4.1. Social Responsibility and Managerial Ethics

Chapter 5
Social
responsibility and
managerial ethics
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Cover illustration © mcherevan / Shutterstock.com
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Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781486006335/Robbins/Management 7/e
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Moral principles(right and wrong behaviour)

that govern a person's behaviour or the
conducting of an activity.
(Oxford dictionary)
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3 3Slide 3 ©2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442538603/Robbins et all/Management/6e
Engineers are involved with designing products and

complex systems which in turn influence the way people
live their lives.
Typical issues for engineers:

Safety, Compliance, Confidentiality, Environmental
health, Conflict of interest, Honesty/Dishonesty,
Societal impact, design/cost trade-offs
4 ©2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442538603/Robbins et all/Management/6e
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Key areas in ethical engineer approach:
 demonstrate integrity
 practice competently
 exercise leadership
 promote sustainability
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5 ©2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442538603/Robbins
©2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442538603/Robbins et all/Management/6e
What is an ethical dilemma?
….situationswhere making ethical decisions

are complex/difficult because of conflicting
moral principles particularly when there are
factors that encourage taking unethical
choices …
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6 Slide 6 ©2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442538603/Robbins et all/Management/6e
Utilitarian Rights
Integrated
Justice Social
Contracts
Which one does business mainly follow?
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The utilitarian believes that it is always right to
do the greatest good for the greatest number.
The “good” is whatever yields the greatest "utility”,
ie downsizing to save the company.
• difficulty of comparing utility among different people,

ie happiness, or job security.
• difficulty to determine against which time frame, ie
short or long term.
• difficulty with the notion there are no rights that we
must respect regardless of the consequences.
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Rights
Immanuel Kant
•each of us has a worth or a dignity that
must be respected
•humanity must always be treated as an
end, not merely as a means
•positive rights
•Helping others
•negative rights
•Duty to interfere
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Theory of Justice view
Rational individuals choose principles of

justice:
•behind a “veil of ignorance” which blinds them
to characteristics (ie age, wealth, position, etc)
and outcomes (which may advantage them)
Principles of fairness and justice are then
presumed to be fair (unbiased)
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Organisational Justice
Distributive justice (fairness of outcomes)

•pay benefits, redundancies
Procedural justice (fairness of policies)
•process control, decision control “voice
phenomenon”
Retributive justice (fairness of punishment)
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Integrated Social Contracts
Utilitarianism Kantian Context
Maximises the Preservation of Reflects cultural

future welfare of rights based upon or industry
most people society’s accepted specific norms
view which the other
views do not
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Two opposing views
The Classical View (conventional)

•management’s responsibility is to maximise
profits/value to shareholders.
The Socio-Economic View (sustainable)

•management’s responsibility goes well beyond the
making of profits. It also includes protecting and
improving society’s welfare.
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Classical/conventional view
Short term focus – profit motive
•focus is on owners and
management
•“defeat the competitor”
approach
Social
obligation
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Copyright ©2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442538603/Robbins et all/Management/6e
Arguments for social responsibility
• Public expectations
• Long-term profits
• Ethical obligation
• Public image
• Better environment
• Discouragement of further government regulation
• Balance of responsibility and power
• Shareholder interest - long-term
• Possession of resources
• Superiority of prevention over cure
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Arguments against social responsibility
• Violation of profit maximisation
• Dilution of purpose
• Costs of being socially responsible
• Too much power socially/politically for business
• Lack of skills beyond economics
• Lack of accountability
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Social responsibility and economic performance
Positive relationship between social involvement and

the economic performance of firms.
Difficulties:
•public perceptions (subjective)
•economic performance (more objective, but short term)
•social screening (longer term)
General conclusion - a firm’s social actions do not
harm its long-term performance.
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Source: © Corbis / K. M. Asad / Demotix
The collapse of the Rana Plaza complex in Dhaka, where 1129 garment workers died,
caused outrage in the West, with many questioning the managerial ethics and social
responsibilities of multinational companies who are contracting out work to unsafe
factories in the developing world to produce their products.
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Source: Courtesy of Ecover Belgium N.V.
Belgian company Ecover has environmental sensitivity at its core.
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Levels of moral development
Pre-conventional: influenced exclusively by

personal interest
Conventional: influenced by the expectations of
others
Principled: influenced by personal ethical
principles of what is right
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Individual characteristics
Personal values
• Personality influences
–ego strength
○Person’s convictions
–locus of control
○Degree to which people believe they control
their own fate
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Structural variables
Performance appraisal system
Rules and Reward

regulations system
Time Cost Competitive

Pressures Constraints pressures
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Organisational Culture:
Culture influences ethical behaviour

• high in risk tolerance, control and conflict
tolerance.
• awareness of ethical issues and can
challenge
Source: F.R. David, “An Empirical Study of Codes of Business Ethics: A Strategic Perspective.” paper presented at
the 48th Annual Academy of Management Conference, Anaheim, California August 1988.
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Values based management
Managers guided by the shared values in place
Four purposes:
1. guide decision making
2. shape employee behaviour
3. influence marketing efforts
4. build team spirit
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Issue Intensity
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Issue Intensity
1. Concentration of effect
• how many people are affected?
• example: HIH, Fanny Mae and Freddie Mac
2. Consensus of evil
• belief that this is good or bad
• example: shoplifting
3. Probability of harm
• will it affect people?
• example: trials of new medical treatments
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Issue Intensity
4. Immediacy of consequences
• immediate or much later?
• example: James Hardie, asbestos
5. Proximity to victim
• not in my backyard so don’t care
• example: plastic
6. Magnitude of consequences
• the degree of harm
• example: heart bypass v hip replacement
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Source: Cartoon by Nicholson from The Australian: www.nicholsoncartoons.com.au
AWB set up Project Rose as an internal investigation but it became focused on

covering up for any allegations or suspicions of kickbacks in relation to its wheat
exports to Iraq.
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Source: Courtesy of Opportunity International Australia.
David Bussau of Opportunity International.
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End of Chapter
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4.1. Social Responsibility and Managerial Ethics

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Chapter 5

Digital Image PowerPoint to accompany:

Moral principles(right and wrong behaviour)

Engineers are involved with designing products and

Typical issues for engineers:

Key areas in ethical engineer approach:

What is an ethical dilemma?

….situationswhere making ethical decisions

• difficulty of comparing utility among different people,

Theory of Justice view

Rational individuals choose principles of

Distributive justice (fairness of outcomes)

Integrated Social Contracts

Utilitarianism Kantian Context

Maximises the Preservation of Reflects cultural

Two opposing views

The Classical View (conventional)

The Socio-Economic View (sustainable)

Arguments for social responsibility

Arguments against social responsibility

• Violation of profit maximisation

• Costs of being socially responsible

• Too much power socially/politically for business

• Lack of skills beyond economics

Social responsibility and economic performance

Positive relationship between social involvement and

Belgian company Ecover has environmental sensitivity at its core.

Levels of moral development

Pre-conventional: influenced exclusively by

Performance appraisal system

Rules and Reward

Time Cost Competitive

Culture influences ethical behaviour

Values based management

Managers guided by the shared values in place

1. guide decision making

2. shape employee behaviour

3. influence marketing efforts

4. build team spirit

AWB set up Project Rose as an internal investigation but it became focused on

David Bussau of Opportunity International.

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