Managerial Ethics and

Social Responsibility
Text: Chapter 7

1
7. Managerial ethics and social responsibility
 Think about it . . .

Integrity has no need of rules.

Albert Camus
French philosopher and journalist

2
7. Managerial ethics and social responsibility
Learning objectives

• Explore reasons behind unethical behavior in global business

• Examine the relationship between culture and bribery and
corruption
• Develop an awareness of various laws and conventions aimed at
curbing unethical behavior
• Learn what managers and companies can do to facilitate a more
transparent ethical and socially responsible global business
environment
• Develop global ethical skills

3
7. Managerial ethics and social responsibility
Ethical and social challenges
• Insider trading in England
• Money and politics in the US
• Customs clearances in Mexico
• Income taxes in Italy and Finland

4
7. Managerial ethics and social responsibility
 Management application 7.1
Managing in an imperfect world

1. What, if anything, do these examples of questionable behavior

have in common?
2. Which of these examples seem less serious to you? That is, can
you rank them in order of their perniciousness? What criteria did
you use to create your ranking?
3. Why are such behaviors so endemic to global business?
4. Taken together, what lessons emerge for global managers?
5. In your view, are there legitimate ways to reduce the prevalence
of such behavior in global commerce or is this just the way the
business environment works and will continue working? Explain.
5
7. Managerial ethics and social responsibility
Ethical and social challenges facing managers and
organizations (Exhibit 7.1)

Bribery and
corruption
Ethnocentrism and
extreme nationalism Discrimination
and social
injustice
Economic
development and
sustainability

Ethical and social

challenges

6
7. Managerial ethics and social responsibility
Ethical and institutional conflicts
• Ethical conflicts represent disagreements that arise when two or
more people (or groups) disagree on what is morally or
philosophically ethically correct. This disagreement is often posed
in terms of right and wrong, moral and immoral, and each group
gets to decide its own version of these two polar opposites.
• Institutional conflicts represent differences over what is legal or
consistent with legitimately determined public policy. In addition to
laws, governments and public agencies also sanction a number of
public policies, policies that are designed for the common good.

7
7. Managerial ethics and social responsibility
Are ethical standards rigid or flexible? Is truth in the
eye of the beholder? (Exhibit 7.2)

Universalism
Truth is absolute.
Society requires certainty and Particularism
predictability.
Truth is subjective.
Right or wrong determined by
religion, rules, and laws. Society can tolerate ambiguity.
Right or wrong determined by
circumstances and relationships, not just
religion, rules and laws.

8
7. Managerial ethics and social responsibility
 Management application 7.2
IKEA in Saudi Arabia

1. IKEA seems to be trapped between two cultures. As a manager

at IKEA, what options do you have to finding a resolution that
would ameliorate the Swedish government and public opinion
while protecting your Saudi market?
2. What would you recommend IKEA do? What are the likely
consequences of your recommendation?
3. Can you identify another example where companies and their
managers are trapped in a conflict between two distinct cultural
environments? What might they do to ameliorate this situation?
Explain.

9
7. Managerial ethics and social responsibility
Laws and conventions governing ethical behavior (see
text)
• Regional laws and conventions
• US Foreign Corrupt Practices Act
• EU Criminal Law Convention on Corruption
• OECD Guidelines for Multinational Enterprises
• UN Global Compact
• Corruption Perception Index

10
7. Managerial ethics and social responsibility
 Management application 7.3
Starting a business in Mumbai

1. As an entrepreneur considering opening a business in India to

take advantage of its cheap and educated labor force, how would
you assess its appeal as a place to do business?
2. How transparent is India’s business environment? What does this
tell you as an entrepreneur?
3. What other information would you need about the Indian
business environment to make an informed decision about
possibly siting there, and how might you get this information?
4. In general, what situational factors can influence the success or
failure of a new venture in India or elsewhere?
11
7. Managerial ethics and social responsibility
Pressures for and against OECD guideline compliance on
bribery and corruption—an example (Exhibit 7.6)
Pressures to comply with OECD guidelines:
- Builds corporate reputation for honesty and
integrity.
- Avoids prosecution for illegal activities by local
or home countries.
- Protects employees from outside pressures.
- Identifies illegal behaviors early through
continual monitoring.
- Supports corruption-free local governments.

