SOCIAL

RESPONSIBILITY
AND ETHICS

Chapter 5
FROM OBLIGATION TO
RESPONSIVENESS TO RESPONSIBILITY
 Social Obligation
 The obligation of a business to meet its economic and legal
responsibilities and nothing more.

 Social Responsiveness
 It means that a company engages in social actions in response to some
popular social need.
 Managers in these companies are guided by social norms and values
and make practical, market-oriented decisions about their actions.

 Social Responsibility
 A socially responsible company goes beyond what it is obligated to do
or chooses to do because of some popular social need and does what it
can to help improve society because it’s the right thing to do.
HOW ORGANIZATIONS GO GREEN
 Legal (or light green) approach- Firms simply do
what is required legally by obeying laws, rules,
and regulations willingly without legal challenge.
 Market approach- Firms respond to preferences
of customers in terms of environmentally
friendly products.
 Stakeholder approach- Firms work to meet the
environmental demands of multiple stakeholders
such as employees, suppliers, or community.
 Activist (or dark green) approach- Firms looks for
ways to protect the earth’s natural resources
and be actively socially responsible.
EVALUATING GREEN
MANAGEMENT ACTIONS
 Organizations become “greener” by
 Using the Sustainability Reporting Guidelines
to document “green” actions.
 Adopting ISO 14000 standards for
environmental management
 Being named as one of the 100 Most
Sustainable Corporations in the world.
MANAGERIAL ETHICS
 Ethics Defined
 Therules and principles that define right and
wrong conduct
FACTORS THAT DETERMINE ETHICAL AND UNETHICAL
BEHAVIOR

Whether someone behaves ethically or unethically when

faced with an ethical dilemma is influenced by several
things:
 His/her stage of Moral development
 Preconventional level
 Conventional level
 Principled/Postconventional level

Stages of Moral development interacts with

 Individual characteristics
 The organization’s structural design
 The organization’s culture
 The intensity of the ethical issue

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 5–7

EXHIBIT 5-3 FACTORS THAT DETERMINE ETHICAL
AND UNETHICAL BEHAVIOR
EXHIBIT 5-4 STAGES OF MORAL
DEVELOPMENT
FACTORS THAT AFFECT EMPLOYEE
ETHICS (CONT’D)
 Moral Development
 Research Conclusions:
 People proceed through the stages of moral development
sequentially.
 There is no guarantee of continued moral development.
 Most adults are in Stage 4.

5–10
FACTORS THAT AFFECT
EMPLOYEE ETHICS (CONT’D)
 Individual Characteristics
 Values

Basic convictions about what is right or wrong

 Personality Variables
 Ego strength
 A personality measure of the strength of a person’s
convictions
 Locus of Control
 A personality attribute that measures the degree to which
people believe they control their own life/fate.
 Internal locus: the belief that you control your destiny.
 External locus: the belief that what happens to you is due
to luck or chance.
5–11
FACTORS THAT AFFECT
EMPLOYEE ETHICS (CONT’D)
 Structural Variables
 Organizational characteristics and mechanisms
that guide and influence individual ethics:
 Goals
 Performance appraisal systems
 Reward allocation systems
Good structural design minimizes ambiguity and
uncertainty and fosters ethical behavior.

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 5–12

 FACTORS THAT AFFECT
EMPLOYEE ETHICS (CONT’D)
 Organizational culture
Organizational culture reflects what the organization
stands for and what it believes in, and they create an
environment that influences employee behaviour
ethically or unethically.
 Values-based management
An approach to managing in which managers establish
and uphold an organization’s shared values.
The purpose of shared values
Guiding managerial decisions
Shaping employee behavior
Influencing the direction of marketing efforts
Building team spirit
FACTORS THAT AFFECT
EMPLOYEE ETHICS (CONT’D)
 Intensity of the Ethical issue
ETHICS IN AN INTERNATIONAL
CONTEXT
 Ethical standards are not universal
Social and cultural differences determine acceptable
behaviors
 Foreign Corrupt Practices Act (FCPA)
Makes it illegal to knowingly corrupt a foreign official,
yet “token” payment to officials are permissible when
doing so is an accepted practice in that country
 The Global Compact
Document created by the United Nations outlining
principles for doing business globally in the areas
of human rights, labor, the environment, and
anticorruption.
HOW MANAGERS CAN IMPROVE ETHICAL
BEHAVIOUR IN AN ORGANIZATION
 Hire individuals with high ethical standards.
 Establish codes of ethics and decision rules.
 Lead by example.
 Delineate job goals and performance appraisal
mechanisms.
 Provide ethics training.
 Conduct independent social audits.
 Provide support for individuals facing ethical dilemmas.

16
CODE OF ETHICS
 A formal statement of an organization’s
primary values and the ethical rules it
expects its employees to follow
 Be a dependable organizational citizen
 Don’t do anything unlawful or improper that will
harm the organization
 Be good to customers

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.

17
EFFECTIVE USE OF A CODE OF
ETHICS
 Develop a code of ethics to guide decision
making
 Communicate the code regularly
 Have all levels of management show
commitment to the code
 Publicly reprimand and consistently
discipline those who break the code

18
ETHICAL LEADERSHIP
 Managers must provide a good role model by:
 Being ethical and honest at all times
 Telling the truth
 Admitting failure and not trying to cover it up
 Communicating shared ethical values to
employees through symbols, stories, and slogans
 Rewarding employees who behave ethically and
punishing those who do not
 Protecting employees (whistleblowers) who
bring to light unethical behaviours or raise
ethical issues

19
THE VALUE OF ETHICS TRAINING
 Training can make a difference in ethical
behaviours
 Training increases employee awareness of
ethical issues in business decisions
 Training clarifies and reinforces the
standards of conduct
 Employees are more confident of support
when taking unpopular but ethically correct
stances

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MANAGING ETHICAL LAPSES
AND SOCIAL IRRESPONSIBILITY
 Provide ETHICAL LEADERSHIP
 PROTECTION OF EMPLOYEES WHO RAISE
ETHICAL ISSUES (whistle-blowers)
AWARENESS OF SOCIAL ISSUES
 Social Entrepreneurs
 Are individual or organization who seeks out
opportunities to improve society by using
practical, innovative, and sustainable
approaches.
 Want to make the world a better place and
have a driving passion to make that happen.
BUSINESSES PROMOTING
POSITIVE SOCIAL CHANGE
 CORPORATE PHILANTHROPY
 Campaigns
 Donations
 Funding own foundations

 EMPLOYEE VOLUNTEERING EFFORTS

 Team volunteering
 Individual volunteering during work hours