1. ©2008 by Nelson, a division of Thomson Canada Limited 1 Management Second Canadian Edition Chuck Williams Alex Z. Kondra Conor Vibert Slides Prepared by: Kerry Rempel, Okanagan College

2. ©2008 by Nelson, a division of Thomson Canada Limited 2 Chapter 3 Ethics and Social Responsibility

3. ©2008 by Nelson, a division of Thomson Canada Limited 3 What Would You Do? Whose interests should GAP pay most attention to: stakeholders, suppliers, overseas workers, or protestors Is GAP responsible for the plight of overseas workers in factories they contract to? What is the ethical thing to do?

4. ©2008 by Nelson, a division of Thomson Canada Limited 4 What is Ethical and Unethical Workplace Behaviour? After reading the next two sections, you should be able to: 1. discuss how the nature of a management job creates the possibility for ethical abuses 2. identify common kinds of workplace deviance

5. ©2008 by Nelson, a division of Thomson Canada Limited 5 Ethics and the Nature of Management Jobs Ethical behaviour follows accepted principles of right and wrong Intentional managerial unethical behaviours company resources for personal use mishandling information encouraging others’ unethical behaviour

6. ©2008 by Nelson, a division of Thomson Canada Limited 6 Ethics and the Nature of Management Jobs Unintentional managerial unethical behaviour poorly constructed policies unrealistic employee goals

7. ©2008 by Nelson, a division of Thomson Canada Limited 7 Workplace Deviance Workplace Deviance – unethical behaviour that violates organizational norms about right and wrong Property deviance Production deviance Political deviance Personal aggression

8. ©2008 by Nelson, a division of Thomson Canada Limited 8 Types of Workplace Deviance Production deviance leaving early taking excessively long breaks purposely working slower intentionally wasting resources Property deviance sabotaging, stealing damaging equipment

9. ©2008 by Nelson, a division of Thomson Canada Limited 9 Types of Workplace Deviance Political deviance using favouritism spreading rumours falsely blaming others for mistakes Personal aggression sexual harassment verbal abuse threatening co-workers

10. ©2008 by Nelson, a division of Thomson Canada Limited 10 How Do You Make Ethical Decisions? After reading this section, you should be able to: 3. describe what influences ethical decision-making 4. explain what practical steps managers can take to improve ethical decision- making

11. ©2008 by Nelson, a division of Thomson Canada Limited 11 Influences on Ethical Decision-Making Ethical intensity of the decision Moral development Principles of ethical decision-making

12. ©2008 by Nelson, a division of Thomson Canada Limited 12 Ethical Intensity of the Decision Magnitude of consequences Social consensus Probability of effect Temporal immediacy Proximity of effect Concentration of effect

13. ©2008 by Nelson, a division of Thomson Canada Limited 13 Kohlberg’s Stages of Moral Development Preconventional Level Stage 1: Punishment and Obedience Stage 2: Instrumental Exchange Conventional Level Stage 3: Good Boy — Nice Girl Stage 4: Law and Order Post Conventional Level Stage 5: Legal Contract Stage 6: Universal Principle Adapted from Exhibit 3.2

14. ©2008 by Nelson, a division of Thomson Canada Limited 14 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

15. ©2008 by Nelson, a division of Thomson Canada Limited 15 Principle of Long-term Self-interest People should never take any action that is not in your or your organization’s long-term self- interest

16. ©2008 by Nelson, a division of Thomson Canada Limited 16 Principle of Personal Virtue People should never do anything that is not honest, open, and truthful, and which you would not be glad to see reported in the newspapers or on TV

17. ©2008 by Nelson, a division of Thomson Canada Limited 17 Principle of Religious Injunctions People should never take any action that is not kind and that does not build a sense of community; a sense of everyone working together for a commonly accepted goal

18. ©2008 by Nelson, a division of Thomson Canada Limited 18 Principle of Government Requirements People should never take any action that violates the law, for the law represents the minimum moral standard

19. ©2008 by Nelson, a division of Thomson Canada Limited 19 Principle of Utilitarian Benefits People should never take any action that does not result in greater good for society. Instead, do whatever creates the greatest good for the greatest number.

