics. In order to reduce the budget of monthly rental. but it also caused them to expend more for the product that they usually bought at a lower price for a single item.When most of companies decided to utilize the machine to replace labor forces. 2.A non-ideal and uncomfortable working environment is also considered as unethical.Most of ethical decisions have personal implications For example. Working conditions. but most of the cases related to bribe. the small stallers are taking for granted for that matter by increasing their price of drinks. Product promotions.
3.Relying on basic principles and values to decide between right or wrong. 3. Ethical analysis. Legal analysis. so that they will be treated fairly. The most important prescription of syariah which stated in Al-Quran is „to act in a decent and benevolent way. and to refrain from wrongdoing.Relying on impersonal social forces to decide between right or wrong. Workforce reduction and plant closures are definitely unpleasant and affecting the people involved but they must know how to utilize the law to deal with the situation. But. the manager should realize that there are many job opportunities at the labor market.3 Analysis of Ethical Problems in Management To create the balance between social and economic performances. the manager is facing dilemma such as the employees might be effected by the retrenchment. 10 . through the impersonal market forces. the analysis will help it to supply the best product for their customers with a limited resources. Environmental pollution.Quran.4 Ethics in Islam Holistic approach of Islam: a) Unity of God b) Unity of human kind c) Unity of religion Islam is universal and timeless because it can be applied to all people in all places. Though the law and rules have been established but the environmental pollutions are very serious throughout the world.Relying on impersonal market forces to make decisions. and the employees must adjust their wages requirements to get the job. For the organization. there are 3 analysis methods to resolve ethical problems: Economic analysis. A democratic society is able to establish its own rule and the people in the society must follow these rules. When workforce reduction is decided.Disposal of waste and air pollution are two most common ethical issues that normally related to the factories. Syariah: Law of Islam that based on Al. All the rational men and women in a society must act on the same principles consistently so that the members will be treated fairly.6.
Riba‟ such as interest of loan is illegitimate and cannot be practiced by Muslim A Muslim is allowed to earn profit only from his work or if his capital is involved. to intimate matters of interpersonal relations. the contract or agreement made will be void. 1/10 of business profits must be allocated as a zakat to other needy Muslim people There are guidelines between halal and haram of a business that must be followed by Muslim businessman 3. Gambling is prohibited because it is a sin to profit from the need or misery of others. ranging from Creator and human. 2. 11 . 5. whenever he shares the risk of loss.Syariah regulates almost every aspects of relationship. Not taking undue advantage of another Fairness and honesty are the expected traits for every Muslim. If the defects being hidden. Islam teaches us about the economic practices such as: 1. The obligations of piety: Any defects in the thing sold must be made obvious. 4.
Law as a guide for managerial decisions and actions when faced with an ethical dilemma 3. Differences between moral dilemma and ethical dilemma 2. Four processes involved in the formation of law 4. He says that if you don't he will not only kill your son but some other innocent inmate as well.0 Differences between moral dilemma and ethical dilemma Moral dilemma: A moral dilemma is when you are put in a situation that tests your own belief of something. What should you do?" 4. a horse has fallen and broke his leg/back and you are an Animal Rights activist who fights for the rat on the street. The horse is clearly suffering and you are against shooting or harming animals but the only way you can help the horse is by shooting him out of his misery right then and there. There is no other choice of whatsoever! Will you shoot the horse to end his misery or stay within your "Moral beliefs"? Ethical dilemma: That you are caught between two possible choices in a situation where both could be considered "ethical" (right or moral choices) but the goodness of one cancels out the other. For example. you are an inmate in a concentration camp. 12 . A sadistic guard is about to hang your son who tried to escape and wants you to pull the chair from underneath him.1 The Rule of Law 1. Law: a set of rules established by as society to govern behavior within that society.Chapter 4: Managerial Ethics and the Rule of Law Let’s Understand: 1. For example. You don't have any doubt that he means what he says. Law acts as a basis for making managerial decisions when we are confronted with an ethical dilemma. Explain the relationship between law and moral standards 5. Five characteristics in definition of law 4. Situations in which each possible course of action breaches some otherwise binding moral principle.
