Chapter 05ii 2011

Management: Arab World
Edition
Robbins, Coulter, Sidani, Jamali
Chapter 5: Social Responsibility and Managerial
Ethics
Lecturer: [Insert your name here]

Learning Outcomes
Follow this Learning Outline as you read and study this
chapter.
5.1 What Is Social Responsibility?
• Differentiate between social obligation, social
responsiveness and social responsibility.
• Discuss whether organizations should be socially involved.
• Describe what conclusion can be reached regarding social
involvement and economic performance.
5.2 Green Management

• Define green management.
• Describe how organizations can go green.
• Explain how green management can be evaluated.
5-3 Copyright © 2011 Pearson Education

Learning Outcomes
5.3 Managers And Ethical Behavior
• Define ethics.
• Discuss the factors that influence whether a person behaves
ethically or unethically.
• Describe what managers need to know about international
ethics.
5.4 Encouraging Ethical Behavior

• Describe managers’ important role in encouraging ethical
behavior.
• Discuss specific ways managers can encourage ethical
behavior.

Learning Outcomes
5.5 Social Responsibility And Ethics Issues In Today’s
World
• Discuss how managers can manage ethical lapses and
social irresponsibility.
• Explain the role of social entrepreneurs.
• Discuss how businesses can promote positive social
change.
5.6 Ethics And CSR In The Arab Region

• Explore business ethics in the Arab world.
• Explain the concept of Wasta in the Arab region.
• Describe CSR in the Arab region and its main drivers.

What Is Social
Responsibility?
1. Differentiate between social obligation, social

responsiveness and social responsibility.
2. Discuss whether organizations should be socially

involved.
3. Describe what conclusion can be reached regarding

social involvement and economic performance.

What Is Social Responsibility?
Managers regularly face decisions that have a dimension of

social responsibility, such as those involving employee
relations, philanthropy, pricing, resource conservation, product
quality and safety, and doing business in countries that devalue
human rights.

What Is Social Responsibility? (cont’d)
Classical View of
Social Obligation
Social responsibility
Socioeconomic View of Social Responsiveness

Social responsibility
Social Responsibility

From Obligation to Responsiveness to
Responsibility
Social Obligation
• When a firm engages in social actions because of its obligation
to meet certain economic and legal responsibilities.
Social Responsiveness
• When a firm engages in social actions in response to some
popular social need.
• A business’s intention, beyond its legal and economic
obligations, to do the right things and act in ways that are
good for society.

What Is Social Responsibility?
The Classical View

• Management’s only social responsibility is to maximize profits
(create a financial return) by operating the business in the best
interests of the stockholders (owners of the corporation).
• Expending the firm’s resources on doing “social good”
unjustifiably increases costs that lower profits to the owners
and raises prices to consumers.

What Is Social Responsibility? (cont’d)
The Socioeconomic View

• Management’s social responsibility goes beyond making
profits to include protecting and improving society’s welfare.
• Corporations are not independent entities responsible only to
stockholders.
• Firms have a moral responsibility to larger society to become
involved in social, legal, and political issues.
• “To do the right thing.”

Exhibit 5–1 Social Responsibility Versus
Social Responsiveness
Social Responsibility Social

Responsiveness
Major consideration Ethical Pragmatic

Focus Ends Means
Emphasis Obligation Responses
Decision framework Long term Medium and short
term
Source: Adapted from S.L. Wartick and P.L. Cochran, “The Evolution of the Corporate Social Performance Model,” Academy of
Management Review, October 1985, p. 766.

Exhibit 5–2 Arguments For and Against
• For • Against
• Public expectations  Violation of profit
• Long-run profits maximization
• Ethical obligation  Dilution of purpose
• Public image  Costs
• Better environment  Too much power
• Discouragement of further  Lack of skills
governmental regulation  Lack of accountability
• Balance of responsibility and power
• Stockholder interests
• Possession of resources
• Superiority of prevention over cures

Does Social Responsibility Pay?
Studies appear to show a positive relationship between

social involvement and the economic performance of
firms.
• Difficulties in defining and measuring “social responsibility” and
“economic performance” raise issues of validity and causation in
the studies.
• Mutual funds using social screening in investment decisions
slightly outperformed other mutual funds.
A general conclusion is that a firm’s social actions do not
harm its long-term performance.

