1. Chapter 5 – Social Responsibility and Managerial Ethics
Two contrasting views of social responsibility
To whom is management responsible?
Levels of responsibility
Social responsibility and economic performance
The “greening” of management
Values-based management
Four views of managerial ethics
Factors that affect employee ethics
Six determinants of issue intensity
Improving ethical behavior

2. Your Company’s Value Statement
If you owned and ran your own company, what would your “key values” be?

3. Social Responsibility – Classical View
Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).
Expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers.

4. Social Responsibility – Socioeconomic View
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”

5. Two Views of Social Responsibility
Socioeconomic View
Protect and serve society’s welfare
Classical View
(Economic View)
Maximize profits

6. The Debate
McDonalds has been criticized for making food unhealthy (e.g., “Supersize Me”), not telling people what’s in it. Should McDonalds become SR by:
Making foods healthier (e.g., smaller portions, leaner beef, canola oil vs, lard)
Advertise what’s in food

7. Arguments For and Against Social Responsibility
For (Socioeconomic View)
Public expects it
More profitable in long-run
Ethical obligation
Better public image
Better environment
Discourages further governmental regulation
Balances responsibility and power
Companies possess resources, so why not?
Better to prevent disease than having to cure it
Against (Classical View)
Violates profit maximization
Dilutes purpose
Costs too much
Gives companies even more power!
Don’t have skills to do it
Not our responsibility
Employers already contribute to social good by allowing people to work, offering good products, maintaining good relations with suppliers
Exhibit 5.2

8. To Whom is Management Responsible?
Exhibit 5.1

9. Levels of Social Involvement
Responsiveness
Social
Responsibility
Social Obligation

10. Social Responsiveness versus Social Responsibility
Social Responsiveness Social Responsibility
Major consideration Pragmatic Ethical
Focus Means Ends
Emphasis Responses Obligation
Decision framework Medium and short-term Long-term
Reactive Proactive
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.
Exhibit 5.3

11. Does Social Responsibility Pay?
Studies appear to show a positive relationship between social involvement and the economic performance of firms.
But hard to define and measure “social responsibility”
Can take years for SR to pay off
Causality problem – which comes first?
A general conclusion is that a firm’s social actions do not harm its long-term performance.

12. Example: HP’s Corporate Objectives
Profit
Customers
Fields of interest
Growth
Our people
Management
Citizenship
“The company strives to honor its obligations to society by being an economic, intellectual, and social asset to each nation and each community in which it operates. The company pledges to make sure that the communities in which it operates are better for its presence.”

13. The Greening of Management
The recognition of the close link between an organization’s decision and activities and its impact on the natural environment.
Global environmental problems facing managers:
Air, water, and soil pollution from toxic wastes
Global warming from greenhouse gas emissions
Natural resource depletion

14. Values-Based Management
An approach to managing in which managers establish and uphold an organization’s shared values.
The Purposes of Shared Values
Serving as guideposts for managerial decisions
Shaping employee behavior
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.

15. Do People Care About _____________?
People Do. Chevron.

16. Do people care enough about wildlife to give evolution a helping hand?
BUT YOU’D BETTER WALK THE TALK, OR IT WILL BACKFIRE!
Do people care enough about wildlife to give evolution a helping hand?
It's tough to be a salmon in California waters today. Water intakes threaten you, power boats bring anglers to try to catch you, and when you finally reach your home river, there may be a dam blocking your way. The last thing you need is for some predator to eat your fry after you spawn.
At Chevron, we care about California's salmon. That's why we're releasing mutation-causing chemicals into San Francisco Bay from our refinery at Point Richmond. As salmon swim through the Bay on their way to their spawning grounds our patented GenenTechroline(TM) alters their chromosomes, giving their offspring a chance to evolve new defenses against predation. The extra eyes on Oncorhynchus guernica, pictured above, are just one example.
And if we save money through this innovative waste disposal technique, and are able to pass it on to our shareholders, so much the better. As the chairman of our Board of Directors said when we started this program, "the 'eyes' have it."
People Do.

17. Suggestions for Creating a Good Corporate Values Statement
Involve the whole company
Let individual departments customize values
Expect and accept employee resistance
Keep it short and avoid trivialities
Leave out religious references
Challenge it and live it 12

18. Values in Corporate Statements
Percentage of Stated Value Respondents
Customer satisfaction 77%
Ethics/integrity 76%
Accountability 61%
Respect for others 59%
Open communication 51%
Profitability 49%
Teamwork 47%
Innovation/change 47%
Continuous learning 43%
Positive work environment 42%
Diversity 41%
Community service 38%
Trust 37%
Social responsibility 33%
Security/safety 33%
Empowerment 32%
Employee job satisfaction 31%
Have fun 24%
Values in Corporate Statements
Exhibit 5.6
Source: “AMA Corporate Values Survey,” ( October 30, 2002.

19. Managerial Ethics Ethics Defined Four Views of Ethics
The rules and principles that define right and wrong conduct.
Four Views of Ethics
The utilitarian view
The rights view
The theory of justice view
The integrative social contracts theory

20. 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 (for the company involved).
Encourages efficiency and productivity and is consistent with the goal of profit maximization.

21. Rights View
Concerned with respecting and protecting individual liberties and privacy
Seeks to protect individual rights of conscience, free speech, life and safety, and due process

22. Theory of Justice View
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

23. 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.
Based on integration of the general social contract and the specific contract between community members.

24. Factors That Affect Ethical and Unethical Behavior
Exhibit 5.7

25. Stages of Moral Development
Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Development Approach,” in T. Lickona (ed.). Moral Development and Behavior: Theory, Research, and Social Issues (New York: Holt, Rinehart & Winston, 1976), pp. 34–35.
Exhibit 5.8

26. Individual Characteristics
Personal Values
Basic convictions about right and wrong
Ego strength
Strength of a person’s convictions
Locus of Control
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.

27. Structural and Cultural Factors
Rules and regulations, job descriptions
Written codes of ethics
Supervisors’ behavior
Rewards and appraisal systems
Cultural
Strength
Peer pressure

28. Determinants of Issue Intensity
Exhibit 5.9