Management 11e John Schermerhorn Chapter 3 Ethics and Social Responsibility

Planning Ahead — Chapter 3 Study Questions What is ethical behavior? How do ethical dilemmas complicate the workplace? How can high ethical standards be maintained? What is social responsibility and governance?

Study Question 1: What is ethical behavior? Ethics Code of moral principles. Set standards of “good” or “bad” or “right” or “wrong” in one’s conduct. Ethical behavior What is accepted as good and right in the context of the governing moral code.

Study Question 1: What is ethical behavior? Law, values, and ethical behavior: Legal behavior is not necessarily ethical behavior. Personal values help determine individual ethical behavior.

Study Question 1: What is ethical behavior? Law, values, and ethical behavior: Values - underlying beliefs and attitudes that help determine individual behavior Terminal values - preferences about desired ends Instrumental values – preferences regarding the means to desired ends

Study Question 1: What is ethical behavior? Alternative ethical views Utilitarian Delivers the greatest good to the most people Individualism Advances long-term self-interests Moral rights Maintains fundamental rights of all human beings

Study Question 1: What is ethical behavior? Justice view of ethics fair and impartial treatment of people according to legal rules and standards Procedural justice – policies and rules fairly applied Distributive justice – equal treatment for all people Interactional justice – people treated with dignity and respect Commutative justice – fairness to all involved

Four views of ethical behavior Management 11e/ Chapter 3

Study Question 1: What is ethical behavior? Cultural issues in ethical behavior: Cultural relativism Ethical behavior is always determined by cultural context. Universalism Behavior unacceptable in one’s home environment should not be acceptable anywhere else. Ethical imperialism Imposing one’s ethical standards on others. Management 11e/ Chapter 3

The extremes of cultural relativism and ethical imperialism in international business ethics. Source: Developed from Thomas Donaldson, “Values in Tension: Ethics Away from Home,” Harvard Business Review, vol. 74 (September-October 1996), pp. 48-62. Management 11e/ Chapter 3

Study Question 1: What is ethical behavior? Sources of information on ethical behavior: Institute for Global Ethics at www.globalethics.org and on Facebook at http://www.facebook.com/pages/Rockland-ME/Institute-for-Global-Ethics/51585783748?ref=ts Ethics Resource Center at www.ethics.org Management 11e/ Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? An ethical dilemma occurs when choices, although having potential for personal and/or organizational benefit, may be considered unethical. Management 11e/ Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? Ethical dilemmas include: Discrimination Sexual harassment Conflicts of interest Product Safety Organizational resources Management 11e/ Chapter 3

Checklist for ethical dilemmas Step 1 Recognize the ethical dilemma. Step 2 Get the facts. Step 3 Identify your options. Step 4 Test each option: Is it legal? Is it right? Is it beneficial? Step 5 Decide which option to follow. Step 6 Ask the Spotlight Questions: To double check your decision. “How would I feel if my family found out about my decision?” “How would I feel if my decision was printed in the local paper or posted online?” Step 7 Take action Management 11e/ Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? Influences on Ethical Decision Making Ethical framework Provides personal rules or strategies for ethical decision making Includes personal values Honesty Fairness Integrity Self-respect Management 11e/ Chapter 3

Kohlberg’s stages of individual moral development Management 11e/ Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? Situational Context and Ethics Intensity Will the situation pose an important ethic challenge? Magnitude of the situation Risk of immediate harm Proximity and concentration of harm Social consensus Management 11e/ Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? Organizational Culture Influence What is considered ethical behavior within the organizational context? What are the expectations of management? What are the expectations of co-workers? Is there a code of ethics? Management 11e/ Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? External environment Government laws and regulations Societal norms and values Competitive climate in an industry Management 11e/ Chapter 3

Study Question 2: How do ethical dilemmas complicate the workplace? Ethical behavior can be rationalized by convincing yourself that: Behavior is not really illegal. Behavior is really in everyone’s best interests. Nobody will ever find out. The organization will “protect” you. Management 11e – Management 11e/ Chapter 3

Study Question 3: How can high ethical standards be maintained? Ethics training: Structured programs that help participants to understand ethical aspects of decision making. Helps people incorporate high ethical standards into daily life. Helps people deal with ethical issues under pressure. Management 11e/ Chapter 3

Study Question 3: How can high ethical standards be maintained? Codes of Ethical Conduct Formal statement of an organization’s values and ethical principles regarding how to behave in situations susceptible to the creation of ethical dilemmas Management 11e/ Chapter 3

Study Question 3: How can high ethical standards be maintained? Moral Management Managers behave in one of three ways immoral manager Chooses to behave unethically amoral manger Disregards ethics of actions, intentionally or unintentionally moral manager Considers ethical behavior as a personal goal Management 11e/ Chapter 3

How can high ethical standards be maintained?

