Chapter 4

Managing Ethics and Social Responsibility

Three Domains of Human Action

Domain of Codified Law
(Legal Standard)

Domain of Ethics
(Social Standard)

Domain of Free Choice

(Personal Standard)

Amount of Explicit Control High Low

Ethics
The code of moral principles and values that govern the behaviors of a person or group with respect to what is right or wrong.

Codified Law
Values and standards that are written into the legal system.

Free Choice
Behavior about which law has no say and for which an individual or organization enjoys complete freedom Example: An individual's choice of a marriage partner or religion.

Ethics
Obedience is to norms and standards levied by self and/or others. These are unenforceable in a legal sense, but are often powerful.

Ethical Dilemma
When all choices have been deemed undesirable because of potentially negative ethical consequences, making it difficult to distinguish right from wrong. (The choices also have attractive attributes.)

Common Ethical Dilemmas

Honesty in advertising and in communications with superiors, clients, and government. Problems relating to special gifts, entertainment, and kickbacks. Overlooking wrong doings of others

Criteria for Ethical Decision Making Approaches

Utilitarian Individualism Moral-Rights Justice Virtue Ethics Practical

Utilitarian Approach
Moral behaviors produce the greatest good for the greatest number.

Individualism Approach
Acts are moral when they promote the individual's best long-term interests (e.g., the golden rule).

Moral-Rights Approach
Human beings have fundamental rights (e.g., free consent, privacy, due process)

Justice Approach
Standards of equity, fairness, and impartiality.

Virtue Ethics Approach

Assumes having good character traits leads to good decisions. This approach does not offer any guidelines for decision making other than not going against ones personal virtues.

Practical Approach
May include consideration of any of the other five approaches and what actions will please stakeholders most.

Factors Affecting Ethical Choices

The Manager
Level or stage of moral development Learned Ethics

The Organization
Systems Culture

Moral Development
Preconventional Level = concerned with external rewards and punishments Conventional Level = conform to the expectations of peers and society (consistent with practical approach to ethical decision making) Postconventional (Principled) Level = individuals develop a personal, internal set of standards and values. (About 20% of adults)

The Organization
Systems
Explicit rules and policies Reward system

Culture
Common Values Traditions

Guidelines for Dealing with Ethical Dilemmas

Is it legal? Is it right? Is it beneficial? To whom? How much? Is it harmful? To whom? How much?

Guidelines for Dealing with Ethical Dilemmas (cont.)

Would you be willing to allow everyone to do what you are considering? Would you like your family to know? Would you like your decision printed in the newspaper? Have you consulted others who are objective and knowledgeable?

Social Responsibility
An Organization taking actions that contribute to society Being a good corporate citizen.

Stakeholder Model
The belief that a business should be operated for the benefit of all who are concerned with it (all stakeholders not just the owners). The foundation of Social Responsibility.

Organizational Stakeholders
Owners, Investors Employees Suppliers Customers Government Society

4 Views of Responsibilities of Business

1- Economic Responsibilities:
The only Social Responsibility = Profit-Maximizing.

2- Legal Responsibilities:
Social Responsibility = Obeying the Law (as well as making a profit)

3- Ethical Responsibilities
To be ethical, an organization should seek a higher standard than merely obeying the law:
e.g., Act with equity, fairness, and impartiality e.g., Respect the rights of individuals e.g., Act for the common good

4 - Discretionary Responsibilities
Purely voluntary, not mandated by economics, law, or ethics Goes beyond what society expects This is true Social Responsibility

Social Responsibility Levels

Level of Concern---Likely Behavior Discretionary-------------------Proaction Ethical-------------------Accommodation Legal------------------Defensive Behavior Economic-------------Anything for profit

Why Social Responsibility?

Self-defense - If business is not proactive, the public or government will press for more regulation Obligation - Business exists due to being sanctioned by society - owes debt to society Self-interest - S.R. good for business in long run

Arguments Against Social Responsibility

Social expenditures amount to theft of business owners equity. Business lacks the ability to pursue social goals. Business would gain too much power if involved in the social domain. (Social issues should be left to those accountable to the voters.)

Ethical Leadership By Example

Senior managers must be strongly committed to ethical conduct.

Code of Ethics
A formal statement of the company's values concerning ethics and social issues.

Principle-based:
Designed to:
Enable the employee to make ethical decisions based on appropriate values e.g., treat people fairly or dont be dishonest

Policy-based:
Outline how to act in specific ethical situations (reducing the need for thinking or shared values):
Conflicts of interest Proprietary information Political gifts Equal opportunities

Organizational Structures to Promote Ethics

Ethics committee = group appointed to monitor company ethics Hot lines- employees can report questionable behavior, possible fraud, waste, or abuse( i.e., Blow the Whistle) Ethics training programs

Whistle-Blowing
Definition:
The disclosure by an employee of illegal, immoral, or illegitimate practices by the organization.

Guidelines:
Be sure you are right (keep accurate records) Try to resolve the situation in-house first Consult an attorney before contacting the media, etc. Realize you could be fired Dont expect to profit financially