Principles of Management, CH 4 - Williams

Management, 12e
Chapter 4: Ethics and Social

Responsibility
©2022 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1
Icebreaker
• Either by reflecting individually or by joining up with one or more other
students, consider one or more of the following questions:
− Would you rather have limited short-term memory or limited long-term
memory?
− Would you rather work for an employer at an easy job or be self-employed
but work incredibly hard?
− Would you rather never get angry or never be envious?
− Would you rather suddenly be elected a senator or suddenly
become a CEO of a major company? (You won’t have any
more knowledge about how to do either job than you do right
now.)
Learning Outcomes (1 of 2)
• By the end of this chapter, you should be able to:

1. Identify common kinds of workplace deviance.
2. Describe how the US Sentencing Commission Guidelines
Manual for Organizations encourages ethical behavior,
including how to calculate fines for unethical behavior.
3. Describe what influences ethical decision-making.
4. Apply the practical steps managers can take to improve
ethical decision-making in real-world situations.
Learning Outcomes (2 of 2)
• By the end of this chapter, you should be able to:

5. Explain to whom organizations are socially responsible.
6. Explain for what organizations are socially responsible.
7. Identify how organizations can respond to societal demands
for social responsibility.
8. Explain whether social responsibility hurts or helps an
organization’s economic performance.
Ethics
LO 1: Identify common kinds of workplace deviance.
• Ethics: the set of moral principles or values that defines right and wrong for a
person or group
• Ethical behavior: behavior that conforms to a society’s accepted principles of
right and wrong
• Workplace deviance: unethical behavior that violates organizational norms
about right and wrong
Workplace Deviance
• Production deviance: unethical behavior that hurts the quality and quantity of
work produced
• Property deviance: unethical behavior aimed at the organization’s property or
products
• Employee shrinkage: employee theft of company merchandise
• Political deviance: using one’s influence to harm others in the company
• Personal aggression: hostile or aggressive behavior toward others
Exhibit 4.1 Types of Workplace Deviance
Polling Activity 1
Which of the following situations do you see as most unethical?

a. You know a team member is moving in a month and leaving the
company. You allow her to do a significant amount of the team’s work
on a client’s project before she leaves and then take credit for the
project results after she leaves.
b. You were a day late getting a project done because you
procrastinated, but you tell your overly demanding manager that you
didn’t get necessary information on time.
c. You are a doctor with a patient whose medication isn’t working. You
have several treatment options that vary in cost. You give him
samples for the most expensive option.
US Sentencing Commission Guidelines
Manual for Organizations
LO 4-2: Describe how the US Sentencing Commission Guidelines Manual for Organizations
encourages ethical behavior, including how to calculate fines for unethical behavior.
• Cover offenses defined by federal laws

• Encourage companies to take proactive steps that will discourage or prevent
white-collar crime
• Give companies an incentive to cooperate and disclose illegal activities to
federal authorities
Determining the Punishment
• Step 1 – Computation of base fine by determining the level of offense

– Level of offense varies depending on the kind of crime, loss incurred, and
the amount of planning that went into the crime
• Step 2 – Judicial determination of a culpability score
• Step 3 – Determination of total fine
– Multiplying the base fine by the culpability score
Exhibit 4.3 Compliance Program Steps from the
U.S. Sentencing Commission Guidelines Manual
Knowledge Check 1
• Which of the following statements best explains the carrot-and-stick approach

of the US Sentencing Commission Guidelines Manual for Organizations?
a. Unincorporated organizations and associations are exempted from
penalties.
b. Smaller fines are imposed on companies that take proactive steps to
encourage ethical behavior.
c. Organizations accused of unethical behavior are excused if the
management was unaware of such behavior.
d. Nonprofit organizations are exempted from fines.
Knowledge Check 1: Answer
• Which of the following statements best explains the carrot-and-stick approach

of the US Sentencing Commission Guidelines Manual for Organizations?
b. Smaller fines are imposed on companies that take proactive steps to
encourage ethical behavior.
Influences on Ethical Decision Making
LO 4-3: Describe what influences ethical decision-making.
• Ethical intensity: the degree of concern people have about an ethical issue
• Moral development
• Principles of ethical decision making
Factors That Contribute to Ethical Intensity
(slide 1 of 2)
• Magnitude of consequences: the total harm or benefit derived from an ethical

decision
• Social consensus: agreement on whether behavior is bad or good
• Probability of effect: the chance that something will happen that results in
harm to others
Factors That Contribute to Ethical Intensity
(slide 2 of 2)
• Temporal immediacy: the time between an act and the consequences the act
produces
• Proximity of effect: the social, psychological, cultural, or physical distance
between a decision maker and those affected by his or her decisions
• Concentration of effect: the total harm or benefit that an act produces on the
average person
Exhibit 4.5 Kohlberg’s Stages of Moral
Development
Principles of Ethical Decision-Making
(slide 1 of 2)
• Principle of long-term self-interest: an ethical principle that holds that you

