© Emily & Jian, MGTO120 Summer 2006, HKUST 1 Very IMPORTANT topics today!!! Part II Defining the Manager’s Terrain Ch.3 Organizational Culture Ch.4 Global Environment Ch.5 Social Responsibility and Managerial Ethics

© Emily & Jian, MGTO120 Summer 2006, HKUST 2 Today’s Agenda  Short review – org. culture (Ch.3) & global environment (Ch. 4)  Ch.5 – social responsibility and managerial ethics  Tutorial – video, group discussion (start your group work as early as possible!) Class ends on 4:00pm today!

© Emily & Jian, MGTO120 Summer 2006, HKUST 3 Ch.5 Social Responsibility and Managerial Ethics Learning objectives: 1. Understand the classical and socioeconomic views of social responsibility. 2. Understand social obligation, social responsiveness, and social responsibility 3. Contrast the four views of managerial ethics 4. Discuss the factors that affect managerial ethics 5. Discuss various ways organizations can improve ethical behavior

© Emily & Jian, MGTO120 Summer 2006, HKUST 4 Where We Are Today Management (Robbins & Coulter) Part 1 Basic Concepts (Ch1) Part 2 Context (ch3-5) Part 1 Retrospect (ch2) Part 3 Planning (ch6-9) Part 4 Organizing (Ch10-13) Part 5 Leading (Ch 14-17) Part 6 Controlling (Ch 18,19)

© Emily & Jian, MGTO120 Summer 2006, HKUST 5 Business Ethics – IMPORTANT to managers and everyone!

© Emily & Jian, MGTO120 Summer 2006, HKUST 6 " Many energy companies have invested in closed or repressive countries – arguing that their investment would help develop the local economy and thereby improve the human rights situation.” What are ethical problems? 环境污染致人死 —— 癌症村与夺命 GDP “The manager of a Mexican firm bribes several high-ranking government officials in Mexico City to secure a profitable government contract....is a standard business practice in Mexico.” (textbook)

© Emily & Jian, MGTO120 Summer 2006, HKUST 7 What Is Social Responsibility? Classical view - maximize profits Milton Friedman – managers’ only job is to serve stockholders doing “social good” adds costs costs have to be passed on to consumers Nobel Prize winner ! ? Socioeconomic view - serve society –Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare. –Corporations are not independent entities responsible only to stockholders. –Firms have a moral responsibility to larger society to become involved in social, legal, and political issues. –“To do the right thing”

© Emily & Jian, MGTO120 Summer 2006, HKUST 8 To Whom is Management Responsible? Different views at different stages

© Emily & Jian, MGTO120 Summer 2006, HKUST 9 Exhibit 3.11 Organizational Stakeholders

© Emily & Jian, MGTO120 Summer 2006, HKUST 10 Social Obligation, Responsiveness, and Responsibility Social Obligation The obligation of a business to meet its economic and legal responsibilities and nothing more. Social Responsiveness The capacity of a firm to adapt to changing societal conditions through the practical decisions of its managers in responding to important social needs. Social Responsibility A firm’s obligations as a moral agent extends beyond its legal and economic obligations, to the pursuit of long-term goals that are good for society.

© Emily & Jian, MGTO120 Summer 2006, HKUST 11 From Obligation to Responsiveness to Responsibility Levels of social involvement: Social Obligation Social Responsibility Social Responsiveness e.g. Johnsons & Johnsons – Tylenol e.g. Café de Coral – non-smoking areas e.g. Tobacco manufacturers – health warning on the packing

© Emily & Jian, MGTO120 Summer 2006, HKUST 12 Social Responsibility versus Social Responsiveness Social Responsibility Social Responsiveness Major considerationEthical Pragmatic Focus Ends Means Emphasis Obligation Responses Decision framework Long term Medium and short term

© Emily & Jian, MGTO120 Summer 2006, HKUST 13 corporate social responsibility  economic performance Does Social Responsibility Pay? Studies appear to show a positive relationship between social involvement and the economic performance of firms. A general conclusion is that a firm’s social actions do not harm its long-term performance.

© Emily & Jian, MGTO120 Summer 2006, HKUST 14 Values-Based Management An approach to managing in which managers establish and uphold an organization’s shared values. Values reflect what the organization stands for and what it believes in Values reflect what the organization stands for and what it believes in The Purposes of Shared Values The Purposes of Shared Values

© Emily & Jian, MGTO120 Summer 2006, HKUST 15 Purposes of Shared Values –Serving as guideposts for managerial decisions –Shaping employee behavior by communicating what the organization expects of its members –Influencing the direction of marketing efforts –Building team spirit

© Emily & Jian, MGTO120 Summer 2006, HKUST 17 Xian Janssen (video if time allows)

© Emily & Jian, MGTO120 Summer 2006, HKUST 18 CEO exchange – What does “social responsibility” mean to Jack Welch? And what do you think?

© Emily & Jian, MGTO120 Summer 2006, HKUST 19 Managerial Ethics Utilitarian View Utilitarian View Ethical decisions are made solely on the basis of their outcomes or consequences such that the greatest good is provided for the greatest number. Ethical decisions are made solely on the basis of their outcomes or consequences such that the greatest good is provided for the greatest number. Encourages efficiency and productivity and is consistent with the goal of profit maximization. Encourages efficiency and productivity and is consistent with the goal of profit maximization. Rights View Rights View Concerned with respecting and protecting individual liberties and privacy. Concerned with respecting and protecting individual liberties and privacy. Seeks to protect individual rights of conscience, free speech, life and safety, and due process. Seeks to protect individual rights of conscience, free speech, life and safety, and due process.

