Part Two: The Culture of Management

Chapter 3: Managing Social

Responsibility and Ethics Chapter 4: Managing Employee Diversity Chapter 5: Managing Organizational Culture and Change

Chapter 6: Entrepreneurship

Chapter 3
Managing Social Responsibility and Ethics

Management Challenges

After reading this chapter, you should be able to:

Apply the four key ethical criteria that managers and employees are likely to use when making business decisions. Understand why businesses establish codes of ethics as a way of guiding the conduct of employees faced with ethical dilemmas. Recognize how to encourage ethical behavior in business.
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Management Challenges (continued)

Make ethical decisions in morally challenging business situations. Recognize the significance of corporate social responsibility. Value stakeholders and understand their influence on a companys priorities and goals.

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Ethics and social responsibility should be high-priority concerns of all members of an organization, not just managers and executives.

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What are business ethics?

Ethics are principles that explain what is good and right and what is bad and wrong and that prescribe a code of behavior based on these definitions. Business ethics provide standards or guidelines for the conduct and decision making of employees and managers.

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What are business ethics? (continued)

In the absence of a code of ethics,

There

is usually a lack of consensus about appropriate ethical behavior; and Different people use different ethical criteria to determine whether a practice or behavior is ethical or unethical.

Business ethics are not the same things as laws.

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What are business ethics? (continued)

People operate under different ethical value systems depending on their:

Personal Religious

experiences

background

Education Family

background

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Management skills needed to make ethical decisions and deal with concerns of stakeholders:

Ethical decision making skills

Ability

to see beyond own self-interest

Skills at analyzing stakeholder concerns

Ability

to be more proactive in dealing with stakeholder issues Ability to identify stakeholders, how they are affected by company policies, how they have been treated in the past, and how they can affect your ability to pursue business goals
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Criteria for ethical decision making:

Utilitarianism
A

means of making decisions based on what is good for the greatest number of people.

Individualism
The

degree to which a society values individual self-interest over group needs and goals. Individual self-interest should be promoted as long as it does not harm others.
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Criteria for ethical decision making:

(continued)

Rights approach
A

means of making decisions based on the belief that each person has fundamental human rights that should be respected and protected.

Justice approach
An

approach to decision making based on treating all people fairly and consistently when making business decisions.
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Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

A company needs to ensure agreement about the relevant criteria on which to judge the ethics of a business decision so that people do not base decisions on personal value systems.

Code of Ethics

Corporate Credos

Ethical Policy Statements

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Numerous companies have adopted ethical policy statements that inform employees of acceptable standards of conduct:

St. Paul Companies

Employees

may accept gifts of inexpensive pens or appointment diaries, but not liquor, lavish entertainment, travel, or clothing. may not conduct business with a company with which they or their relatives are associated, unless Eli Lily has given specific approval and authorization.
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Eli Lilly and Company

Employees

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Company examples (continued)

General Dynamics Corporation

Employees

may not use or share inside information (that is not available to the general public) for personal gain. and racial and sexual slurs are not

J.D. Edwards and Company

Profanity

tolerated. Language should convey a loving, caring, and sensitive attitude toward other people.
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Managing Ethics
Ethics Training

Ethical Structures Whistleblower Policies

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Whistleblower policies should include the following key features:

The policy encourages reporting unethical conduct. Meaningful procedure to deal fairly with reported violations. Those who report violations are protected from retaliation. Alternative reporting procedures. Anonymous reporting to an ethics officer/committee. Feedback to employees on ethics violations. Top management support and involvement.
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Eight steps to sound ethical decision making in business:

1. Gather the facts. 2. Define the ethical 6. Consider your

character and integrity. issues. 3. Identify the affected 7. Think creatively about potential parties. actions. 4. Identify the 8. Check your gut consequences. feelings. 5. Identify your obligations.
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Should firms be socially responsible?

Do corporations have a responsibility to conduct their affairs ethically? Should corporations be judged by the same standards as individuals? Should a business be concerned with more than the pursuit of profits for its shareholders?

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Benefits of social responsibility:

Pursuit of social responsibility as a goal may ultimately lead to survival of the organization. Narrow focus on producing goods and services for profit may impair company performance in the long run. Corporate responsibility is related to higher financial performance and the ability to recruit better quality job applicants.
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Disadvantages of social responsibility:

Socially responsible firms are likely to be less efficient and may be driven out of business by more efficient competitors willing to single-mindedly pursue profits. Firms that give profits are more likely to fail and become a detriment to society because jobs and stockholders investments are lost.

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Organizational Stakeholders
Owners Employees

Governments Customers

Social Activist Groups

Community Competitors
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Strategies for Managing Stakeholders

Confrontation Damage Control

Accommodation

Proactive Approach

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Applications of Management Perspectives:

For the Manager

It is critical for a manager to be seen as an ethical person. Managers are role models for other employees and are held to a higher standard of personal conduct. Managers are responsible for creating an environment that supports ethical behavior and discourages unethical behavior. A manager should set goals for ethical conduct.
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Applications of Management Perspectives:

For Managing Teams

Teams must place a high priority on behaving ethically. When teams or groups tolerate unethical conduct, it can be very difficult to extinguish this norm. Tolerance of unethical activities can lead to more serious breaches of conduct that can damage the reputation of the entire team.

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Applications of Management Perspectives:

For Individuals

Front-page ethical test.

How would I feel if my decision became a headline in a local newspaper? Would I feel comfortable describing my actions or decision to a customer or stockholder?

Golden rule ethical test.

Would I be willing to be treated in the same manner? Is an opportunity for personal gain clouding my judgment?
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Personal gain test.

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.