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Environment, Ethics and Social Responsibility

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					Ch. 12. Environment Ethics and Social Responsibility

1. ENVIRONMENT AND COMPETITIVE ADVANTAGE
What is competitive advantage?
 Competitive advantage allows an organisation to deal with market and environmental forces better than its competitors.  Competitive advantage may be achieved through products, pricing, customer service, cost efficiency, and quality, among other aspects of operating excellence Competitive advantage creates high value that competitors cannot replicate.

The general environment
 The general environment consists of all the background conditions in the external environment of an organisation.  The components of the general environment include:  Economic conditions. General state of the economy in terms of inflation, income levels, gross domestic product, unemployment, and related indicators of economic health.  Socio-cultural conditions. General state of prevailing social values on such matters as human rights and environment, trends in education and related social institutions, as well as demographic patterns.  Legal-political conditions. General state of the prevailing philosophy and objectives of the political party or parties running the government, as well as laws and government regulations.  Technological conditions. General state of the development and availability of technology in the environment, including scientific advancements.  Natural environment conditions. General state of nature and conditions of the natural or physical environment, including levels of environmentalism.  We identify several diversity trends in the sociocultural environment. These trends are:  People from a non-English-speaking percentage of the workforce.  More women are working.  People with disabilities are gaining more access to the workplace.  Workers are increasingly from non-traditional families.  Average age of workers is increasing.  Diversity of workers’ religious beliefs is increasing.  Differences in the general environment are organisations with international operations. especially noticeable in background are an increasing

The specific environment
 The specific environment (or task environment) consists of all the actual organisations, groups and persons with whom an organisation must interact in order to survive and prosper.
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 The specific environment is often described in terms of stakeholders — the persons, groups and institutions who are affected by the organisation’s performance.  The multiple stakeholders that exist in an organisation’s environment. The stakeholders important to the specific environment are:
1. Customers — specific consumer or client groups, individuals and organisations, that purchase the organisation’s goods and/or use its services. 2. Suppliers — specific providers of the human, information, and financial resources and raw materials needed by the organisation to operate. 3. Competitors — specific organisations that offer the same or similar goods and services to the same consumer or client groups. 4. Regulators — specific government agencies and representatives, at the local, state and national levels, that enforce laws and regulations affecting the organisation’s operations.

Environmental uncertainty
 Environmental uncertainty means that there is a lack of complete information regarding what developments will occur in the external environment. This makes it difficult to predict future states of affairs and to understand their potential implications for the organisation.  Some recent trends in environmental uncertainty along two dimensions:
1. 2.

complexity, or the number of different factors in the environment the rate of change in these factors

 In general, when environmental uncertainty increases, management must direct more attention to the external environment, and there is an increased need for flexible and adaptable organisational designs and work practices.

WHAT IS ETHICAL BEHAVIOUR?
Basic definitions
 Ethics can be defined as the code of moral principles that sets standards of good or bad, or right or wrong, in one’s conduct and thereby guides the behaviour of a person or group.  Ethical behaviour is behaviour that is accepted as ‘good’ and ‘right’ as opposed to ‘bad’ or ‘wrong’ in the context of the governing moral code.

Law, values and ethical behaviour
 Any behaviour considered ethical should also be legal in a just and fair society.  Legal behaviour, however, is not necessarily ethical behaviour.  What one considers to be ethical varies according to personal values –– the underlying beliefs and attitudes that help determine individual behaviour.

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Alternative views of ethical behaviour.
 There are four views of ethical behaviour. These views are as follows: o o o o Utilitarian view. Ethical behaviour is that which delivers the greatest good to greatest number of people. Individualism view. Ethical behaviour is that which best serves long-term self-interests. Moral-rights view. Ethical behaviour is that which respects the fundamental rights of all people. Justice view. Ethical behaviour is that which is impartial and fair in treating people according to guiding rules and standards. 1. Procedural justice — the degree to which policies and rules are fairly administered. 2. Distributive justice — the degree to which people are treated the same regardless of individual characteristics based on ethnicity, race, gender, age or other particularistic criteria. 3. Interactional justice — the degree to which others are treated with dignity and respect.

