Chapter 3

Ethics and Social Responsibility

©2004 by Nelson, a division of Thomson Canada Limited

1

What Would You Do?

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Should McDonald’s bow to pressure from PETA? Where do the egg farmers fit in this situation? What is the ethical thing to do?

2

What is Ethical and Unethical Workplace Behaviour?
After reading the next two sections, you should be able to: 1. discuss how the nature of a management job creates the possibility for ethical abuses 2. identify common kinds of workplace behaviour
©2004 by Nelson, a division of Thomson Canada Limited

3

Ethics and the Nature of Management Jobs

Ethical behaviour follows accepted principles of right and wrong Intentional managerial unethical behaviours
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company resources for personal use mishandling information encouraging others’ unethical behaviour
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Ethics and the Nature of Management Jobs

Unintentional managerial unethical behaviour
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poorly constructed policies unrealistic employee goals

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5

Workplace Deviance
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Property deviance Production deviance Political deviance Personal aggression

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6

Types of Workplace Deviance
Production deviance
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leaving early taking excessively long breaks purposely working slower intentionally wasting resources sabotaging, stealing damaging equipment
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Property deviance
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Types of Workplace Deviance
Political deviance
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using favouritism spreading rumours falsely blaming others for mistakes sexual harassment verbal abuse threatening co-workers
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Personal aggression
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How Do You Make Ethical Decisions?
After reading this section, you should be able to: 3. describe what influences ethical decision-making 4. explain what practical steps managers can take to improve ethical decision- making
©2004 by Nelson, a division of Thomson Canada Limited

9

Influences on Ethical Decision-Making
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Ethical intensity of the decision Moral development Principles of ethical decisionmaking

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10

Ethical Intensity of the Decision

Magnitude of consequences Social consensus Probability of effect

Temporal immediacy Proximity of effect Concentration of effect

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11

Kohlberg’s Stages of Moral Development
Preconventional Level
Stage 1: Punishment and Obedience Stage 2: Instrumental Exchange

Conventional Level
Stage 3: Good Boy — Nice Girl Stage 4: Law and Order

Post Conventional Level
Stage 5: Legal Contract Stage 6: Universal Principle
Adapted from Exhibit 3.2 ©2004 by Nelson, a division of Thomson Canada Limited

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Principles of Ethical Decision-Making
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Principle of longterm interest Principle of personal virtue Principle of religious injunctions Principle of government requirements

Principle of utilitarian benefits Principle of individual rights Principle of distributive justice

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Principle of Long-term Self-interest

People should never take any action that’s is not you or your organization’s longterm self-interest

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14

Principle of Personal Virtue

People should never do anything that is not honest, open, and truthful, and which you would not be glad to see reported in the newspapers or on TV

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15

Principle of Religious Injunctions

People should never take any action that is not kind and that does not build a sense of community; a sense of everyone working together for a commonly accepted goal

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16

Principle of Government Requirements

People should never take any action that violates the law, for the law represents the minimum moral standard

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Principle of Utilitarian Benefits

People should never take any action that does not result in greater good for society. Instead, do whatever creates the greatest good for the greatest number.

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Principle of Individual Rights

People should never take any action that infringes on others’ agreed-on rights

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Principle of Distributive Justice

People should never take any action that harms the least among us: the poor, the uneducated, the unemployed

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20

Practical Steps to Ethical Decision-Making

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Selecting and hiring ethical employees Codes of ethics Ethics training Ethical climate

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21

Selecting and Hiring Ethical Employees

Increase ethical behaviours by hiring more ethical employees Testing for ethics
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Overt-integrity tests Personality-based integrity tests

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22

What Really Works
Integrity Tests

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23

What Really Works

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24

Codes of Ethics
Corporate statements on ethics  To encourage ethical decisionmaking and behaviour

Companies must communicate the codes to others both within and outside the organization Management must also develop practical ethical standards and procedures specific to the company’s line of business
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Ethics Training

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Develop employee awareness about ethics Achieve credibility with employees Teach employees a practical model of ethical decision-making

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26

Ethical Climate
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Managers act ethically Top managers are active in the in the company ethics program An effective reporting system Fairly and consistently punish those who violate the ethics code

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A Basic Model of Ethical Decision-Making
1. 2. 3. 4. 5. 6. Identify the problem Identify the constituents Diagnose the situation Analyze your options Make your choice Act
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Adapted from Exhibit 3.4 ©2004 by Nelson, a division of Thomson Canada Limited

Learning Objectives: What is Social Responsibility?
After reading the next four sections, you should be able to explain: 5. To whom organizations are responsible 6. For what organizations are socially responsible 7. How organizations can choose to respond to societal demands for social responsibility 8. Whether social responsibility hurts or helps an organization’s economic performance

©2004 by Nelson, a division of Thomson Canada Limited

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To Whom Are Organizations Socially Responsible?

Shareholders
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managers must satisfy the owners social responsibility is maximizing shareholder wealth persons or groups with a legitimate interest in a company’s actions Social responsibility is satisfying the interests of multiple stakeholders
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Stakeholders
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Shareholder Model: Friedman

Managers cannot act effectively as moral agents for shareholders Time, money, and attention diverted to social causes undermine market efficiency

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31

Stakeholder Model of Corporate Social Responsibility
Firm’s stakeholders:
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Governments Investors Political groups Customers

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Communities Employees Trade associations Suppliers

Adapted from Exhibit 3.5 ©2004 by Nelson, a division of Thomson Canada Limited

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Primary Stakeholder Issues
Company Employees Shareholders Customers Suppliers Public stakeholders
Adapted from Exhibit 3.6 ©2004 by Nelson, a division of Thomson Canada Limited

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For What Are Organizations Socially Responsible
Total Social Responsibilities
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Economic Legal Ethical Discretionary

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34

Responses to Demands for Social Responsibility
Social Responsiveness  Reactive

Fight all the way Do only what is required Be progressive Lead the industry
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Defensive

Accommodative

Proactive

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Social Responsibility and Economic Performance

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Social responsibility can sometimes cost a company significantly if it chooses to be socially responsible Sometimes it does pay to be socially responsible While socially responsible behaviour may be “the right thing to do,” it does not guarantee profitability 36

What Really Happened?

Treatment of hens was viewed as one of “ethical intensity” McDonald’s developed a set of Animal Welfare Guiding Principles McDonald’s decided it would no longer buy eggs from suppliers who debeaked hens or kept them in very small cages Shareholder Model versus Stakeholder Model
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©2004 by Nelson, a division of Thomson Canada Limited