20. ©2008 by Nelson, a division of Thomson Canada Limited 20 Principle of Individual Rights People should never take any action that infringes on others’ agreed-on rights

21. ©2008 by Nelson, a division of Thomson Canada Limited 21 Principle of Distributive Justice People should never take any action that harms the least among us: the poor, the uneducated, the unemployed

22. ©2008 by Nelson, a division of Thomson Canada Limited 22 Practical Steps to Ethical Decision-Making Selecting and hiring ethical employees Codes of ethics Ethics training Ethical climate

23. ©2008 by Nelson, a division of Thomson Canada Limited 23 Selecting and Hiring Ethical Employees Increase ethical behaviours by hiring more ethical employees Testing for ethics Overt-integrity tests Personality-based integrity tests

24. ©2008 by Nelson, a division of Thomson Canada Limited 24 What Really Works Integrity Tests

25. ©2008 by Nelson, a division of Thomson Canada Limited 25 What Really Works

26. ©2008 by Nelson, a division of Thomson Canada Limited 26 Codes of Ethics Corporate statements on ethics To encourage ethical decision-making and behaviour Companies must communicate the codes to others both within and outside the organization Management must also develop practical ethical standards and procedures specific to the company’s line of business

27. ©2008 by Nelson, a division of Thomson Canada Limited 27 Ethics Training Objectives of Ethics Training Develop employee awareness about ethics Achieve credibility with employees Teach employees a practical model of ethical decision-making

28. ©2008 by Nelson, a division of Thomson Canada Limited 28 Ethical Climate To establish an Ethical Climate: Managers must act ethically Top managers must be active in the company ethics program There must be an effective reporting system Managers must fairly and consistently punish those who violate the ethics code

29. ©2008 by Nelson, a division of Thomson Canada Limited 29 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 Adapted from Exhibit 3.4

30. ©2008 by Nelson, a division of Thomson Canada Limited 30 Learning Objectives: What is Social Responsibility? 5. Explain to whom organizations are socially responsible 6. Explain for what organizations are socially responsible 7. Explain how organizations can choose to respond to societal demands for social responsibility 8. Explain whether social responsibility hurts or helps an organization’s economic performance After reading the next four sections, you should be able to explain:

31. ©2008 by Nelson, a division of Thomson Canada Limited 31 To Whom Are Organizations Socially Responsible? Shareholders managers must satisfy the owners social responsibility is maximizing shareholder wealth Stakeholders persons or groups with a legitimate interest in a company’s actions Social responsibility is satisfying the interests of multiple stakeholders

32. ©2008 by Nelson, a division of Thomson Canada Limited 32 Shareholder Model: Friedman Managers cannot act effectively as moral agents for shareholders Time, money, and attention diverted to social causes undermine market efficiency

33. ©2008 by Nelson, a division of Thomson Canada Limited 33 Stakeholder Model of Corporate Social Responsibility Exhibit 3.5

34. ©2008 by Nelson, a division of Thomson Canada Limited 34 Primary Stakeholders Some stakeholders are more important to the firm’s survival: Company Employees Shareholders Customers Suppliers Public stakeholders Adapted from Exhibit 3.6

35. ©2008 by Nelson, a division of Thomson Canada Limited 35 Secondary Stakeholders Secondary Stakeholders can influence or be influenced by the company: media special interest groups Adapted from Exhibit 3.6

36. ©2008 by Nelson, a division of Thomson Canada Limited 36 For What Are Organizations Socially Responsible Total Social Responsibilities Economic Legal Ethical Discretionary

37. ©2008 by Nelson, a division of Thomson Canada Limited 37 Responses to Demands for Social Responsibility Social Responsiveness Reactive Fight all the way Defensive Do only what is required Accommodative Be progressive Proactive Lead the industry

38. ©2008 by Nelson, a division of Thomson Canada Limited 38 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 behaviour may be “the right thing to do,” it does not guarantee profitability

39. ©2008 by Nelson, a division of Thomson Canada Limited 39 What Really Happened? After three straight years of not being profitable, Gap adopted a multi-stakeholder approach to solving the problems in overseas factories. Gap joined Social Accountability International’s Corporate Involvement Program, the Ethical Trading Initiative, and the UN’s Global Compact. Gap began providing training for managers in overseas factories on how to be better managers and improve labour relations. Suppliers were made to comply with Gap’s Code of Vendor Conduct, pass initial evaluation visits and be approved by Gap’s global compliance staff.