Chapter 4
Managing Ethics and Managing Ethics and Social ResponsibilitySocial Responsibility
Three Domains of Human Action
Domain of Domain of Codified LawCodified Law(Legal Standard)(Legal Standard)
Domain ofDomain ofEthicsEthics
(Social Standard)(Social Standard)
Domain ofDomain ofFree ChoiceFree Choice
(Personal Standard)(Personal Standard)
Amount of
Explicit ControlHigh Low
Ethics The code of moral principles and values that The code of moral principles and values that govern the behaviors of a person or group govern the behaviors of a person or group with respect to what is right or wrong. with respect to what is right or wrong.
Codified LawCodified Law Values and standards that are written into Values and standards that are written into
the legal system.the legal system.
Free Choice
Behavior about which law has no say Behavior about which law has no say and for which an individual or and for which an individual or organization enjoys complete organization enjoys complete freedomfreedom
Example: An individual's choice of a Example: An individual's choice of a marriage partner or religion.marriage partner or religion.
EthicsObedience is to norms and standards levied Obedience is to norms and standards levied
by self and/or others. These are by self and/or others. These are unenforceable in a legal sense, but are unenforceable in a legal sense, but are often powerful. often powerful.
Ethical DilemmaEthical DilemmaWhen all choices have been deemed When all choices have been deemed
undesirable because of potentially negative undesirable because of potentially negative ethical consequences, making it difficult to ethical consequences, making it difficult to distinguish right from wrong. (The choices distinguish right from wrong. (The choices also have attractive attributes.)also have attractive attributes.)
Common Ethical Dilemmas
Honesty in advertising and in Honesty in advertising and in communications with superiors, communications with superiors, clients, and government.clients, and government.
Problems relating to special gifts, Problems relating to special gifts, entertainment, and kickbacks.entertainment, and kickbacks.
Overlooking wrong doings of othersOverlooking wrong doings of others
Criteria for Ethical Decision Making
ApproachesUtilitarian Utilitarian
IndividualismIndividualism
Moral-Rights Moral-Rights
Justice Justice
Practical Practical
Utilitarian Approach Moral behaviors produce the greatest Moral behaviors produce the greatest good for the greatest number.good for the greatest number.
Individualism ApproachActs are moral when they promote Acts are moral when they promote the individual's best long-term the individual's best long-term interests (e.g., the “golden rule”).interests (e.g., the “golden rule”).
Moral-Rights Approach Human beings have fundamental Human beings have fundamental rights (e.g., free consent, privacy, due rights (e.g., free consent, privacy, due process) process)
Justice ApproachStandards of equity, fairness, and Standards of equity, fairness, and impartiality. impartiality.
Practical ApproachMay include consideration of any of the May include consideration of any of the other four approaches and what actions other four approaches and what actions will please stakeholders most.will please stakeholders most.
Factors Affecting Ethical Choices
The ManagerThe Manager
Level or stage of moral development
Learned Ethics
The OrganizationThe Organization
Systems
Culture
Moral DevelopmentPreconventionalPreconventional Level = concerned Level = concerned with external rewards and with external rewards and punishmentspunishments
ConventionalConventional Level = conform to the Level = conform to the expectations of peers and society expectations of peers and society (consistent with practical approach to (consistent with practical approach to ethical decision making)ethical decision making)
Postconventional Postconventional (Principled) Level = (Principled) Level = individuals develop a personal, individuals develop a personal, internal set of standards and values. internal set of standards and values. (About 20% of adults)(About 20% of adults)
The Organization
SystemsSystemsExplicit rules and policiesExplicit rules and policies
Reward systemReward system
CultureCultureCommon ValuesCommon Values
TraditionsTraditions
Guidelines for Dealing with Ethical Dilemmas
Is it legal?Is it legal?
Is it right?Is it right?
Is it beneficial? To whom? How much?Is it beneficial? To whom? How much?
Is it harmful? To whom? How much?Is it harmful? To whom? How much?
Guidelines for Dealing with Ethical Dilemmas
(cont.)
Would you be willing to allow everyone Would you be willing to allow everyone to do what you are considering?to do what you are considering?
Would you like your family to know?Would you like your family to know?
Would you like your decision printed in Would you like your decision printed in the newspaper?the newspaper?
Have you consulted others who are Have you consulted others who are objective and knowledgeable?objective and knowledgeable?
Social Responsibility
An Organization taking actions that An Organization taking actions that contribute to societycontribute to society
Being a good corporate citizen.Being a good corporate citizen.
