Copyright ©2011 by Cengage Learning. All rights reserved 1 Chapter 4 Ethics and Social...

Copyright ©2011 by Cengage Learning. All rights reserved

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Chapter 4Ethics and Social Responsibility

Designed & Prepared byB-books, Ltd.

MGMT3

Chuck Williams


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Ethical and Unethical Workplace Behavior

Ethics

The set of moral principles or values that defines right and wrong for a person or group.


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What Is Ethical and Unethical Workplace Behavior?

After reading these sections, you should be able to:

1. identity common kinds of workplace deviance.

2. describe the U.S. Sentencing Commission Guidelines for Organizations and explain how they both encourage ethical behavior and punish unethical behavior by businesses.


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1.11.1

Common Kinds of Workplace Deviance


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Beyond the BookDan Ariely on CheatingIn his studies on factors that lead to cheating, behavioral economist Dan Ariely has found that people are more likely to cheat when they don’t receive the payoff directly. Further cheating can build on itself, once a person takes the first step the next one becomes easier. Sometimes, however, honest behavior just requires a little reminder. In a test in which participants were rewarded for correct answers and allowed to report their own scores, Ariely found that quizzing participants on the Ten Commandments first eliminated cheating.

Source: E. Gibson, “When People Reckon It’s O.K. to Cheat”, Business Week, 5 October 2009. 25.


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U.S. Sentencing Commission Guidelines

Companies can be prosecuted and punished

even if management didn’t know about

the unethical behavior.

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Who, What, and Why?

• Nearly all businesses are covered

• Punishes a number of offenses

• Encourages businesses to be proactive

2.12.1


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Partial List of Offenses

Invasion of privacy

Price fixing

Fraud

Customs violations

Antitrust violations

Civil rights violations

Theft

Money laundering

Conflicts of interest

Embezzlement

Dealing in stolen goods

Copyright infringements

Extortion

…and more

2.12.1


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Steps in determining fine size:

1. Determine the base fine.

2. Compute a culpability score.

3. Multiply the base fine by the culpability score.

Steps in determining fine size:

1. Determine the base fine.

2. Compute a culpability score.

3. Multiply the base fine by the culpability score.

Compliance Program Steps

Proactive companies get smaller fines!

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Compliance Program Steps1. Establish standards and procedures.

7. Improve program after violations.

6. Enforce standards consistently and fairly.

5. Train employees on standards and procedures.

3. Delegate decision-making authority only to ethical employees.

4. Encourage employees to report violations.

2. Assign upper-level managers to be in charge.

2.22.2


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How Do You Make Ethical Decisions?

After reading the next two sections, you should be able to:

4. describe what influences ethical decision making.

5. explain what practical steps managers can take to improve ethical decision making.


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Influences on Ethical Decision Making

EthicalEthicalAnswersAnswersDepend Depend

on…on…

EthicalEthicalAnswersAnswersDepend Depend

on…on…

Ethical Intensity of DecisionEthical Intensity of Decision

Moral Development of ManagerMoral Development of Manager

Ethical Principles UsedEthical Principles Used

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Ethical Intensity Depends on…

Concentration of effectConcentration of effect

Magnitude of consequencesMagnitude of consequences

Social consensusSocial consensus

Probability of effectProbability of effect

Proximity of effectProximity of effect

Temporal immediacyTemporal immediacy

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Biz Flix: Emperor’s Club

Take Two Video

Click

Based on the clip, what ethical principles do you think most inform William Hundert’s thinking?

What was Sedgewick Bell’s level of moral development? Explain.