requirement to act or not to act have to be consistent and cannot be contradict with each other. Law as a guide to moral choice Legal arguments: An established set of rules in a society.The law must be obeyed by all.- Law is used when a conflict between organization‟s economic performance and social performance exist. Published. 2. works. Social institutions and their responsibilities Responsibilities Law formation Law explanation Law interpretation Law enforcement Social Institutions Legislatures and councils Attorneys and paralegal personnel Courts and agencies Police 4. Accepted. they will lose money. Law is formed through several processes: a) Individual process b) Group process 13 . Five characteristics in definition of law: Consistent. Before that happened.2 Definition of Law 1. or else if it is proven they disobey the law. For example.3 Formation of Law 1. generally accepted and usually enforced. 2. Law: A consistent set of universal rules that are widely published. 3. Law as combined moral judgment The need to get the majority of the voters to pass a law restricting these actions. These rules reflect the collective choice of members of its society represents any decisions and actions that affect its welfare.People must conduct or not conduct their act based on the law.requirement to act or not to act must be applicable to anyone and anywhere. Universal. we must comply with majority of the population 4.the law must be published and put in print to make it accessible to everyone in the society. Enforced. attorneys are trained to interpret and explain the law to the client (public). 3. freedom or even their lives. It is a collective judgments made by the members of society. whether voluntarily or involuntarily.
b) Beliefs. and values tend to become associated in small groups. Social process The social process involves an accumulation of power. beliefs. beliefs. and values which collectively forms his or her moral standards. The individual moral standards are: a) Norms.3 Technological changes Political changes Economic changes Cultural changes Figure 4. belief. beliefs.3: Interactions of interrelated factors of the context 4.Criteria of thought. Individual process Individual has a set of norms. Each individual develops his or her set of norms. They are the ways an individual expects people to think about given concepts. then you would expect or want others to accept the concept as you do. For example. The ways in which an individual expects everyone to act when faced with a given situation. and values of an individual.Criteria of behavior and involves action. Group process: Context or the general background or surrounding environment of a situation plays a significant role in the norm. People with similar norms. c) Values. and values through exposure to these contexts: a) Cultural or religious b) Social or political c) Economic or technological The contexts are interrelated with each other as shown in Figure 4. The important norms and beliefs that a person „values‟ or „holds‟ in high esteem.c) Social process d) Political process 2. The small groups are part of larger organizations such as: Business firms Labor unions 14 . if you believe in parliamentary democracy.Rankings or priorities given to the norms and beliefs. 3. There is no action but an abstract way of thinking that supports individual norms.
The elected representatives are formally assigned the responsibility of the formulation of laws in a representative system. beliefs. It can be implemented according through the alternative theories such as: a) Presidential leadership b) Institutional compromise c) Congressional bargaining d) Constituent pressure The public can express opinions on potential laws by voting for some administrators and legislators. the norms. - Moral standards of members of society: Lack of information on corporate conduct 15 . beliefs and values and compromise with each other to achieve their objective. through political process. Political processes In political processes. and values held by organizations. then it is difficult to influence the law. Political parties Charitable agencies Religious institutions The small group functioning as the channel to set up their own common norms. letters and surveys. groups and individuals are institutionalized into law to resolve the conflicts. 4. Every organizations. Therefore. Moral standards of individual may be diluted in the formation of small groups Since each individual of small groups has their own norms. they can express their opinions through media. If the personal moral standards are not conveyed accurately.4 Problems in the Transfer from Individual Moral Standards to Universal Legal Requirements. the different views will be accustomed to develop consistent and universal rules. The compromise is formed through: a) Autocratic decisions b) Bureaucratic adjustment c) Collective choice/ collective bargaining 5. compromise have to be made. It is more manageable and easy to control or make decisions through the small groups compared to individual or a larger group of people (nation). group and individuals have different views on norms and beliefs. beliefs and values. Besides that.
hence it is difficult to influence the law if relevant information is missing. - Misrepresented in large corporation There is no evidence to suggest that each individual and each group within the organization has equal influence in determining that all of them are sharing the same norms. in the provision of tax legislation. 16 . beliefs and values. - Misrepresented in formulation of laws There is no guarantee that all organizations have equal influence in determining the law. For example. certain organizations always seem to be favored.The members may be unaware about their organization‟s misconduct.
Responsibilities of management in addressing ethical problems. Structural causes of unethical conduct in organizations. b) Beliefs: standard of thought that usually stated in positive statements. a) Norms: standard of behavior that usually stated in negative statements. Ethics training. Ombudsman position. Ethics hotline.Statement about norms and beliefs of an organization. Usually. Four main ethical safeguards. For example: We will provide the best airline facilities for the users. 5. For example: Don‟t smoke in the office area.Most of big companies are utilizing ethics hotline as a way for their workers to channel their problems that related with their work place. 3. 2. 4.Chapter 5: Organizational Approaches in Improving Ethical Behavior Let’s Understand: 1.0 Improving ethical climate of organization „Ethical safeguards‟ is used to improve the ethical climate of an organization. the ombudsman will be relieved of operation but involved in counseling other workers. Effective ethics training should be related to real situations that employees may experience in their job and 17 .Ombudsman is a person within an organization. Solutions to structural causes of unethical behavior. often older or respected manager who is close to retirement. The hotline is a useful method for the workers because it will not provide the details of the workers and they will not be threatened to lose their job or feeling embarrass to tell the truth. the ethics hotline is used by women employees that involved in sexual harassment at their workplace to communicate their problems to the organization. There 4 main ethical safeguards which are: Ethical codes. Normally.A program that purposely held to educate employees about firms ethical standards.
