Management Chap5

© 2014 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1. What Is Managerial Ethics?
2. Ethical Management Today
3. Ethical Dilemmas: What Would You Do?
4. Criteria for Ethical Decision Making
5. The Individual Manager and Ethical
Choices
6. What Is Corporate Social Responsibility?
7. Evaluating Corporate Social Responsibility
8. Managing Company Ethics and Social
Responsibility
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
 Ethics – code of moral principles and values
that govern the behaviors of right or wrong
 Standards about good/bad
 Ethical issues can be complex
 People in organizations have divergent
views about right/wrong
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Ethics can be more clearly understood when
compared with behaviors governed by law
and by free choice.
4
 Codified law. Values and standards are
written into the legal system and are
enforceable in the courts. Lawmakers have
ruled that people and corporations must
behave in a certain way such as obtaining
licenses for cars or paying taxes.
 Free choice. Free choice pertains to
behavior about which law has no say and
for which an individual or organization
enjoys complete freedom.
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 Ethics. Ethics lies between the domains of
codified law and free choice. It has no
specific laws, but does have standards of
conduct that are based on shared
principles and values about moral conduct
that guide an individual or company.
Because ethical standards are not codified,
disagreements and dilemmas about proper
behavior often occur.
6
 Ethical lapses during the last decade have
been pervasive
 Corporations and people have become
associated with greed, deceit,
irresponsibility, and lack of moral
conscience
7
In a recent Gallup poll regarding the perception of
business leaders:
 Just 15 percent of respondents rated leaders’
honesty and ethical standards as “high” or “very
high.”
 About 76 percent of people surveyed agree with
the statement that corporate America’s moral
compass is “pointing in the wrong direction”;
 69 percent say that executives rarely consider the
public good in making decisions; and a whopping
94 percent say that executives make decisions
based primarily on advancing their own careers.
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Another recent survey of Wall Street workers
by the law firm Labaton Sucharow shows that:
 Almost 25 percent of finance professionals
say that they would cheat to make $10
million if they could get away with it.
 Moreover, 52 percent believe that it is likely
that their competitors have engaged in
illegal or unethical activity.
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“The bottom line is that when
shareholder value capitalism is
paramount, the rest of us suffer.
CEOs will readily dupe customers,
sack employees, and spoil the
environment to meet expectations”
(Roger Martin - Dean and Professor at the Rotman
school of Management, Toronto)
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 Managers carry a big responsibility for
setting an ethical climate
 Ethical
crises have brought ethical
management to the forefront
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Ethical dilemma: A situation that
arises when all alternative choices
or behaviors are deemed
undesirable because of potentially
negative consequences, making it
difficult to distinguish right from
wrong.
13
You are the moral agent–what would you do?
Your company requires a terrorist watch list that
screens all new customers and takes
approximately 24 hours from the time an order is
placed. You can close a lucrative deal with a
potential long-term customer overnight, even
though that means the required watch list
screening will have to be done after the fact.
14
On the train ride from your home in Ipswich to
your office in London, your peaceful morning
routine is disturbed by neighboring passengers
carrying on a loud mobile business meeting.
Within minutes, you realize that they are
discussing a client that your own firm has been
courting. Furthermore, you soon have the time,
phone number, and passcode for a conference
call that the consultants are having with the
client later that day. It isn’t your fault that they
gave out that information in a public place, but
you wonder what you should do with it.
15
As a sales manager for a major pharmaceuticals
company, you’ve been asked to promote a
new drug that costs $2,500 per dose. You’ve
read the reports saying the drug is only one
percent more effective than an alternate drug
that costs less than $625 per dose. The VP of
sales wants you to aggressively promote the
$2,500-per-dose drug. He reminds you that, if you
don’t, lives could be lost that might have been
saved with that one percent increase in the
drug’s effectiveness.
16
A woman was dying of incurable cancer and
had only about six months to live. She was in
terrible pain, but was so weak that a large
dose of a pain killer such as morphine would
probably kill her. She was delirious with pain,
and in her calm periods, she would ask her
doctor to give her enough morphine to kill
her. She said she couldn’t stand the pain and
that she was going to die in a few months
anyway.
What should the doctor do?
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 Utilitarianapproach – moral behavior
produces the greatest good for the
greatest number
 Individualism approach – acts are
moral if they promote the individual’s
long-term interest. Individualism is
believed to lead to honesty and
integrity because that works best in
the long run.
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 Moral-rights approach – humans have
fundamental rights and liberties that
cannot be taken away by an
individual’s decision such as the right
to privacy, the right of free consent, or
the right to freedom of speech.
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 Justice approach – moral decisions must be
based on standards of equity, fairness, and
impartiality
Distributive justice
Procedural justice
Compensatory justice
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 Distributive justice requires that
different treatment of people not be
based on arbitrary characteristics.
Men and women should not receive
different salaries if they are performing
the same job; however, people who
differ in a substantive way can be
treated differently.
21
 Procedural justice requires that rules be
administered fairly. Rules should be clearly
stated and be consistently and impartially
enforced.
 Compensatory justice argues that the party
responsible should compensate individuals
for the cost of their injuries. Individuals
should not be held responsible for matters
over which they have no control.
22
 Practical approach – sidesteps debates about
what is right, good, or just and bases decisions
on prevailing standards of the profession and
the larger society, taking the interests of all
stakeholders into account.
 A decision would be considered ethical if it
is one that would be considered acceptable
by the professional community, one the
manager would not hesitate to publish on the
evening news, and one that a person would
typically feel comfortable explaining to family
and friends.
23
 Individuals bring their own personality and
traits to organizations
 Personal needs, family influence, and