Beyond the Book


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Moral Development

Societal Societal ExpectationsExpectationsSelfishSelfish InternalizedInternalized

PrinciplesPrinciples

PreconventionalPreconventionalPreconventionalPreconventional ConventionalConventionalConventionalConventional PostconventionalPostconventionalPostconventionalPostconventional

Kohlberg’s Stages of Moral Development

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Stages of Moral Development

PreconventionalPreconventionalPreconventionalPreconventional

1. Punishment andObedience

2. InstrumentalExchange

1. Punishment andObedience

2. InstrumentalExchange

ConventionalConventionalConventionalConventional

3. Good boy, nice girl

4. Law and order

3. Good boy, nice girl

4. Law and order

PostconventionalPostconventionalPostconventionalPostconventional

5. Social contract

6. Universalprinciple

5. Social contract

6. Universalprinciple

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Principles of Ethical Decision Making

Long-term self-interestLong-term self-interest

Personal virtuePersonal virtue

Religious injunctionsReligious injunctions

Government requirementsGovernment requirements

Utilitarian benefitsUtilitarian benefits

Individual rightsIndividual rights

Distributive justiceDistributive justice3.33.3


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Principle of long-term self-interestPrinciple of long-term self-interest

Never take any action not in your organization’s long-term self-interest.

Never take any action not in your organization’s long-term self-interest.


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Principle of Personal VirtuePrinciple of Personal Virtue

Never do anything that is not honest, open, and truthful and that you would not beglad to see reported in the newspapers

or on TV.

Never do anything that is not honest, open, and truthful and that you would not beglad to see reported in the newspapers

or on TV.

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Principle of Religious InjunctionsPrinciple of Religious Injunctions

Never take any action that is not kindand that does not build a

sense of community.

Never take any action that is not kindand that does not build a

sense of community.

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Principle of Government RequirementsPrinciple of Government Requirements

Never take any action that violates the law,for the law represents the minimal

moral standard.

Never take any action that violates the law,for the law represents the minimal

moral standard.

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Principle of Utilitarian BenefitPrinciple of Utilitarian Benefit

Never take any action that does not result ingreater good for society.

Never take any action that does not result ingreater good for society.

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Principle of Individual RightsPrinciple of Individual Rights

Never take any action that infringes on others’ agreed-upon rights.

Never take any action that infringes on others’ agreed-upon rights.

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Principle of Distributive JusticePrinciple of Distributive Justice

Never take any action that harms the least among us:

the poor, the uneducated,the unemployed.

Never take any action that harms the least among us:

the poor, the uneducated,the unemployed.

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Practical Steps to Ethical Decision Making

Select and hire ethical employeesSelect and hire ethical employees

Establish a Code of EthicsEstablish a Code of Ethics

Train employees to make ethical decisionsTrain employees to make ethical decisions

Create an ethical climateCreate an ethical climate

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• Overt Integrity Tests

• Personality-Based Integrity Tests

Select and hire ethical employeesSelect and hire ethical employees

If you found a wallet containing $50, would you return it with the money?

4.14.1


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Beyond the BookTop B-Schools for EthicsEvery two years, the Aspen Institute ranks the top

business schools on how well they teach social, ethical, and environmental issues. Schools that integrate these issues into core classes like finance and accounting will score higher. The top schools are:

1. York University at Toronto (Schulich School of Business)

2. University of Michigan (Ross)3. Yale University’s School of Business4. Stanford Graduate School of Business5. Notre Dame (Mendoza)

Source: P. Glader, “York, Michigan, Yale Top Ethics Ranking”, The Wall Street Journal, 26 October 2009. http://online.wsj.com/article/SB10001424052748704335904574497761926234076.html (accessed 10/28/2009).


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Establish a Code of EthicsEstablish a Code of Ethics

• Communicate code of ethics both inside and outside the company

• Develop ethical standards and proceduresspecific to business

http://www.nortelnetworks.comWeb Link 4.24.2


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Ethics Training

Ethics TrainingEthics Training

• Develops employee awareness of ethics

• Achieves credibility with employees

• Teaches a practical model of ethical decision making

http://ethics.bellsouth.comWeb Link 4.34.3


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A Basic Model of Ethical Decision Making

1. Identify the problem1. Identify the problem

2. Identify the constituents2. Identify the constituents

3. Diagnose the situation3. Diagnose the situation

4. Analyze your options 4. Analyze your options

5. Make your choice5. Make your choice

6. Act6. Act

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Ethical Climate

Managers establish an ethical climate when they…

1. act ethically.

