Modern Management: Concepts and Skills

Fifteenth Edition, Global Edition

Chapter 3
Society, Ethics, and
Sustainability

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Learning Objectives (1 of 2)
3.1 A thorough understanding of the term social
responsibility
3.2 Insights about the social responsiveness of an
organization
3.3 Insights for meeting social audit challenges

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Learning Objectives (2 of 2)
3.4 Thoughts on how to meet philanthropy challenges
3.5 Ways for building sustainable organizations
3.6 An appreciation for the role that ethics plays in
management

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Fundamentals of Social Responsibility
• Social Responsibility
– The managerial obligation to take action that protects
and improves both the welfare of society as a whole
and the interests of the organization
• Areas of Social Responsibility
– Urban/Consumer Affairs, Community Volunteerism,
Employment Practices
– Ecology Conservation (Going Green)

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Arguments for Social Responsibility
Activities
• Businesses as a whole are a subset of society
• Businesses have a responsibility to help maintain and
improve the overall welfare of society
• Performing social responsibility activities earns greater
organizational profits (a relationship not yet proven by
research)

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Arguments Against Social Responsibility
Activities
• Milton Friedman, Distinguished Economist
– Businesses being socially responsible conflict with
profit interests of business owners
– Socially responsible public activities conflict with private
organizational objectives
– Unethical to use owner profits for society’s interests

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Conclusions About Being Socially
Responsible
• Businesses and managers should
– Perform all legally required social responsibility
activities
– Consider voluntarily performing social responsibility
activities beyond those legally required
– Inform all relevant individuals of the extent to which
organizations will be involved in social responsibility
activities

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Social Responsibility and Federal
Legislation
Table 3.1 Primary Functions of Several Federal Agencies That Enforce
Social Responsibility Legislation
Federal Agency
Equal Employment Opportunity Commission
Office of Federal Contract Compliance
Programs
Environmental Protection Agency
Consumer Product Safety Commission
Occupational Safety and Health Administration
National Highway Traffic Safety Administration
Mining Enforcement and Safety Administration
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Primary Agency Functions
Investigates and conciliates employment discrimination complaints
that are based on race, sex, or creed
Ensures that employers holding federal contracts grant equal
employment opportunity to people regardless of their race or sex
Formulates and enforces environmental standards in such areas as
water, air, and noise pollution
Strives to reduce consumer misunderstanding of manufacturers’
product design, labeling, and so on, by promoting clarity of these
messages
Regulates safety and health conditions in nongovernment
workplaces
Attempts to reduce traffic accidents through the regulation of
transportation-related manufacturers and products
Attempts to improve safety conditions for mine workers by enforcing
all mine safety and equipment standards
Voluntarily Performing Social
Responsibility Activities
• Adhering to legislative mandates is the minimum standard
managers must achieve
• Managers need to ask themselves how far above the
minimum they are willing to go while still maintaining the
success of the organization
• Managers should clearly communicate their involvement in
social responsibility activities to all stakeholders

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Social Responsiveness
• The degree of effectiveness and efficiency an organization
displays in pursuing its social responsiveness
• The greater the degree of effectiveness and efficiency, the
more socially responsive the organization is said to be

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Determining If a Social Responsibility Exists
(1 of 2)

• Management obligations based on

– Business situation
– Impact on stakeholders
• Stakeholders
– Any individual or group that is directly or indirectly
affected by an organization’s decisions

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Determining If a Social Responsibility Exists
(2 of 2)

Table 3.2 Stakeholders of a Typical Modern Organization and Examples

of Social Obligations Managers Owe to Them
Stakeholder Social Obligations Owed
Stockholders/owners of the organization To increase the value of the organization
Suppliers of materials To deal with them fairly
Banks and other lenders To repay debts
Government agencies To abide by laws
Employees and unions To provide a safe working environment and to
negotiate fairly with union representatives
Consumers To provide safe products
Competitors To compete fairly and to refrain from restraints
of trade
Local communities and society at large To avoid business practices that harm the
environment

