Chapter 4 Copyright ©2009 by Cengage Learning Inc. All rights reserved 1 Chapter 4 Ethics and Social Responsibility.

Chapter 4Copyright ©2009 by Cengage Learning Inc. All rights reserved

1

Chapter 4Ethics and

Social Responsibility


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Ethical and Unethical Workplace Behavior

Ethics

The set of moral principles or values that defines right and wrong for a person or group.

Question: it an act is illegal, is it unethical by default?


ETHICS: MURKIER THAN YOU THINK

Legal and Unethical Legal and Ethical

Promoting R-rated movies to young teens Producing high quality products

Producing products that you know will break before their time

Rewarding integrity

Paying non-living wages to workers in developing countries

Leading by example

Ford Pinto case Treating employees fairly

Contributing to the community

Respecting the environment

Illegal and Unethical Illegal and Ethical

Embezzling money Providing rock-bottom prices only to distributors in underserved areas

Engaging in sexual harassment Collaborating with other medical clinics to guarantee low prices in low-income countries (collusion)

Practicing Collusion with competitors Parking in a no-parking zone

Encouraging fraudulent accounting


UNIVERSAL ETHICAL STANDARDS

Developed by Character Counts, a

nonpartisan organization of

educators, community leaders, and

ethicists.


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Ethics and the Nature of Management Jobs

Unethical Managerial BehaviorUnethical Managerial Behavior

Authority and PowerAuthority and Power

Handling InformationHandling Information

Influencing the Behavior of OthersInfluencing the Behavior of Others

Setting GoalsSetting Goals

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Workplace Deviance

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Workplace Deviance

Unethical behavior that violates organizational norms about right and wrong

Two dimensions Degree of deviance Target of deviant behavior


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Types of Workplace Deviance

22Adapted from Exhibit 4.1

Production Deviance

Production Deviance

Property DevianceProperty Deviance

Political DeviancePolitical Deviance

Personal AggressionPersonal

Aggression

Minor Serious

Organizational

Interpersonal

Negative impact on production…. Misuse of corporate property….

Causing political harm to others… Personal aggression


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Production Deviance

Leaving earlyTaking excessive breaks Intentionally working slowlyWasting resources

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12

Property Deviance

Sabotaging equipment

Accepting kickbacks

Lying about hours worked

Stealing from company

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13

Political Deviance

Showing favoritismGossiping about

coworkersBlaming coworkersCompeting

nonbeneficially

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14

Personal Aggression

Sexual harassmentVerbal abuseStealing from coworkersEndangering coworkers

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U.S. Sentencing Commission Guidelines

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

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Who, What, and Why?

Nearly all businesses are covered

Punishes a number of offenses

Encourages businesses to be proactive

3.13.1

Includes all businesses, nonprofits, partnerships, labor unions, unincorporated organizations and associations, incorporated organizations and even pension funds, trusts, and joint stock companies.


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Partial List of Offenses

3.13.1

Invasion of privacy

Price fixing

Fraud

Customs violations

Antitrust violations

Civil rights violations

Theft

Money laundering

Conflicts of interest

Embezzlement

Dealing in stolen goods

Copyright infringements

Extortion

…and more


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Steps in determining fine size

1. determine the base fine

2. compute a culpability score

3. multiply the base fine by the culpability score

Steps in determining fine size

1. determine the base fine

2. compute a culpability score

3. multiply the base fine by the culpability score

Compliance Program Steps

Smaller fines for companies that are

proactive

3.23.2


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Compliance Program Steps

Adapted from Exhibit 4.3

1. Establish standards and procedures.

7. Improve program after violations.

6. Enforce standards consistently and fairly.

5. Train employees on standards and procedures.

3. Delegate decision-making authority only to ethical employees.

4. Encourage employees to report violations.

2. Assign upper-level managers to be in charge.

3.23.2

Revise if required


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Influences on Ethical Decision Making

EthicalEthicalAnswersAnswersDepend Depend

on…on…

EthicalEthicalAnswersAnswersDepend Depend

on…on…

Ethical Intensity of DecisionEthical Intensity of Decision

Moral Development of ManagerMoral Development of Manager

Ethical Principles UsedEthical Principles Used

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Ethical Intensity Depends on…

Concentration of effectConcentration of effect

Magnitude of consequencesMagnitude of consequences

Social consensusSocial consensus

Probability of effectProbability of effect

Proximity of effectProximity of effect

Temporal immediacyTemporal immediacy

4.14.1

Total harm or benefit derived from an ethical decision

Agreement on whether behavior is bad or good.

The chance that something will happen and harm others

The time between an act and the consequences of the act.

