Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Chapter 3 Ethics and Social Responsibility

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © What Would You Do?  PETA v. McDonald’s  Should McDonald’s assure that animals are treated “humanely”?  What ethical guidelines are relevant in this situation?

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © After discussing this section you should be able to: Learning Objectives Ethics 1.discuss how the nature of a management job creates the possibility for ethical abuses, 2.identify common kinds of workplace deviance, 3.describe the 1991 U.S. Sentencing Commission Guidelines and how its recommendations now make ethical behavior much more important for businesses.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Ethics and the Nature of Management Jobs  Ethical behavior follows accepted principles of right and wrong  Intentional managerial unethical behaviors  company resources for personal use  mishandling information  encouraging others’ unethical behavior

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Ethics and the Nature of Management Jobs (Cont’d.)  Unintentional managerial unethical behavior  poorly constructed policies  unrealistic employee goals

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright ©  Behavior that violates organizational norms about right and wrong  Two dimensions  Degree of deviance ªminor to serious  Target of deviant behavior ªthe organization or particular people Workplace Deviance

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Types of Workplace Deviance  Production  Property  Political  Personal Aggression

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Production Deviance  Hurts the quality and/or quantity of work  Such as leaving early, taking excessively long breaks, etc.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Property Deviance  Unethical behavior aimed at company property  Such as sabotage, stealing, damaging equipment, etc.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Political Deviance  Using one’s influence to harm others in the company  Such as favoritism, spreading rumors, falsely blaming others, etc.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Personal Aggression  Hostile or aggressive behavior toward others  Such as sexual harassment, verbal abuse, threatening others, etc.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Workplace Deviance MINOR ORGANIZATIONAL INTERPERSONAL SERIOUS Property Deviance sabotaging equipment accepting kickbacks lying about hours worked stealing from the company Personal Aggression sexual harassment verbal abuse stealing from co-workers endangering co-workers Political Deviance showing favoritism gossiping about co-workers blaming co-workers competing nonbeneficially Production Deviance leaving early excessive breaks working slow wasting resources Adapted from Exhibit 3.1

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © U.S. Sentencing Commission Guidelines  Companies can be prosecuted and punished even if management didn’t know about the unethical behavior  Who, What, and Why  Determining Punishment

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Who, What, and Why  Nearly all businesses - profit and nonprofit- are covered  Punishes a number of actions  Encourages businesses to be proactive on employee crime

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Determining Punishment  Smaller fines for companies that are proactive  Steps in determining fine size  determine the base fine  compute a culpability score  multiply the base fine by the culpability score  Compliance programs are important

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Compliance Program Steps for the 1991 U.S. Sentencing Guidelines  Establish standards and procedures to meet the company’s business needs.  Put upper-level managers in charge of the compliance program.  Don’t delegate decision-making authority to employees who are likely to act illegally or unethically.  Use auditing, monitoring, and other methods to encourage employees to report violations.  Use company publications and training to inform employees about the company’s compliance standards and procedures.  Enforce compliance standards by fairly and consistently disciplining violators.  After violations occur, find appropriate ways to improve the compliance program. Adapted from Exhibit 3.2

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © After discussing this section you should be able to: Learning Objectives Making Ethical Decisions 4.describe what influences ethical decision making, 5.explain what practical steps managers can take to improve ethical decision making.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Influences on Ethical Decision Making  Ethical Intensity of the Decision  Moral Development of the Manager  Ethical Principles Used to Solve the Problem

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Ethical Intensity of the Decision  Magnitude of consequences  Social consensus  Probability of effect  Temporal immediacy  Proximity of effect  Concentration of effect

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Moral Development of the Manager Preconventional Level Stage 1: Punishment & Obedience Stage2: Instrumental Exchange Conventional Level Stage 3: Good Boy - Nice Girl Stage 4: Law & Order Post Conventional Level Stage 5: Legal Contract Stage 6: Universal Principle Adapted from Exhibit 3.3 Davidson & Worrell, Business & Society 34 (1995):

