CH 03 Ed 6

Exploring
Management
John Schermerhorn, Jr. and Daniel G. Bachrach
Sixth Edition
Chapter 3
Ethics and Social Responsibility

"So if hearing that the CEO of
Apple is gay can help someone
struggling to come to terms
with who he or she is, or bring
comfort to anyone who feels
alone, or inspire people to
insist on their equality, then
it's worth the trade-off with
my own privacy.“
Tim Cook, CEO Apple, Inc.

Copyright ©2018 John Wiley & Sons, Inc.
Your Chapter 3 Takeaways
• Understand how ethics and ethical behavior play

out in the workplace. (3.1)
• Know how to maintain high standards of ethical
conduct. (3.2)
• Identify when organizations are and are not acting
in socially responsible ways. (3.3)
Copyright ©2018 John Wiley & Sons, Inc. 3

Takeaway 3.1 – answers to come
•Ethical behavior is values driven.
•Views differ on what constitutes moral behavior
•What is considered ethical can vary across cultures.
•Ethical dilemmas arise as tests of personal ethics and
values.
•People have tendencies to rationalize unethical
behaviors.

ETHICS IN THE WORKPLACE 3.1
Ethical Behavior
Ethics
• A code of moral principles that sets standards of
good or bad, or right or wrong, in our conduct.
Ethical Behavior
• That which is “right” or “good” in the context of
governing moral code.
• Ethical behavior is value driven

Values Driven
Values
• Broad beliefs about what is appropriate behavior
Terminal Values
• Preferences about desired end states
Instrumental Values
• Preferences regarding the means to desired ends

The Most Common Unethical Acts by Managers

include:
• Verbal
• Sexual
• Racial harassment
• Misuse of company property
• Giving preferential treatment

Views on Moral Behavior Differ
Moral Reasoning
• Reasons for various ethical practices
Figure 3.1 How Do Alternative Moral Reasoning

Approaches View Ethical Behavior?

Moral Reasoning
Utilitarian View
• Which action delivers the most good to the
largest amount of people?

Moral Reasoning
Individualism View
• Which action is in our best interest in the
long-term?
• Can be quite different from the best choice for
the short term

Procedural
ETHICS IN THE WORKPLACEDistributive
3.1 Interactional Commutative
Justice Justice Justice Justice
Moral Reasoning
• Rules are • People are • People are • Transactions
applied fairly treated the treated with are fair and
Justice View same dignity and everyone has
regardless of respect access to the
personal same
characteristics information

Moral Reasoning
Moral Rights View

• Fundamental rights of all people are
respected

Moral Reasoning
Excerpt From Universal Declaration of Human
Rights United Nations
•Article 1—All human beings are born free and equal in dignity
and right
•Article 18—Everyone has the right to freedom of thought,
conscience, and religion
•Article 19—Everyone has the right to freedom of opinion and
expression
•Article 22—Everyone has the right to work, to free choice of
employment, to just and favorable conditions of work
•Article 26—Everyone has the right to education
Ethics Varies Across Cultures
Situation:
• A 12-year-old boy is working in a garment factory in
Bangladesh. He is the sole income earner for his
family. He often works 12-hour days and was once
burned quite badly by a hot iron. One day he is told
he can’t work. His employer was given an ultimatum
by the firm’s major American customer – “No child
workers if you want to keep our contracts.” The boy
says, “I don’t understand. I could do my job very well.
My family needs the money.”

Cultural Relativism and Moral Absolutism
• Cultural relativism justifies a decision if it conforms

to local values, laws, and practices
• Moral absolutism justifies a decision only if it
conforms to the ways of the home country.
Figure 3.2 How Do Cultural Relativism and Moral

Absolutism Influence International Business Ethics?

Ethical Dilemma
• A situation that, although offering potential

benefits, is unethical.
• One of the most common ethical dilemmas
occurs when a company’s culture conflicts with
an employee’s personal ethics.

Common Examples of Unethical Behavior at Work

Rationalizing Unethical Behavior

Four reasons:
People Have a Tendency to Rationalize Unethical Behavior
1. “What I’m doing is not really illegal.”

2. “My behavior is in everyone’s best interests.”
3. “Nobody will ever know about it.”
4. “The Organization will stand behind me.”