religious background shape individuals
 Personality characteristics such as ego,

confidence, and independence may
enable managers to make ethical choices
24
25
The manager’s level or stage of moral
development is an important personal trait in
making ethical decisions.
 Pre-conventional level. At this level a
manager is concerned with external
rewards and punishment and obeys
authority to avoid detrimental personal
consequences. These managers are likely
to be autocratic or coercive
26
 Conventional level. At this level managers
learn to conform to expectations of good
behavior as defined by colleagues, friends,
family, and society. These managers are
interested in interpersonal relationships and
cooperation.
27
 Post-conventional level (also called
principled level). At this level individuals
develop an internal set of standards and
values and will disobey rules or laws that
violate these principles. Internal values are
more important than expectations of
significant others. These managers typically
use a transformative or servant leadership
style.
28
 The great majority of managers operate at
the conventional level. A few managers
have not advanced beyond the pre-
conventional level.
 Only about 20 percent of American adults
reach the principled level of moral
development.
29
Social responsibility means distinguishing right from
wrong. It means being a good corporate citizen.
Corporate social responsibility (CSR) is
management’s obligation to make choices and
take actions that will contribute to the welfare and
interests of society as well as the organization.
Social responsibility can be a difficult concept to
grasp because people have different beliefs as to
which actions improve society’s welfare. Social
responsibility covers a wide range of issues that are
ambiguous with regard to what is right or wrong.
30
A responsibility among firms to
meet the needs of their
stakeholders and a responsibility
among stakeholders to hold
firms to account for their actions
--- Chandler (2017) ---
31
 Enlightened organizations view the internal
and external environment as having a
variety of stakeholders.
 A stakeholder is any group within or outside
the organization that has a stake in the
organization’s performance.
 Each stakeholder has a different criterion of
responsiveness because it has a different
interest in the organization.
32
 The organization’s performance affects
stakeholders.
 Stakeholders can also have a tremendous
effect on the organization’s performance and
success.
 Today, special interest groups continue to be
one of the largest stakeholder concerns that
companies face.
 Environmental responsibility has become a
primary issue as both business and the public
acknowledge the damage that has been done
to our natural environment.
33
34
 2015 United Nations Climate Change
Conference
 The Paris Agreement is a legally binding
international treaty on climate change. It
was adopted by 196 Parties at COP 21 in
Paris, on 12 December 2015 and entered
into force on 4 November 2016.
 Its goal is to limit global warming to well
below 2, preferably to 1.5 degrees Celsius,
compared to pre-industrial levels.
35
Stakeholders of a company are
individuals or groups affected by the
company and they also can affect the
company.
36
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 Going GREEN is a new business imperative
Change in social attitudes
New governmental policies
Climate change
 Information technology immediately
spreads the negative decisions of
corporations
 More organizations are embracing
sustainability
38
Sustainability – economic development
that generates wealth and meets the
needs of current generation while
preserving the environment for the needs
of future generations
39
 The triple bottom line refers to measuring an
organization’s social performance, its
environmental performance, and its
financial performance. This is sometimes
called the three Ps: People, Planet, and
Profit.
40
 The first P, People, looks at socially
responsible aspects including fair labor
practices, diversity, supplier relations,
treatment of employees, and contributions
to community.
 The second P, Planet, measures aspects
such as the organization’s commitment to
environmental sustainability.
 The third P, Profit, looks at the organization’s
success in making sustainable profits, the
financial bottom line.
41
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 The first criterion of social responsibility is
economic responsibility.
 The business institution is the basic
economic unit of society. Its responsibility is
to produce the goods and services that
society wants and to maximize profits for its
owners and shareholders.
 Economic responsibility carried to extreme
is called the profit-maximizing view,
advocated by Nobel economist Milton
Friedman.
43
 Legal responsibility defines what society
deems important with respect to
appropriate corporate behavior.
 Businesses are expected to fulfill their
economic goals within the law.
 Legal requirements are imposed by local
governments, state legislators, and federal
regulatory agencies.
44
 Ethical responsibility includes behaviors that
are not necessarily codified into law and
may not serve the firm’s direct economic
interests. To be ethical, decision makers
should act with equity, fairness, and
impartiality, respect the rights of individuals,
and treat individuals differently only when
relevant to the organization’s goals.
Unethical behavior occurs when decisions
enable an individual or company to gain at
the expense of society.
45
 Discretionary responsibility is voluntary and
guided by a company’s desire to make
social contributions not mandated by
economics, law, or ethics.
 Discretionary activities include philanthropic
contributions that offer no direct financial
payback to the company and are not
expected.
 Discretionary responsibility is the highest
criterion of social responsibility.
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 Code of ethics – a formal statement of
the company’s values regarding ethics
and social issues
 Ethical structures – systems, positions, and

programs like ethics training
 Whistle-blowing – employee disclosure of

illegal, immoral, or illegitimate practices
48
 Ethics and social responsibility are important
business issues
 The connection between ethics and financial

performance has been widely debated
 Integrity and trust are essential elements in

sustaining successful and profitable business
relationships
49

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© 2014 Cengage Learning. All Rights Reserved.

 Personal needs, family influence, and

 Personality characteristics such as ego,

 Ethical structures – systems, positions, and

 Whistle-blowing – employee disclosure of

 The connection between ethics and financial

 Integrity and trust are essential elements in

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