Principle and Practice of Management MGT Ippt chap005

Ethics, Corporate Responsibility,

and Sustainability

Chapter Five

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Learning Objectives

LO1 Describe how different ethical perspectives guide decision making

LO2 Explain how companies influence their ethics environment

LO3 Outline a process for making ethical decisionsLO4 Summarize the important issues surrounding corporate

social responsibilityLO5 Discuss reasons for businesses’ growing interest in the

natural environmentLO6 Identify actions managers can take to manage with the

environment in mind

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Ethics

Ethics The system of rules

that governs the ordering of values

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Telling the Truth and Lying: Possible Outcomes

Table 5.1

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It’s a Personal Issue

Most of us think we are good decision makers, ethical, and unbiased.

But most people have unconscious biases that favor themselves and their own group.

Managers often: Hire people who are like them Think they are immune to conflicts of interest Take more credit than they deserve Blame others when they deserve some blame

themselves

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It’s a Personal Issue

If the employer pays for the computer and the time you spend sitting in front of it, is it ethical for you to use the computer to do tasks unrelated to your work?

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Ethics

Ethical issue Situation, problem, or opportunity in which an

individual must choose among several actions that must be evaluated as morally right or wrong

Business ethics The moral principles and standards that guide

behavior in the world of business.

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Ethical Systems

Moral philosophy Principles, rules, and values people use in

deciding what is right or wrongUniversalism

The ethical system stating that all people should uphold certain values that society needs to function.

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Caux Principles

Caux Principles Ethical principles established by international

executives based in Caux, Switzerland, in collaboration with business leaders from Japan, Europe, and the United States.

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Caux Principles

Kyosei living and working

together for the common good, allowing cooperation and mutual prosperity to coexist with healthy and fair competition

Human dignity concerns the value of

each person as an end, not a means to the fulfillment of others’ purposes

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Ethical Systems

Egoism An ethical system defining acceptable behavior

as that which maximizes consequences for the individual

Utilitarianism An ethical system stating that the greatest good

for the greatest number should be the overriding concern of decision makers.

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Ethical Systems

Relativism Philosophy that bases ethical behavior on the opinions

and behaviors of relevant other peopleVirtue ethics

Classification of people based on their level of moral judgment.

Kohlberg’s model of cognitive moral development Perspective that what is moral comes from what a

mature person with “good” moral character would deem right.

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Current Ethical Issues in Business

Table 5.2

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Business Ethics

Ethical climate In an organization,

the processes by which decisions are evaluated and made on the basis of right and wrong

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Danger Signs

1. Excessive emphasis on short-term revenues over longer-term considerations.

2. Failure to establish a written code of ethics.3. A desire for simple, “quick fix” solutions to ethical problems.4. An unwillingness to take an ethical stand that may impose

financial costs.5. Consideration of ethics solely as a legal issue or a public

relations tool6. Lack of clear procedures for handling ethical problems.7. Responding to the demands of shareholders at the expense

of other constituencies

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Danger Signs

Ethical leader One who is both a moral person and a moral

manager influencing others to behave ethically.

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Ethics Programs

Compliance-based ethics programs Company mechanisms typically designed by

corporate counsel to prevent, detect, and punish legal violations.

Integrity-based ethics programs Company mechanisms designed to instill in

people a personal responsibility for ethical behavior

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A Process for Ethical Decision Making

Figure 5.1

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Ethical Decision Making

Making ethical decisions takes: Moral awareness

realizing the issue has ethical implications Moral judgment

knowing what actions are morally defensible Moral character

the strength and persistence to act in accordance with your ethics despite the challenges

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Courage

Behaving ethically requires not just moral awareness and moral judgment but also moral character, including the courage to take actions consistent with your ethical decisions

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Corporate Social Responsibility

Corporate social responsibility (CSR) Obligation toward

society assumed by business.

Triple bottom line

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Corporate Social Responsibility

Economic responsibilities To produce goods and services that society wants

at a price that perpetuates the business and satisfies its obligations to investors.

Legal responsibilities To obey local, state, federal, and relevant

international laws

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Corporate Social Responsibility

Ethical responsibilities Meeting other social expectations, not written as

law.

Philanthropic responsibilities Additional behaviors and activities that society

finds desirable and that the values of the business support.

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Pyramid of Global Corporate SocialResponsibility and Performance

Figure 5.2

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Corporate Social Responsibility

Transcendent education An education with five higher goals that balance

self-interest with responsibility to others Empathy, generativity, mutuality, civil aspiration,

intolerance of ineffective humanity

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Contrasting Views

First - holds that managers act as agents for shareholders and, as such, are obligated to maximize the present value of the firmSecond - managers should be motivated by principled moral reasoning

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Reconciliation

Profit maximization and corporate social responsibility used to be regarded as antagonistic, leading to opposing policies. But the two views can converge

Recent attention has also been centered on the possible competitive advantage of socially responsible actions

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Ecocentric Management

Ecocentric management Goal is the creation of sustainable economic

development and improvement of quality of life worldwide for all organizational stakeholders.

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Ecocentric Management

Sustainable growth Economic growth and development that meet

present needs without harming the needs of future generations

Life-cycle analysis (LCA) A process of analyzing all inputs and outputs,

though the entire “cradle-to-grave” life of a product, to determine total environmental impact