Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 1 Chapter 4 Prepared by Deborah Baker Texas Christian University Management 4th Edition Chuck Williams Ethics and Social Responsibility

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 2 What Would You Do?  Gap has received negative news coverage regarding sweatshop labor exploitation  Retailers rely on foreign factories to keep their prices low How do you decide whose interests take precedence? Is Gap responsible for poor treatment of workers? What would you do? Gap, Inc. Headquarters  Protest groups are calling for boycotts; Gap is losing $$

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 3 Ethical and Unethical Workplace Behavior Ethics The set of moral principles or values that defines right and wrong for a person or group.

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 4 What Is Ethical and Unethical Workplace Behavior? After reading these sections, you should be able to: 1. discuss how the nature of management jobs creates the possibility for ethical abuses. 2. identity common kinds of workplace deviance. 3. describe the U.S. Sentencing Commission Guidelines for Organizations and explain how they both encourage ethical behavior and punish unethical behavior by businesses.

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 5 Ethics and the Nature of Management Jobs Unethical Managerial Behavior Authority and Power Handling Information Influencing the Behavior of Others Setting Goals 1 1

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 6 Ethics and the Nature of Management Jobs Managers can encourage ethical behaviors by…  using resources for company business only  handling information confidentially  not influencing others to engage in unethical behavior  not creating policies that reward employees for unethical behavior  setting reasonable goals 1 1

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 7 Workplace Deviance 2 2 Unethical behavior that violates organizational norms about right and wrong  Two dimensions  Degree of deviance  Target of deviant behavior

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 8 Types of Workplace Deviance 2 2 Adapted from Exhibit 4.1 Production Deviance Property Deviance Political Deviance Personal Aggression MinorSerious Organizational Interpersonal

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 9 Production Deviance  Leaving early  Taking excessive breaks  Intentionally working slow  Wasting resources 2 2

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 10 Property Deviance  Sabotaging equipment  Accepting kickbacks  Lying about hours worked  Stealing from company 2 2

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 11 Political Deviance  Showing favoritism  Gossiping about coworkers  Blaming coworkers  Competing nonbeneficially 2 2

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 12 Personal Aggression  Sexual harassment  Verbal abuse  Stealing from coworkers  Endangering coworkers 2 2

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 13 U.S. Sentencing Commission Guidelines Companies can be prosecuted and punished even if management didn’t know about the unethical behavior. 3 3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 14 Who, What, and Why?  Nearly all businesses are covered  Punishes a number of offenses  Encourages businesses to be proactive 3.1

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 15 Partial List of Offenses 3.1 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

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 16 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 3.2

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 17 Compliance Program Steps Adapted from Exhibit Establish standards and procedures. 7. Improve program a fter 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. 3.2 Revise if required

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 18 How Do You Make Ethical Decisions? After reading the next two sections, you should be able to: 4. describe what influences ethical decision making. 5. explain what practical steps managers can take to improve ethical decision making.

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 19 Influences on Ethical Decision Making Ethical Answers Depend on… Ethical Intensity of Decision Moral Development of Manager Ethical Principles Used 4 4

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 20 Ethical Intensity Depends on… Concentration of effect Magnitude of consequences Social consensus Probability of effect Proximity of effect Temporal immediacy 4.1

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 21 Biz Flix: Emperor’s Club Take Two Video Click What is Bell’s level of morality? Explain. How typical do you think this conflict is in business? In daily life? 4 4

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 22 Moral Development 4.2 Adapted from Exhibit 4.4 Societal Expectations Selfish Internalized Principles PreconventionalPreconventionalConventionalConventionalPostconventionalPostconventional Kohlberg’s Stages of Moral Development

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 23 Stages of Moral DevelopmentPreconventionalPreconventional 1.Punishment and Obedience 2.Instrumental Exchange 1.Punishment and Obedience 2.Instrumental ExchangeConventionalConventional 3.Good boy, nice girl 4.Law and order 3.Good boy, nice girl 4.Law and orderPostconventionalPostconventional 5.Social contract 6.Universal principle 5.Social contract 6.Universal principle 4.2

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 24 Principles of Ethical Decision Making Long-term self-interest Personal virtue Religious injunctions Government requirements Utilitarian benefits Individual rights Distributive justice 4.3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 25 Principle of long-term self-interest Never take any action not in your organization’s long-term self-interest. 4.3 Principles of Ethical Decision Making

