Chapter 05 Managerial Ethics and Corporate Social Responsibility

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Chapter 05 Managerial Ethics and Corporate Social Responsibility Powered By Docstoc
					Chapter 4
            Ethics and Social

Learning Objectives
o   Define ethics and understand the relationship between law and
o   Identify the stakeholders of organizations and understand each
    group’s claims on the organization and how each is affected by
    the organization’s actions.
o   Explain four approaches (utilitarian, moral rights, justice and
    practical) to help organizations evaluate choices in ethical
o   Describe the four main sources of a manager’s ethics – societal,
    occupational, individual, organizational ethics
o   Define corporate social responsibility and the four approaches
    which organization’s may take regarding social responsibility. 4-2
What is Managerial Ethics?
The inner-guiding moral principles, values, and
  beliefs that people use to decide what is the
  “right” or appropriate way to behave.
  Ø Ethics is about making decisions.

n   Poor managerial ethics
    Ø Can generate negative publicity
    Ø Bring down company’s stock price
    Ø Put the company out of business.

Ethical Dilemma
An ethical dilemma is a quandary which people find
  themselves in when right and wrong cannot be
  clearly identified. Their actions might help one
  person at the expense of another or their own self
   Ø All choices have potentially negative consequences
   Ø Values are in conflict

Ethics and Law
Ethics                         Law
• Unenforceable norms and      • Values are written into
values guide behavior          enforceable standards of
• There are no specific laws
                               • Laws are enforced by the
                               justice system

Ethics and laws change as norms and values of
society changes
Stakeholders and Ethics
Organizational Stakeholders – people or groups that
  supply a company with its productive resources and
  have a claim on its resources.
     Has a stake in the organization’s performance

When there are no laws to specify behavior, managers
  must decide what is the ethical way to behave toward
  organizational stakeholders
Stakeholders and Ethics

Stakeholders and Ethics
  Want to maximize their return on investment
  Want to be sure management is not engaging in actions which
  could hurt company’s reputation
  Responsible for using resources to increase organization’s
  Have the right to expect a reward for their use of resources to
  improve organization’s performance
  Juggle multiple interests                                         4-8
Stakeholders and Ethics
  Most critical stakeholder
  Want quality product at low price – organization must create
  loyal customers and attract new ones

  Want success of organization for economic development
  (taxes and income of citizens)
  Want good quality of life with safe environment for citizens

Stakeholders and Ethics
  Organizations have a responsibility to create structure that
  rewards employees fairly for their contribution

Suppliers and Distributors
  Suppliers expect to be paid fairly and promptly for their
  Distributors expect to receive quality products at agreed-upon
Approaches For
Ethical Decision Making

Utilitarian Approach
v   Ethical dilemmas are resolved by making decisions which
    result in the greatest good for the greatest number.
v   In making decisions, consider the effect of each
    alternative on all parties
v   Select the alternative which satisfies the greatest number
    of people.
v   Decisions are based on outcomes or consequences

Problem: Adhering to the common good approach can result
   in ignoring the individual’s rights.
Moral Rights Approach
n   Ethical dilemmas are resolved by making decisions which
    maintain and protect the fundamental rights and privileges of
    people affected by the decision

n   Asserts human beings have fundamental rights and liberties.
        •   Right to freedom, life and safety
        •   Right to privacy
        •   Right to free speech
        •   Right to freedom of conscience

n   Focuses on “ethics” of decision independent of consequences
Justice Approach
o   Ethical dilemmas are resolved by basing decisions on
    standards of equity, fairness, and impartiality.

o   In making decisions, choose alternatives which result in
    fair and impartial treatment to the involved parties
     Ø Different treatment should not be based on arbitrary
     Ø Administer rules fairly
     Ø If harm done, injured party should be made whole

Practical Approach
o   Ethical dilemmas are resolved by making decisions
    based on whether the typical person in society would
    think it is acceptable.
o   A decision is ethical if the manager can answer yes to
    three questions
     Ø Is my decision within accepted values and standards
        of business today?
     Ø Are you willing to communicate the decision to all
     Ø Would people I am closest to (family, friends)
        approve of the decision?
Determinants of Business Ethics
There are four main determinants of differences in ethics
   between people, employees, companies and countries

            ü Societal Ethics
            ü Occupational Ethics
            ü Individual Ethics
            ü Organizational Ethics
Individual Ethics: Three Levels of Personal
Moral Development (based on L. Kohlberg)
n   Preconventional Level
    Ø   Individual is concerned with concrete consequences –
        stick to rules to avoid punishment. Ethical actions are
        those that “follow the rules.”
    Ø   At a higher stage within this level, individual follows rules
        when it is in his/her immediate interests. Ethical actions
        are those that result in an equal exchange or “fair deal.”
    Ø   Managers at this level expect dependable accomplishment
        of tasks within the approved methods

Individual Ethics: Three Levels of Personal
Moral Development
n   Conventional Level
    Ø   The individual conforms to expectations of what is good
        behavior. Expectations are defined by people closest to
        you, society, and groups.
    Ø   Ethical actions are those that “live up” to what is expected
        by people close to you. Fulfill duties and obligations.
    Ø   Managers at this level emphasize cooperation and
        collaboration to accomplish tasks.
    Ø   Most adults operate at this level.
Individual Ethics: Three Levels of Personal
Moral Development
n   Postconventional or Principled Level
    Ø   The individual is guided by own values and standards and
        will disobey rules which violate own principles.
    Ø   Ethical actions are those which conform to an individual’s
        own principles and standards. May result in “civil
    Ø   According to Kohlberg, less than 20 percent of American
        adults reach this level.
    Ø   Managers at this level focus on the needs of employees and
        encourage them to think for themselves.
Organizational Ethics
n   Most of us operate at the Conventional level of moral
    development, so …
    Ø   The norms and values of your immediate work group,
        department and the organization will have great influence
        on ethical behavior.

n   Company culture lets people know what behaviors
    the company supports and those actions considered
n   The organization’s rules, policies and reward systems
    guide people’s actions                                          4-20
Organizational Structures
ü   Develop a code of ethics or credo for the organization - A
    formal statement of the company’s values concerning ethics
    and social issues; it communicates to employees what the
    company stands for.

ü   Creation of Ethics officers – a management position dedicated
    to monitoring organizational practices and teaching ethical
    practices to employees

ü   The Sarbanes-Oxley Act passed in 2003 requires procedures
    for handling whistleblowers’ concerns regarding accounting

Social Responsibility
The way a company’s managers and employees view
  their obligation to make decisions that protect,
  enhance and promote the welfare of society as well
  as the organization.

Does the organization have responsibilities beyond
  economic responsibilities (maximizing profits for
  owners and shareholders)?


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