Pressures to ignore OECD guidelines:

- May threaten new local business opportunities.
- Risks government retaliation for non-payment
of bribes.
- May fail to protect firm against corrupt or illegal
actions by competitors.
- Can ultimately threaten corporate revenues
and profitability.

12
7. Managerial ethics and social responsibility
Characteristics of ethical managerial behavior (Exhibit
7.7)

Ethical behavior Social responsibility

Concern for honesty and integrity in Concern for economic fairness and
business dealings with colleagues, social justice in local and global
customers, and partners communities
Ethical managerial
behavior
Environmental stewardship Fair employment practices
Concern for enviromental Concern for equal opportunity,
sustainability and quality of life both workplace safety, and employee
at home and abroad development

13
7. Managerial ethics and social responsibility
 Management application 7.4
#MeToo goes global
1. As a senior manager in a global firm, what would you do if you learned
about employees engaging in sexual harassment outside the
workplace? Do you have any authority or responsibility for such
behavior outside of work? Explain.
2. What role, if any, does culture or cultural differences play in efforts to
eliminate sexual discrimination and harassment in the workplace?
3. What situational contingencies (see Chapter 4) other than culture might
affect a company’s ability to seriously address sexual discrimination
and harassment in the workplace?
4. If you were an advisor to a global firm, what advice would you give
them about concrete efforts they could take to reduce such behavior in
their global operations?
14
7. Managerial ethics and social responsibility
 Corporate social responsibility

The top 50 best managed companies had an average rating of 75%

on overall corporate social responsibility; the lower-ranked
companies had an average rating of 44%. Draw your own
conclusions

15
7. Managerial ethics and social responsibility
 Corporate social responsibility (examples – see text)

• Unilever
• Royal Dutch Shell
• LEGO
• BMW

16
7. Managerial ethics and social responsibility
 Management application 7.5
Doing well by doing good
1. Unilever CEO Niall FitzGerald argues that corporate social
responsibility is a good business decision not because it is a nice thing
to do or because people are forcing us to do it, but because it is good
for business. If corporate social responsibility is such a good thing, why
is it so difficult to convince some companies and some industries to be
more socially responsible? What would you suggest to change this
situation? Explain.
2. Select one of the above four company examples and conduct a force
field analysis (see text) of the pressures for and against greater
company efforts in corporate social responsibility.
3. If you owned a small manufacturing company in Vietnam, how would
you balance the pressures to become environmentally sustainable with
the pressures for rural job creation and economic development?
17
7. Managerial ethics and social responsibility
Strategies for managing ethically (Exhibit 7.8)
1. Develop ethical
awareness
• Understand the mission and
core values of the firm,
especially as they relate to
local cultures and
communities.
• Understand the limits of
universalism.
• Identify the root causes of
ethical conflict when they
emerge.
• Understand diverse
perspectives in ethical
conflicts and the logic
behind them.
7. Managerial ethics and social responsibility
2. Develop ethical
application skills
• Learn to say "no".
• Use the "ethics warning
system" (e.g., golden rule)
when making decisions
affecting others.
• Learn to recognize and
critically analyze
questionable proposals,
agreements, or actions.
• Consider when you must
draw the boundary around
your personal concerns in
an ethical issue.
3. Take the lead
• Build co-worker and
corporate support for ethical
actions.
• Research legal and
institutional factors prior to
any actions or agreements.
• Publicize your company's
ethical standards, along
with your own professional
standards.
• Be proactive in seeking out
opportunities for corporate
social responsibility.
18
Key concepts
• biznez • force field analysis
• corporate social responsibility • insider trading
• Corruption Perception Index • International Labour
• ethical behavior Organization
• ethical vs. institutional conflict • OECD Guidelines
• ethics • particularism vs. universalism
• ethics warning system • sharia law
• EU Criminal Law Convention on • UN Global Compact
Corruption • US Foreign Corrupt Practices
Act

7. Managerial ethics and social responsibility 19