Management Ethics and Social Responsibility MGMT 370 Chapter 5

Ethical Behavior Ethics The system of rules that governs the ordering of values Values Terminal Instrumental Perspectives Individualism Utilitarianism Moral-Rights Justice

Telling the Truth and Lying: Possible Outcomes

Personal Ethics Most of us believe we are ethical but most have unconscious biases that favor ourselves and our 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

Is it ethical to: Shop online during company time? Using office equipment for personal use? Read personal emails while at work?

Cultural Issues and Ethics Dimensions of justice perceptions Procedural Distributive Interactional Cultural Relativism Universalism Ethical Imperialism

Ethical Systems Moral philosophy Universalism Principles, rules, and values people use in deciding what is right or wrong Universalism The ethical system stating that all people should uphold certain values that society needs to function.

Ethical Systems Egoism Utilitarianism 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.

Ethics Systems Relativism Virtue ethics Philosophy that bases ethical behavior on the opinions and behaviors of relevant other people Virtue ethics Classification of people based on their level of moral judgment.

Ethics Systems 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.

Ethics in the Workplace Ethical dilemmas Rationalizing Factors Individual Organization External environment

Ethics in the Workplace 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.

Dangerous Practice Excessive emphasis on short-term revenues over longer-term considerations. Failure to establish a written code of ethics. A desire for simple, “quick fix” solutions to ethical problems. An unwillingness to take an ethical stand that may impose financial costs.

Dangerous Practices Consideration of ethics solely as a legal issue or a public relations tool Lack of clear procedures for handling ethical problems. Responding to the demands of shareholders at the expense of other constituencies

Ethical Standards Training Whistleblowing Modeling Code of ethics Moral management Immoral Amoral Moral

Ethical Environment Sarbanes-Oxley Act Act passed into law by Congress in 2002 to establish strict accounting and reporting rules in order to make senior managers more accountable and to improve and maintain investor confidence

Ethics Programming 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

Ethical Issues in Business

Ethical Decision Making Model

Ethical Decision Making 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

Courage to be Ethical Why might employees lack courage in ethical issues? A belief that the company would not take corrective action A fear that management would retaliate against the employee for speaking up Doubt that the employee’s report would be kept confidential

Business Costs of Unethical Activity

Corporate social responsibility (CSR) Obligation toward society assumed by business.

Corporate Social Responsibility Economic responsibilities Produce goods and services that society wants at a price that perpetuates the business and satisfies its obligations to investors. Legal responsibilities Obey local, state, federal, and relevant international laws

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.

Pyramid of Global Corporate Social Responsibility and Performance

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

CSR as Competitive Advantage Profit maximization and corporate social responsibility used to be considered antagonistic, leading to opposing policies; the two views can converge Recent attention has also been centered on the potential competitive advantage of socially responsible actions

Ecocentric management Creation of sustainable economic development and improvement of quality of life worldwide for all organizational stakeholders.

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