Stakeholder Model
The belief that a business should be The belief that a business should be operated for the benefit of all who are operated for the benefit of all who are concerned with it (all “stakeholders” concerned with it (all “stakeholders” notnot just the owners). just the owners).
The foundation of Social The foundation of Social Responsibility.Responsibility.
Organizational Stakeholders
Owners, Investors Owners, Investors
EmployeesEmployees
SuppliersSuppliers
CustomersCustomers
GovernmentGovernment
SocietySociety
4 Views of Responsibilities of
Business
1- Economic 1- Economic Responsibilities:Responsibilities:
The only Social The only Social Responsibility = Responsibility = Profit-Maximizing. Profit-Maximizing.
2- Legal 2- Legal Responsibilities:Responsibilities:
Social Responsibility Social Responsibility = Obeying the Law = Obeying the Law (as well as making (as well as making a profit)a profit)
3- Ethical Responsibilities
To be ethical, an organization should To be ethical, an organization should seek a seek a higher higher standard than merely standard than merely obeying the law:obeying the law:
e.g., Act with equity, fairness, and e.g., Act with equity, fairness, and impartialityimpartiality
e.g., Respect the rights of individualse.g., Respect the rights of individuals
e.g., Act for the common goode.g., Act for the common good
4 - Discretionary Responsibilities
Purely voluntary, not mandated by Purely voluntary, not mandated by economics, law, or ethicseconomics, law, or ethics
Goes beyond what society expectsGoes beyond what society expects
This is This is truetrue Social Responsibility Social Responsibility
Social Responsibility Levels
Level of Concern---Level of Concern---Likely BehaviorLikely Behavior
Discretionary-------------------Discretionary-------------------ProactionProaction
Ethical-------------------Ethical-------------------AccommodationAccommodation
Legal------------------Legal------------------Defensive BehaviorDefensive Behavior
Economic-------------Economic-------------Anything for profitAnything for profit
Why Social Responsibility?
Self-defense Self-defense - If business is not - If business is not proactive, the public or government proactive, the public or government will press for more regulationwill press for more regulation
Obligation Obligation - Business exists due to - Business exists due to being sanctioned by society - owes being sanctioned by society - owes debt to societydebt to society
Self-interestSelf-interest - S.R. good for business in - S.R. good for business in long runlong run
Arguments Against Social Responsibility
Social expenditures amount to Social expenditures amount to theft theft of of business owners’ equity.business owners’ equity.
Business Business lacks the abilitylacks the ability to pursue to pursue social goals.social goals.
Business would gain Business would gain too much powertoo much power if if involved in the social domain. involved in the social domain. (Social issues should be left to those (Social issues should be left to those accountable to the voters or religious accountable to the voters or religious leaders, etc.)leaders, etc.)
Ethical Leadership By Example
Senior managers must be strongly Senior managers must be strongly committed to ethical conduct.committed to ethical conduct.
Code of Ethics A formal statement of the company's values concerning ethics and social
issues.
Principle-based:Principle-based:Designed to:Designed to:Enable the employee to Enable the employee to
make ethical decisions make ethical decisions based on appropriate based on appropriate valuesvalues
e.g., “treat people fairly” e.g., “treat people fairly” or “don’t be or “don’t be dishonest”dishonest”
Policy-based:Policy-based:Outline how to act in Outline how to act in
specificspecific ethical ethical situations (reducing situations (reducing the need for thinking the need for thinking or shared values):or shared values):
Conflicts of interestConflicts of interestProprietary informationProprietary informationPolitical giftsPolitical giftsEqual opportunitiesEqual opportunities
Organizational Structures Organizational Structures to Promote Ethicsto Promote Ethics
Ethics committee Ethics committee = group appointed to = group appointed to monitor company ethicsmonitor company ethics
Hot linesHot lines- employees can report - employees can report questionable behavior, possible fraud, questionable behavior, possible fraud, waste, or abuse( i.e., Blow the Whistle”)waste, or abuse( i.e., Blow the Whistle”)
Ethics Ethics training programstraining programs
Whistle-BlowingDefinition:Definition:
The disclosure by an The disclosure by an employee of illegal, employee of illegal, immoral, or immoral, or illegitimate illegitimate practices by the practices by the organization.organization.
Guidelines:Guidelines:Be sure you are right Be sure you are right
(keep accurate records)(keep accurate records)Try to resolve the Try to resolve the
situation in-house firstsituation in-house firstConsult an attorney before Consult an attorney before
contacting the media, contacting the media, etc.etc.
Realize you could be firedRealize you could be firedDon’t expect to profit Don’t expect to profit
financiallyfinancially