© Emily & Jian, MGTO120 Summer 2006, HKUST 20 Managerial Ethics (cont’d) The Theory of Justice The Theory of Justice Organizational rules are enforced fairly and impartially and follow all legal rules and regulations. Organizational rules are enforced fairly and impartially and follow all legal rules and regulations. Protects the interests of underrepresented stakeholders and the rights of employee. Protects the interests of underrepresented stakeholders and the rights of employee. Integrative Social Contracts Theory Integrative Social Contracts Theory Ethical decisions should be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong. Ethical decisions should be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong. Based on integration of the general social contract and the specific contract between community members. Based on integration of the general social contract and the specific contract between community members.

© Emily & Jian, MGTO120 Summer 2006, HKUST 21 Why employee would behave ethically or unethically? Individual characteristics Individual characteristics Organizational characteristics Organizational characteristics Issue Intensity Issue Intensity

© Emily & Jian, MGTO120 Summer 2006, HKUST 22 Factors That Affect Ethical and Unethical Behavior

© Emily & Jian, MGTO120 Summer 2006, HKUST 23 Individual Characteristics Affecting Ethical Behaviors Stage of Moral Development Stage of Moral Development A measure of an individual’s independence from outside influences A measure of an individual’s independence from outside influences Values Values Basic convictions about what is right or wrong on a broad range of issues Basic convictions about what is right or wrong on a broad range of issues Personality Variables Personality Variables Ego strength Ego strength Locus of Control Locus of Control

© Emily & Jian, MGTO120 Summer 2006, HKUST 24 Stages of Moral Development

© Emily & Jian, MGTO120 Summer 2006, HKUST 25 Organizational Characteristics Affecting Ethical Behaviors Performance appraisal systems Performance appraisal systems Reward allocation systems Reward allocation systems Behaviors (ethical) of managers Behaviors (ethical) of managers Organizational culture Organizational culture Good structural design minimizes ambiguity and uncertainty and fosters ethical behavior.

© Emily & Jian, MGTO120 Summer 2006, HKUST 26 Intensity of the ethical issue

© Emily & Jian, MGTO120 Summer 2006, HKUST 27 How Managers Can Improve Ethical Behavior in An Organization 1. Hire individuals with high ethical standards. 2. Establish codes of ethics and decision rules. 3. Lead by example. 4. Delineate job goals and performance appraisal mechanisms. 5. Provide ethics training. 6. Conduct independent social audits. 7. Provide support for individuals facing ethical dilemmas.

© Emily & Jian, MGTO120 Summer 2006, HKUST 28 Many organizations are now having their “Codes of conduct”

© Emily & Jian, MGTO120 Summer 2006, HKUST 29 JUSTICE (practical, by John, not in text) a model of Ethical Decision criteria 1. J ustice: all follow same rule 2. U tilitarianism: greatest good 3. S piritual values: do unto others as you would want them to do to you 4. T V rule: defend openly on TV 5. I nfluence: any influence of your action? 6. C ore: important to you, your core values 7. E mergency: urgency of situation

© Emily & Jian, MGTO120 Summer 2006, HKUST 30 “ Parable of the Sadhu ” What is the ethical issue? What are the dilemmas? What do you think Buzz McCoy did? What would YOU do? Why? (apply the JUSTICE model?)

© Emily & Jian, MGTO120 Summer 2006, HKUST 31 true story: Parable on ethics. During a climbing expedition in Nepal, a man encounters a dying pilgrim - a sadhu, an Indian holy man. Members of several groups do what they can - food, warm clothes, etc. - but none made sure that he would be safe. Should someone have stopped to help the sadhu to safety? Would it have done any good? Was the group responsible? Parable of the Sadhu

© Emily & Jian, MGTO120 Summer 2006, HKUST 32 characters: Wall Street New York Banker Buzz McCoy, good-hearted mountain climber Steven, the “ Sherpa ” (local guide) and the Sadhu (a Monk, a Holy man) Some strange English: “ Mate ” : Australian/ New Zealander for friend “ Good Samaritan ” (from Samaria) helped victim (Bible story) altitude sickness Nepal (country at top of Himalayas) 32 degrees is freezing in Fahrenheit scale put yourself in other person ’ s shoes – the dilemma, what did they do, what should they do, and what would you do?

© Emily & Jian, MGTO120 Summer 2006, HKUST 33 Why did it happen? Stress Goal Obsession Failures of leadership –value conflicts –buck passing: no one takes final responsibility –decision by technicians bad examples alien cultural environments blaming the victim failure of individual moral responsibility

© Emily & Jian, MGTO120 Summer 2006, HKUST 34 Enron “The downfall of Enron Corporation is one of the most infamous and shocking events in financial world in the whole history of the mankind, and its reverberations were felt on global scale.” Anderson (Textbook page 125) Search information about the cases of Worldcom, Tyco International, Imclone...what were the ethical issues involved? HK cases?? Read more articles in google, searching with key works like “Business Ethics”, “managerial ethics”, and “Enron”, “Anderson”, etc. Tons of articles! Cases

© Emily & Jian, MGTO120 Summer 2006, HKUST 35 Homework (remember, this course is to HELP you to think critically, but it is YOU who THINK): Think about social responsibility and ethics issues in your life – (un)ethical things that you observed/encountered/did? Why and in what sense it is (un)ethical? Think about social responsibility and ethics issues in your life – (un)ethical things that you observed/encountered/did? Why and in what sense it is (un)ethical? How HKUST can improve campus ethical behavior? How HKUST can improve campus ethical behavior? Plan ahead ! – mid-term exam, group movie project Plan ahead ! – mid-term exam, group movie project

© Emily & Jian, MGTO120 Summer 2006, HKUST 36 Starting next class... We will talk about POLC in greater detail. Part III Planning Read Ch.6 & 7