Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Chapter 3 Ethics and Social Responsibility

Management, 2e by Chuck WilliamsSouth-Western/Thompson LearningCopyright © 2003

Chapter 3Chapter 3

Ethics and Social Responsibility

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What Would What Would YouYou Do? Do?

PETA v. McDonald’sShould McDonald’s assure that animals

are treated “humanely”?What ethical guidelines are relevant in

this situation?

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After discussing this section you should be able to:

Learning ObjectivesLearning ObjectivesEthicsEthics

1. discuss how the nature of a management job creates the possibility for ethical abuses,

2. identify common kinds of workplace deviance,

3. describe the 1991 U.S. Sentencing Commission Guidelines and how its recommendations now make ethical behavior much more important for businesses.

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Ethics and the Nature of Ethics and the Nature of Management JobsManagement Jobs

Ethical behavior follows accepted principles of right and wrong

Intentional managerial unethical behaviorscompany resources for personal usemishandling informationencouraging others’ unethical behavior

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Ethics and the Nature of Management Ethics and the Nature of Management Jobs (Cont’d.)Jobs (Cont’d.)

Unintentional managerial unethical behaviorpoorly constructed policiesunrealistic employee goals

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Behavior that violates organizational norms about right and wrong

Two dimensionsDegree of deviance

minor to serious

Target of deviant behaviorthe organization or particular people

Workplace DevianceWorkplace Deviance

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Types of Workplace DevianceTypes of Workplace Deviance

ProductionPropertyPoliticalPersonal Aggression

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Production DevianceProduction Deviance

Hurts the quality and/or quantity of workSuch as leaving early, taking excessively

long breaks, etc.

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Property DevianceProperty Deviance

Unethical behavior aimed at company property

Such as sabotage, stealing, damaging equipment, etc.

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Political DeviancePolitical Deviance

Using one’s influence to harm others in the company

Such as favoritism, spreading rumors, falsely blaming others, etc.

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Personal AggressionPersonal Aggression

Hostile or aggressive behavior toward others

Such as sexual harassment, verbal abuse, threatening others, etc.

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Workplace DevianceWorkplace Deviance

MINOR

ORGANIZATIONAL

INTERPERSONAL

SERIOUS

Property Deviance•sabotaging equipment•accepting kickbacks•lying about hours worked•stealing from the company

Personal Aggression•sexual harassment•verbal abuse•stealing from co-workers•endangering co-workers

Political Deviance•showing favoritism•gossiping about co-workers•blaming co-workers•competing nonbeneficially

Production Deviance•leaving early•excessive breaks•working slow•wasting resources

Adapted fromExhibit 3.1

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U.S. Sentencing Commission U.S. Sentencing Commission GuidelinesGuidelines

Companies can be prosecuted and punished even if management didn’t know about the unethical behavior

Who, What, and WhyDetermining Punishment

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Who, What, and WhyWho, What, and Why

Nearly all businesses - profit and nonprofit- are covered

Punishes a number of actionsEncourages businesses to be proactive

on employee crime

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Determining PunishmentDetermining Punishment

Smaller fines for companies that are proactive

Steps in determining fine sizedetermine the base finecompute a culpability scoremultiply the base fine by the

culpability scoreCompliance programs are important

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Compliance Program Steps for the Compliance Program Steps for the 1991 U.S. Sentencing Guidelines1991 U.S. Sentencing Guidelines

Establish standards and procedures to meet the company’s business needs.

Put upper-level managers in charge of the compliance program.

Don’t delegate decision-making authority to employees who are likely to act illegally or unethically.

Use auditing, monitoring, and other methods to encourage employees to report violations.

Use company publications and training to inform employees about the company’s compliance standards and procedures.

Enforce compliance standards by fairly and consistently disciplining violators.

After violations occur, find appropriate ways to improve the compliance program.

Adapted from Exhibit 3.2

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After discussing this section you should be able to:

Learning ObjectivesLearning ObjectivesMaking Ethical DecisionsMaking Ethical Decisions

4. describe what influences ethical decision making,

5. explain what practical steps managers can take to improve ethical decision making.

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Influences on Ethical Decision Influences on Ethical Decision MakingMaking

Ethical Intensity of the DecisionMoral Development of the

ManagerEthical Principles Used to Solve

the Problem

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Ethical Intensity of the DecisionEthical Intensity of the Decision

Magnitude of consequences

Social consensus Probability of effect

Temporal immediacy Proximity of effect Concentration of

effect

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Moral Development of the ManagerMoral Development of the ManagerPreconventional LevelStage 1: Punishment & ObedienceStage2: Instrumental Exchange

Conventional LevelStage 3: Good Boy - Nice GirlStage 4: Law & Order

Post Conventional LevelStage 5: Legal ContractStage 6: Universal Principle

Adapted fromExhibit 3.3 Davidson & Worrell, Business & Society 34 (1995): 171-196

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Principles of Ethical Decision Principles of Ethical Decision MakingMaking

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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Principle of Long-Term Self-InterestPrinciple of Long-Term Self-Interest

People should never take any action that is not in their or their organization’s long-term self-interest

The key is long-term, not short-term interests

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Principle of Personal VirtuePrinciple of Personal Virtue

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

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Principle of Religious InjunctionsPrinciple of Religious Injunctions

People should never take an action that is unkind or that harms a sense of community, such as the positive feelings that come from working together to accomplish a commonly accepted goal.