18 . Ethical issues have to be made part of the process and cannot be ignored Hard ethical questions have to be asked by managers and specific ethical answers have to be supplied by corporate executives. laws and regulations. expectations. the decisions are implemented based on the head of department and not through collective meeting with other department in the organization. Decentralization. there must be 2 components in the responds: a) Character – The character to face issues which have adverse social impacts associated with each of the alternatives b) Courage. The problem with divisionalized organization. A cross-functional team does not allow to be built because of the differences in knowledge and objectives. The ethics training should educate the employees about firm‟s policies. 5. 5.3 Ethical Responsibilities of Management Resolutions of conflict have to be done as part of strategic planning process.1 Structural Causes of Unethical Behavior There are 2 structural causes of unethical behaviors in organization: Divisionalization.2 Solutions to Structural Causes of Unethical Behaviors Multiple analysis using economic. In order for the executives to give a good response.When the organization is divided into several functions and departments.Thoughtfully evaluates each of alternatives following economic. legal. The authority given to the employees can caused several unethical issues such as expending company‟s money on personal satisfaction. and moral forms of reasoning make the issues clearer and apparent. 3 goals of ethics training are: a) Recognizes situation that requires ethical decision making b) Understand the cultures and values of the organization c) Able to evaluate the consequences of ethical decisions on the company 5. Less emphasis on financial measures of performance such as sales revenues and profits but more on numerical measures for example customer complaints and employees absentees. legal and moral forms of reasoning.possible ethical solutions to those problems. the aim or objectives of each division might not be the same or sharing mutual mission.A decentralized decision making might be effective for a big company but it also can cause severe damages for those company if it not implemented in the best approach. Decentralized decision making allows lower employees to decide or act on something that related to their work without the authorization of higher management people.
engage in volunteerism.Chapter 6: Social Responsibility and Organizations Let’s Understand: 1. Managing and Evaluating Social Responsibility 6. large or small. 19 . Relationship between Government and Social Responsibility of Organizations 7. legal.Do what is right and fair and avoid harm. at a strategic level of its economic. Ethical responsibilities. Areas of Social Responsibility 4. Figure 6. Philanthropy Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities Figure 6. Arguments on Social Responsibility 5.0: Pyramid of Social Responsibility Philanthropy responsibilities. Definition of Corporate Social Responsibility (CSR). ethical.0 Definition of Corporate Social Responsibility (CSR) Corporate social responsibility or CSR is defined as the adoption of an organization regardless of private or public. It is a set of obligations that an organization has to protect and extend to the society in which it functions. 2.0 shows the level of CSR and its role. and community responsibilities to meet the stakeholder expectations.A good corporate citizen. support to the community by providing education programs and health services. Historical Views of Social Responsibility 3. Organizational Approaches to Social Responsibility 6.
Economic responsibilities.1 Historical Views of Social Responsibility Evolution of social responsibility can be divided into three eras: 1. Rockefeller (oil). 6.A pricing strategy that charges customers different prices for the same product or service. the seller will charge each customer the maximum price that he or she is willing to pay. an employer may use the threat of lockout such as hiring guard. 3.Legal responsibilities.Temporary work stoppage or denial of employment initiated during labor dispute initiated by management of company.P. It happens when a payment or offering of services with the intent to influence or gain something from an organization or a person.Obey the laws and regulations such as environmental. maximize sales and minimize costs. The seller places customers in groups based on certain attributes such as economy status and charges each group a different price. President Suharto was known as “Mr. A lockout can act to force union workers to accept changes such as lower wages. Started in United States on late 1800s. Twenty - 20 . changing lock and fine to convince the union to back down. 2.Be profitable. For example. If the union is asking for higher wages. The early entrepreneurs used their powers to practice undesirable business. employment and consumer laws.It is a form of negotiated bribes because there is implied collusion between the two parties. In pure price discrimination. The practices of early entrepreneurs: Era of social responsibility Entrepreneurial era a) Labor lockouts. b) Discriminatory pricing policies. Monopoly by large businesses on small businesses that lead by several influential entrepreneurs such as J. 3. Morgan (railroads) and John D. c) Kickbacks. Entrepreneurial era Depression era Social era Explanations and Practices 1. 2.
