1. Ethics and Social Responsibility
Chapter 4
Ethics and Social Responsibility

2. Copyright © 2015 by Nelson Education Ltd.
Identify common kinds of workplace deviance.
Describe ethics guidelines and legislation in North America.
Describe what influences ethical decision making.
Explain what practical steps managers can take to improve ethical decision making.
Explain to whom organizations are socially responsible.
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Explain for what organizations are socially responsible.
Explain how organizations can choose to respond to societal demands for social responsibility.
Explain whether social responsibility hurts or helps an organization’s economic performance.
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4. Ethical and Unethical Workplace Behaviour
Ethics:
set of moral principles or values that defines right and wrong for a person/group
Ethical behaviour:
behaviour that conforms to a society’s accepted principles of right and wrong
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5. Ethics: Alarming Facts
45 percent of employees reported having observed misconduct in the workplace during the previous 12 months.
74 percent of employees surveyed believed that it was possible to damage a company’s reputation through social media.
53 percent believed that their social networking pages were none of their employers’ business.
50 percent of active social networkers believe it is acceptable to keep copies of confidential work documents for possible use in future jobs, compared with 15 percent of non-active social networkers.
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6. Ethics: Alarming Facts
94 percent of respondents said it was either critical or important that the company they work for be ethical.
82 percent of a group of employees surveyed said, “They would work for less to be at a company that had ethical business practices, and more than a third left a job because they disagreed with the actions of fellow employees or managers.”
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Workplace Deviance:
unethical behaviour that violates organizational norms about right and wrong
Production deviance:
unethical behaviour that hurts the quality and quantity of work produced
Property deviance:
unethical behaviour aimed at the organization’s property or products
Employee shrinkage:
employee theft of company merchandise 1
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8. Types of Workplace Deviance
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9. Political Deviance:
using one’s influence to harm others in the company
Personal aggression
hostile or aggressive behaviour toward others 1
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10. International Code of Ethics for Canadian Business Principles
Concerning community participation and environmental protection, we will:
strive within our sphere of influence to ensure a fair share of benefits to stakeholders impacted by our activities;
ensure meaningful and transparent consultation with all stakeholders and attempt to integrate our corporate activities with local communities as good corporate citizens; 2
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11. International Code of Ethics for Canadian Business Principles (cont’d)
ensure our activities are consistent with sound environmental management and conservation practices; and
provide meaningful opportunities for technology cooperation, training, and capacity building within the host nation.
B. Concerning human rights, we will:
support and respect the protection of international human rights within our sphere of influence; and
not be complicit in human rights abuses.
Source: W. Cragg and K. McKague, “Compendium of Ethics Codes and Instruments of Corporate Responsibility”, Toronto: Schulich School of Business, York University, 2005. 2
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12. International Code of Ethics for Canadian Business Principles (cont’d)
C. Concerning business conduct, we will:
not make illegal and improper payments and bribes and will refrain from participating in any corrupt business practices;
comply with all applicable laws and conduct business activities with integrity; and
ensure contractors’, suppliers’, and agents’ activities are consistent with these principles.
Source: W. Cragg and K. McKague, “Compendium of Ethics Codes and Instruments of Corporate Responsibility”, Toronto: Schulich School of Business, York University, 2005. 2
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13. International Code of Ethics for Canadian Business Principles (cont’d)
D. Concerning employee rights and health and safety, we will:
ensure health and safety of workers is protected;
strive for social justice and respect freedom of association and expression in the workplace; and
ensure consistency with other universally accepted labour standards related to exploitation of child labour, forced labour, and non-discrimination in employment.
Source: W. Cragg and K. McKague, “Compendium of Ethics Codes and Instruments of Corporate Responsibility”, Toronto: Schulich School of Business, York University, 2005. 2
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14. Six Factors that Contribute to Ethical Intensity
Magnitude of consequences
Social consensus
Probability of effect
Temporal immediacy
Concentration of effect
Source: T.M. Jones, “Ethical Decision Making by Individuals in Organizations: An Issue-Contingent Model,” Academy of Management Review 16 (1991): 366–95.
3.1
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15. Kohlberg’s Stages of Moral Development
3.2
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16. Class Activity: Ethical Dilemmas
Beyond the Book
You are consultant who has just received a USB key that has a copy of a proposal your competitor submitted. Should you copy it and use it to make your proposal that much better?
In groups of four, what would the consultant do at each stage of moral development?
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17. Principles of Ethical Decision Making
Principle of:
You should never:
long-term self-interest
do anything that is not in your or your organization’s long-term self-interest.
personal virtue
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.
religious injunctions
do anything that is not kind and that does not build a sense of community.
3.3
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18. Principles of Ethical Decision Making
Principle of:
You should never:
government requirements
take any action that violates the law, for the law represents the minimal moral standard.
utilitarian benefits
take any action that does not result in greater good for society.
individual rights
take any action that infringes on others’ agreed-upon rights.
distributive justice
take any action that harms the least fortunate among us in some way.