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principles of Ethical Decision Making  Principle of Long- term Self-interest  Principle of Personal Virtue  Principle of Religious Injunctions  Principle of Government Requirements  Principle of Utilitarian Benefits  Principle of Individual Rights  Principle of Distributive Justice

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principle of Long-Term Self-Interest  People should never take any action that is not in their or their organization’s long- term self-interest  The key is long-term, not short-term interests

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principle of Personal Virtue  People should never do anything that is not honest, open, and truthful, and which they would not be glad to see reported in the newspapers or on TV

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principle of Religious Injunctions  People should never take an action that is unkind or that harms a sense of community, such as the positive feelings that come from working together to accomplish a commonly accepted goal.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principle of Government Requirements  The law represents the minimal moral standards of society  People should never take any action that violates the law.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principle of Utilitarian Benefits  People should never take any action that does not result in greater good for society  People should do whatever creates the greatest good for the greatest number

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principle of Individual Rights  People should never take any action that infringes on others’ agreed-on rights

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Principle of Distributive Justice  People should never take any action that harms the least among us in some way

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Practical Steps to Ethical Decision Making  Selecting and Hiring Ethical Employees  Codes of Ethics  Ethics Training  Ethical Climate

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Selecting and Hiring Ethical Employees  Increase ethical behaviors by hiring more ethical employees  Testing for ethics  Overt integrity tests  Personality-based integrity tests

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © What Really Works? Workplace Deviance (Counterproductive Behaviors) Overt Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personality-Based Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 82% Probability of success68%

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © What Really Works? (Cont’d.) Job Performance Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personality-Based Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success70% Probability of success69%

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © What Really Works? (Cont’d.) Theft Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success57%

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Codes of Ethics  Corporate statements on ethics  The relationship between codes and behavior depend on:  companies communicating the codes to others both within and outside the company  companies developing practical ethical standards and procedures specific to the company’s line of business

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Ethics Training  Develop employee awareness about ethics  Achieve credibility with employees  Teach employees a practical model of ethical decision making

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © A Basic Model of Ethical Decision Making Identify the proble m Identify the constituent s Diagnose the situation Analyze your options Make your choice Ac t Adapted from Exhibit 3.5

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Ethical Climate

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © After discussing this section you should be able to explain: Learning Objectives Social Responsibility 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.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © To Whom Are Organizations Socially Responsible?  Shareholders  managers must satisfy the owners  social responsibility is maximizing shareholder wealth  Stakeholders  persons with a legitimate interest in the company  social responsibility is satisfying the interests of multiple stakeholders

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Been There, Done That  Large multinational corporations are the cause of many social problems  Businesses should be audited socially & environmentally  She is an activist against corporate corruption Anita Roddick, founder and co-chair of The Body Shop International PLC

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Shareholders Only - Friedman  Managers cannot act effectively as moral agents for shareholders  Time, money, and attention diverted to social causes undermine market efficiency

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Stakeholder View

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © For What Are Organizations Socially Responsible? Economic Responsibilities Legal Responsibilities Ethical Responsibilities Discretionary Responsibilities Adapted from Exhibit 3.8 Carroll, Academy of Management Review 4 (1979):

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Blast From The Past 100 Years of Corporate Philanthropy  1800s - doctrine of ultra vires  Benefits to employees allowed in late 19th century  1940s corporate philanthropy took place  Now, U.S. companies donate approximately $6 billion a year

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Responses to Demands for Social Responsibility ReactionDefenseAccommodationProaction Fight all the way Do only what is requ ired Be Progressive Lead the industry Do Nothing Do Much Withdrawal Public Relations Approach Legal Approach BargainingProblem Solving Adapted from Exhibit 3.9 Carroll, Academy of Management Review 4 (1979):

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Social Responsibility and Economic Performance  Social responsibility can sometimes cost a company significantly if it chooses to be socially responsible  Sometimes it does pay to be socially responsible  While socially responsible behavior may be “the right thing to do,” it does not guarantee profitability

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © What Really Happened?  McDonald’s formed the Animal Advisory Council  Developed Animal Welfare Guiding Principles  McDonald’s changed their egg purchasing practices