Securities and Exchange Commission (SEC) was established to: a) Regulate the sales of securities b) Control unfair stock market practices 7. The program help American to move out from Depression era as it shaped the attitudes of American. Large organizations dominated the American economy and people criticized them for irresponsible financial practices which led to stock market crash. The government introduced the New Deal Program with three main focuses: a) Help unemployed Americans and troubled manufacturing sector b) Promoting economic recovery c) Reforming the American finance system 5. 4. e) Tax evasion. The program was based on three essential things which are relief. 6. The public official forced the federal government to overcome the undesirable practices by enforcing the law.five percent” because he required that all major contracts throughout the nation provide him with 25 percent of the income before he would approve the contract. The era where American history was characterized by social responsibility as the Social Era of 1960s. Social era 1. During this era. As a result. there were growing trend towards social responsibility 21 . introduced New Deal Program to protect the investors and small businesses. 3.Act of extorting money or a valuable item from person by threatening to expose an act or discreditable information. 2. President Franklin Roosevelt (32nd USA leader). d) Blackmail. the government actions managed to insist the organizations to actively involves in promoting the welfare of the American public. Depression era 1. downfall of farming sector) and social (extremely poor citizens) issues. recovery and reform to solve the economic(stock market crashed. organization or corporation intentionally avoids paying its true tax liability.A person. 2. In 1934.
Practices to maintain social responsible in an organization: a) Maintain proper accounting procedures Manage the organization righteously to protect the shareholders‟ rights and investments b) Provide appropriate information on current and projected financial performance of the firm c) 2. to strengthen the efforts of the organizations. Organizational constituents Organizational constituents are people that affected by the organization‟s practices and have stakes in its performance. public image and negative customers‟ perceptions towards the organization. The major constituents are: a) Federal government b) Suppliers c) Employees d) Customers e) Investors The people who own or invest in the organization are affected by anything the firm does. there are methods to protect the environment that can be implemented such as: a) Develop feasible ways to avoid contributing to acid rain. Therefore. if a manager is caught because of practicing bribe. depletion of ozone layer and global warming. Organizational Natural Environment Recently. Ex: use filters to reduce carbon emission b) Find alternative methods to handle sewage. hazardous wastes and trash c) Develop safety policies to guide the organizations 22 .6. For example. the organization‟s constituents will be affected in term of profit. many companies have become more socially responsible in handling the pollutants from their factories that can cause great effects on the environment for example global warming and ozone depletion.2 Areas of Responsibility There are three key areas of organization‟s social responsibility: Constituents Natural environment General social welfare 1.
organizations that make clear and visible contributions to society can achieve enhanced reputation aand gain a greater market share for their products or services. There is a potential for conflict of interest Opposing Social Responsibility 1. Business often have the necessary resources to solve problems 4. Involvement in social program gives business too much power 3. Businesses create problems and should help to solve them 2. 23 . Social responsibility can enhance profits 4.Company may also practices the following activities: a) Support and join non-profit foundations and associations.3 Arguments on Social Responsibility Supporting Social Responsibility 1. 6. radio and televisions c) Lead the effort to improve public health and education 3. The purpose of business is to generate profit Usually. Business lack the expertise to manage social program 3. Corporations are citizens in our society 2. b) Support for museums. Organizations General Social Welfare Organizations should act to correct or at least not contribute to political inequalities.
c) Usually. 24 . Social obstruction: a) Lowest degree of social responsibility b) Do as little as possible to solve social or ethical problems.4 Organizational Approaches to Social Responsibility Four approaches that an organization can implement ranging from low to high degrees of socially responsible practices: Highest degree of social responsibility Social contribution Social response Social obligation Lowest degree of social responsibility Social obstruction Social contribution: a) Has the highest degree of social responsibility b) Exceeding minimal requirements and involves proactively seeking opportunities to contribute to society. solve social or environmental problems which related to the organization. Social response: a) Meet legal and ethical requirements and going beyond those requirements in certain cases. c) View themselves as citizens in a society. b) Voluntarily to participate in certain social programs but the organizer must convince the organization that the program is worthy of their supports. the organizations that practice this approach will cover up their false action or deny any accusations when they do unethical and illegal activities.6. Social obligation: a) Follow the legal requirement. b) Managers insist that their main task is to generate profit.
c) Direct regulationi) Focuses on two areas of social responsibility which are organizational constituents and natural environment.: a) Personal contacts and network b) Lobbying c) Political Action Committee d) Favours and other influence tactics Influence of Gov. through Parliament. ii) If the government wants organization to spend on training the unemployed people.6.1 Influences of Government to Organizations a) The government influences organizations through direct and indirect regulations.establishment of laws and rules that guide what organizations can and cannot do under certain circumstances.5 Relationship between Government and Social Responsibility Government Influences of business to Gov.5. the law to provide the tax incentives can be passed to companies that open new training facilities. b) Regulation. ii) The federal / state government has created special agencies to monitor and control certain aspects of business activities d) Indirect regulationi) Influence how organizations spend their „social responsibility‟ dollars by providing greater or less tax incentives. to business: a) Environmental protection legistation b) Consumer protection legislation c) Employee protection legislation d) Securities legislation e) Tax codes Business organization Figure 6.3: How organization and government influences each other 6. 25 .