3.3
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19. Practical Steps to Ethical Decision Making
Hiring
Code of Ethics
Training
Climate 4
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20. 1. Selecting and Hiring Ethical Employees
If you found a wallet containing $50, would you return it with the money?
Overt Integrity Tests
Personality-Based Integrity Tests
4.1
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21. Class Activity: Can Ethics Be Taught?
Beyond the Book
If you can’t hire entirely ethical employees, can you teach someone who is unethical to act ethically in spite of him- or herself?
Discuss as a class.
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22. 2. Code of Ethics
Communicate the code of ethics both inside and outside the company.
Develop practical ethical standards and procedures specific to business.
Canadian Tire Code of Conduct
4.2
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23. Class Activity: Code of Ethics
Beyond the Book
In groups, write a code of ethics (five elements minimum) for the class.
As groups, report to the class.
As a class, build a collective code of ethics.
Identify which type of deviance is targeted by each element of the collective code.
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24. Purchasing Managers Received Kickbacks
Beyond the Book
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.
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3. Ethics Training
Develops employee awareness of ethics
Achieves credibility with employees
Teaches a practical model of ethical decision making
4.3
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26. 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.
Source: L.A. Berger, “Train All Employees to Solve Ethical Dilemmas,” Best’s Review - Life Health Insurance Edition 95 (1995): 70–80. © A.M. Best Company - used with permission.
4.3
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4. Ethical Climate
Managers:
act ethically
are active in company ethics programs
report potential ethics violations by putting in place a reporting system that encourages managers and employees to report potential ethics violations
4.4
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Ethical Culture
The Ethics Research Center cautions that when the economic business environment improves, misconduct may rise unless a strong ethical culture is in place.
To achieve such a culture, management must set the tone.
Studies have found that the two major drivers of ethics culture are senior executives and supervisors.
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Types of Retaliation Experienced as a Result of Reported Misconduct (2011)
According to the 2011 National Business Ethics Survey, whistle-blowing is on the rise: 65 percent of employees surveyed said they had reported workplace misconduct when it was observed. And 22 percent of employees reporting misconduct said they had experienced some form of retaliation as a result of their actions.
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30. What Is Social Responsibility?
A business’s obligation to pursue policies, make decisions, and take actions that benefit society
McKinsey & Co. study:
Of 1,144 top global executives,
79 percent said some responsibility … would fall on corporations
3 percent believe they do a good job of dealing with issues 5
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31. To Whom Are Organizations Socially Responsible?
Stakeholder Model
Satisfy interests of multiple stakeholders
Shareholder Model
Maximize profits 5
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32. Secondary Stakeholders
Stakeholder Model
Primary Stakeholders
Secondary Stakeholders
Shareholders
Employees
Customers
Suppliers
Governments
Local communities
Media
Special interest groups
Trade associations 5
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33. 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
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Triple Bottom Line
“Bottom line”: profit-and-loss account “People account”: a measure of how socially responsible a company has been throughout its operations “Planet account”: a measure of how environmentally responsible a company has been
The Triple Bottom Line (TBL) consists of three P’s: profit, people, and the planet. The TBL is intended to measure the financial, social, and environmental performance of a company over a period of time. Only a company that produces a TBL takes into account the full cost involved in doing business. The “bottom line” is what you measure, what you get, because what you measure is what you likely pay attention to. Only when companies measure their social and environmental impact along with their financial performance will we have socially and environmentally responsible organizations.
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35. Responses to Demands for Social Responsibility
Social responsiveness refers to a company’s strategy for responding to its stakeholders’ economic, legal, ethical, or discretionary expectations concerning social responsibility.
Using a reactive strategy, a company will do less than society expects. A company may deny responsibility for a problem or fight any suggestions that it should solve the problem.
Using a defensive strategy, a company admits responsibility for a problem but will do the least required to meet societal expectations.
Using an accommodative strategy, a company will accept responsibility for a problem and take a progressive approach by doing all that could be expected to solve the problem. 7
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36. Social Responsibility and Economic Performance
Beyond the Book
Realities of Social Responsibility
Can cost a company
Sometimes it does pay
Does not guarantee profitability
Timberland’s Social & Environmental Performance 8
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37. Does It Pay to Be Socially Responsible?
There is a tradeoff between economic performance and being socially responsible.
There is a small, positive relationship between economic performance and being socially responsible that strengthens with corporate reputation.
Being socially responsible won’t make business less profitable.
What this suggests is that costs can be high, especially early on, but they can be offset by better product/corporate reputation, resulting in stronger sales/higher profit margins.
For example, the HondaJet
It usually does pay to be socially responsible, and relationships become stronger when a company or products have a strong reputation for social responsibility.
For example, GE’s ecoimagination
Even if generally small, a positive relationship between social responsibility and economic performance becomes stronger when a company has a positive reputation for social responsibility. If there is no tradeoff between being socially responsible and economic performance, then social responsibility can have significant costs and there is no guarantee that socially responsible companies will be profitable.
For example, Ben & Jerry’s
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