Social Responsibility and Management Ethics

What Is Social Responsibility?What Is Social Responsibility?

The Classical ViewThe Classical ViewManagement’s only social responsibility is to maximize Management’s only social responsibility is to maximize

profits (create a financial return) by operating the profits (create a financial return) by operating the business in the best interests of the stockholders (owners business in the best interests of the stockholders (owners of the corporation).of the corporation).

  Expending the firm’s resources on doing “social good” Expending the firm’s resources on doing “social good”

unjustifiably increases costs that lower profits to the unjustifiably increases costs that lower profits to the owners and raises prices to consumers.owners and raises prices to consumers.

Cont..The Socioeconomic ViewThe Socioeconomic View  

Management’s social responsibility goes beyond Management’s social responsibility goes beyond making profits to include protecting and improving making profits to include protecting and improving society’s welfare.society’s welfare.

  Corporations are not independent entities responsible Corporations are not independent entities responsible

only to stockholders.only to stockholders.  Firms have a moral responsibility to larger society to Firms have a moral responsibility to larger society to

become involved in social, legal, and political issues.become involved in social, legal, and political issues.  ““To do the right thing”To do the right thing”

From Obligation to Responsiveness to Responsibility Social ObligationSocial ObligationThe obligation of a business to meet its economic and The obligation of a business to meet its economic and

legal responsibilities and nothing more.legal responsibilities and nothing more.  Social ResponsivenessSocial ResponsivenessWhen a firm engages in social actions in response to When a firm engages in social actions in response to

some popular social need. some popular social need.

Social ResponsibilitySocial ResponsibilityA business’s intention, beyond its legal and economic A business’s intention, beyond its legal and economic

obligations, to do the right things and act in ways that are obligations, to do the right things and act in ways that are good for society.good for society.

Does Social Responsibility Pay?Does Social Responsibility Pay?

••Studies appear to show a positive relationship between Studies appear to show a positive relationship between social involvement and the economic performance of social involvement and the economic performance of firms.firms.

  Difficulties in defining and measuring “social Difficulties in defining and measuring “social

responsibility” and “economic performance raise responsibility” and “economic performance raise issues of validity and causation in the studies.issues of validity and causation in the studies.

  Mutual funds using social screening in investment Mutual funds using social screening in investment

decisions slightly outperformed other mutual funds.decisions slightly outperformed other mutual funds.  ••A general conclusion is that a firm’s social actions do A general conclusion is that a firm’s social actions do

not harm its long-term performance.not harm its long-term performance.

The Greening of ManagementThe Greening of Management

The Greening of ManagementThe Greening of Management

The recognition of the close link between an The recognition of the close link between an organization’s decision and activities and its impact on organization’s decision and activities and its impact on the natural environment.the natural environment.

  

Global environmental problems facing managers:Global environmental problems facing managers:

  

Air, water, and soil pollution from toxic wastesAir, water, and soil pollution from toxic wastes

Global warming from greenhouse gas emissionsGlobal warming from greenhouse gas emissions

Natural resource depletionNatural resource depletion

How Organizations Go Green ?Legal (or Light Green) ApproachLegal (or Light Green) ApproachFirms simply do what is legally required by obeying Firms simply do what is legally required by obeying

laws, rules, and regulations willingly and without legal laws, rules, and regulations willingly and without legal challenge.challenge.

Market ApproachMarket ApproachFirms respond to the preferences of their customers Firms respond to the preferences of their customers

for environmentally friendly products.for environmentally friendly products.Stakeholder ApproachStakeholder ApproachFirms work to meet the environmental demands of Firms work to meet the environmental demands of

multiple stakeholders—employees, suppliers, and the multiple stakeholders—employees, suppliers, and the community.community.

  Activist ApproachActivist ApproachFirms look for ways to respect and preserve Firms look for ways to respect and preserve

environment and be actively socially responsible.environment and be actively socially responsible.

Evaluating the Greening of ManagementEvaluating the Greening of Management

Organizations become “greener” byOrganizations become “greener” by

Using the Sustainability Reporting Guidelines to Using the Sustainability Reporting Guidelines to document “green” actions.document “green” actions.

