bm_chapter 4 -revised

Chapter 4

Managerial Ethics and Corporate

Social Responsibility

(c)2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

New Manager’s Questions

• If an action is legal, then it is also ethical.

1 2 3 45

Mostly yes Mostly no



• It’s wrong to be a snitch or a tattler, even if it is about telling on your company when it is doing something illegal or immoral.

1 2 3 45




• It’s not the manager’s job to solve problems in the outside world.

1 2 3 45



A Few Stats

• 79% of respondents in the U.S. believe questionable business practices are widespread

• Fewer than 1/3 said they think most chief executive officers (CEOs) are honest


Managerial Ethics

• Ethics - code of moral principles and values that govern the behaviors of right or wrong

• Standards about good/bad• Ethical issues can be complex• People in organizations have divergent

views about right/wrong


Three Domains of Human Action


Domains of Human Action

• Codified law– Values & standards are written into the legal

systems– Enforceable in the courts– Lawmakers set rules that people & corporations

must follow in a certain way• Obtaining licenses for cars or paying corporate taxes



• Free Choice– Opposite end of scale– Pertains to behavior about which the law has no

say – Individual or organization enjoys complete

freedom• Eat lunch• Choose music to listen to



• Ethics– No specific laws– Standards of conduct based on shared principles

& values about moral conduct that guide an individual or company


Ethical Dilemmas

• Ethics is always about making decisions• Some issues are difficult to resolve• Ethical dilemma – Arises in a situation concerning right or wrong

when values are in conflict– Right & wrong cannot be clearly identified


Ethical DilemmasYou are the moral agent, what would you do?

Your company requires a terrorist watch list that screens all new customers and takes approximately 24 hours from the time an

order is placed. You can close a lucrative deal with a potential long-term customer

overnight, even though that means the required watch-list screening will have to be

done after the fact.



As a sales manager for a major pharmaceuticals company, you’ve been asked to promote a new

drug that costs $2500 per dose. You’ve read the reports saying the drug is only 1% more effective than an alternate drug that costs less than $625

per dose. The VP of sales wants you to aggressively promote the $2500 per does drug.

He reminds you that if you don’t do so, lives could be lost that might have been saved with that 1%

increase in drug effectiveness.



Your company is hoping to build a new overseas manufacturing plant. You could save about $5

million by not installing standard pollution-control equipment that is required in the U.S. The plant will employ many local workers in a poor country where jobs are scarce. Your research shows that

pollutants from the factory could potentially damage the local fishing industry. Yet building

the factory with the pollution-control equipment will likely make the plant too expensive to build.



You have been collaborating with a fellow manager on an important project. One

afternoon, you walk into his office a bit earlier than schedules & see sexually explicit images on his computer monitor. The company has a zero-

tolerance sexual-harassment policy as well as strict guidelines regarding personal use of the

Internet. However, your colleague was in his own office and not bothering anyone else.


Study of Human Morality--#1

A runaway trolley is heading down the tracks toward 5 unsuspecting people. You’re standing near a switch that will divert the trolley onto a siding, but there is a single worker on the siding who cannot be warned in time to escape and will almost certainly be killed.

Would you throw the switch?


Study of Human Morality--#2

What if the worker is standing on a bridge over the tracks and you have to push him off the bridge to stop the trolley with his body in order to save the 5 unsuspecting people? (Assume his body is large enough to stop the trolley & yours is not.)

Would you push the man, even though he would almost certainly be killed?


Results

97% of respondents said they could throw the switch (which would almost certainly lead to the death of the worker)

42% said they could actually push the man to his death


Criteria for Ethical Decision Making

• Most ethical dilemmas involve a conflict between the needs of the part and the needs of the whole– Individual vs. the organization– Organization vs. society as a whole

• Normative strategy– Based on norms & values to guide decision

making



• Utilitarian Approach – moral behavior produces the greatest good for the greatest number.• Adopted by 19th-century philosophers Jeremy

Bentham & John Stuart Mill• Select the option that benefits the greatest # of

people



• Individualism Approach – acts are moral if they promote the individual’s long-term interest.• Produce a greater ratio of good to bad for the

individual compared with other alternative is the right one to perform

• Leads to honesty & integrity because that works best in the long run



• Moral-Rights Approach – humans have fundamental rights and liberties that cannot be taken by an individual's decision.• Best maintains the rights of those affected by it


Six Moral Rights (Moral Rights Approach)

The right of free consent.

The right to privacy.

The right of freedom of conscience.

The right of free speech.

The right to due process.

The right to life and safety.



• Justice Approach – moral decisions must be based on standards of equity, fairness and impartiality.• 3 types of justice are concern to managers• Distributive – requires that different treatment of

people not be based on arbitrary characteristics• Procedural – requires that rules be administered

fairly• Compensatory – individuals should be compensated

for the cost of their injuries by the party responsible


A Manager’s Ethical Choices Individuals bring their own personality and

traits to organizations

Personal needs, family influence and religious background shape individuals

Personality characteristics like ego, confidence and independence


Three Levels of Personal Moral Development


Transparency International Bribe Index


What is Corporate Responsibility?

• Distinguishing right from wrong; doing right• Good corporate citizenship• Make choices that contribute to society and

stakeholders• Stakeholders – any group within or outside

the organization that has a stake


Major Stakeholders Relevant to Monsanto Company


The Bottom of the Pyramid

• Corporations can alleviate poverty and social ills while making profits

• BOP is twofold, profit and address poverty

• Serving and engaging customers at lowest level of economy

• Profitable Responsibility is essential for sustainability


The Ethic of Sustainability

Sustainability – economic development that generates wealth and meets the needs of current population while preserving the

environment for the needs of future generations.


Evaluating Corporate Social Performance


Managing Company Ethics and Social Responsibility

Code of Ethics – a formal statement of the company’s values regarding ethics and

social issues.

•2 types of code of ethics•Principle based – affect corporate culture; define fundamental values & contain general language•Policy based – outline procedures to be used in specific situations



Ethical Structures – systems, positions and programs a company can undertake to

implement ethical behavior.

•Ethics committee – group of executives appointed to oversee company ethics•Chief ethics officer – company executive who oversees all aspects of ethics & legal compliance•Ethics training – helps employees deal with ethical questions & translate the values stated in a code of ethics into everyday behavior



Whistle-blowing – employee disclosure of illegal, immoral, or illegitimate practices.

•2002 Sarbanes-Oxley Act provides some safety for whistle-blowers


Building an Ethical Organization


The Business Case for Ethics and Social Responsibility

• Ethics and social responsibility is an important business issue

• Stakeholders are pushing more initiatives and issues

• The connection between ethics and financial performance has been widely debated

bm_chapter 4 -revised

Education

accessible website

company c2011 cengage

honestc2011 cengage

toc2011 cengage learning

noc2011 cengage learning

ethical dilemmas ethics

domains of human action

moral agent