should never take any action that is not in your or your organization’s long-term
self-interest
• Principle of religious injunctions: an ethical principle that holds that you
should never take any action that is not kind and that does not build a sense of
community
• Principle of government requirements: an ethical principle that holds that you
should never take any action that violates the law, for the law represents the
minimal moral standard
Principles of Ethical Decision-Making
(slide 2 of 2)
• Principle of individual rights: an ethical principle that holds that you should
never take any action that infringes on others’ agreed-upon rights
• Principle of personal virtue: an ethical principle that holds that you should
never do anything that is not honest, open, and truthful and that you would not
be glad to see reported in the newspapers or on TV
• Principle of distributive justice: an ethical principle that holds that you should
never take any action that harms the least fortunate among us: the poor, the
uneducated, the unemployed
• Principle of utilitarian benefits: an ethical principle that holds that you should
never take any action that does not result in greater good for society
Discussion Activity 1
• What factors do you consider when you are making an ethical decision?
Discussion Activity 1: Debrief
• What factors do you consider when you are making an ethical decision?
− Ethical decisions depend on the following:
 Ethical intensity is the degree of concern a person has about an ethical
issue.
 The level of moral development of the person making the decisions,
whether the preconventional level, conventional level, or postconventional
level of moral development.
 Principles of ethical decision-making held by the decision makers may
include long-term self-interest, personal virtue, religious injunctions,
government requirements, utilitarian benefits, individual rights, or
distributive justice.
Practical Steps to Ethical Decision-Making
LO 4-4: Apply the practical steps managers can take to improve
ethical decision-making in real-world situations.
• Managers can encourage more ethical decision-making in their organizations by

− carefully selecting and hiring ethical employees
− establishing a specific code of ethics
− training employees to make ethical decisions
− creating an ethical climate
Selecting and Hiring Ethical Employees
• Overt integrity test: a written test that estimates job applicants’ honesty by
directly asking them what they think or feel about theft or about punishment of
unethical behaviors
• Personality-based integrity test a written test that indirectly estimates job
applicants’ honesty by measuring psychological traits, such as dependability
and conscientiousness
Code of Ethics
• Companies establish a specific code of ethics, or code for business conduct

among organization’s members
− Communicate the code to others both inside and outside the company
− Develop standards and procedures specific to the company
Knowledge Check 2
• Which of the following bests enables a code of ethics to encourage

ethical decision-making and behavior in a company?
a. It must be communicated only inside the company.
b. Management must focus primarily on customer and shareholder
interests.
c. Management must develop practical ethical standards and
procedures specific to the company’s line of business.
d. It should revolve around legal factors rather than organizational
goals and mission.
Knowledge Check 2: Answer
• Which of the following bests enables a code of ethics to encourage

ethical decision-making and behavior in a company?
c. Management must develop practical ethical standards and
procedures specific to the company’s line of business.
Ethics Training
• Training employees to make ethical decisions involves

− developing employees' awareness of ethics
− achieving credibility with employees
− teaching a practical model of ethical decision-making
Ethical Climate
• Fostering ethical decision-making starts with the organizational culture:

− Ensure that managers act ethically themselves
− Promote top management activity and commitment to the company ethics
program
− Develop a system that encourages report of violations
 Whistleblowing: reporting others’ ethics violations to management or
legal authorities
− Fairly and consistently punish those who violate the code of ethics
Polling Activity 2
You discover that one of your employees has alerted the Federal Trade
Commission about a company executive who has been sharing insider
information about the company with an investment firm. What is your next move?
a. Reinforce the whistleblower’s actions to others in the company as a way to

safeguard the company’s ethical reputation
b. Talk with HR to ensure that the whistleblower’s identity is protected
c. Say nothing to avoid putting yourself on the FTC’s radar
d. Review the company’s code of ethics with all your subordinates
Social Responsibility of Organizations
(slide 1 of 2)
LO 4-5: Explain to whom organizations are socially responsible.
• Social responsibility: a business’s obligation to pursue policies, make

decisions, and take actions that benefit society
• Shareholder model: a view of social responsibility that holds that an
organization’s overriding goal should be profit maximization for the benefit of
shareholders
• View held by economist Milton Friedman who believed:
− organizations are not effective moral agents
− attention to social causes undermines market efficiency
Social Responsibility of Organizations
(slide 2 of 2)
• Stakeholder model: a theory of corporate responsibility that holds that

management’s most important responsibility, long-term survival, is achieved by
satisfying the interests of multiple corporate stakeholders
• Stakeholders: persons or groups with a stake, or legitimate interest, in a
company’s actions
− Primary stakeholder: any group on which an organization relies for its long-
term survival
− Secondary stakeholder: any group that can influence or be influenced by a
company and can affect public perceptions about the company’s socially
responsible behavior
Exhibit 4.7 Stakeholder Model of Corporate
Social Responsibility
Socially Responsible Organizations
LO 4-6: Explain for what organizations are socially responsible.
• Companies best benefit their stakeholders by fulfilling these responsibilities:

