You are on page 1of 28

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
The code of moral principles and values
that govern the behaviors of a person or
group with respect to what is right or
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
Example: An individual's choice of a
marriage partner or religion.
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

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
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

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

The Organization
Moral Development
Preconventional Level = concerned
with external rewards and
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

Explicit rules and policies
Reward system
Common Values
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
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

Owners, Investors
4 Views of
Responsibilities of
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

To be ethical, an organization should

seek a higher standard than merely
obeying the law:
e.g., Act with equity, fairness, and
e.g., Respect the rights of individuals
e.g., Act for the common good
4 - Discretionary
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

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

Senior managers must be strongly

committed to ethical conduct.
Code of Ethics
A formal statement of the company's
values concerning ethics and social
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
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