Chapter 4 Managerial Ethics and Corporate Social Responsibility
Chapter 4
Managerial Ethics and Corporate
Social Responsibility
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New Manager’s Questions
• If an action is legal, then it is also ethical.
1 2 3 45
Mostly yes Mostly no
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New Manager’s Questions
• It’s wrong to be a snitch or a tattler, even if it is about telling on your company when it is doing something illegal or immoral.
1 2 3 45
Mostly yes Mostly no
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New Manager’s Questions
• It’s not the manager’s job to solve problems in the outside world.
1 2 3 45
Mostly yes Mostly no
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A Few Stats
• 79% of respondents in the U.S. believe questionable business practices are widespread
• Fewer than 1/3 said they think most chief executive officers (CEOs) are honest
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Managerial Ethics
• Ethics - code of moral principles and values that govern the behaviors of right or wrong
• Standards about good/bad• Ethical issues can be complex• People in organizations have divergent
views about right/wrong
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Three Domains of Human Action
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Domains of Human Action
• Codified law– Values & standards are written into the legal
systems– Enforceable in the courts– Lawmakers set rules that people & corporations
must follow in a certain way• Obtaining licenses for cars or paying corporate taxes
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Domains of Human Action
• Free Choice– Opposite end of scale– Pertains to behavior about which the law has no
say – Individual or organization enjoys complete
freedom• Eat lunch• Choose music to listen to
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Domains of Human Action
• Ethics– No specific laws– Standards of conduct based on shared principles
& values about moral conduct that guide an individual or company
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Ethical Dilemmas
• Ethics is always about making decisions• Some issues are difficult to resolve• Ethical dilemma – Arises in a situation concerning right or wrong
when values are in conflict– Right & wrong cannot be clearly identified
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Ethical DilemmasYou are the moral agent, what would you do?
Your company requires a terrorist watch list that screens all new customers and takes approximately 24 hours from the time an
order is placed. You can close a lucrative deal with a potential long-term customer
overnight, even though that means the required watch-list screening will have to be
done after the fact.
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Ethical DilemmasYou are the moral agent, what would you do?
As a sales manager for a major pharmaceuticals company, you’ve been asked to promote a new
drug that costs $2500 per dose. You’ve read the reports saying the drug is only 1% more effective than an alternate drug that costs less than $625
per dose. The VP of sales wants you to aggressively promote the $2500 per does drug.
He reminds you that if you don’t do so, lives could be lost that might have been saved with that 1%
increase in drug effectiveness.
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Ethical DilemmasYou are the moral agent, what would you do?
Your company is hoping to build a new overseas manufacturing plant. You could save about $5
million by not installing standard pollution-control equipment that is required in the U.S. The plant will employ many local workers in a poor country where jobs are scarce. Your research shows that
pollutants from the factory could potentially damage the local fishing industry. Yet building
the factory with the pollution-control equipment will likely make the plant too expensive to build.
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Ethical DilemmasYou are the moral agent, what would you do?
You have been collaborating with a fellow manager on an important project. One
afternoon, you walk into his office a bit earlier than schedules & see sexually explicit images on his computer monitor. The company has a zero-
tolerance sexual-harassment policy as well as strict guidelines regarding personal use of the
Internet. However, your colleague was in his own office and not bothering anyone else.
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Study of Human Morality--#1
A runaway trolley is heading down the tracks toward 5 unsuspecting people. You’re standing near a switch that will divert the trolley onto a siding, but there is a single worker on the siding who cannot be warned in time to escape and will almost certainly be killed.
Would you throw the switch?
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Study of Human Morality--#2
What if the worker is standing on a bridge over the tracks and you have to push him off the bridge to stop the trolley with his body in order to save the 5 unsuspecting people? (Assume his body is large enough to stop the trolley & yours is not.)
Would you push the man, even though he would almost certainly be killed?
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Results
97% of respondents said they could throw the switch (which would almost certainly lead to the death of the worker)
42% said they could actually push the man to his death
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Criteria for Ethical Decision Making
• Most ethical dilemmas involve a conflict between the needs of the part and the needs of the whole– Individual vs. the organization– Organization vs. society as a whole
• Normative strategy– Based on norms & values to guide decision
making
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Criteria for Ethical Decision Making
• Utilitarian Approach – moral behavior produces the greatest good for the greatest number.• Adopted by 19th-century philosophers Jeremy
Bentham & John Stuart Mill• Select the option that benefits the greatest # of
people
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Criteria for Ethical Decision Making
• Individualism Approach – acts are moral if they promote the individual’s long-term interest.• Produce a greater ratio of good to bad for the
individual compared with other alternative is the right one to perform
• Leads to honesty & integrity because that works best in the long run
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Criteria for Ethical Decision Making
• Moral-Rights Approach – humans have fundamental rights and liberties that cannot be taken by an individual's decision.• Best maintains the rights of those affected by it
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Six Moral Rights (Moral Rights Approach)
The right of free consent.
The right to privacy.
The right of freedom of conscience.
The right of free speech.
The right to due process.
The right to life and safety.
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Criteria for Ethical Decision Making
• Justice Approach – moral decisions must be based on standards of equity, fairness and impartiality.• 3 types of justice are concern to managers• Distributive – requires that different treatment of
people not be based on arbitrary characteristics• Procedural – requires that rules be administered
fairly• Compensatory – individuals should be compensated
for the cost of their injuries by the party responsible
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A Manager’s Ethical Choices Individuals bring their own personality and
traits to organizations
Personal needs, family influence and religious background shape individuals
Personality characteristics like ego, confidence and independence
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Three Levels of Personal Moral Development
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Transparency International Bribe Index
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What is Corporate Responsibility?
• Distinguishing right from wrong; doing right• Good corporate citizenship• Make choices that contribute to society and
stakeholders• Stakeholders – any group within or outside
the organization that has a stake
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Major Stakeholders Relevant to Monsanto Company
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The Bottom of the Pyramid
• Corporations can alleviate poverty and social ills while making profits
• BOP is twofold, profit and address poverty
• Serving and engaging customers at lowest level of economy
• Profitable Responsibility is essential for sustainability
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The Ethic of Sustainability
Sustainability – economic development that generates wealth and meets the needs of current population while preserving the
environment for the needs of future generations.
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Evaluating Corporate Social Performance
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Managing Company Ethics and Social Responsibility
Code of Ethics – a formal statement of the company’s values regarding ethics and
social issues.
•2 types of code of ethics•Principle based – affect corporate culture; define fundamental values & contain general language•Policy based – outline procedures to be used in specific situations
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Managing Company Ethics and Social Responsibility
Ethical Structures – systems, positions and programs a company can undertake to
implement ethical behavior.
•Ethics committee – group of executives appointed to oversee company ethics•Chief ethics officer – company executive who oversees all aspects of ethics & legal compliance•Ethics training – helps employees deal with ethical questions & translate the values stated in a code of ethics into everyday behavior
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Managing Company Ethics and Social Responsibility
Whistle-blowing – employee disclosure of illegal, immoral, or illegitimate practices.
•2002 Sarbanes-Oxley Act provides some safety for whistle-blowers
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Building an Ethical Organization
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The Business Case for Ethics and Social Responsibility
• Ethics and social responsibility is an important business issue
• Stakeholders are pushing more initiatives and issues
• The connection between ethics and financial performance has been widely debated