Social Responsibility and Managerial Ethics Chapter 4 Social Responsibility and Managerial Ethics Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

What Is Social Responsibility? “a business’s obligation, beyond that required by law and economics, to pursue long-term goals that are good for society” Robbins, et. al., 2006, P. 96 The Classical View Maximize profits for the benefit of the stockholders Doing “social good” unjustifiably increases costs The Socio-economic View Management should also protect and improve society’s welfare Corporations are responsible not only to stockholders Firms have a moral responsibility to larger society “to do the right thing” Managers regularly face decisions that have a dimension of social responsibility. We define social responsibility as a business’s obligation, beyond that required by law and economics, to pursue long-term goals that are good for society. This definition assumes that a business obeys laws and pursues economic interests. But also note that this definition views business as a moral agent. That is, in its effort to do good for society, it must differentiate between right and wrong. The more obvious examples include: employee relations, philanthropy, pricing, resource conservation, product quality, and doing business in countries that violate human rights. There are two opposing views of what social responsibility is. 1. The classical view is the view that management’s only social responsibility is to maximize profits. a. Milton Friedman is the most outspoken advocate of this view. b. He argues that managers’ primary responsibility is to operate the business in the best interests of the stockholders—the true owners of the organization. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Exhibit 4.1 Approaches to Social Responsibility Obstructionist Defensive Accommodative Proactive Approach Approach Approach Approach Disregard Minimal Moderate Strong for social commitment commitment commitment responsibility to social to social to social responsibility responsibility responsibility A. Obstructionist approach: avoids social responsibility. Obstructionist managers engage in unethical and illegal behaviour, and try to hide their behaviour from organizational stakeholders and society at large. B. Defensive approach: minimal socially responsible position. These organizations have a commitment to ethical behaviour, making sure that employees behave legally and no harm is done to others. The claims and interests of shareholders come first with this approach, and little attention is paid to other stakeholders. C. Accommodative approach: going beyond legal requirements, choosing to support social responsibility in a balanced fashion. Accommodative managers try to balance the interests of shareholders with those of other stakeholders by making choices that appear reasonable to all members of society. D. Proactive approach: finds out about and meets the needs of different stakeholder groups. Promotes the interests of stockholders, shareholders, and stakeholders, using organizational resources to do so. These managers feel a responsibility to society as a whole. The defensive approach is consistent with the classical view, while the accommodative and proactive approaches are consistent with the socio-economic view. No Social Responsibility High Social Responsibility Source: Adapted from S.L. Wartick and P.L. Cochran, “The Evolution of the Corporate Social Performance Model,” Academy of Management Review, October 1985, p. 766. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Values-based Management Managers establish and uphold an organization’s shared values Purposes of Shared Values Guiding managerial decisions Shaping employee behaviour Influencing the direction of marketing efforts Building team spirit The Bottom Line on Shared Corporate Values An organization’s values are reflected in the decisions and actions of its employees Values-based management is an approach to managing in which managers establish, promote, and practise an organization’s shared values. A. Purposes of Shared Values (see Exhibit 4.3) 1. They act as guideposts for managerial decisions and actions. 2. They also serve to shape employee behaviour and to communicate what the organization expects of its members. 3. The shared corporate values also can influence the organization’s marketing efforts. 4. Finally, shared values are a way to build team spirit in organizations. B. The Bottom Line on Shared Corporate Values 1. A 2002 survey on corporate values by the AMA showed that managers at a number of organizations have made a commitment to a set of core values (see Exhibit 4.4 for the survey results). 2. Only 64% said that their corporate values were linked to performance evaluations and compensation. 3. An organization’s values are revealed in the decisions and actions of employees. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Exhibit 4.3 Purposes of Shared Values ORGANIZATIONAL VALUES Guide Managers' Shape Employee Influence Build Team Spirit Decisions and Actions Behaviour Marketing Efforts Purposes of Shared Values (see Exhibit 4.3) 1. They act as guideposts for managerial decisions and actions. 2. They also serve to shape employee behaviour and to communicate what the organization expects of its members. 3. The shared corporate values also can influence the organization’s marketing efforts. 4. Finally, shared values are a way to build team spirit in organizations. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Managerial Ethics Ethics: Four Views of Ethics “The rules and principles that define right and wrong conduct” Robbins, et. al., 2006, p. 103 Four Views of Ethics Utilitarian view Rights view Theory of justice view Integrative social contracts theory Recent corporate scandals including Enron, WorldCom, Tyco, and ImClone may cause many to conclude that corporate America has no ethics. The term ethics refers to rules and principles that define right and wrong conduct. Four Views of Ethics 1. Utilitarian view of ethics says that ethical decisions are made solely on the basis of their outcomes or consequences. 2. Rights view of ethics is concerned with respecting and protecting individual liberties and privileges such as the rights to privacy, free speech, and due process. 3. Theory of justice view of ethics is where managers impose and enforce rules fairly and impartially and do so by following all legal rules and regulations. 4. Integrative social contracts theory proposes that ethical decisions be based on existing ethical norms in industries and communities in determining what constitutes right and wrong. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Managerial Ethics (cont’d) Utilitarian View Greatest good is provided for the greatest number Encourages efficiency and productivity and is consistent with the goal of profit maximization Rights View Respecting and protecting individual liberties and privileges Seeks to protect individual rights of conscience, free speech, life and safety, and due process Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Managerial Ethics (cont’d) The Theory of Justice Organizational rules are enforced fairly and impartially and follow all legal rules and regulations Protects the interests of underrepresented stakeholders and the rights of employees Integrative Social Contracts Theory Ethical decisions should be based on existing ethical norms in industries and communities Based on integration of the general social contract and the specific contract between community members Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Factors That Affect Employee Ethics Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity 1. Stages of Moral Development. Research confirms three levels of moral development (see Exhibit 4.6). Each level has two stages. First level is preconventional. Person’s choice based on personal consequences involved. b. Conventional level indicates that moral values reside in maintaining expected standards. c. Principled level has individuals make a clear effort to define moral principles apart for the authority of the groups to which individuals belong. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Factors That Affect Employee Ethics Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity Locus of Control A personality attribute that measures the degree to which people believe they control their own life Internal locus: the belief that you control your destiny External locus: the belief that what happens to you is due to luck or chance c. Locus of control refers to a personality attribute that measures the degree to which people believe they control their own fate. Externals are less likely to take personal responsibility for the consequences of their behaviour and are more likely to rely on external forces. 1. Write down which applies most to you (Internal or External) and explain why. 2. Get into your groups and try to figure out on average how the group as a whole is motivated? Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Exhibit 4.7 Determinants of Issue Intensity How much agreement is there that this action is wrong? How likely is it How many people that this action will be harmed? will cause harm? Consensus of Wrong Greatness Probability of Harm of Harm Issue Intensity Concentration Immediacy of 5. Finally, the intensity of an issue can affect ethical decisions. There are six characteristics that determine issue intensity (see Exhibit 4.7). a. Greatness of harm b. Consensus of wrong c. Probability of harm d. Immediacy of consequences e. Proximity to victim f. Concentration of effect According to these guidelines, the larger the number of people harmed, the more agreement that the action is wrong, the greater the likelihood that the action will cause harm, the more immediately that the consequences of the action will be felt, the closer the person feels to the victim(s), and the more concentrated the effect of the action on the victim(s), the greater the issue intensity. The more intense an issue is, the more we should expect employees to behave ethically. of Effect Consequences Proximity to How concentrated Victim(s) Will harm be felt is the effect of the immediately? action on the victim(s)? How close are the potential victims? Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Ethics in an International Context Ethical standards are not universal Social and cultural differences determine acceptable behaviours LIST THREE ITEMS YOU FEEL ARE OF UTMOST IMPORTANCE TO YOU in regards to ethics! IN YOUR GROUPS DISCUSS TWO ethics you all have in COMMON IN YOUR GROUP find ONE ethic that you have DIFFERENT Are ethical standards universal? Hardly! Social and cultural differences between countries are important environmental factors that determine ethical and unethical behaviour. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