1. Formal approaches: Legal compliance. and international laws.Give funds. scholarships or other gifts to charities or other programs.6 Managing and Evaluating Social Responsibility a) Managing Social Responsibility Formal and informal approaches are used to manage the social responsibility of an organization. evaluate new strategies and assess a new environmental plan. b) Lobbyingi) An attempt by individuals or groups called as lobbyist to influence legislation.Members of the organization follows basic ethical and legal standards of behavior. organizations rely on favors and other influence tactics to gain support 6. c) Political Action Committees (PACs)i) Special organizations which created to solicit and distribute money to political candidates because organizations cannot legally make direct donations to political campaigns ii) The organizations will encourage the employees to donate to PCA and support the political candidates that have the same views with the organizations to achieve mutual benefits.Organization complies with local. federal.6. Philanthropic giving. Ethical compliance. state. Formal ethics committee is assigned to review proposal for new project.2 Influences of organization to government Four methods that organization able to influence the government: a) Personal contactsi) Many executives and political leaders know each other because they are in the same social circles.5. Functional managers are assigned to manage the legal compliance. ii) Business executive may able to contact a politician directly and present his case regarding a piece of legislation being considered. 26 . d) Favorsi) Sometimes.
b) Evaluating Social Responsibility Social audit.a formal and detail analysis of the effectiveness of the firm‟s social performance. and economic bottom lines (Triple Bottom Line). environmental. Benefits of social audit to corporation: i) To achieve the best social performance ii) To improve relationships with stakeholders through dialogues iii) To facilitate organizational improvement and organizational learning iv) To allow the company to assess its impacts on the environment. The whistle-blower might be fired by the organization or received appreciation. Informal approaches: Leadership and culture.a process of assessing and reporting business performance of economic .A good leadership practices and organization cultures are able to lead to adoption of employees on social responsibility Whistle-blowing. legal. The benefits of social reporting to corporations: i) To facilitate reputation management ii) To promote accountability iii) To increase transparency iv) To make the stockholders and investors easy to evaluate the social performance of the company 27 .Disclosure by an employee of illegal or unethical conducts by others within the organization. Corporate social audit. Social audit encourages corporations to look into the social.2. community and society Social audit is recorded in a social report. ethical and philanthropic social responsibilities expected by stakeholders.
accountability and control of corporate decisions. The Code of Corporate Governance 6. and actions has to be in place to earn the corporation‟s stakeholders‟ continuous trust. Oversight means check and balance. Perspectives of Corporate Governance 5. future investors. 4. The needs to study corporate governance: a) It is part of corporation‟s responsibility to observe some practices that are regarded as appropriate.Chapter 7: Corporate Governance Let’s Understand: 1. c) Due to recent malpractice cases. MAICSA 7. The Needs of Study Corporate Governance 3.0 Definition of Corporate Governance Corporate governance-A formal system of oversight. address mistakes. MICG vs. 7. Supporting Bodies of Corporate Governance. Allows management decisions to be questioned and challenged that reduce risk of mismanagement The main objective of oversight is to minimize top management abuse of power For example. 2. operations. reduce risks and avoid misconduct to achieve integrity. Future of Corporate Governance 7. the media and industry.1 Components of Corporate Governance Three components of corporate governance are: Oversight 1. Components of Corporate Governance 4. 3. 28 . Definition of Corporate Governance 2. b) Top managements are responsible and accountable to their stockholders. the employees can question the top management for the practicality of investing in a new project at abroad. the companies are under greater scrutiny by all parties which include stockholders. d) Corporate governance aims to balance power. the government.
2. top management will proceed with the process. All other stakeholders‟ interests are of secondary importance. b) Employees might lose their jobs c) 29 . As the owners of the corporation. 2.2 Corporate Governance Perspective Corporate governance can be viewed from two perspectives: Shareholder perspectives1. the people who might be affected: a) Shareholders might suffer losses Loyal customers might discontinue purchasing or using the corporation‟s service and product. As the promises are made to the public. 2. The spirit of corporate governance is in the interest of the stakeholders because they also invest in the success of the firm. All corporate decisions and actions can affect or might be affected by its stakeholders. A process of auditing and improving organization decisions and actions. Stakeholder perspectives1. Accountability 1. standard or goal 7. Organizations must practice good corporate governance to serve the interest of shareholders. management has to be accountable to them or else they will lose the public trust. the corporation should be responsible and accountable to its shareholders 3. The actual performance is compared with budget. 2. Control 1. 3. For example if a corporation involved in bribe. For example. Accountability means how the decisions taken by the management align with the firm‟s direction (mission and vision). if the shareholders satisfied with top management‟s decision then.