Green Management
1. Define green management.
2. Describe how organizations can go green.
3. Explain how green management can be evaluated.

The Greening of Management
The recognition of the close link between an

organization’s decision and activities and its impact on the
natural environment.
Global environmental problems facing managers:
 Air, water, and soil pollution from toxic wastes
 Global warming from greenhouse gas emissions
 Natural resource depletion

How Organizations Go Green
Legal (or Light Green) Approach

• Firms simply do what is legally required by obeying laws,
rules, and regulations willingly and without legal challenge.
Market Approach
• Firms respond to the preferences of their customers for
environmentally friendly products.

How Organizations Go Green (cont’d)
Stakeholder Approach
• Firms work to meet the environmental demands of multiple
stakeholders ‒ employees, suppliers, and the community.
Activist Approach
• Firms look for ways to respect and preserve the
environment and be actively socially responsible.

Exhibit 5–3 Green Approaches
Source: Based on R.E. Freeman. J. Pierce, and R. Dodd. Shades of Green: Business Ethics and the Environment (New York: Oxford University
Press, 1995).

Evaluating the Greening of Management
Organizations become “greener” by

• Using the Sustainability Reporting Guidelines to document
“green” actions.
• Adopting ISO 14000 standards for environmental management.
• Being named as one of the 100 Most Sustainable Corporations
in the World.

Managers And Ethical
Behavior
1. Define ethics.
2. Discuss the factors that influence whether a person

behaves ethically or unethically.
3. Describe what managers need to know about

international ethics.

Managerial Ethics
Ethics Defined
• Principles, values, and beliefs that define what is right and
wrong behavior.

Exhibit 5–4 Green Factors That Determine
Ethical and Unethical
Behavior

Factors That Affect Employee Ethics
Moral Development
• A measure of independence from outside influences
 Levels of Individual Moral Development
– Preconventional level
– Conventional level
– Principled level
• Stage of moral development interacts with:
 Individual characteristics
 The organization’s structural design
 The organization’s culture
 The intensity of the ethical issue
Exhibit 5–5 Stages of Moral Development
Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Development Approach,” in T. Lickona (ed.). Moral
Development and Behavior: Theory, Research, and Social Issues (New York: Holt, Rinehart & Winston, 1976), pp. 34–35.

Moral Development
• Research Conclusions:
 People proceed through the stages of moral development
sequentially.
 There is no guarantee of continued moral development.
 Most adults are in Stage 4 (“good corporate citizen”).

(cont’d)
Individual Characteristics
• Values
 Basic convictions about what is right or wrong.
• Personality
 Ego strength ‒ A personality measure of the strength of a person’s
convictions.
 Locus of Control
– A personality attribute that measures the degree to which
people believe they control their own life.
– Internal locus: the belief that you control your destiny.
– External locus: the belief that what happens to you is due to
luck or chance.
(cont’d)
Structural Variables
• Organizational characteristics and mechanisms that guide and
influence individual ethics:
 Performance appraisal systems
 Reward allocation systems
 Behaviors (ethical) of managers

(cont’d)
Organization’s Culture
• Values-Based Management
 An approach to managing in which managers establish and
uphold an organization’s shared values.
• The Purposes of Shared Values
 Guiding managerial decisions
 Shaping employee behavior
 Influencing the direction of marketing efforts
 Building team spirit

(cont’d)
Organization’s Culture (cont’d)
• The Bottom Line on Shared Corporate Values
 An organization’s values are reflected in the decisions and
actions of its employees.
Intensity of the Ethical Issue

Exhibit 5–6 Issue Intensity

Ethics in an International Context
Ethical standards are not universal

• Social and cultural differences determine acceptable behaviors.
Implications for international managers
• It is important for individual managers working in foreign
cultures to recognize the social, cultural, and political/legal
influences on what is appropriate and acceptable behavior.
Implications for international companies
• International businesses must clarify their ethical guidelines so
that employees know what is expected of them while working in
a foreign location.

