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Chapter 4

Managing Ethics and


Social Responsibility
Three Domains of
Human Action

Domain of Domain of Domain of


Codified Law Ethics Free Choice
(Legal Standard) (Social Standard) (Personal Standard)

Amount of

Explicit Control
High Low
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.
Codified Law
Values and standards that are written into
the legal system.
Free Choice

Behavior about which law has no say


and for which an individual or
organization enjoys complete
freedom
Example: An individual's choice of a
marriage partner or religion.
Ethics
Obedience is to norms and standards levied by
self and/or others. These are unenforceable
in a legal sense, but are often powerful.

Ethical Dilemma
When all choices have been deemed
undesirable because of potentially negative
ethical consequences, making it difficult to
distinguish right from wrong. (The choices
also have attractive attributes.)
Common Ethical
Dilemmas

Honesty in advertising and in


communications with superiors,
clients, and government.
Problems relating to special gifts,
entertainment, and kickbacks.
Overlooking wrong doings of others
Criteria for Ethical
Decision Making
Approaches
Utilitarian
Individualism
Moral-Rights
Justice
Practical
Utilitarian Approach
Moral behaviors produce the greatest
good for the greatest number.

Individualism Approach
Acts are moral when they promote
the individual's best long-term
interests (e.g., the golden rule).
Moral-Rights Approach
Human beings have fundamental
rights (e.g., free consent, privacy, due
process)

Justice Approach
Standards of equity, fairness, and
impartiality.
Practical Approach
May include consideration of any of the
other four approaches and what actions
will please stakeholders most.
Factors Affecting Ethical
Choices
The Manager
Level or stage of moral
development
Learned Ethics

The Organization
Systems
Culture
Moral Development
Preconventional Level = concerned
with external rewards and
punishments
Conventional Level = conform to the
expectations of peers and society
(consistent with practical approach to
ethical decision making)
Postconventional (Principled) Level =
individuals develop a personal,
internal set of standards and values.
(About 20% of adults)
The Organization

Systems
Explicit rules and policies
Reward system
Culture
Common Values
Traditions
Guidelines for Dealing
with Ethical Dilemmas

Is it legal?
Is it right?
Is it beneficial? To whom? How much?
Is it harmful? To whom? How much?
with Ethical Dilemmas
(cont.)
Would you be willing to allow everyone
to do what you are considering?
Would you like your family to know?
Would you like your decision printed in
the newspaper?
Have you consulted others who are
objective and knowledgeable?
Social Responsibility

An Organization taking actions that


contribute to society
Being a good corporate citizen.
Stakeholder Model

The belief that a business should be


operated for the benefit of all who are
concerned with it (all stakeholders
not just the owners).
The foundation of Social
Responsibility.
Organizational
Stakeholders

Owners, Investors
Employees
Suppliers
Customers
Government
Society
4 Views of
Responsibilities of
Business
1- Economic 2- Legal
Responsibilities: Responsibilities:
The only Social Social Responsibility
Responsibility = = Obeying the Law
Profit-Maximizing. (as well as making
a profit)
3- Ethical
Responsibilities

To be ethical, an organization should


seek a higher standard than merely
obeying the law:
e.g., Act with equity, fairness, and
impartiality
e.g., Respect the rights of individuals
e.g., Act for the common good
4 - Discretionary
Responsibilities
Purely voluntary, not mandated by
economics, law, or ethics
Goes beyond what society expects
This is true Social Responsibility
Social Responsibility Levels

Level of Concern--- Likely Behavior


Discretionary------------------- Proaction
Ethical------------------- Accommodation
Legal------------------ Defensive Behavior
Economic------------- Anything for profit
Why Social
Responsibility?

Self-defense - If business is not


proactive, the public or government
will press for more regulation
Obligation - Business exists due to
being sanctioned by society - owes
debt to society
Self-interest - S.R. good for business in
long run
Arguments Against
Social Responsibility
Social expenditures amount to theft of
business owners equity.
Business lacks the ability to pursue
social goals.
Business would gain too much power if
involved in the social domain. (Social
issues should be left to those
accountable to the voters or religious
leaders, etc.)
Ethical Leadership By
Example

Senior managers must be strongly


committed to ethical conduct.
Code of Ethics
A formal statement of the company's
values concerning ethics and social
issues.
Principle-based: Policy-based:
Designed to: Outline how to act in
Enable the employee to specific ethical
make ethical decisions situations (reducing
the need for thinking
based on appropriate or shared values):
values Conflicts of interest
e.g., treat people fairly Proprietary information
or dont be Political gifts
dishonest Equal opportunities
Organizational Structures
to Promote Ethics
Ethics committee = group appointed to
monitor company ethics
Hot lines- employees can report
questionable behavior, possible fraud,
waste, or abuse( i.e., Blow the Whistle)
Ethics training programs
Whistle-Blowing
Definition: Guidelines:
The disclosure by an Be sure you are right
employee of illegal, (keep accurate records)
immoral, or Try to resolve the situation
in-house first
illegitimate Consult an attorney before
practices by the contacting the media,
organization. etc.
Realize you could be fired
Dont expect to profit
financially