Adopting ISO 14001 standards for environmental Adopting ISO 14001 standards for environmental managementmanagement

Being named as one of the 100 Most Sustainable Being named as one of the 100 Most Sustainable Corporations in the World.Corporations in the World.

Values-Based ManagementValues-Based Management

Value based Management is an approach to managingValue based Management is an approach to managing in which managers establish and upholdin which managers establish and uphold anorganization’s shared values. anorganization’s shared values. ••The Purposes of Shared ValuesThe Purposes of Shared ValuesGuiding managerial decisionsGuiding managerial decisionsShaping employee behaviorShaping employee behaviorInfluencing the direction of marketing effortsInfluencing the direction of marketing effortsBuilding team spiritBuilding team spirit••The Bottom Line on Shared Corporate ValuesThe Bottom Line on Shared Corporate ValuesAn organization’s values are reflected in the decisions An organization’s values are reflected in the decisions

and actions of its employees.and actions of its employees.

Managerial EthicsManagerial Ethics

  

Ethics DefinedEthics DefinedPrinciples, values, and beliefs that define what is right Principles, values, and beliefs that define what is right

and wrong behavior.and wrong behavior.  \Factors That Affect Employee EthicsFactors That Affect Employee Ethics  ••Moral DevelopmentMoral DevelopmentA measure of independence from outside influencesA measure of independence from outside influencesLevels of Individual Moral DevelopmentLevels of Individual Moral Development––Preconventional level–Conventional level–Principled levelPreconventional level–Conventional level–Principled level

  Stage of moral development interacts with:Stage of moral development interacts with:Individual characteristicsIndividual characteristicsThe organization’s structural designThe organization’s structural designThe organization’s cultureThe organization’s cultureThe intensity of the ethical issueThe intensity of the ethical issue

cont..

Moral DevelopmentMoral DevelopmentResearch Conclusions:Research Conclusions:People proceed through the stages of moral development People proceed through the stages of moral development

sequentially.sequentially.There is no guarantee of continued moral development.There is no guarantee of continued moral development.Most adults are good corporate citizen.Most adults are good corporate citizen.

Individual Characteristics Affecting Ethical Individual Characteristics Affecting Ethical BehaviorsBehaviors

ValuesValuesBasic convictions about what is right or wrong on a broad range Basic convictions about what is right or wrong on a broad range

of issuesof issues

 Individual CharacteristicsIndividual Characteristics  ••Personality VariablesPersonality VariablesEgo strengthEgo strengthA personality measure of the strength of a person’s convictionsA personality measure of the strength of a person’s convictions

  Locus of ControlLocus of ControlA personality attribute:A personality attribute: that measures the degree to which that measures the degree to which

people believe they control their ownpeople believe they control their own life.life.Internal locus:Internal locus: the belief that you control your destiny. the belief that you control your destiny.External locus:External locus: the belief that what happens to you is due to the belief that what happens to you is due to

luck or chance.luck or chance.

cont..

Other VariablesOther Variables  ••Structural VariablesStructural Variables  

Organizational characteristics and mechanisms that Organizational characteristics and mechanisms that guide and influence individual ethics:guide and influence individual ethics:

Performance appraisal systemsPerformance appraisal systems

Reward allocation systemsReward allocation systems

Behaviors (ethical) of managersBehaviors (ethical) of managers

• • An Organization’s Culture An Organization’s Culture 

• • Intensity of the Ethical IssueIntensity of the Ethical Issue

Ethics in an International ContextEthics in an International Context

 

Ethical standards are not universal.Ethical standards are not universal.

Social and cultural differences determine acceptable Social and cultural differences determine acceptable behaviors.behaviors.

Foreign Corrupt Practices ActForeign Corrupt Practices Act

Makes it illegal to corrupt a foreign official yet “token” Makes it illegal to corrupt a foreign official yet “token” payments to officials are permissible when doing so is payments to officials are permissible when doing so is an accepted practice in that country.an accepted practice in that country.

How Managers Can Improve Ethical Behavior in How Managers Can Improve Ethical Behavior in An OrganizationAn Organization 11. . Hire individuals with high ethical standards.Hire individuals with high ethical standards.

