Lecture Management (2nd edition) – Chapter 6: Ethics and social responsibility
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MANAGEMENT
SECOND EDITION
Chapter 6
Ethics and Social
Responsibility
Learning Objectives
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Explain ethics as they relate to the five domains of individuals,
organizations, stakeholders, government, and the global
community
Demonstrate processes and practices for managing organizational
ethics
Describe how businesses approach social responsibility
Summarize management’s role in building responsible businesses
based on ethical decision making
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (p. 144)
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Ethics
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The moral principles, values, and beliefs that
govern group or individual behavior according
to what is right or wrong and what contributes
to the balanced good of all stakeholders
Ethical dilemma – a situation in which no
choice is entirely right
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
Domains of ethical decision making
Figure 6.1
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Individuals (p. 145)
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Lawrence Kohlberg’s “stages of moral development”
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Progression from interests in self to interest in others (p. 146)
Preconventional – moral decisions are based primarily on selfprotection or
selfinterest
Conventional – moral decisions are based primarily on social norms
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Societal norms – expectations about how people (and organizations) should
behave
Postconventional – moral decisions are based primarily on what individual
believes is good for society as a whole
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Kohlberg’s stages of moral development
Figure 6.2
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Organizations posture of the organization toward the local
and global communities (p. 146)
Figure 6.3
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Valuebased management company’s culture impacts
employee behavior in ways that are
consistent with the
organization’s mission
and values (p. 147)
Figure 6.4
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Stakeholders (p. 148)
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Internal and external constituents with a direct interest
in the organization’s behavior
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Experience the effects of company’s management decisions
Figure 6.5
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Externality – a cost (negative) or benefit (positive) that occurs beyond the
direct exchange between an organization and its stakeholders (p. 148)
Escalation – an increase in an organization’s behavior as a direct response to
a competitor’s behavior (p. 149)
CRITICAL
THINKING
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Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Governments (p. 149)
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Enact legal requirements to prevent unethical
behavior
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E.g., SarbannesOxley Act (2002) – requires greater
transparency in company accounting practices
Face “fundamental largefirm problem” stemming
from:
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Separation of ownership and control
Decentralized regulation system
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
What Are Ethics? (cont.)
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Globe (p. 150)
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Globallevel of ethics – principles, values, and
beliefs that are widely considered universal
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United Nations’ “The Global Compact”
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Intended to guide decision making in the areas of human
rights, labor, the environment, and anticorruption
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Making Ethical Decisions (p. 151)
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Principles of ethics (p. 152)
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Legal principle – decisions that follow both the
letter and spirit of the law
Individual rights principle – decisions that do not
infringe upon the rights of other people
Virtuous principle – decisions of which you would
be publicly proud
Longterm principle – decisions that support the
longterm interests of yourself and your
organization
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Making Ethical Decisions (cont.)
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Principles of ethics (cont.)
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Community principle – decisions that contribute to
the strength and wellbeing of the community (p.
152)
Utilitarian principle – decisions that provide the
greatest good to the greatest number (or the least
harm to the fewest number)
Distributed justice principle – decisions that do not
harm those who already are disadvantaged
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Making Ethical Decisions (cont.)
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Codes of conduct organization’s published guidelines of its
expectations about ethical behavior (p. 153)
• Typically address conduct in eight areas
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Fiduciary
Dignity
Property
Transparency
Reliability
Fairness
Citizenship
Responsiveness
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Making Ethical Decisions (cont.)
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Principlebased management (p. 153)
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Organization proactively connects values and
beliefs to behavior expectations
All stakeholders are continuously made aware of
standards for behavior
Stakeholders become a vital component to decision
making
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Social Responsibility (p. 154)
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Social responsibility (p. 155)
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Proactive behaviors for the benefit of society
Corporate social responsibility (CSR)
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Programs that coordinate the company’s efforts to
address societal and community challenges as they
emerge
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Social Responsibility (cont.)
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Approaches to social responsibility (p. 155)
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Proactive approach – organization goes beyond industry
norms to solve and prevent problems
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Begin by consulting the articles of incorporation
May change the legal structure to support socially responsible
activities
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B Lab – nonprofit organization that certifies socially responsible
companies
Accommodative approach – organization accepts
responsibility and takes action in response to societal
pressures (p. 156)
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Social Responsibility (cont.)
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Approaches to social responsibility (cont.)
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Defensive approach – organization accepts
responsibility, but does only the minimum required
(p. 156)
Reactive approach – organization denies
responsibility for social problems and responds
only when legally required
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
How Does Social Responsibility Pay?
(p. 157)
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Social entrepreneurs people who start a business for the dual
purpose of profits and societal benefits
• Consumers and investors becoming more active in supporting
and investing in socially responsible companies
• Social investing – e.g., Calvert Social Investment Fund screens
companies on financial performance and:
Environment
Human rights
Workplace
Indigenous peoples’ rights
Community relations
Product safety and impact
Governance business ethics
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Managing Social Responsibility Today
(p. 158)
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Managers must make principlebased
decisions informed by industry and societal
standards
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Internalizing an externality – management
proactively addresses a negative externality for the
benefit of its stakeholders
Building an ethical culture
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Apply a framework for ethical decision making
Ethics training
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Managing Social Responsibility Today
(cont.)
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Ethical decision making framework (p. 158)
• Duties (p. 159)
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Perfect duties – clearly articulated moral obligations
Imperfect duties – moral obligations that can be interpreted in
different ways
Rights –behaviors that can be expected from others, based on
their duties
Standards of excellence – organization’s highest expectations
of behavior
Commitments – selfdefined principles unique to an
individual or organization
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Managing Social Responsibility Today
(cont.)
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Ethical decision making framework (cont.)
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Applying the framework (p. 159)
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Understanding the situation
Connecting behaviors to standards
Impartial analysis
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Visibility – the “newspaper test”
Generality – would all organizational members be comfortable
with action taken
Legacy – would decision maker be comfortable being
remembered for the action taken
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Managing Social Responsibility Today
(cont.)
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Ethics training (p. 159)
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Intended to prevent unethical behavior from occurring
Figure 6.6
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
Managing Social Responsibility Today
(cont.)
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Ethics training (cont.)
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Audience for training
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Training characteristics – trainees’ current moral profile
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Audience’s assertiveness, cognitive ability, perspective on ethical
behavior (p. 159)
Needs assessment – determine audience’s need for ethics training (p.
160)
Training transfer – steps to assure that what is learned about ethics will
be used on the job
Evaluation – determine the effect of training on trainees’:
Reaction to the training Workplace behavior
Knowledge/skills tests Organizational performance
Copyright ©2017 John Wiley & Sons, Inc.
Copyright ©2017 John Wiley & Sons, Inc.