Social, psychological, cultural or physical distance of a decision maker to those affected by his/her decisions.

How much the act affects the average person.


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Moral Development

4.24.2Adapted from Exhibit 4.4

Societal Societal ExpectationsExpectationsSelfishSelfish InternalizedInternalized

PrinciplesPrinciples

PreconventionalPreconventionalPreconventionalPreconventional ConventionalConventionalConventionalConventional PostconventionalPostconventionalPostconventionalPostconventional

Kohlberg’s Stages of Moral Development

Selfish: I don’t want to get into trouble…..Expectations: What do you want from me?????? Internal: You have a conscious….


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Stages of Moral Development

PreconventionalPreconventionalPreconventionalPreconventional

1. Punishment andObedience

2. InstrumentalExchange

1. Punishment andObedience

2. InstrumentalExchange

ConventionalConventionalConventionalConventional

3. Good boy, nice girl

4. Law and order

3. Good boy, nice girl

4. Law and order

PostconventionalPostconventionalPostconventionalPostconventional

5. Social contract

6. Universalprinciple

5. Social contract

6. Universalprinciple

4.24.2

You are given a copy of Microsoft Office 2010. Should you copy it to your system?

I’m afraid it will cause trouble for me, so I do not copy the software.

This will really help me, so I copy the software.

Others are copying the software, so I will do it also..

It’s against the law, so I will not copy the software.

If I copy the software, it will cause harm to the authors, so I do not copy

it.

Your personal principles of right or wrong rule, regardless of the

consequences.


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Principles of Ethical Decision Making (Larue Hosmer)

Long-term self-interestLong-term self-interest

Personal virtuePersonal virtue

Religious injunctionsReligious injunctions

Government requirementsGovernment requirements

Utilitarian benefitsUtilitarian benefits

Individual rightsIndividual rights

Distributive justiceDistributive justice4.34.3


Consider an example

One winter morning, Richard Addessi (an IBM employee) showered, shaved and dressed for the office. Before he could get to his car, he fell dead on the garage floor of a sudden heart attack. Addessi was four months short of his 30-year anniversary with the company, at which he could have retired. Given that he was only four months short of full retirement, do you award full retirement benefits to Addessi’s wife and daughters? If yes, they will receive his full retirement benefits of $1800/month and free lifetime medical coverage. If no, they will receive only $340/month and will have to pay $473 a month just to continue their current medical coverage. What would be the ethical thing to do?


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Principle of long-term self-interestPrinciple of long-term self-interest

Never take any action not in your organization’s long-term self-interest.

Never take any action not in your organization’s long-term self-interest.

4.34.3

Principles of Ethical Decision Making

Under this principle, IBM should NOT award offerthe retirement benefits to Mrs. Addessi, since IBM always has thousands of employees this close to Retirement.


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Principle of Personal VirtuePrinciple of Personal Virtue

Never do anything that is not honest, open, and truthful and that you would not beglad to see reported in the newspapers

or on TV.

Never do anything that is not honest, open, and truthful and that you would not beglad to see reported in the newspapers

or on TV.

4.34.3


Under this principle, IBM should have quietly offered the benefits to Mrs. Addessi. Whoneeds this type of publicity?


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Principle of Religious InjunctionsPrinciple of Religious Injunctions

Never take any action that is not kindand that does not build a

sense of community.

Never take any action that is not kindand that does not build a

sense of community.

4.34.3


Under this principle, IBM should offer the benefitsTo Mrs. Addessi out of compassion and kindness.


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Principle of Government RequirementsPrinciple of Government Requirements

Never take any action that violates the law,for the law represents the minimal

moral standard.

Never take any action that violates the law,for the law represents the minimal

moral standard.

4.34.3


Using this principle, IBM would deny full benefits to Mrs. Addessi, since her husband did not qualify for them.


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Principle of Utilitarian BenefitPrinciple of Utilitarian Benefit

Never take any action that does not result ingreater good for society.

Never take any action that does not result ingreater good for society.

4.34.3


Using this principle, IBM should deny benefits,Since by doing so with regularity might result inCutting stock dividend, hurting millions.


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Principle of Individual RightsPrinciple of Individual Rights

Never take any action that infringes on others’ agreed-upon rights.

Never take any action that infringes on others’ agreed-upon rights.

4.34.3

Using this principle, IBM should deny benefits,Since offering them could be perceived as Violating the rights of other employees whoHad to wait 30 years to receive the same benefits.


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Principle of Distributive JusticePrinciple of Distributive Justice

Never take any action that harms the least among us:

the poor, the uneducated,the unemployed.