How Managers Can Improve Ethical Behaviour in an Organization Hire individuals with high ethical standards. Establish codes of ethics and decision rules. Lead by example. Delineate job goals and performance appraisal mechanisms. Provide ethics training. Conduct independent social audits. Provide support for individuals facing ethical dilemmas. 1. The selection process for bringing new employees into organizations should be viewed as an opportunity to learn about an individual’s level of moral development, personal values, ego strength, and locus of control. 2. A code of ethics is a formal statement of an organization’s primary values and the ethical rules it expects employees to follow. Ethical leadership is also an important element in fostering ethical behaviour. Top management’s leadership and commitment to ethical behaviour is extremely important because it’s the top managers who set the cultural tone. 4. Employees’ job goals should be tangible and realistic, because when goals are clear and realistic, they reduce ambiguity and motivate rather than punish. Job goals are usually a key issue in performance appraisal. If an organization wants its employees to uphold high ethical standards, it must include this dimension in its appraisal process. Performance appraisals should be comprehensive and not just focus on economic outcomes. 5. Ethics training should be used to help teach ethical problem solving and to present simulations of ethical situations that might arise. If it does nothing else, ethics training should increase awareness of ethical issues 6. Independent social audits evaluate decisions and management practices in terms of the organization’s code of ethics and can be used to deter unethical behaviour. 7. Finally, organizations can provide formal protective mechanisms so that employees with ethical dilemmas can do something about them without fear of reprisal. “Whistle-blowers” can be a key part of a company’s ethics program because they are willing to step forward and expose unethical behaviour, no matter what the cost professionally or personally. The company must limit these potential negative effects. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Code of Ethics A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow Be a dependable organizational citizen Don’t do anything unlawful or improper that will harm the organization Be good to customers A code of ethics is a formal statement of an organization’s primary values and the ethical rules it expects employees to follow. Also, decision rules can be developed to guide managers in handling ethical dilemmas in decision-making. A survey of companies’ codes of ethics found their content tended to fall into three categories: 1. Be a dependable organizational citizen; 2. Don’t do anything unlawful or improper that will harm the organization; and 3. Be good to customers. Source: F.R. David, “An Empirical Study of Codes of Business Ethics: A Strategic Perspective.” Paper presented at the 48th Annual Academy of Management Conference, Anaheim, California, August 1988. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Ethical Leadership Managers must provide a good role model by: Being ethical and honest at all times Telling the truth Admitting failure and not trying to cover it up Communicating shared ethical values to employees through symbols, stories, and slogans Rewarding employees who behave ethically and punishing those who do not Protecting employees (whistleblowers) who bring to light unethical behaviours or raise ethical issues Ethical leadership is also an important element in fostering ethical behaviour. Top management’s leadership and commitment to ethical behaviour is extremely important because it’s the top managers who set the cultural tone. Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

The Value of Ethics Training Training can make a difference in ethical behaviours Training increases employee awareness of ethical issues in business decisions Training clarifies and reinforces the standards of conduct Employees are more confident of support when taking unpopular but ethically correct stances Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.

Thank You! Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc.