1 Chapter 4 Ethics and Social Responsibility Designed & Prepared by B-books, Ltd. MGMT 2008 Chuck Williams

2 Ethical and Unethical Workplace Behavior Ethics The set of moral principles or values that defines right and wrong for a person or group.

3 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.

4 Ethics and the Nature of Management Jobs Unethical Managerial Behavior Authority and Power Handling Information Influencing the Behavior of Others Setting Goals 1 1

5 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

6 Source: Republished with permission of Academy of Management, P.O.Box 3020, Briar Cliff Manor, NY, “A Typology of Deviant Workplace Behaviors,” (Figure), S. L. Robinson & R. J. Bennett. Academy of Management Journal, 1995, Vol. 38. Reproduced by permission of the publisher via Copyright Clearance Center, Inc. 62 P a r t 1 : I n t r o d u c t i o n t o M a n a g e m e n t 1.1 Common Kinds of Workplace Deviance

7 U.S. Sentencing Commission Guidelines Companies can be prosecuted and punished even if management didn’t know about the unethical behavior. 2 2

8 Who, What, and Why? Nearly all businesses are covered Punishes a number of offenses Encourages businesses to be proactive 2.1

9 Partial List of Offenses 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 2.1

10 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 2.2

11 Compliance Program Steps 1. 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. 2.2

12 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.

13 Influences on Ethical Decision Making Ethical Answers Depend on… Ethical Intensity of Decision Moral Development of Manager Ethical Principles Used 3 3

14 Ethical Intensity Depends on… Concentration of effect Magnitude of consequences Social consensus Probability of effect Proximity of effect Temporal immediacy 3.1

15 Dr. Dickerson’s Doctoral Dissertation. Ethical Decision Making within Public Accounting Findings: Social Consensus –The more the social agreement (corp. culture) about the issue, the more likely people are to recognize the situation. Proximity –The closer to the people who would be harmed by the dilemma, the more likely they are to recognize that this is an ethical issue. Business Ethics (BUS 60)

16 Moral Development Societal Expectations Selfish Internalized Principles PreconventionalPreconventionalConventionalConventionalPostconventionalPostconventional Kohlberg’s Stages of Moral Development 3.2

17 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 3.2

18 Principles of Ethical Decision Making Long-term self-interest Personal virtue Religious injunctions Government requirements Utilitarian benefits Individual rights Distributive justice 3.3

19 Principle of long-term self-interest Never take any action not in your organization’s long-term self-interest. Principles of Ethical Decision Making 3.3

20 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. 3.3

21 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. 3.3

22 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. 3.3

23 Principles of Ethical Decision Making Principle of Utilitarian Benefit Never take any action that does not result in greater good for society. 3.3

24 Principles of Ethical Decision Making Principle of Individual Rights Never take any action that infringes on others’ agreed-upon rights. 3.3

25 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. 3.3

26 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 4 4

27 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? 4.1

28 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 4.2

29 Purchasing Managers Received Kickbacks Home Depot Inc. fired four purchasing managers for receiving kickbacks from product vendors. The managers received at least $1 million to stock and display vendors’ products. Home Depot is instituting a zero- tolerance policy on gifts offered by vendors. Source: Zimmerman, A “Home Depot Fires Employees Amid Probe of Kickbacks.” The Wall Street Journal. August 2, pg.A2. Beyond the Book

30 Ethics Training Develops employee awareness of ethics Achieves credibility with employees Teaches a practical model of ethical decision making “Ethics Scenarios Game” Web Link 4.3

31 Ethics Training Lockheed Boeing Bell South U.S. Dept. of Justice 3M City of Philadelphia And more require employees to take ethics training

32 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 4.3

33 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 4.4

34 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.

35 What Is Social Responsibility? Social Responsibility A business’s obligation to…  pursue policies  make decisions  take actions that benefit society

36 What Is Social Responsibility? Recall from Chapter 3 that PETA and Procter & Gamble have an ongoing disagreement about what is socially responsible.

37 To Whom Are Organizations Socially Responsible? Stakeholder Model Stakeholder Model Satisfy Interests of Multiple Stakeholders Satisfy Interests of Multiple Stakeholders Shareholder Model Maximize Profits 5 5

38 Pros Shareholder Model Firm maximizes shareholder wealth and satisfaction The company stock increases in value Cons Organizations cannot act effectively as moral agents for shareholders Time, money, and attention diverted to social causes undermine market efficiency 5 5

39 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 5 5

40 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 $ ? 6 6

41 Responses to Demands for Social Responsibility 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 7 7

42 Social Responsibility and Economic Performance Realities of Social Responsibility Can cost a company Sometimes it does pay Does not guarantee profitability 8 8