Cultural issues in ethical behaviour
 Ethical management in a global environment is challenged by the complexities of different cultures and value systems throughout the world.  Cultural relativism is the notion that there is no one right way to behave and that ethical behaviour is always determined by the cultural context.  Cultural relativism with the alternative position that suggests if behaviour is not okay in one’s home environment, it shouldn’t be acceptable practice anywhere else. This alternative is known as universalism. Critics claim universalism is a form of ethical imperialism, or the attempt to externally impose one’s ethical standards on others.  Business ethicist Thomas Donaldson argues instead that certain fundamental rights and ethical standards, or ‘hyper-norms’ should transcend cultural boundaries. Even with a commitment to the core values underlying a transcultural umbrella, international business behaviours can be tailored to local and regional cultural contexts.  How multinational companies can show respect for core or universal values. Specifically, multinational companies should:  Respect human dignity by creating a corporate culture that values employees, customers and suppliers; keeping a safe workplace; and producing safe products and services. Respect basic rights by protecting rights of employees, customers and communities; and avoiding anything that threatens safety, health, education and living standards. Be good citizens by supporting social institutions, including economic and educational systems; and working with local government and institutions to protect the environment.

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ETHICS IN THE WORKPLACE
What is an ethical dilemma?
 An ethical dilemma occurs when someone must choose whether or not to pursue a course of action that, although offering the potential of personal or organisational benefit or both, may be considered unethical.

Ethical problems faced by managers.
 Potential sources of ethical dilemmas include discrimination, sexual harassment, conflicts of interest, customer confidence and organisational resources.  According to a Harvard Business Review survey, many ethical dilemmas involve conflicts with superiors, customers and subordinates.

Rationalisations for unethical behaviour
 Convincing yourself that the behaviour is not really illegal. This rationalisation is particularly common in ambiguous situations. A good rule of thumb is ‘when in doubt, don’t do it’.  Convincing yourself that the behaviour is in everyone’s best interest. This rationalisation involves the mistaken belief that because someone may benefit, the behaviour is also in the interest of others. When asking ‘How far should I go?’ the best answer is ‘Don’t find out’.  Convincing yourself that nobody will ever find out what you’ve done. This argument assumes no crime is committed unless discovered. To deter this view, make sure sanctions for wrongdoing are public.  Convincing yourself that the organisation will ‘protect’ you. This implies the organisation will condone the practice, but organisational norms should not be put above the law or social morality.

Factors influencing ethical behaviour:
 There are three factors: the person, the organisation and the environment –– that influence ethical behaviour. 1. The person. In developing ethical frameworks as personal strategies for ethical decision making, managers are influenced by the following factors: – family influences – religious values – personal standards – personal needs. 2. The organisation. The organisation also plays a key role in shaping managerial ethics through: – policies and codes of conduct – behaviour of supervisors and peers – organisational culture.

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3. The environment. Managerial ethics are also shaped by the following components of the external environment: – government laws and regulations – norms and values of society – ethical climate of industry.

HOW CAN HIGH ETHICAL STANDARDS BE MAINTAINED?
Progressive organisations employ a variety of methods for maintaining high ethical standards.

Ethics training
 Ethics training refers to structured programs that help participants understand the ethical aspects of decision making, and help people incorporate high ethical standards into their daily behaviours. Ethics training helps people deal with ethical issues while under pressure.  The checklist for making ethical decisions when encountering ethical dilemmas. – – – – – – Recognise the ethical dilemma Get the facts Identify your options Test each option: Is it legal? Is it right? Is it beneficial? Decide which option to follow Double-check your decision by asking: ‘How would I feel if my family found out about my decision?’ ‘How would I feel about this if my decision were printed in the local newspaper?’ Take action.

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Whistleblower protection:
 A whistleblower is a person who exposes the misdeeds of others in organisations to preserve ethical standards and protect against wasteful, harmful, or illegal acts.  Federal and state laws increasingly offer whistleblowers some protection from retaliatory discharge. Still, legal protection can be inadequate  Organisational barriers to whistleblowing include: – – – A strict chain of command that makes it difficult to report unethical practices to higher-level managers. Strong work group identities that encourage loyalty and self-censorship. Ambiguous priorities that make it difficult to distinguish right from wrong.

 Ethics advisors, formal ethics staff units and moral quality circles are three ways in which organisations have attempted to overcome these whistleblowing barriers and to encourage high ethical standards.

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Ethical role models
 Because top managers serve as role models, their behaviour can either encourage or discourage unethical behaviour.  Although top managers have a special responsibility for setting the ethical tone of an organisation, all managers can influence the ethical behaviour of the people who work for and with them.  Too much pressure to accomplish goals that are too difficult can also encourage unethical behaviour. One survey of executives suggests that most feel they are under pressure to compromise their ethics to achieve company goals.  Part of any manager’s ethical responsibility is to be realistic in setting performance goals for others.