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 26 Principles of Ethical Decision Making Principle of Personal Virtue Never do anything that is not honest, open, and truthful and that you would not be glad to see reported in the newspapers or on TV. 4.3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 27 Principles of Ethical Decision Making Principle of Religious Injunctions Never take any action that is not kind and that does not build a sense of community. 4.3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 28 Principles of Ethical Decision Making Principle of Government Requirements Never take any action that violates the law, for the law represents the minimal moral standard. 4.3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 29 Principles of Ethical Decision Making Principle of Utilitarian Benefit Never take any action that does not result in greater good for society. 4.3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 30 Principles of Ethical Decision Making Principle of Individual Rights Never take any action that infringes on others’ agreed-upon rights. 4.3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 31 Principles of Ethical Decision Making Principle 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. 4.3

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 32 Practical Steps to Ethical Decision Making Select and hire ethical employees Establish a Code of Ethics Train employees to make ethical decisions Create an ethical climate 5 5

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 33 Practical Steps to Ethical Decision Making  Overt Integrity Tests  Personality-Based Integrity Tests Select and hire ethical employees If you found a wallet containing $50, would you return it with the money? 5.1

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 34 Doing the Right Thing If You Cheat in College, Will You Cheat in the Workplace?  College students who cheat are likely to cheat again.  70 percent of students don’t see cheating as a problem.  People who cheat and cheat again see their behavior as normal.  60 percent of people who cheat their employers don’t feel guilty for doing so. If You Cheat in College, Will You Cheat in the Workplace?  College students who cheat are likely to cheat again.  70 percent of students don’t see cheating as a problem.  People who cheat and cheat again see their behavior as normal.  60 percent of people who cheat their employers don’t feel guilty for doing so.

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 35 What Really Works Studies show that Integrity Tests…  Help reduce workplace deviance  Help hire workers who are better performers Studies show that Integrity Tests…  Help reduce workplace deviance  Help hire workers who are better performers However they have a smaller effect on assessing theft.

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 36 What Really Works (continued) Overt Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success82% Workplace Deviance (Counterproductive Behaviors) Personality-Based Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success68%

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 37 What Really Works (continued) Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 69% Job Performance Personality-Based Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success70%

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 38 What Really Works (continued) Overt Integrity Tests & Theft 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 57% Theft

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 39 Practical Steps to Ethical Decision Making Establish a Code of Ethics  Communicate code of ethics to both inside and outside the company  Develop ethical standards and procedures specific to business Web Link

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 40 Ethics Training  Develops employee awareness of ethics  Achieves credibility with employees  Teaches a practical model of ethical decision making “Ethics Scenarios Game” Web Link

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 41 Ethics Training Tower Records Lockheed Boeing Bell South U.S. Dept. of Justice 3M City of Philadelphia And more require employees to take ethics training

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 42 A Basic Model of Ethical Decision Making 1. Identify the problem 2. Identify the constituents 3. Diagnose the situation 4. Analyze your options 5. Make your choice 6. Act Adapted from Exhibit

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 43 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 Climate Web Link

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 44 What Is Social Responsibility? After reading these sections, you should be able to explain: 6. to whom organizations are socially responsible. 7. for what organizations are socially responsible. 8. how organizations can choose to respond to societal demands for social responsibility. 9. whether social responsibility hurts or helps an organization’s economic performance.

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 45 What Is Social Responsibility? Social Responsibility A business’s obligation to…  pursue policies  make decisions  take actions that benefit society

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 46 What Is Social Responsibility?  Recall from Chapter 3 that PETA and Procter & Gamble have an ongoing disagreement about what is socially responsible.

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 47 To Whom Are Organizations Socially Responsible? Stakeholder Model Stakeholder Model Satisfy Interests of Multiple Stakeholders Satisfy Interests of Multiple Stakeholders Shareholder Model Maximize Profits 6 6

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 48 Pros Shareholder Model  Firm maximizes shareholder wealth and satisfaction  The company stock increases in value 6 6 Cons  Organizations cannot act effectively as moral agents for shareholders  Time, money, and attention diverted to social causes undermine market efficiency

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 49 Stakeholder Model Primary Stakeholders: Shareholders Employees Customers Suppliers Governments Local Communities Primary Stakeholders: Shareholders Employees Customers Suppliers Governments Local Communities Secondary Stakeholders: Media Special Interest Groups Trade Associations Secondary Stakeholders: Media Special Interest Groups Trade Associations 6 6

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 50 Organization’s Social Responsibilities Abide by principles of right and wrong Obey laws and regulations Ethical Legal Economic Discretionary Be profitable Serve a social role 7 7 $ ?

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 51 Responses to Demands for Social Responsibility 8 8 Reactive Defensive Accommo- dative Proactive Fight all the way DO NOTHING DO MUCH Withdrawal Do only what is required Legal Approach Bargaining Problem Solving Public Relations Approach Be progressive Lead the industry

Chapter 4 Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved 52 Social Responsibility and Economic Performance Realities of Social Responsibility Can cost a company Sometimes it does pay Does not guarantee profitability 9 9