2. Establish codes of ethics and decision rules.2. Establish codes of ethics and decision rules.

3. Lead by example.3. Lead by example.

4. Set realistic job goals and include ethics in performance 4. Set realistic job goals and include ethics in performance appraisals.appraisals.

5. Provide ethics training.5. Provide ethics training.

6. Conduct independent social audits.6. Conduct independent social audits.

7. Provide support for individuals facing ethical dilemmas.7. Provide support for individuals facing ethical dilemmas.

The Value of Ethics TrainingThe Value of Ethics Training

  

•• Can make a difference in ethical behaviors.Can make a difference in ethical behaviors.

•• Increases employee awareness of ethical issues in Increases employee awareness of ethical issues in business decisions.business decisions.

•• Clarifies and reinforces the organization’s standards Clarifies and reinforces the organization’s standards of conduct.of conduct.

•• Helps employees become more confident that they Helps employees become more confident that they will have the organization’s support when taking will have the organization’s support when taking unpopular but ethically correctunpopular but ethically correct stances.stances.

Effective Use of a Code of Ethics •• Develop a code of ethics as a guide in handling Develop a code of ethics as a guide in handling

ethical dilemmas in decision making.ethical dilemmas in decision making.

•• Communicate the code regularly to all employees.Communicate the code regularly to all employees.

•• Have all levels of management continually reaffirm the Have all levels of management continually reaffirm the importance of the ethics code and the organization’s importance of the ethics code and the organization’s commitment to the code.commitment to the code.

•• Publicly reprimand and consistently discipline those Publicly reprimand and consistently discipline those who break the code.who break the code.

Ethical LeadershipEthical Leadership

  

Managers must provide a Managers must provide a good role modelgood role model by: by:

Being ethical and honest at all times.Being ethical and honest at all times.

Telling the truth; don’t hide or manipulate Telling the truth; don’t hide or manipulate information.information.

Admitting failure and not trying to cover it up.Admitting failure and not trying to cover it up.

Communicating shared ethical values to Communicating shared ethical values to employees through symbols, stories, and employees through symbols, stories, and slogans.slogans.

Rewarding employees who behave ethically and Rewarding employees who behave ethically and punish those who do not.punish those who do not.

Protecting employees who bring to light Protecting employees who bring to light unethical behaviors or raise ethical issues.unethical behaviors or raise ethical issues.

Awareness of Social Issues ••Social EntrepreneursSocial Entrepreneurs

  Are individuals or organizations who seek out Are individuals or organizations who seek out

opportunities to improve society by using practical, opportunities to improve society by using practical, innovative, and sustainable approaches.innovative, and sustainable approaches.

  

Want to make the world a better place and have a Want to make the world a better place and have a driving passion to make that happen. driving passion to make that happen.

  

Cont..••Social Impact ManagementSocial Impact Management

  

Is the field of inquiry at the intersection of business Is the field of inquiry at the intersection of business practice and wider societal concerns that reflects and practice and wider societal concerns that reflects and respects the complex interdependency of those two respects the complex interdependency of those two realities.realities.

  

Seeks to answer the question of how to go about Seeks to answer the question of how to go about increasing managers’ awareness within their decision-increasing managers’ awareness within their decision-making processes of how society is impacted by the making processes of how society is impacted by the conduct and activities of their firms.conduct and activities of their firms.

Twelve Questions for Examining the Ethics of a Business Decision 1. Have you defined the problem accurately? 2. How would you define the problem if you stood on the other side of

the fence? 3. How did this situation occur in the first place? 4 To whom and to what do you give your loyalty as a person

and as a member of the corporation? 5. What is your intention in making this decision? 6. How does this intention compare with the probable results? 

            Cont..7. Whom could your decision or action injure? 8. Can you discuss the problem with the affected parties before you

make the decision?  9. Are you confident that your position will be as valid over a long

period of time as it seems now?  10. Could you disclose without qualm your decision or action to

your boss, your chief executive officer, the board of directors, your family, society as a whole?

11. What is the symbolic potential of your action if understood? If misunderstood?

 12. Under what conditions would you allow exceptions to your

stand?