Elyana Mahardhika - 2206041171

CHAPTER 3
ETHICS AND SOCIAL RESPONSIBILITY

3.1 ETHICS
Ethics set standards of good or bad, right or wrong. Ethical behavior is the “good” or
“right” in the context of a governing moral code.

3.1.1 Laws and Values as Influences on Ethical Behavior

Legal behavior is not necessarily ethical behavior because personal values also
influence individual ethical behavior
Values are broad beliefs about what is appropriate behavior.
1. Terminal values : preferences about desired end states.
2. Instrumental values : preferences regarding the means to desired ends.

3.1.2 Alternative Views of Ethics

1. Utilitarian : delivers the greatest good to the most people
2. Individualism : advances long-term self-interests
3. Moral rights : respects & protects the fundamental rights of all people
4. Justice : fair & impartial treatment of people according to legal standards
Justice in organizations focuses on four dimensions:
1. Procedural : policies and rules fairly applied
2. Distributive : fair distribution of outcomes
3. Interactional : people treated with dignity and respect
4. Commutative : fairness to all involved

3.1.3 Cultural Issues and Ethical Behavior

Cultural relativism suggests there is no “one right way” to behave because ethical
behavior is determined by its cultural context. Moral absolutism suggests ethical standards
apply universally across all cultures. Ethical imperialism impose one’s ethical standards on
other cultures.

3.2 ETHICS IN THE WORKPLACE

3.2.1 Ethical Dilemmas
Ethical dilemma is a situation that offers potential benefit or gain and that may be also
be considered unethical, there is no clear “right” or “wrong”. Examples:
1. Discrimination 4. Product safety
2. Sexual harassment 5. Use of organizational resource
3. Conflicts of interest

3.2.2 Influences on Ethical Decision Making

A personal rule or strategy for making ethical decisions is called ethical framework.

Stages of Moral development according to Lawrence Kohlberg:

Ethics intensity or issue intensity indicates the extent to which an issue is perceived to
pose important ethics challenges.
3.2.3 Rationalizations for Unethical Behavior
People often rationalize ethical transgressions with after-the-fact justifications.
Examples:
- “Behavior is not really ilegal.”
- “Behavior is really in everyone’s best interests.”
- “Nobody will ever find out.”

3.3 MAINTAINING HIGH ETHICAL STANDARDS

3.3.1 Moral Management
Managers behave in one of these three ways:
1. Immoral manager : behaves unethically
2. Amoral manager : fails to consider ethics
3. Moral manager : makes ethical behavior a personal goal

3.3.2 Ethics Training

Ethics training help people understand the ethical aspects of decision making and to
incorporate high ethical standards into their daily behavior.

3.3.3 Codes of Ethical Conduct

A code of ethics is a formal statement of an organization’s values and ethical
standards. Some areas often covered by codes of ethics:
1. Organizational citizenship 5. Political contributions
2. Illegal improper acts 6. Honesty of records
3. Customer/coworker relationships 7. Confidentiality of corporate information
4. Bribes and kickbacks

3.3.4 Whistleblower Protection

A whistleblower exposes the misdeeds of others in organizations to preserve ethical
standards. Barriers to whistleblowing include:
1. Strict chain of command
2. Strong work group identities
3. Ambiguous priorities
3.4 SOCIAL RESPONSIBILITY
All organizations have stakeholders which are the persons, groups, and other
organizations directly affected by the behavior of the organizations. Stakeholder power
refers to the capacity of the stakeholder to positively or negatively affect the operations of the
organization. Demand legitimacy is the validity and legitimacy of a stakeholder’s interest in
the organization. Issue urgency indicates the extent to which a stakeholder’s concerns need
immediate action.

3.4.1 Social Responsibility, Stewardship, and The Triple Bottom Line

Corporate Social Responsibility (CSR) is the obligation of an organization to serve the
interests of multiple stakeholders, including society at large. Sustainability means acting in
ways that support a high quality of life for present and future generations. A sustainable
business refers to firms that operate in ways that both meet the needs of customers while
protecting and advancing the well-being of natural environment. Stewardship means taking
personal responsibility to always respect and protect the interests of organizational
stakeholders. The Triple bottom line evaluates organizational performance on economic,
social, and environmental criteria. The 3 P’s of Organizational Performance are profit,
people, and planet.

3.4.2 Perspectives on Corporate Social Responsibility

1. Classical view : business should focus on profits.
2. Socioeconomic : business should focus on broader social welfare as well as profits.
3. Shared value : economic and social progress are interconnected.
Virtuous circle occurs when socially responsible behavior improves financial
performance, which leads to more responsible behavior in the future.
3.4.3 Evaluating Corporate Social Performances
A social responsibility audit measures an organization’s performances in various
areas of social responsibility.

3.4.4 Corporate Governance

Corporate governance is the oversight of top management by a board of directors.
The governance involves hiring, firing, and compensating top executives, also assessing
strategy and verifying financial records. The Sarbanes-Oxley Act of 2002 (SOX) is designed
to hold top managers accountaable for the financial conduct of the organizations they lead.