− Economic responsibility: a company’s social responsibility to make a
profit by producing a valued product or service
− Legal responsibility: a company’s social responsibility to obey society’s
laws and regulations
− Ethical responsibility: a company’s social responsibility not to violate
accepted principles of right and wrong when conducting its business
− Discretionary responsibilities: the social roles that a company fulfills
beyond its economic, legal, and ethical responsibilities
Social Responsiveness (slide 1 of 2)
LO 4-7: Identify how organizations can respond
to societal demands for social responsibility.
• Social responsiveness: a company’s strategy to respond to stakeholders’

economic, legal, ethical, or discretionary expectations concerning social
responsibility
• Reactive strategy: a social responsiveness strategy in which a company does
less than society expects
• Defensive strategy: a social responsiveness strategy in which a company
admits responsibility for a problem but does the least required to meet societal
expectations
Social Responsiveness
(slide 2 of 2)
• Accommodative strategy: a social responsiveness strategy in which a

company accepts responsibility for a problem and does all that society expects
to solve that problem
• Proactive strategy: a social responsiveness strategy in which a company
anticipates a problem before it occurs and does more than society expects to
take responsibility for and address the problem
Discussion Activity 2
• You are a manager for a company that processes tea. One of your employees
has presented a plan for developing an organic, free-trade facility. You are
uncertain how profitable this plan will be for the company. What do you tell your
employee?
Discussion Activity 2: Debrief
• You are a manager for a company that processes tea. One of your
employees has presented a plan for developing an organic, free-trade
facility. You are uncertain how profitable this plan will be for the
company. What do you tell your employee?
− Fair trade, a financial relationship between producers, sellers, and
consumers based on the principle of equity within the exchange of
goods, enables growers to take their livelihoods to the next level and
blend the benefits of modern techniques with artisan practices.
− Pursuing fair trade certification can benefit the economic and social
integrity of the entire supply chain, allow the company to take a
holistic approach to business, and create a profitable business
model that benefits everyone involved.
Social Responsibility and Economic
Performance
LO 4-8: Explain whether social responsibility hurts or
helps an organization’s economic performance.
• No trade-off between being socially responsible and economic performance

• Relationship becomes stronger when a company has a strong reputation for
social responsibility
• No guarantee that socially responsible companies will be profitable
What Would You Do?
Liquid detergent packages are the fastest growing part of the $2 billion detergent
market, of which Procter & Gamble controls 80%. Unfortunately, small children and
the elderly often confuse the small multicolored Tide Pod packages with candy.
After introducing Tide Pods, the number of detergent-related emergency room visits
for children tripled, while the number of detergent-related poison control center
calls for children rose by a factor of 2.5. A total of ten people have died from eating
Tide Pods.
If you were the CEO of Procter & Gamble, what would you do?
Summary (1 of 2)
• Now that the lesson has ended, you should have learned how to:
1. Identify common kinds of workplace deviance.
2. Describe the U.S. Sentencing Commission Guidelines Manual for
Organizations encourages ethical behavior, including how to calculate fines
for unethical behavior.
3. Describe what influences ethical decision making.
4. Apply the practical steps managers can take to improve ethical decision
making in real-world situations.
Summary (2 of 2)
• Now that the lesson has ended, you should have learned how to:
5. Explain to whom organizations are socially responsible.
6. Explain for what organizations are socially responsible.
7. Identify how organizations can respond to societal demands for social
responsibility.
8. Explain whether social responsibility hurts or helps an organization’s
economic performance.

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Management, 12e

Chapter 4: Ethics and Social

• By the end of this chapter, you should be able to:

• By the end of this chapter, you should be able to:

Which of the following situations do you see as most unethical?

• Cover offenses defined by federal laws

• Step 1 – Computation of base fine by determining the level of offense

• Which of the following statements best explains the carrot-and-stick approach

• Which of the following statements best explains the carrot-and-stick approach

• Magnitude of consequences: the total harm or benefit derived from an ethical

• Principle of long-term self-interest: an ethical principle that holds that you

• Managers can encourage more ethical decision-making in their organizations by

• Companies establish a specific code of ethics, or code for business conduct

• Which of the following bests enables a code of ethics to encourage

• Which of the following bests enables a code of ethics to encourage

• Training employees to make ethical decisions involves

• Fostering ethical decision-making starts with the organizational culture:

a. Reinforce the whistleblower’s actions to others in the company as a way to

• Social responsibility: a business’s obligation to pursue policies, make

• Stakeholder model: a theory of corporate responsibility that holds that

• Companies best benefit their stakeholders by fulfilling these responsibilities:

• Social responsiveness: a company’s strategy to respond to stakeholders’

• Accommodative strategy: a social responsiveness strategy in which a

• No trade-off between being socially responsible and economic performance

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