4 Supporting Organizations on Corporate Governance in Malaysia The Malaysian Institute of Corporate Governance Malaysian Institute of Chartered Securities and Administrators Established in 1988 Non.7. e) Regulatory functions of SC: Regulating all matters related to securities and future contracts Regulating the take over and mergers of companies Regulating all matters relating to unit trust schemes Licensing and supervising all licensed persons Encouraging self-regulation Ensuring proper conduct of market institutions and licensed persons Code of corporate governance issued in 2000 which covers three main areas: a) Directors.The code covers director appointments.Emphasize on information for investment decisions and annual general meetings c) Accountability and audit.Internal control and auditor relations Revised version of the Code (2007) concentrates on strengthening the Board of Directors and the audit committee The Code is divided into two parts: a) The principles of corporate governance b) The best practices of corporate governance 7. formality and transparency b) Shareholders.profit public company Established in 1958 Aims: To produce qualified company secretaries and ensuring the professionalism of its members 30 .3 Code of Corporate Governance Malaysian Code of Corporate Governance is formulated and governed by Securities Commissions (SC). Securities Commissions (SC)a) Established on 1 March 1993 b) A government agency which is self-funding statutory body with investigate and enforcement powers c) Report to Minister of Finance d) Protect the stockholders‟ right by making sure that the stock markets are conducted fairly and the investment information is fully disclosed.
Commit Chartered Secretaries to advocate good corporate governance principles and practices Missions: 1. Strengthen corporate governance principle and compliance effort 7. Undertake research. ethical practices and corporate administration through continuous education programs for a major corporate figures such as company directors. The objective of this assessment is to reflect the effectiveness of the boards in governing the corporation. 4. They must not be isolated from organization‟s operations. 2. 31 .The BOD should take the responsibilities to develop the corporation‟s mission and vision by taking stakeholders‟ interest into careful consideration. Perform self-assessments. development and publication of corporate governance guides and standards 3.BOD also required to perform self-assessment.5 Future of Corporate Governance Corporate governance will be a significant part of corporate management. Provide education and training in good corporate governance. Facilitate business and corporate governance development in the country 2. CEO and investors. Improve corporate governance best practices Achieve satisfactory level of corporate governance best practices and compliance.Maintain the highest standard of integrity and ethics among its members within the profession Objective: Missions: To be a leading establishment for promotion of best practices and corporate governance development 1. 3. Therefore. organizations are encouraged to practice good corporate governance: Involvement of Board of Directors. Promote voluntary disclosure of corporate governance best practices 5.
thus strengthening the natio n‟s economy. Greater government involvement. Enhanced role of nomination committee. it will ensure continuous support for business. Greater management support.Shareholders and stakeholders are now more well-informed and educated. They also must inform their weaknesses and failures in the report. The corporations are expected to explain their decisions and justify their actions.More narrative information will appear in the annual report.Series of training and seminar are conducted for the corporations to realize the best person that are accountable for their organizations. Aware the current business situations that might give them opportunities and harms. Shift of the model. Well-elaborated explanation.When the government increase involvements to promote good corporate governance practice.Shift to the stakeholder model from shareholder model will be more apparent.A greater management support for corporate governance is vital to realize good corporate governance practices. Conduct training and seminar.The nomination committee is expected to play a more active role in nominating qualified board members. Well-informed shareholders and stakeholders. 32 .
Definitions of Economic System 2.0 Definitions of Economic System Economic system is an ongoing process where people exchange materials goods and personal services in support of a wide range of human interests. Moral Dimensions of an Economic System 4.job training Give job performance feedback Allow them to participate in decision making affecting the structure and objectives of their jobs Provide them with safe working conditions 33 . Good economic system will ensure the following: a) Fairness in the access to resources and the exchange and distribution of goods and services b) Prohibit obstacles like discrimination on irrelevant reason that interfere with anyone‟s access to resources c) Everyone in the system enjoying the fair share of resources Factors that indicate good management: Attract capable people into the organization Keep turnover low Secure employees loyalty to the company Maintain and increase their productivity level Methods to motivate and satisfy employees: Provide them with on and off-the.Chapter 8: The Moral Dimensions of an Economic System Let’s Understand: 1. Ranking and Rating 6. Differences between Affirmative action and Preferential Statement 5. Factors of Good Management 3. Ethical Implications of Performance Appraisal 8.