Codes of ethics
 Codes of ethics are official written guidelines on how to behave in situations susceptible to the creation of ethical dilemmas.  Most codes of ethical conduct identify expected behaviour in terms of general organisational citizenship, the avoidance of illegal or improper acts in one’s work, and good relationships with customers.  Areas often covered in written codes of ethics include the following: – – – – – – workforce diversity bribes and kickbacks political contributions honesty of books or records customer/supplier relationships confidentiality of corporate information.

 Ethical guidelines for international business that are provided by the United Nations’ Global Compact are identified below – Human rights 1. Support and respect the protection of internationally proclaimed human rights within their sphere of influence. 2. Make sure you are not complicit in human rights abuses. – Labour 1. Uphold the freedom of association and the effective recognition of the right to collective bargaining. 2. Uphold the elimination of all forms of forced and compulsory labour. 3. Uphold the effective abolition of child labour. 4. Eliminate discrimination in respect to employment and occupation. – Environment 1. Support a precautionary approach to environmental challenges. 2. Undertake initiatives to promote greater environmental responsibility.

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3. Encourage the development and diffusion of environmentally friendly technologies.  Ethical codes cannot cover all situations; nor are they automatic insurance for universal ethical conduct.

SOCIAL RESPONSIBILITY
Background on organisational social responsibility  Organisational social responsibility looks at ethical behaviour from the organisational level rather than the individual level.  Organisational stakeholders are those persons, groups and other organisations directly affected by the behaviour of the organisation and holding a stake in its performance.  Corporate social responsibility is an obligation of the organisation to act in ways that serve both its own interests and the interests of its many external stakeholders.

Stakeholder issues and practices
 The belief that people do their best in healthy work environments with a balance of work and family life.  The belief that organisations perform best when located in healthy communities.  The belief that organisations gain by treating the natural environment with respect.  The belief that organisations must be managed and led for long-term success.  The belief that the organisation’s reputation must be protected to ensure consumer and stakeholder support.

Perspectives on social responsibility
 The classical view of corporate social responsibility holds that management’s only responsibility in running a business is to maximise profits.  The socioeconomic view of corporate social responsibility holds that management of any organisation must be concerned for the broader social welfare and not just for corporate profits.  The arguments of the classical view ‘against’ social responsibility and the arguments of the socioeconomic view ‘in favour of’ social responsibility are summarised below. AGAINST Reduced business profits. Higher business costs. Dilution of business purpose. IN FAVOUR OF Will add long-run profits for businesses. Better public image for businesses. Help businesses to avoid more governmental regulation.

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Too much social power for businesses. Lack of business accountability to the public.

Businesses have the resources and ethical obligation to act responsibly. Better environment for everyone. The public wants it.

 In today’s world, the public at large expects businesses and other organisations to act with genuine social responsibility.  Increasing empirical evidence exists that indicates high performance in social responsibility can be associated with strong financial performance and, at worst, has no adverse financial impact.

Evaluating social performance.
 A social audit is a systematic assessment and reporting of an organisation’s resource commitments and action accomplishments in various areas of social responsibility.  Four criteria for evaluating corporate social performance  Is the organisation’s economic responsibility met? Its economic responsibility is met when it earns a profit through the provision of goods and services desired by customers. Is the organisation’s legal responsibility met? Its legal responsibility is fulfilled when it operates within the law and according to the requirements of various external regulations. Is the organisation’s ethical responsibility met? Its ethical responsibility is met when its actions voluntarily conform to both legal expectations and the broader values and moral expectations of society. Is the organisation’s discretionary responsibility met? Its discretionary responsibility involves the organisation’s voluntary movement beyond basic economic, legal and ethical expectations to provide leadership in advancing the well-being of individuals, communities and society as a whole.

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Social responsibility strategies
There are four strategies of social responsibility in terms of level of commitment to social responsibility. These strategies are 1. The obstructionist strategy (‘fight the social demands’) meets the organisation’s economic responsibility. 2. The defensive strategy (‘do the minimum legally required’) meets the organisation’s economic and legal responsibilities. 3. The accommodative strategy (‘do the minimum ethically required’) meets the organisation’s economic, legal and ethical responsibilities. 4. The proactive strategy (‘take leadership in social initiatives’) meets all the criteria of social performance –– economic, legal, ethical and discretionary responsibilities.

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Lecture Notes by Mr. Mujeeb Khan 0333-9471388


				
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