2. are active in company ethics programs.

3. report potential ethics violations.

4. punish those who violate the code of ethics.

Establishing an Ethical ClimateEstablishing an Ethical Climate

http://www.whistleblowers.orgWeb Link 4.44.4

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What Is Social Responsibility?After reading these sections, you should be able to explain:

6. to whom organizations are socially responsible.

7. for what organizations are socially responsible.

8. how organizations can choose to respond to societal demands for social responsibility.

9. whether social responsibility hurts or helps an organization’s economic performance.


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What Is Social Responsibility?

Social Responsibility

A business’s obligation to… pursue policies make decisions take actions

…that benefit society.


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To Whom Are Organizations Socially Responsible?

StakeholderModel

StakeholderModel

Satisfy Interests of Multiple Stakeholders

Satisfy Interests of Multiple Stakeholders

ShareholderModel

ShareholderModel Maximize ProfitsMaximize Profits

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ProsPros

Shareholder Model

• Firm maximizes shareholder wealth and satisfaction

• The company stock increases in value

ConsCons

• Organizations cannot act effectively as moral agents for shareholders

• Time, money, and attention diverted to social causes undermine market efficiency

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Stakeholder Model

Primary Stakeholders:

ShareholdersEmployeesCustomersSuppliers

GovernmentsLocal Communities

Primary Stakeholders:

ShareholdersEmployeesCustomersSuppliers

GovernmentsLocal Communities

Secondary Stakeholders:

MediaSpecial Interest Groups

Trade Associations

Secondary Stakeholders:

MediaSpecial Interest Groups

Trade Associations

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Organization’s Social Responsibilities

Abide by principlesAbide by principlesof right and wrongof right and wrong

Obey laws andObey laws andregulationsregulations

EthicalEthical

LegalLegal

EconomicEconomic

DiscretionaryDiscretionary

Be profitableBe profitable

Serve a social roleServe a social role

$

?

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Responses to Demands for Social Responsibility

ReactiveReactive DefensiveDefensive Accommo-dative

Accommo-dative ProactiveProactive

Fight all the way

DO NOTHING

DO MUCH

Withdrawal

Do only what is required

Legal Approach

BargainingProblemSolving

PublicRelationsApproach

Beprogressive

Lead theindustry

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Beyond the BookGreen Labels at Wal-MartWal-Mart has announced a new environmental labeling

program which will require all of its suppliers to calculate and disclose the full environmental costs of making their products. This plan has been controversial as it would increase costs for Wal-Mart’s 100,000 suppliers. Similar efforts in Europe have proven difficult to implement with sometimes confusing results for consumers. Some experts think customers could start seeing these labels as early as 2011.

Source: M. Bustillo, “Wal-Mart Puts Green Movement Into Stores,” The Wall Street Journal, 16 July 2009. A1.


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Social Responsibility and Economic Performance

Realities ofSocial

Responsibility

No tradeoff between social responsibility and profit

No tradeoff between social responsibility and profit

Usually it does payUsually it does pay

Does not guarantee profitability

Does not guarantee profitability

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Beyond the BookNike’s Green Goes UndercoverNike is quietly incorporating green production methods.

When Nike released an eco-friendly boot in 2005, critics said the earthy looking design detracted from the company’s high-tech image. So while Nike is implementing new measure to help cut costs and improve its bottom line, such as recycling rubber from old shoes into its new ones and investing in faster sewing machines to cut production times and save on electricity costs, Nike’s new greener side might not be apparent on the store shelves.

Source: R. Jana, “Nike Goes Green. Very Quietly”, Business Week, 22 June 2009. 56.

Copyright ©2011 by Cengage Learning. All rights reserved 1 Chapter 4 Ethics and Social...

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