Chapter 3: Ethical Behavior and Social Responsibility

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Chapter 3
Ethical Behaviours and Social Responsibilities
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Planning Ahead Chapter 3 Study Questions

• What is ethical behavior?
• How do ethical dilemmas complicate the workplace?
• How can high ethical standards be maintained?
• What is corporate social responsibility?
• How do organizations and governments work
  together in society?

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Study Question 1
What is ethical behaviour?
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• Ethics
• Code of moral principles.
• Set standards of good and bad as opposed to
  right and wrong.
• Ethical behavior
• What is accepted as good and right in the context
  of the governing moral code.

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Laws, values, and ethical behaviour

• Legal behavior is not necessarily ethical
  behavior.
• Personal values help determine individual ethical
  behavior.
• Terminal values
• Preferences about desired end states. Such as
  goals one strives to achieve in life. Ex.
  Self-respect, family security.
• Instrumental values--preferences regarding the
  means for accomplishing desired ends,,,honesty,
  ambition, courage

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• Utilitarian view of ethics greatest good to the
  greatest number of people.
• Individualism view of ethics primary commitment
  is to ones long-term self-interests.
• Moral-rights view of ethics respects and
  protects the fundamental rights of all people.
• Justice view of ethics fair and impartial
  treatment of people according to legal rules and
  standards.

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Figure 3.1 Four views of ethical behavior.
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Cultural issues in ethical behaviour

• Cultural relativism
• Ethical behavior is always determined by cultural
  context.
• Cultural universalism
• Behavior that is unacceptable in ones home
  environment should not be acceptable anywhere
  else.

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Figure 3.2 The extremes of cultural relativism
and ethical imperialism in international business
ethics.
Source Developed from Thomas Donaldson, Values
in Tension Ethics Away from Home, Harvard
Business Review, vol. 74 (September-October
1996), pp. 48-62.
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• How international businesses can respect core or
  universal values
• Respect for human dignity
• Create culture that values employees, customers,
  and suppliers.
• Keep a safe workplace.
• Produce safe products and services.
• Respect for basic rights
• Protect rights of employees, customers, and
  communities.
• Avoid anything that threatening safety, health,
  education, and living standards.
• Be good citizens
• Support social institutions, including economic
  and educational systems.
• Work with local government and institutions to
  protect environment.

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Study Question 2
How do ethical dilemmas complicate the workplace?
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• An ethical dilemma occurs when choices, although
  having potential for personal and/or
  organizational benefit, may be considered
  unethical.
• Ethical dilemmas include
• Discrimination
• Sexual harassment
• Conflicts of interest
• Customer confidence
• Organizational resources

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• Unethical behavior can be rationalized by
  convincing yourself that
• Behavior is not really illegal.
• Behavior is really in everyones best interests.
• Nobody will ever find out.
• The organization will protect you.

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• Factors influencing ethical behavior include
• The person
• Family influences, religious values, personal
  standards, and personal needs.
• The organization
• Supervisory behavior, peer group norms and
  behavior, and policy statements and written
  rules.
• The environment
• Government laws and regulations, societal norms
  and values, and competitive climate in an
  industry.

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Figure 3.3 Factors influencing ethical managerial
behaviorthe person, organization, and
environment.
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Study Question 3
How can high ethical standards be maintained?
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Checklist for dealing with ethical dilemmas

• Step 1. Recognize the ethical dilemma
• Step 2 Get the facts
• Step 3. Identify your options
• Step 4. Test each option Is it legal? Is it
  right? Is it beneficial?
• Step 5. Decide which option to follow
• Step 6. Double-check decision by asking the
  spotlight questions 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?
• Step 7. Take action.

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Ethics training

• Structured programs that help participants to
  understand ethical aspects of decision making.
• Helps people incorporate high ethical standards
  into daily life.
• Helps people deal with ethical issues under
  pressure.

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Whistleblowers

• Expose misdeeds of others to
• Preserve ethical standards
• Protect against wasteful, harmful, or illegal
  acts
• Laws protecting whistleblowers vary

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• Barriers to whistleblowing include
• Strict chain of command
• Strong work group identities
• Ambiguous priorities
• Organizational methods for overcoming
  whistleblowing barriers
• Ethics staff units who serve as ethics advocates
• Moral quality circles

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Ethical Role Models

• Top managers serve as ethical role models.
• All managers can influence the ethical behavior
  of people who work for and with them.
• Excessive pressure can foster unethical behavior.
• Managers should be realistic in setting
  performance goals for others.

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• Codes of ethics
• Formal statement of an organizations values and
  ethical principles regarding how to behave in
  situations susceptible to the creation of ethical
  dilemmas.
• Areas often covered by codes of ethics
• Bribes and kickbacks
• Political contributions
• Honesty of books or records
• Customer/supplier relationships
• Confidentiality of corporate information

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Study Question 4
What is corporate social responsibility?
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Corporate social responsibility

• Looks at ethical issues on the organization
  level.
• Obligates organizations to act in ways that serve
  both its own interests and the interests of
  society at large.

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• Organizational stakeholders
• Those persons, groups, and other organizations
  directly affected by the behavior of the
  organization and holding a stake in its
  performance.
• Typical organizational stakeholders
• Employees
• Customers
• Suppliers
• Owners
• Competitors
• Regulators
• Interest groups

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Figure 3.4 Multiple stakeholders in the
environment of an organization.
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Beliefs that guide socially responsible business
practices

• People do their best with a balance of work and
  family life.
• Organizations perform best in healthy
  communities.
• Organizations gain by respecting the natural
  environment.
• Organizations must be managed and led for
  long-term success.
• Organizations must protect their reputations.

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Perspectives on social responsibility

• Classical view
• Managements only responsibility is to maximize
  profits.
• Socioeconomic view
• Management must be concerned for the broader
  social welfare, not just profits.

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• Arguments against social responsibility
• Reduced business profits
• Higher business costs
• Dilution of business purpose
• Too much social power for business
• Lack of public accountability

• Arguments in favor of social responsibility
• Adds long-run profits
• Improved public image
• Avoids more government regulation
• Businesses have resources and ethical obligation

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Criteria for evaluating corporate social
performance

• Is the organizations
• Economic responsibility met?
• Legal responsibility met?
• Ethical responsibility met?
• Discretionary responsibility met?

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Figure 3.5 Criteria for evaluating corporate
social performance.
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Strategies for pursuing social responsibility

• Obstructionist meets economic responsibilities.
• Defensive meets economic and legal
  responsibilities.
• Accommodative meets economic, legal, and
  ethical responsibilities.
• Proactive meets economic, legal, ethical, and
  discretionary responsibilities.

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Figure 3.6 Four strategies of corporate social
responsibilityfrom obstructionist to proactive
behavior.
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Study Question 5
How do organizations and governments work
together in society?
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How government influences organizations

• Common areas of government regulation of business
  affairs
• Occupational safety and health
• Fair labor practices
• Consumer protection
• Environmental protection

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How organizations influence governments

• Personal contacts and networks
• Public relations campaigns
• Lobbying
• Political action committees
• Sometimes by illegal acts, such as bribery or
  illegal financial contributions to political
  campaigns

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Figure 3.7 Centrality of ethics and social
responsibility in leadership and the managerial
role.
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• Corporate governance
• The oversight of the top management of an
  organization by a board of directors.
• Corporate governance involves
• Hiring, firing, and compensating the CEO.
• Assessing strategy.
• Verifying financial records.