The Global Compact
Another guide to being ethical in international business

• Document created by the United Nations outlining principles for
doing business globally in the areas of human rights, labor,
and the environment and anti-corruption.
• “More than 3,000 CEOs have signed the Compact, making it the
world’s largest voluntary corporate citizenship initiative.”

Exhibit 5–7 Issue Ten Principles of the
United Nations
Human Rights
Principle 1: Support and respect the protection of international human rights within their
sphere of influence.
Principle 2: Make sure business corporations are not complicit in human rights abuses.
Labor Standards
Principle 3: Freedom of association and the effective recognition of the right to collective
bargaining.
Principle 4: The elimination of all forms of forced and compulsory labor.
Principle 5: The effective abolition of child labor.
Principle 6: The elimination of discrimination in respect of employment and occupation.
Environment
Principle 7: Support a precautionary approach to environmental challenges.
Principle 8: Undertake initiatives to promote greater environmental responsibility.
Principle 9: Encourage the development and diffusion of environmentally friendly
technologies.
Principle 10: Businesses should work against corruption in all its forms, including extortion and
bribery.

Exhibit 5–8 Business Participants in the
Global Compact by Region and
Size
Source: “Participants and Stakeholders – Business Associations”, United Nations Global Compact,
http://www.unglobalcompact.org/ParticipantsAndStakeholders/business_associations.html.

Encouraging Ethical
Behavior
1. Describe managers’ important role in encouraging

ethical behavior.
2. Discuss specific ways managers can encourage ethical

behavior.

How Managers Can Improve Ethical
Behavior in An Organization
1. Hire individuals with high ethical standards.
2. Establish codes of ethics and decision rules.
3. Lead by example.
4. Set realistic job goals and include ethics in performance
appraisals.
5. Provide ethics training.
6. Conduct independent social audits.
7. Provide support for individuals facing ethical dilemmas.

Codes of Ethics
• Is a formal statement of an organization’s values and the

ethical rules it expects employees to follow.
• What should it include?
• It should be specific enough to show employees the spirit in
which they are supposed to do things yet loose enough to
allow for freedom of judgment.
• Unfortunately, the mere presence of a code of ethics does not
guarantee that people will follow it.

Exhibit 5–9 Codes of Ethics
Cluster 1. Be a Dependable Organizational Citizen
1. Comply with safety, health, and security regulations.

2. Demonstrate courtesy, respect, honesty, and fairness.
3. Illegal drugs and alcohol at work are prohibited.
4. Manage personal finances well.
5. Exhibit good attendance and punctuality.
6. Follow directives of supervisors.
7. Do not use abusive language.
8. Dress in business attire.
9. Firearms at work are prohibited.

Exhibit 5–9 Codes of Ethics (cont’d)
Cluster 2. Do Not Do Anything Unlawful or Improper That

Will Harm the Organization
1. Conduct business in compliance with all laws.

2. Payments for unlawful purposes are prohibited.
3. Bribes are prohibited.
4. Avoid outside activities that impair duties.
5. Maintain confidentiality of records.
6. Comply with all antitrust and trade regulations.
7. Comply with all accounting rules and controls.
8. Do not use company property for personal benefit.

Exhibit 5–9 Codes of Ethics (cont’d)
Cluster 2. Do Not Do Anything Unlawful or Improper That

Will Harm the Organization (cont’d)
9. Employees are personally accountable for company funds.

10. Do not propagate false or misleading information.
11. Make decisions without regard for personal gain.
Cluster 3. Be Good to Customers

1. Convey true claims in product advertisements.
2. Perform assigned duties to the best of your ability.
3. Provide products and services of the highest quality.

Effective Use of a Code of Ethics
1. Model appropriate behavior and reward those who act

ethically.
2. Communicate the code regularly to all employees.
3. Managers should continually reaffirm the importance of the
ethics code and consistently discipline those who break it.
4. The organization’s stakeholders (employees, customers, and
so forth) should be considered when an ethics code is
developed or improved.
5. Use the 12 questions approach (next slide).

