Ethics and Social Responsibility

CHAPTER 5
 Learning Objectives

 Define ethics and explain how ethical behavior

relates to behavior governed by law and free
choice.
 Explain the utilitarian, individualism, moral-
rights, and justice approaches for evaluating
ethical behavior.
 Describe how both individual and organizational
factors shape ethical decision making.
 Define corporate social responsibility and how
to evaluate it along economic, legal, ethical,
and discretionary criteria.

2 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Learning Objectives (contd.)

 Describe four organizational approaches to

environmental responsibility, and explain the
philosophy of sustainability.
 Discuss how ethical organizations are created
through ethical leadership and organizational
structures and systems.
 Identify important stakeholders for an
organization and discuss how managers
balance the interests of various stakeholders.

3 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Ethics

 The code of moral principles and

values that govern the behaviors of a
person or group with respect to what
is right or wrong.

4 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Three Domains of Human Action
Exhibit 5.1

Domain of Codified Law Domain of Ethics Domain of Free Choice

(Legal Standard) (Social Standard) (Personal Standard)

Amount of

Explicit Control
High Low

5 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Ethical Dilemma

 A situation that arises when all

alternative choices or behaviors have
been deemed undesirable because...

 Of potentially negative ethical

consequences, making it difficult to
distinguish right from wrong

6 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Criteria For
Ethical Decision Making

Most ethical dilemmas involve

Conflict between needs of the part &
whole
- Individual versus the organization
- Organization versus society as a whole
Managers benefit from a normative
strategy to guide their decision
making - norms and values

7 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Ethical Decision Making Approaches

 Utilitarian Approach
 Individualism Approach
 Moral-Rights Approach
 Justice Approach

8 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Utilitarian Approach

● Moral behavior produces the greatest

good for the greatest number

● Example – recent trend among

companies to monitor employee use
of the Internet

9 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Individualism Approach
● Acts are moral when they promote the
individual's best long-term interests, which
ultimately leads to the greater good
● Individual self-direction paramount
● Individualism is believed to lead to honesty
& integrity since that works best in the long
run
● However, top executives from WorldCom,
Enron, Tyco demonstrate flaws of approach

10 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Moral-Rights Approach

 Moral decisions are those that best

maintain the rights of those people
affected by them.
 An ethical decision is one that avoids
interfering with the fundamental rights
of others.

11 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Six Moral Rights

1. The right of free consent

2. The right to privacy
3. The right of freedom of conscience
4. The right of free speech
5. The right to due process
6. The right to life and safety

12 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Justice Approach

 Moral Decisions must be based on

standards of equity, fairness,
impartiality
Three types of Justice Approaches:
 Distributive Justice
 Procedural Justice
 Compensatory Justice

13 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Distributive Justice

 Different treatment of people should not

be based on arbitrary characteristics

 In case of substantive differences,

people should be treated differently in
proportion to the differences among
them

14 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Procedural Justice

 Rules should be clearly stated

 Rules should be consistently and

impartially enforced

15 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Compensatory Justice

● Individuals should be compensated for the

cost of their injuries by the party
responsible

● Individuals should not be held responsible

for matters they have no control over

16 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Factors Affecting Ethical Choices

 The Manager
 Levels or stages of moral
development
• Pre-conventional
• Conventional
• Post-conventional
 The Organization

17 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Levels of Personal Moral Development

Exhibit 5.2

18 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 The Organization

 Rarely can ethical or unethical corporate

actions be attributed solely to the
personal values of a single manager
 Values adopted within the organization
are highly important
 Most people believe their duty is to fulfill
obligations and expectations of others

19 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Corporate Social Responsibility

 Organization’s obligation to make

decisions and take actions that will
enhance the welfare and interests
of society and organization
 Being a good corporate citizen
 Difficulty in understanding – issues
can be ambiguous with respect to
right and wrong

20 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Organizational Stakeholders

 Any group within or outside the

organization that has a stake in the
organization’s performance
 Each stakeholder
– Has a different criterion of responsiveness
– Has a different interest in the company
 Monsanto

21 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Environmental Responsibility Commitment
Adapted from Exhibit 5.6

The Shades of Activist

Approach
Corporate Green
Stakeholder
Approach

Market Approach

Legal Approach

22 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 Total Corporate Social Responsibility

Total Corporate Social Responsibility

Exhibit 5.7

23 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

 The Ethical Organization
The Three Pillars of an Ethical Organization

Exhibit 5.9

24 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.