age and etc. Wages Employees‟ wages are generally determined by the job market. Moral right to employment 2.screening practices based on race. Ex: 20% Malay. The right or wrong behaviors are determine by the specified society. 34 . Ex: It is morally wrong to deny women equality in the work-place in modern America. savings and pension plans. should act that way. race.8. age or religious preference are immoral and violate the right of anyone to be treated with dignity. b) Utilitarian. regardless of gender. If the fair hiring practices are beneficial for an organization. but in the early 19’s the statement is unacceptable by the American . 20 % India. then hiring and promotion policies would have to follow the customs acceptable to a particular society. 3. The employers must ensure not to discriminate on characteristics that have nothing to do with individual‟s job performance. gender.Adopt the same principle with naturalist but the judgment would be depended upon the overall consequences of these practices.1 Moral Dimensions of an Economic System 1.if there are no laws against discrimination. religion. Affirmative action and preferential treatment Differences between affirmative action and preferential treatment: Affirmative action Deals with employment and promotion opportunities being open to all. 4. 60% Chinese to work in a Western company Setting specific quotas for minorities Preferential treatment Practice of hiring or promoting members of minority groups in preference to those from non-minority groups. then it c) The cultural relativist. Fair hiring practices Viewpoints given by ethical theorists: a) Natural Law of Moralist. vacations. a) Large industry: Competitive salaries include basic wages and bonuses and assorted benefits like paid holidays. medical and dental insurance. This action will ensure that everyone has an equal opportunity to compete for any job he or she is qualified to do. sick days.
employers are able to observe the employees performance directly and judge their work. 8. knowledge and experience.b) Small business: Wages depend on the financial affordability of an enterprise. so at minimum. the jobs should provide wages and benefits that will assure they live in some minimal but comfort enough.For a small business. by using this principle employers want to pay civil servants the same salaries if it can be proved that jobs involving different responsibilities. For example. The one who perform better than others at the same level will receive a higher pay. The appraisal process is not very complex. But. 35 . Share of the return on resources Managers and workers have the right to a „fair‟ share of the return for their contribution to the company‟s success. the principle is not taken into consideration when the employees can do the work faster or more efficient than other employees. 7. skill. in some states in USA.2 Ranking and Rating There are two types of performance appraisal which are: Informal appraisal. Equal pay for equal work The principle states that people performing the same kind of work must be paid the same salaries. Shareholders have the right to a fair share of their companies‟ return. Bonuses and benefits may or may not be the part of the package Employment is the employee‟s access to a fair share of material resources. Equal pay for comparable work The principle refers to pay equal salaries for a job with different responsibilities. Race. risk of accident). Formal appraisal. the systems used are grading.For a large company. age. The have the right to claim the largest share as they had invested in the company. and handicaps will not affect the principles as equal work is concerned. However. gender. and rating their co-workers in various units of business. that will surely requires the employer to pay higher. such as lorry driver and tree trimmers require the same levels of education. 5. it was argued because it must considers other factors such as long working hours. ranking. which justifies to be paid more. 6. The principle is argued by many employees because each job requires different capacity.
It would be bad to let a person think that he is doing good job when that is not the case. A subordinate whose performance is poor or unsatisfactory has to be made aware of the fact. and train to help improve their performance.3 Ethical Implications of Performance Appraisal The formal or informal public recognition of their work received from the employers is a powerful constituent of their self-image. there are guidelines that need to be observed. 4.8. 3. To ensure ethical treatment of employees in the appraisal process. an employer must follow the appraisal plan and performs evaluation righteously to judge the employees because it will reflect their hard work. Get the feedback: Employees must be informed about their performance as a result of the feedbacks. 5. coach. Set the objectives: Give a clear and concrete objectives for the appraisal period 2. Therefore. Use valid criteria: Performance must be measured based on valid criteria. Have the right for improvement: Subordinates have right to counsel. Supervisors need to provide the details of his subordinate performance to choose the best employees for the appraisal. 36 . Have essential information on subordinate: Only person who knows well about their employees will be the best choice to rate the employees. The key ethical guidelines for performance appraisal are: 1.
scold the employees in front of the other employees which cause the employees felt demoralized and violating his rights. Employees may also have a right to privacy in their telephone conversations or voicemail messages. 9.Chapter 9: Employees and the Workplace Let’s Understand: 1.1 Substance Abuse Random testing for substance may be morally justified if there is valid suspicion and strong evidence that a significant number of employees may be abusing alcohol or using illegal drugs. Many organizations used drug test to avoid issues of hiring drug addict that will harm their organizations and job reputation. a) The test is accurate. including handbags or briefcases. employees may be threatened with the loss of jobs for such failures as: Disagree to falsify financial statement Refuse sexual advances Refuse to commit deception on behalf of a union or a company 37 . In order for an organization to conduct the pre-employment test on the candidates. Definition of Employees Right to Privacy 2. and private mail addressed only to employee. However. But. storage lockers accessible only by the employee. it needs to ensure that.2 Abusing Employees Some employees who unable to control their anger. employees have very limited rights to privacy in their e-mail messages and Internet usage while using the employer's computer system. employees have a right to privacy in the workplace. the reason for the employees to scold his employees is because for the work failure. 9. the applicant is allowed to provide evidence that he or she is taking drugs under a legitimate medical prescription.0 Definition of Employees Right to Privacy In most states. Abusing Employees 9. This right to privacy applies to the employee's personal possessions. Usually. b) The results of the test are remain confidential and will only inform to person who is concerned. Substance abuse 3.
