Chapter 05 Managerial Ethics and Corporate Social

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Transcript Chapter 05 Managerial Ethics and Corporate Social

Chapter 4
Ethics and Social
Learning Objectives
Define ethics and understand the relationship between law and
Identify the stakeholders of organizations and understand each
group’s claims on the organization and how each is affected by
the organization’s actions.
Explain four approaches (utilitarian, moral rights, justice and
practical) to help organizations evaluate choices in ethical
Describe the four main sources of a manager’s ethics – societal,
occupational, individual, organizational ethics
Define corporate social responsibility and the four approaches
which organization’s may take regarding social responsibility. 4-2
What is Managerial Ethics?
The inner-guiding moral principles, values, and
beliefs that people use to decide what is the
“right” or appropriate way to behave.
 Ethics is about making decisions.
Poor managerial ethics
 Can generate negative publicity
 Bring down company’s stock price
 Put the company out of business.
Ethical Dilemma
An ethical dilemma is a quandary which people find
themselves in when right and wrong cannot be
clearly identified. Their actions might help one
person at the expense of another or their own
 All choices have potentially negative consequences
 Values are in conflict
Ethics and Law
• Unenforceable norms and
values guide behavior
• Values are written into
enforceable standards of
• There are no specific laws
• Laws are enforced by the
justice system
Ethics and laws change as norms and values of
society changes
Stakeholders and Ethics
Organizational Stakeholders – people or groups that
supply a company with its productive resources and
have a claim on its resources.
Has a stake in the organization’s performance
When there are no laws to specify behavior, managers
must decide what is the ethical way to behave toward
organizational stakeholders
Stakeholders and Ethics
Stakeholders and Ethics
Want to maximize their return on investment
Want to be sure management is not engaging in actions which
could hurt company’s reputation
Responsible for using resources to increase organization’s
Have the right to expect a reward for their use of resources to
improve organization’s performance
Juggle multiple interests
Stakeholders and Ethics
Most critical stakeholder
Want quality product at low price – organization must create
loyal customers and attract new ones
Want success of organization for economic development
(taxes and income of citizens)
Want good quality of life with safe environment for citizens
Stakeholders and Ethics
Organizations have a responsibility to create structure that
rewards employees fairly for their contribution
Suppliers and Distributors
Suppliers expect to be paid fairly and promptly for their inputs
Distributors expect to receive quality products at agreed-upon
Approaches For
Ethical Decision Making
Utilitarian Approach
Ethical dilemmas are resolved by making decisions which
result in the greatest good for the greatest number.
In making decisions, consider the effect of each
alternative on all parties
Select the alternative which satisfies the greatest number
of people.
Decisions are based on outcomes or consequences
Problem: Adhering to the common good approach can result
in ignoring the individual’s rights.
Moral Rights Approach
Ethical dilemmas are resolved by making decisions which
maintain and protect the fundamental rights and privileges of
people affected by the decision
Asserts human beings have fundamental rights and liberties.
Right to freedom, life and safety
Right to privacy
Right to free speech
Right to freedom of conscience
Focuses on “ethics” of decision independent of consequences
Justice Approach
Ethical dilemmas are resolved by basing decisions on
standards of equity, fairness, and impartiality.
In making decisions, choose alternatives which result in
fair and impartial treatment to the involved parties
 Different treatment should not be based on arbitrary
 Administer rules fairly
 If harm done, injured party should be made whole
Practical Approach
Ethical dilemmas are resolved by making decisions
based on whether the typical person in society would
think it is acceptable.
A decision is ethical if the manager can answer yes to
three questions
 Is my decision within accepted values and standards
of business today?
 Are you willing to communicate the decision to all
 Would people I am closest to (family, friends)
approve of the decision?
Determinants of Business Ethics
There are four main determinants of differences in ethics
between people, employees, companies and countries
 Societal Ethics
 Occupational Ethics
 Individual Ethics
 Organizational Ethics
Individual Ethics: Three Levels of Personal
Moral Development (based on L. Kohlberg)
Preconventional Level
Individual is concerned with concrete consequences – stick
to rules to avoid punishment. Ethical actions are those that
“follow the rules.”
At a higher stage within this level, individual follows rules
when it is in his/her immediate interests. Ethical actions
are those that result in an equal exchange or “fair deal.”
Managers at this level expect dependable accomplishment
of tasks within the approved methods
Individual Ethics: Three Levels of Personal
Moral Development
Conventional Level
The individual conforms to expectations of what is good
behavior. Expectations are defined by people closest to
you, society, and groups.
Ethical actions are those that “live up” to what is expected
by people close to you. Fulfill duties and obligations.
Managers at this level emphasize cooperation and
collaboration to accomplish tasks.
Most adults operate at this level.
Individual Ethics: Three Levels of Personal
Moral Development
Postconventional or Principled Level
The individual is guided by own values and standards and
will disobey rules which violate own principles.
Ethical actions are those which conform to an individual’s
own principles and standards. May result in “civil
According to Kohlberg, less than 20 percent of American
adults reach this level.
Managers at this level focus on the needs of employees and
encourage them to think for themselves.
Organizational Ethics
Most of us operate at the Conventional level of moral
development, so …
The norms and values of your immediate work group,
department and the organization will have great influence
on ethical behavior.
Company culture lets people know what behaviors
the company supports and those actions considered
The organization’s rules, policies and reward systems
guide people’s actions
Organizational Structures
Develop a code of ethics or credo for the organization - A
formal statement of the company’s values concerning ethics
and social issues; it communicates to employees what the
company stands for.
Creation of Ethics officers – a management position dedicated
to monitoring organizational practices and teaching ethical
practices to employees
The Sarbanes-Oxley Act passed in 2003 requires procedures
for handling whistleblowers’ concerns regarding accounting
Social Responsibility
The way a company’s managers and employees view
their obligation to make decisions that protect,
enhance and promote the welfare of society as well
as the organization.
Does the organization have responsibilities beyond
economic responsibilities (maximizing profits for
owners and shareholders)?