Never take any action that harms the least among us:

the poor, the uneducated,the unemployed.

4.34.3

Using this principle, IBM would award Mrs.Addessi full benefits.


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Practical Steps to Ethical Decision Making

Select and hire ethical employeesSelect and hire ethical employees

Establish a Code of EthicsEstablish a Code of Ethics

Train employees to make ethical decisionsTrain employees to make ethical decisions

Create an ethical climateCreate an ethical climate

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Overt Integrity Tests Personality-Based Integrity Tests

Select and hire ethical employeesSelect and hire ethical employees

If you found a wallet containing $50, would you return it with the money?

5.15.1


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Establish a Code of EthicsEstablish a Code of Ethics

Communicate code of ethics to those both inside and outside the company

Develop ethical standards and proceduresspecific to your business

5.25.2


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Ethics Training

Ethics TrainingEthics Training

Develops employee awareness of ethics

Achieves credibility with employees

Teaches a practical model of ethical decision making

5.35.3


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Ethics Training

Tower Records

Lockheed

Boeing

Bell South

U.S. Dept. of Justice

3M

TCU

And more require employees to take ethics training


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A Basic Model of Ethical Decision Making

1. Identify the problem1. Identify the problem

2. Identify the constituents2. Identify the constituents

3. Diagnose the situation3. Diagnose the situation

4. Analyze your options 4. Analyze your options

5. Make your choice5. Make your choice

6. Act6. Act

Adapted from Exhibit 4.6

5.35.3 What makes it an ethical problem? Think in terms of rights, obligations, fairness, relationships, and integrity. How would you define the problem if you stood on the other side of the fence?

Who has been hurt? Who could be hurt? Who could be helped? Are they willing players, or are they victims? Can you negotiate with them?

How did it happen in the first place? What could have prevented it? Is it going to get worse or better? Can the damage now be undone?

Imagine the range of possibilities. Limit yourself to the two or three most manageable. What are the likely outcomes of each? What are the likely costs? Look to the company mission statement or code of ethics for guidance.

What is your intention in making this decision? Can you discuss the problem with the affected parties before you act? Could you disclose without qualm your decision to your boss, the CEO, the board of directors, your family or society as a whole?

Do what you have to do. Don't be afraid to admit errors. Be as bold in confronting a problem as you were in causing it.


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Ethical Climate

Managers:

1. Act ethically

2. Are active in company ethics programs

3. Report potential ethics violations

4. Punish those who violate the code of ethics

Establishing an Ethical ClimateEstablishing an Ethical Climate

5.45.4http://www.whistleblowers.orgWeb Link


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What Is Social Responsibility?

Social Responsibility

A business’s obligation to… pursue policies make decisions take actions that benefit society


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What Is Social Responsibility?

Recall from Chapter 3 that PETA and Procter & Gamble have an ongoingdisagreement about what is socially responsible.


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To Whom Are Organizations Socially Responsible?

StakeholderModel

StakeholderModel

Satisfy Interests of Multiple Stakeholders

Satisfy Interests of Multiple Stakeholders

ShareholderModel

ShareholderModel Maximize ProfitsMaximize Profits

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Stakeholder Model

Primary Stakeholders:

ShareholdersEmployeesCustomersSuppliers

GovernmentsLocal Communities

Primary Stakeholders:

ShareholdersEmployeesCustomersSuppliers

GovernmentsLocal Communities

Secondary Stakeholders:

MediaSpecial Interest Groups

Trade Associations

Secondary Stakeholders:

MediaSpecial Interest Groups

Trade Associations

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Organization’s Social Responsibilities

Abide by principlesAbide by principlesof right and wrongof right and wrong

Obey laws andObey laws andregulationsregulations

EthicalEthical

LegalLegal

EconomicEconomic

DiscretionaryDiscretionary

Be profitableBe profitable

Serve a social roleServe a social role

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$

?


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Responses to Demands for Social Responsibility

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ReactiveReactive DefensiveDefensive Accommo-dative

Accommo-dative ProactiveProactive

Fight all the way

DO NOTHING

DO MUCH

Withdrawal

Do only what is required

Legal Approach

BargainingProblemSolving

PublicRelationsApproach

Beprogressive

Lead theindustry


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Social Responsibility and Economic Performance

Realities ofSocial

Responsibility

Can cost a companyCan cost a company

Sometimes it does paySometimes it does pay

Does not guarantee profitability

Does not guarantee profitability

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Chapter 4 Copyright ©2009 by Cengage Learning Inc. All rights reserved 1 Chapter 4 Ethics and Social Responsibility.

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