Exhibit 5–10 Twelve Questions Approach
1. Have you defined the problem accurately?

2. How would you define the problem if you stood on the other
side of the fence?
3. How did this situation occur in the first place?
4. To whom and to what do you give your loyalty as a person
and as a member of the corporation?
5. What is your intention in making this decision?
6. How does this intention compare with the probable results?
7. Whom could your decision or action injure?
8. Can you discuss the problem with the affected parties before
you make the decision?

Exhibit 5–10 Twelve Questions Approach
(cont’d)
9. Are you confident that your position will be as valid over a

long period of time as it seems now?
10. Could you disclose without qualm your decision or action to
your boss, your chief executive officer, the board of directors,
your family, society as a whole?
11. What is the symbolic potential of your action if understood? If
misunderstood?
12. Under what conditions would you allow exceptions to your
stand?

The Value of Ethics Training
• Can make a difference in ethical behaviors.

• Increases employee awareness of ethical issues in business
decisions.
• Clarifies and reinforces the organization’s standards of
conduct.
• Helps employees become more confident that they will have
the organization’s support when taking unpopular but
ethically correct stances.

Exhibit 5–11 Being an Ethical Leader
• Be a good role model by being ethical and honest.

• Tell the truth always.
• Don’t hide or manipulate information.
• Be willing to admit your failures.
• Share your personal values by regularly communicating them
to employees.
• Stress the organization’s or team’s important shared values.
• Use the reward system to hold everyone accountable to the
values.

Social Responsibility And
Ethics Issues In Today’s
World
1. Discuss how managers can manage ethical lapses and
social irresponsibility.
2. Explain the role of social entrepreneurs.
3. Discuss how businesses can promote positive social

change.

Managing Ethical Lapses and Social
Irresponsibility
• Provide ethical leadership
• Protect employees who raise ethical issues (whistle-blowers)

Awareness of Social Issues
Social Entrepreneurs
• Are individuals or organizations who seek out opportunities to
improve society by using practical, innovative, and
sustainable approaches.
• Want to make the world a better place and have a driving
passion to make that happen.

Businesses Promoting Positive Social
Change
Corporate Philanthropy
• Campaigns
• Donations
• Funding own foundations
Employee Volunteering Efforts
• Team volunteering
• Individual volunteering during work hours

Ethics And CSR In The
Arab Region
1. Explore business ethics in the Arab world.
2. Explain the concept of Wasta in the Arab region.
3. Describe CSR in the Arab region and its main drivers.

Ethics And CSR In The Arab Region
• The Corruption Perceptions Index (CPI) table shows a

country's ranking and score. The closer it gets to 10.0, the
more transparent it is.
• Indicators for countries in the MENA region demonstrate that
there is a problem of ethics or an ethics crisis in the region.

Exhibit 5–12
The
Corruption
Perceptions
Index –
Scores for
Selected
Countries in
the Region

Problem of ethics?
Indicators for countries in the MENA region demonstrate that there

is a problem of ethics. Such low scores could be attributed to
several factors. Such as:
• Red-tape (rigid commitment to redundant rules)
• Stringent bureaucracy
• Mismanagement and waste
• Inefficiencies
• Nepotism (favoritism given to friends and family irrespective of
merit)
• Ineffective due process (weak laws or weak implementation of
laws)

Wasta
Means “intermediary”
• It is a feature in Arab environments that has lots of
implications for managerial practice.
• Wasta, as a social process, has played a significant role in
many Arab societies.
• Wasta sometimes could give the benefiting person a head
start over others.

CSR In The Arab World
CSR in Arab Countries

• Many managers link CSR to their religious upbringing as both
Islam and Christianity have deemed it necessary for people to
help each other.
• Zakat (the religious requirement to give a portion of one’s
wealth to the poor and needy) is often linked to CSR.
• But religious charity has a private religious meaning
whereas CSR reflects corporate initiatives which go beyond
personal drivers.