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Principle of Government Principle of Government RequirementsRequirementsThe law represents the minimal moral

standards of societyPeople should never take any action that

violates the law.

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Principle of Utilitarian BenefitsPrinciple of Utilitarian Benefits

People should never take any action that does not result in greater good for society

People should do whatever creates the greatest good for the greatest number

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Principle of Individual RightsPrinciple of Individual Rights

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

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Principle of Distributive JusticePrinciple of Distributive Justice

People should never take any action that harms the least among us in some way

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Practical Steps to Ethical Decision Practical Steps to Ethical Decision MakingMaking

Selecting and Hiring Ethical EmployeesCodes of EthicsEthics TrainingEthical Climate

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Selecting and Hiring Ethical Selecting and Hiring Ethical EmployeesEmployeesIncrease ethical behaviors by hiring more

ethical employeesTesting for ethics

Overt integrity testsPersonality-based integrity tests

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What Really Works?What Really Works?

Workplace Deviance(Counterproductive Behaviors)

Overt Integrity Tests & Workplace Deviance

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Personality-Based Integrity Tests & Workplace Deviance

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 82%


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What Really Works? (What Really Works? (Cont’d.)Cont’d.)

Job Performance

Overt Integrity Tests & Job Performance

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Personality-Based Integrity Tests & Job Performance

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Probability of success 70%


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What Really Works? (What Really Works? (Cont’d.)Cont’d.)

Theft

Overt Integrity Tests & Job Performance

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


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Codes of EthicsCodes of Ethics

Corporate statements on ethicsThe relationship between codes and

behavior depend on:companies communicating the codes

to others both within and outside the company

companies developing practical ethical standards and procedures specific to the company’s line of business

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Ethics TrainingEthics Training

Develop employee awareness about ethics

Achieve credibility with employeesTeach employees a practical model of

ethical decision making

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A Basic Model of Ethical Decision A Basic Model of Ethical Decision MakingMaking Identify

the proble

m

Identify the

constituents

Diagnose the

situation

Analyze your

options

Make your

choice

Act

Adapted from Exhibit 3.5

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Ethical ClimateEthical Climate

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After discussing this section you should be able to explain:

Learning ObjectivesLearning ObjectivesSocial ResponsibilitySocial Responsibility

6. to whom organizations are socially responsible,7. for what organizations are socially responsible,8. how organizations can choose to respond to societal

demands for social responsibility,9. whether social responsibility hurts or helps an

organization’s economic performance.

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To Whom Are Organizations To Whom Are Organizations Socially Responsible?Socially Responsible?

Shareholdersmanagers must satisfy the ownerssocial responsibility is maximizing

shareholder wealthStakeholders

persons with a legitimate interest in the company

social responsibility is satisfying the interests of multiple stakeholders

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Been There, Done ThatBeen There, Done That

Large multinational corporations are the cause of many social problems

Businesses should be audited socially & environmentally

She is an activist against corporate corruption

Anita Roddick, founder and co-chair of The Body Shop International PLC

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Shareholders Only - FriedmanShareholders Only - 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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Stakeholder ViewStakeholder View

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For What Are Organizations Socially For What Are Organizations Socially Responsible?Responsible?

Economic Responsibilities

Legal Responsibilities

Ethical Responsibilities

Discretionary Responsibilities

Adapted fromExhibit 3.8

Carroll, Academy of Management Review 4 (1979): 497-505

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BlastBlast From From TheThe Past Past100 Years of Corporate Philanthropy100 Years of Corporate Philanthropy

1800s - doctrine of ultra vires Benefits to employees allowed in late

19th century1940s corporate philanthropy took placeNow, U.S. companies donate

approximately $6 billion a year

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Responses to Demands for Social Responses to Demands for Social ResponsibilityResponsibilityReaction Defense Accommodation Proaction

Fight allthe way

Do only whatis required

BeProgressive

Lead theindustry

DoNothing

DoMuch

Withdrawal PublicRelationsApproach

LegalApproach

Bargaining ProblemSolving

Adapted fromExhibit 3.9 Carroll, Academy of Management Review 4 (1979): 497-505

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Social Responsibility and Economic Social Responsibility and Economic PerformancePerformanceSocial 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 behavior may be “the right thing to do,” it does not guarantee profitability

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What What ReallyReally Happened? Happened?

McDonald’s formed the Animal Advisory Council

Developed Animal Welfare Guiding Principles

McDonald’s changed their egg purchasing practices

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Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Chapter 3 Ethics and Social Responsibility