Study Question 3: How can high ethical standards be maintained? Areas often covered by codes of ethics: Bribes and kickbacks Political contributions Honesty of books or records Customer/supplier relationships Confidentiality of corporate information Management 11e/ Chapter 3

Study Question 3: How can high ethical standards be maintained? Whistleblowers Expose misdeeds of others to: Preserve ethical standards Protect against wasteful, harmful, or illegal acts Laws protecting whistleblowers vary Management 11e/ Chapter 3

Study Question 3: How can high ethical standards be maintained? Barriers to whistleblowing include: Strict chain of command Strong work group identities Ambiguous priorities Management 11e/ Chapter 3

Study Question 3: How can high ethical standards be maintained? Organizational methods for overcoming whistleblowing barriers: Ethics staff units who serve as ethics advocates Moral quality circles Management 11e/ Chapter 3

Study Question 3: How can high ethical standards be maintained? Social entrepreneurship: a unique form of entrepreneurship that seeks novel ways to solve pressing social problems at home and abroad Housing and job training for homeless Bringing technology to poor families Improving literacy among disadvantaged youth Offering small loans to start minority-owned businesses Management 11e/ Chapter 3

Corporate social responsibility and governance: Study Question 4: What is social responsibility and corporate governance? Corporate social responsibility and governance: Looks at ethical issues on the organization level. Obligates organizations to act in ways that serve both its own interests and the interests of society at large. Management 11e/ Chapter 3

Stakeholder Management Study Question 4: What is social responsibility and corporate governance? Stakeholder Management Stakeholders persons, groups, and other organizations directly affected by the behavior of the organization and holding a stake in its performance. Management 11e/ Chapter 3

Typical organizational stakeholders Study Question 4: What is social responsibility and corporate governance? Typical organizational stakeholders Organization Employees Customers Suppliers Owners Competitors Regulators Interest groups Management 11e/ Chapter 3

Perspectives on social responsibility: Study Question 4: What is social responsibility and corporate governance? Perspectives on social responsibility: Classical view Management’s only responsibility is to maximize profits. Socioeconomic view Management must be concerned for the broader social welfare, not just profits. Management 11e/ Chapter 3

Study Question 4: What is social responsibility and governance? Arguments against social responsibility: Reduced business profits Higher business costs Dilution of business purpose Too much social power for business Lack of public accountability Arguments in favor of social responsibility: Adds long-run profits Improved public image Avoids more government regulation Businesses have resources and ethical obligation Management 11e/ Chapter 3

Criteria for evaluating corporate social performance. Management 11e/ Chapter 3

Strategies for pursuing social responsibility: Study Question 4: What is social responsibility and corporate governance? Strategies for pursuing social responsibility: Obstructionist meets economic responsibilities. Defensive meets economic and legal responsibilities. Accommodative meets economic, legal, and ethical responsibilities. Proactive meets economic, legal, ethical, and discretionary responsibilities. Management 11e/ Chapter 3

Four strategies of corporate social responsibility—from obstructionist to proactive behavior. Management 11e/ Chapter 3

Study Question 4: What is social responsibility and governance? Corporate governance: The oversight of the top management of an organization by a board of directors. Corporate governance involves: Hiring, firing, and compensating the CEO. Assessing strategy. Verifying financial records. Management 11e/ Chapter 3

Study Question 4: What is social responsibility and governance? How government influences organizations: Common areas of government regulation of business affairs: Occupational safety and health Fair labor practices Consumer protection Environmental protection Management 11e/ Chapter 3

Patagonia: Turning a profit without losing your soul Chapter 3 Case Patagonia: Turning a profit without losing your soul Management 11e/ Chapter 3

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