Natural law moralists would regard any abuse of an employee as morally wrong. it is unlikely that societal customs anywhere in the world would accept this kind of treatment at the workplace. while utilitarian moralists would find it justified only in extreme circumstances where the overall goods demands it. For a cultural relativist. 38 .Using threats to try to force employees to violate the law is a kind of invasion of privacy.
Managers are not allowed to provide any off-hours consultation to competitors or patent invention that may directly receive information from employment or using company‟s facilities.blowing 3. 10. unless it is directly permitted by the companies. Whistle. 39 . he is considered to owe his loyalty to the company. Definitions of loyalty to a company 2. Improper Loyalty 10. friends. The Morality to Terminate Whistle-Blower 4. family members or the media. supervisors.is someone that reports on fellow employees. both while employed and after leaving the company.1 Whistle.Chapter 10: Loyalty to a Company Let’s Understand: 1. Any person who violates the terms of the employment contract is subject to disciplinary actions such as: Dismissal Face a lawsuit Managers are not allowed to do any activities that conflict with their company‟s interests. or company officers illegal or immoral actions. Employee will not share any confidential information with outsiders whether family.0 Definitions of Loyalty to a Company Loyalty indicates the moral obligations of employees to do the following: a) Discharge their duties competently b) Obey the legitimate orders of their superiors c) Keep company information and trade secrets confidential d) Avoid any conduct that is in conflict with the company‟s rightful interest Once a person accepts a job with a company.blowing Whistle-blower.
1.Whistle-blowing can be divided into two categories: a) Internal whistle-blowing: Accusation is made through the lines of supervision or other designated channels within the company. employees. he also might be fired as act of troublemaking. Explanation 10. then the whistle blower has the right to tell the superior. The blower must be sure about his facts. He might help his company to catch a suspect but.blowing: Accusation is reported to people outside the company such as government authorities or the media. External agencies There is evident that external agencies such as auditors or public regulatory bodies are unable or unwilling to report what is going on.1 Internal Whistle-blowing Criteria of justification for internal whistle.blowing: Criteria of Justification Significant harm Accurate facts It should be evident that the harm to the company is significant. if he proved not guilty. Degree of harm The degree of harm that the company will suffer as a result of the whistle-blowing should Explanation wrongful conduct 40 . Already known by the management Reasonable expectations Impact on oneself The whistle-blower should try to find out whether the suspect‟s activity is already known by the higher management. There should be reasonable expectations that accusation will be effective and the suspect‟s supervisor will put a stop to the false acts. through proper lines of organization. Consider the possible damage on the whistle-blower‟s reputation. 10. Wrongful accusation may seriously damage the reputation of the accused. Moral obligations If it proves that employees commit act that breach the moral obligations.1. b) External whistle. Significant case of harm A significant harm to stockholders.2 External Whistle-blowing Criteria of justification for external whistle-blowing: Criteria of Justification Internal report of It must be ensured that effort has to be made to report wrongful conduct internally. or the public has to be at issue such as fraud and unsafe working environment. The company has the right to clean it name before it goes to public.
misinterpreted it and cause it to be more serious than it really was Act of revenge on a fellow employee or supervisor As a protest over an unfavorable company policy Eliminate a rival for the purpose of promotion 10. Though the employee is just a low operator in a company but he or she has the right to inform the superiors about the wrongdoings of higher staff. But for private sectors. whistle blower is regarded as informer. They consider as being loyalty towards the government. 10. there are no legitimate reasons to discipline them. Justification in taking action against the whistle-blower: Lied about the case.3 Improper Loyalty It would be violation of fiduciary duty to cover up actions by a supervisor‟s mistakes and wrongdoings.2 Morality of Terminating Whistle-Blowers As the whistle-blowers have reported a genuine case of misconduct through appropriate channels or have gone outside the company. government employees who blow the whistle are protected by law against retaliation. 41 .be proportionate to the harm its wrongdoing is causing. A manager would be obliged to report wrongdoing to outsiders only if serious harm is at issue and if it is evident that appropriate levels of supervision are unable to stop it. In the United States.