Chapter 4: Ethics and Social

Responsibility
 What Is Ethical and Unethical
Workplace Behavior?
1. identify common kinds of workplace
deviance

2. describe the U.S. Sentencing Commission

Guidelines for Organizations and explain how
they both encourage ethical behavior and
punish unethical behavior by businesses

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 Workplace Deviance
• Ethical behavior
– conforms to a society’s accepted principles of right
and wrong.

• Workplace deviance
– unethical behavior that violates organizational norms
about right and wrong.

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 Types of
Workplace Deviance

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 Who, What, and Why
• Who
– nearly all companies: nonprofits, partnerships, labor
unions, unincorporated organizations, incorporated
organizations, pension funds, trusts, joint stock companies
• What
– offenses defined by federal laws: invasion of privacy, price
fixing, fraud, theft, embezzlement, etc.
• Why
– The purpose of the guidelines is not just to punish
companies after violations, but to encourage companies to
prevent violations before they happen.

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 Offense Levels, Base Fines, Culpability Scores, and Possible Total
Fines under the U.S. Sentencing Commission Guidelines for
Organizations

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 Compliance Programs Steps from
the U.S. Sentencing Commission
Guidelines for Organizations

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reserved.
 How Do You Make Ethical
Decisions?
3. describe what influences ethical
decision making

4. explain what practical steps

managers can take to improve
ethical decision making

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Influences on Ethical Decision Making
• Ethical intensity

• Moral development

• Ethical principles

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 Ethical Intensity
The degree of concern people have about an ethical
issue.

•Magnitude of consequences
•Social consensus
•Probability of effect
•Temporal immediacy
•Proximity of effect
•Concentration of effect

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 Kohlberg’s Stages of
Moral Development

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Principles of Ethical Decision Making
• Principle of long-term self 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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 Selecting and Hiring Ethical
Employees
• Overt integrity tests

• Personality-based integrity tests

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 Codes of Ethics
• A company must communicate its code inside
and outside the company.

• Management must develop practical ethical

standards and procedures specific to the
company’s line of business.

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 Objectives of Ethics Training
• Develop employees’ awareness of ethics

• Achieve credibility with employees

• Teach employees a practical model of ethical

decision making

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 The Kew Gardens Principles
1. Need – When the need is greater, you have a
greater responsibility to act.
2. Proximity – How close are you to the problem?
Proximity is not just physical. It can also apply to
other areas, such as relationships.
3. Capability – You can be expected to intervene
only insofar as you are able to.
4. Last Resort – If no one else is able to help, it
becomes much more important for you to
intervene.

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 A Basic Model of
Ethical Decision Making

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 Ethical Climate
• Organizational culture is key to fostering ethical
decision making.

• Management needs to be active in and

committed to the ethics program.

• Encourage managers and employees to report

ethical violations (whistleblowing)

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 What Is Social Responsibility?
5. explain to whom organizations are socially
responsible
6. explain for what organizations are socially
responsible
7. explain how organizations can choose to respond to
societal demands for social responsibility
8. explain whether social responsibility hurts or helps
and organization’s economic performance

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 To Whom Are Organizations
Socially Responsible?
• Shareholder model
– the only social responsibility that businesses have is
to maximize profits

• Stakeholder model
– management’s most important responsibility is not
just maximizing profits, but the firm’s long term-
survival.

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 Stakeholder Model of Corporate
Social Responsibility
People or groups who are interested in and
affected by the organization’s actions.

•Primary stakeholders

•Secondary stakeholders

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 Stakeholder Model of
Corporate Social Responsibility

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reserved.
 For What Are Organizations
Socially Responsible?
• Economic responsibility

• Legal responsibility

• Ethical responsibility

• Discretionary responsibility

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 Responses to Demands for
Social Responsibility
Social responsiveness: a company’s strategy for
responding to stakeholders’ expectations
concerning economic, legal, ethical, or
discretionary responsibility.

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 Social Responsiveness Strategies
• Reactive
• Defensive
• Accommodative
• Proactive

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 Social Responsibility and
Economic Performance
• There is no tradeoff between being socially
responsible and economic performance.

• It usually does pay to be socially responsible.

• There is no guarantee that socially responsible

companies will be profitable.

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 Scenario (Real): ITC’s CSR Initiatives
• On one hand, ITC manufactures tobacco
products and affects the health of society
negatively
• On the other hand, ITC does a lot of CSR
activities to poverty alleviation; promoting
education and skill development; promoting
healthcare including preventive healthcare etc.
– Are the above two activities aligned? Justify.

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