Chapter 4 Managing Ethics and Social Responsibility.

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