CSR In The Arab World (cont’d)
CSR in Arab Countries

• A study about businesses involved in CSR activities in Dubai
found that CSR enhanced financial performance, employee
commitment, and corporate reputation.
• Many examples of CSE are present in Arab countries.
• CSR is mainly represented through philanthropy and charity,
and lacks formalization and institutionalization.
• CSR in the region seems to be driven more by rational and
political choices rather than responding to societal
expectations.

Drivers of CSR in the Region
1. A desire to develop the investment climate (Turkey, Morocco,

Egypt)
2. Intensity of rivalry and a desire for better efficiency and
productivity (Jordan, Turkey, Egypt)
3. A desire to emulate models by the international business
environment (all countries)
4. International codes of conducts (Morocco, Turkey)
5. Governmental regulations (Turkey, Morocco, Palestine,
Jordan)
6. Activism of civil society groups such as Transparency
International and Greenpeace directly or through local chapters
(Turkey, Lebanon)
Source; M. Ararat, “Corporate Social Responsibility across Middle East and North Africa,” April 1, 2006). Available at SSRN:
http://ssrn.com/abstract=1015925
7.Copyright
5-58 Awards and
© 2011 Pearson prizes (Morocco, Turkey)
Education
Terms to Know
classical view ethics
socioeconomic view values
social obligation ego strength
social responsiveness locus of control
social responsibility code of ethics
social screening whistle-blower
greening of management social entrepreneur
values-based management

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Management: Arab World

Lecturer: [Insert your name here]

5.2 Green Management

5-3 Copyright © 2011 Pearson Education

5.4 Encouraging Ethical Behavior

5-4 Copyright © 2011 Pearson Education

5.6 Ethics And CSR In The Arab Region

5-5 Copyright © 2011 Pearson Education

1. Differentiate between social obligation, social

2. Discuss whether organizations should be socially

3. Describe what conclusion can be reached regarding

5-6 Copyright © 2011 Pearson Education

Managers regularly face decisions that have a dimension of

5-7 Copyright © 2011 Pearson Education

Socioeconomic View of Social Responsiveness

5-8 Copyright © 2011 Pearson Education

5-9 Copyright © 2011 Pearson Education

The Classical View

5-10 Copyright © 2011 Pearson Education

The Socioeconomic View

5-11 Copyright © 2011 Pearson Education

Social Responsibility Social

Major consideration Ethical Pragmatic

5-12 Copyright © 2011 Pearson Education

5-13 Copyright © 2011 Pearson Education

Studies appear to show a positive relationship between

5-14 Copyright © 2011 Pearson Education

1. Define green management.

2. Describe how organizations can go green.

3. Explain how green management can be evaluated.

5-15 Copyright © 2011 Pearson Education

The recognition of the close link between an

5-16 Copyright © 2011 Pearson Education

Legal (or Light Green) Approach

5-17 Copyright © 2011 Pearson Education

5-18 Copyright © 2011 Pearson Education

5-19 Copyright © 2011 Pearson Education

Organizations become “greener” by

5-20 Copyright © 2011 Pearson Education

2. Discuss the factors that influence whether a person

3. Describe what managers need to know about

5-21 Copyright © 2011 Pearson Education

5-22 Copyright © 2011 Pearson Education

5-23 Copyright © 2011 Pearson Education

5-25 Copyright © 2011 Pearson Education

5-26 Copyright © 2011 Pearson Education

5-28 Copyright © 2011 Pearson Education

5-29 Copyright © 2011 Pearson Education

5-30 Copyright © 2011 Pearson Education

5-31 Copyright © 2011 Pearson Education

Ethical standards are not universal

5-32 Copyright © 2011 Pearson Education

Another guide to being ethical in international business

5-33 Copyright © 2011 Pearson Education

5-34 Copyright © 2011 Pearson Education

5-35 Copyright © 2011 Pearson Education

1. Describe managers’ important role in encouraging

2. Discuss specific ways managers can encourage ethical

5-36 Copyright © 2011 Pearson Education

5-37 Copyright © 2011 Pearson Education

• Is a formal statement of an organization’s values and the

5-38 Copyright © 2011 Pearson Education

Cluster 1. Be a Dependable Organizational Citizen

1. Comply with safety, health, and security regulations.