Study Guide for Takeaway 3.1
Rapid Review:
•Ethical behavior is that which is accepted as “good” or “right” as opposed to “bad” or
“wrong.”
•The utilitarian, individualism, moral rights, and justice views offer different approaches to
moral reasoning; each takes a different perspective of when and how a behavior becomes
ethical.
•Cultural relativism argues that no culture is ethically superior to any other; moral
absolutism believes there are clear rights and wrongs that apply universally, no matter
where in the world one might be.
•An ethical dilemma occurs when one must decide whether to pursue a course of action
that, although offering the potential for personal or organizational gain, may be unethical.
•Ethical dilemmas faced by managers often involve conflicts with superiors, customers, and
subordinates over requests that involve some form of dishonesty.
•Common rationalizations for unethical behavior include believing the behavior is not
illegal, is in everyone’s best interests, will never be noticed, or will be supported by the
organization. Copyright ©2018 John Wiley & Sons, Inc. 19
Questions for Discussion:

1. For a manager, is any one of the moral reasoning
approaches better than the others?
2. Will a belief in cultural relativism create inevitable ethics
problems for international business executives?
3. Are ethical dilemmas always problems, or can they be
opportunities?

Be Sure You Can… for Takeaway 3.1

•differentiate between legal behavior and ethical behavior
•differentiate between terminal and instrumental values and give
examples of each
•list and explain four approaches to moral reasoning
•illustrate distributive, procedural, interactive, and commutative justice in
organizations
•explain the positions of cultural relativism and moral absolutism in
international business ethics
•illustrate the types of ethical dilemmas common in the workplace
•explain how bad management can cause ethical dilemmas
•list four common rationalizations for unethical behavior
MAINTAINING HIGH STANDARDS 3.2
Takeaway 3.2 – answers to come

• Personal character and moral development influence
ethical conduct.
• Managers as positive role models can inspire ethical
conduct.
• Training in ethical decision making may improve
ethical conduct.
• Protection of whistleblowers may encourage ethical
conduct.
• Formal codes of ethics set standards for ethical
conduct
MAINTAINING HIGH STANDARDS OF ETHICAL CONDUCT 3.2
Influence on Moral Development

Ethical Frameworks
• Personal rules and strategies for making ethical decisions
Lawrence Kohlberg
• Three levels of moral development
Figure 3.3 What are the Stages in Kohlberg’s Three Levels of Moral Development?

Management Influence
Management Behavior
• In order to have a positive impact on ethical conduct
throughout an organization, those at the top must walk the
talk.
• An Immoral managers chooses to behave unethically.
• An Amoral manager fails to consider ethics
• A Moral manager makes ethical behavior a personal goal.

Ethics Training
Ethics Training
• Seeks to help people understand the ethical aspects
of decision making and to incorporate high ethical
standards into their daily behavior.
• Training helps employees understand the corporate
culture and expectations regarding ethical behavior.

Ethical Dilemma
TIPS TO REMEMBER
Checklist for Dealing with Ethical Dilemmas
Step 1. Recognize the ethical dilemma
Step 2. Get the facts
Step 3. Identify your options
Step 4. Test each option by asking: Is it legal? Is it right? Is it beneficial?
Step 5. Decide which option to follow.
Step 6. Double-check your decision by asking three spotlight questions.
“How would I feel if my family found out about my decision?”
“How would I feel if my decision was reported in the local newspaper or posted on
the Internet?”
“What would the person I know who has the strongest character and best ethical
judgment say about my decision?”
Step 7. Take action.

Whistleblowing
Whistleblowers
• Persons who expose organizational misdeeds in
order to preserve ethical standards and protect
against wasteful, harmful, or illegal acts.
• Many whistleblowers were / are fired for their
actions.
• State and federal laws now offer some protection.

Whistleblowing
Organizational barriers to whistleblowing

• Strict chain of command
• Strong work group identities
• Ambiguous priorities

Codes of Ethics
Formal codes of ethics set standards for

ethical conduct
• Discrimination
• Forced labor
• Working conditions
• Freedom of association

Rapid Review:
• Ethical behavior is influenced by an individual’s character and represented by core
values and beliefs.
• Kohlberg describes three levels of moral development—preconventional, conventional,
and postconventional—with each of us moving step-by-step through the levels as we
grow ethically over time.
• Ethics training can help people better understand how to make decisions when dealing
with ethical dilemmas at work.
• Whistleblowers who expose the unethical acts of others have incomplete protection
from the law and can face organizational penalties.
• All managers are responsible for acting as ethical role models for others.
• Immoral managers choose to behave unethically; amoral managers fail to consider
ethics; moral managers make ethics a personal goal.
• Formal codes of conduct spell out the basic ethical expectations of employers regarding
the behavior of employees and other
Copyright contractors.
©2018 John Wiley & Sons, Inc. 30

1. Is it right for organizations to require ethics training
of employees?
2. Should whistleblowers have complete protection
under the law?
3. Should all managers be evaluated on how well they
serve as ethical role models?