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Social Responsiveness and Decision Making
(1 of 2)

• An effective and efficient socially responsive organization

works with wasting resources in the process
• Managers must pursue only those responsibilities their
organization possesses and has a right to undertake

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Social Responsiveness and Decision Making
(2 of 2)

Figure 3.1 Flowchart of social

responsibility decision making that
generally will enhance the social
responsiveness of an organization

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Approaches to Meeting Social
Responsibilities (1 of 2)
• Incorporate social goals into annual planning process
• Seek comparative industry norms for social programs
• Present reports to owners and stakeholders
• Experiment with different approaches
• Attempt to measure cost of social programs

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Approaches to Meeting Social
Responsibilities (2 of 2)
• Different managerial approaches
– Requirement: Firm only does what is required by law
– Recognition: Firm has obligations to pursue both profit
and social goals
– Believing: Firm has both profit and social goals

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Social Audit Challenge
• Process of measuring social responsibility activities to
assess organizational performance
• Social Audit Steps
– Monitoring
– Measuring
– Appraising

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Philanthropy Challenge
• Promote welfare of others through general monetary
donations to social causes
• Aim to increase the well-being of people
• Focuses on supporting the arts, education, world peace,
and disaster relief
• Managers should donate to causes that in some way
benefit both the organization and the society

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The Sustainable Organization Challenge
• Includes conserving national resources, reducing waste,
recycling, and protecting threatened species
• Sustainability
– The degree to which a person or entity can meet its
present needs without compromising the ability of
others to meet their needs

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Defining a Sustainable Organization
Challenge
• Sustainable Organization
– An organization that can meet their present needs
without compromising future generations ability to meet
theirs
• The Triple Bottom-Line
– Management should work toward making their
organizations sustainable in three areas: economy,
environment, and society

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Why Sustainability?
Three reasons why managers should build sustainable
organizations
• Increased profits
• Increased productivity
• Increased innovation

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Steps to Sustainability
• Set sustainability goals
• Hire organization members who can help organization
become more sustainable
• Reward employees who contribute to organization’s
sustainability goals
• Track progress in reaching sustainability goals

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Managers and Ethics
• Ethics
– The capacity to reflect on values in the corporate
decision-making process, to determine how these
values and decisions affect various stakeholder groups,
and to establish how managers can use these
observations in day-to-day company management
• Ethical managers strive for management practices that are
fair and just.

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Benefits of Ethics in Management Practices
Ethical business practices can lead to these benefits
• Increased Productivity
• Improved Stakeholder Relations
• Minimizing Government Regulation

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Code of Ethics (1 of 2)
• A formal statement that acts as guide for how employees
should act and make decisions
• Ninety percent of Fortune 500 firms have a code of ethics
• Cannot be expected to cover all behavior and should be
evaluated and refined periodically

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Code of Ethics (2 of 2)
Figure 3.2 Highlights of the Code of Ethics for financial managers at
Publix Super Markets

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Creating an Ethical Workplace (1 of 2)
• Create, distribute, and improve a Code of Ethics
• Appoint a Chief Ethics Officer
• Provide Training
– Do not focus on teaching morals
– Give employees criteria for helping determine if an
action is ethical

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Creating an Ethical Workplace (2 of 2)
Ethical Standards
• Utilitarian: Ethical behavior provides the most good or
least harm for the greatest number of people
• Rights: Ethical behavior promotes the respect and rights
of others
• Virtue: Behaviors are ethical if they reflect high moral
values such as honesty, fairness, and compassion

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Following the Law: Sarbanes-Oxley Reform
Standards
• Mainly the result of unethical practices of at Enron
Corporation
• Passed to prevent accounting deception of publicly owned
companies
• Holds managers accountable and can result in significant
jail time
• Supports whistle-blowing—employee reporting of
suspected misconduct or corruption

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