•explain how ethical behavior is influenced by personal factors

•list and explain Kohlberg’s three levels of moral development
•explain the term “whistleblower”
•list three organizational barriers to whistleblowing
•compare and contrast ethics training, ethics role models, and
codes of conduct for their influence on ethics in the workplace
•state the spotlight questions for double-checking the ethics of a
decision
•describe differences between the inclinations of amoral, immoral,
and moral managers when facing difficult decisions
SOCIAL RESPONSIBILITIES OF ORGANIZATIONS 3.3
Takeaway 3.3 answers to come

• Social responsibility is an organization’s obligation to best serve
society.
• Perspectives differ on the importance of corporate social
responsibility.
• Shared value integrates corporate social responsibility into
business strategy.
• Social businesses and social entrepreneurs are driven by social
responsibility.
• Social responsibility audits measure the social performance of
organizations.
• Sustainability is an important social responsibility goal.
Social Responsibility is Serving Society

Stakeholders are people and institutions most directly
affected by an organization’s performance.
Figure 3.4 Who are the Stakeholders of Organizations?

Corporate Social Responsibility

• It is the obligation of the organization to
act in ways that serve both its own
interests and the interests of its
stakeholders, representing society at
large.
• Often called “CSR.”

Social Responsibility is Serving Society

Triple Bottom Line—how well an organization
performs when measured not only on financial
criteria, but also on social and environmental
ones.
• Is the decision economically sound?
• Is the decision socially responsible?
• Is the decision environmentally sound?
Three Ps
• Profit, People, Planet

Views on Corporate Social Responsibility
• Creating Shared Value:

• “The purpose of a corporation must be redefined
as creating shared value, not just profit.”
Socioeconomic View Classical View
Responsibility increases Reduces business profits and
long-run profits creates higher business costs
Improves public image Dilutes business purpose
Businesses have resources and Gives too much social power to

ethical obligations to act responsibly business

Social Responsibility
Virtuous Circle
• Socially responsible actions lead to improved
financial performance.
• Organization is more likely to engage in socially
responsible acts in the future.
• Example: car manufacturers who produce fuel-
efficient and hybrid cars may see improved financial
performance and introduce more fuel efficient
models.

Social Business and Social Entrepreneurs

Social business
• Business model that addresses social problems such
as hunger, illiteracy, and poverty
Social entrepreneurs
• Create businesses that help to solve pressing social
problems
• Examples: Grameen Bank, Tom’s Shoes, This Bar Saves
Lives

Measuring Social Responsibility

Social responsibility audit
• Determines the organization’s performance in various
areas of social responsibility
• Ranges from compliance to conviction

Sustainability
Sustainability
• concerns doing business in such a way that respects
future generations and their right to the world's
natural resources
• Organization operates in a way that meets the
needs of the customer and protects natural
environment
Sustainable development
• uses natural resources in such a way that today's
needs are met, yet they are preserved for future
generations
Sustainability
• Environmental Capital or Natural Capital is the

storehouse of natural resources - that we use to sustain
life and produce goods and services for society.
• Land, Water, Minerals, Atmosphere
• Much broader than a focus on the natural environment
alone.
• Scholar Jeffrey Pfeffer offers a strong case in favor of
giving management attention not only to issues of
ecological and environmental sustainability—but also to
social and human sustainability.
ISO14001
• Global quality standard that certifies

organizational environmental objectives for
minimal environmental impact.
• Requires certified organizations to set
environmental objectives and targets
• Requires certified organizations to account for
the environmental impact of their activities,
products, or services

Rapid Review:
•Corporate social responsibility is an obligation of the organization to act in ways that serve
both its own interests and the interests of its stakeholders.
•In assessing organizational performance today, the concept of the triple bottom line evaluates
how well organizations are doing on economic, social, and environmental performance criteria.
•Criteria for evaluating corporate social performance include how well it meets economic, legal,
ethical, and discretionary responsibilities.
•The argument against corporate social responsibility says that businesses should focus on
making profits; the argument for corporate social responsibility says that businesses should use
their resources to serve broader social concerns.
•The concept of sustainable development refers to making use of environmental resources to
support societal needs today while also preserving and protecting the environment for use by
future generations.
•Social businesses and social entrepreneurs pursue business models that help to directly
address important social problems.


1. Choose an organization in your community. What questions
would you ask to complete an audit of its social responsibility
practices?
2. Is the logic of the virtuous circle a convincing argument in favor
of corporate social responsibility?
3. Should government play a stronger role in making sure
organizations commit to sustainable development?

• explain the concept of social responsibility

• summarize arguments for and against corporate social
responsibility
• illustrate how the virtuous circle of corporate social
responsibility might work
• explain the notion of social business

Copyright
Copyright © 2018 John Wiley & Sons, Inc.
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responsibility for errors, omissions, or damages, caused by the use of these programs or
from the use of the information contained herein.

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Exploring

Ethics and Social Responsibility

Tim Cook, CEO Apple, Inc.

• Understand how ethics and ethical behavior play

Copyright ©2018 John Wiley & Sons, Inc. 3

Copyright ©2018 John Wiley & Sons, Inc. 4

Copyright ©2018 John Wiley & Sons, Inc. 5

Copyright ©2018 John Wiley & Sons, Inc. 6

The Most Common Unethical Acts by Managers

Copyright ©2018 John Wiley & Sons, Inc. 7

Views on Moral Behavior Differ

Figure 3.1 How Do Alternative Moral Reasoning

Copyright ©2018 John Wiley & Sons, Inc. 8

Copyright ©2018 John Wiley & Sons, Inc. 9

Copyright ©2018 John Wiley & Sons, Inc. 10

Copyright ©2018 John Wiley & Sons, Inc. 11

Moral Rights View

Copyright ©2018 John Wiley & Sons, Inc. 112

Ethics Varies Across Cultures

Copyright ©2018 John Wiley & Sons, Inc. 14

Cultural Relativism and Moral Absolutism

• Cultural relativism justifies a decision if it conforms

Figure 3.2 How Do Cultural Relativism and Moral

Copyright ©2018 John Wiley & Sons, Inc. 15

• A situation that, although offering potential

Copyright ©2018 John Wiley & Sons, Inc. 16

Common Examples of Unethical Behavior at Work

Copyright ©2018 John Wiley & Sons, Inc. 17

Rationalizing Unethical Behavior

People Have a Tendency to Rationalize Unethical Behavior

1. “What I’m doing is not really illegal.”

Copyright ©2018 John Wiley & Sons, Inc. 18

Study Guide for Takeaway 3.1

Study Guide for Takeaway 3.1

Questions for Discussion:

Copyright ©2018 John Wiley & Sons, Inc. 200

Be Sure You Can… for Takeaway 3.1

Takeaway 3.2 – answers to come

Influence on Moral Development

Copyright ©2018 John Wiley & Sons, Inc.

Copyright ©2018 John Wiley & Sons, Inc.

Copyright ©2018 John Wiley & Sons, Inc.

Step 7. Take action.

Copyright ©2018 John Wiley & Sons, Inc. 266

Copyright ©2018 John Wiley & Sons, Inc.

Organizational barriers to whistleblowing

Copyright ©2018 John Wiley & Sons, Inc.

Formal codes of ethics set standards for

Copyright ©2018 John Wiley & Sons, Inc. 299

Study Guide for Takeaway 3.2

Study Guide for Takeaway 3.2

Questions for Discussion:

Copyright ©2018 John Wiley & Sons, Inc. 31

Be Sure You Can… for Takeaway 3.2

•explain how ethical behavior is influenced by personal factors

Takeaway 3.3 answers to come

Social Responsibility is Serving Society

Figure 3.4 Who are the Stakeholders of Organizations?

Copyright ©2018 John Wiley & Sons, Inc. 34

Corporate Social Responsibility

Copyright ©2018 John Wiley & Sons, Inc. 35

Social Responsibility is Serving Society

Copyright ©2018 John Wiley & Sons, Inc. 36