Ethics and Social Responsibility 1. 2 Study Questions What is ethical behavior? How do ethical...

Ethics and Social Responsibility

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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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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.

Study Question 1: What is ethical behavior?

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Law, values, and ethical behavior:

– Legal behavior is not necessarily ethical

behavior.

– Personal values help determine individual

ethical behavior.

• Terminal values (preferences about desired ends)

• Instrumental values (preferences regarding the

means to desired ends)


Values

Values are beliefs about what is right and wrong and what is important in life. Values encompass social, cultural and moral aspects of life. Values determine the importance of thing, action or belief.

Ethics

Ethics are moral principles which control or influence an individual‘s personal and professional behavior. It is system of moral principles or rules of behavior. It is connected with beliefs and principles about what is right and wrong. (Morals define personal character, while ethics stress a social system in which those morals are applied e.g. Lawyer)

Why Ethics in Business

Many times laws are insufficient and don’t cover all aspects or “gray areas” of a problem. How could tobacco companies in US have been protected by the law for decades until the settlement in 1997, when the industry agreed to pay $368.5 billion for the first 25 years and then $15 billion a year indefinitely to compensate US for the costs of health care for tobacco related illnesses?

Business Ethics in Islam

Ethics may be defined as a set of moral principles that distinguish what is right from what is wrong. It is a normative field because it prescribes what one should do or abstain from doing (Beekun, 1997); the term most closely related to ethics in the al-Qur’ān is Khuluq. The al-Qur’ān also uses a whole array of terms to describe the concept: Khayr (goodness), birr (righteousness), adl (justice), haqq (truth and right), taqwā (piety) and so on.


In Islamic business ethics no businessman is allowed to do dishonesty. In al-Qur’ān it is mentioned that

Give just measures and cause no loss (to others by fraud). And weigh with scales true and upright. And withhold not things justly due to men (26:181-183)


Islam does not tolerate interference in the market system by hoarding or other forms of manipulations. Allah‘s Messenger said:

“He who hoards is a sinner.”

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Utilitarian view of ethics — greatest good to the greatest number of people.

Individualism view of ethics — primary commitment is to one’s 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 behavior:– Cultural relativism

• Ethical behavior is always determined by cultural context.

– Cultural universalism • Behavior that is unacceptable in one’s 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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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

Study Question 2: How do ethical dilemmas complicate the workplace?

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Ethical behavior can be rationalized by convincing

yourself that:

– Behavior is not really illegal.

– Behavior is really in everyone’s 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 behavior—the person, organization, and environment.

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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.

Study Question 3: How can high ethical standards be maintained?

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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 organization’s 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?

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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Study Question 4: What is corporate social responsibility?

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—

• Management’s 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 ethical obligation

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Criteria for evaluating corporate social

performance:

– Is the organization’s …

• 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 responsibility—from obstructionist to proactive behavior.

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Study Question 5: How do organizations and governments work together in society?

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

– Sometimes by illegal acts, such as bribery or illegal

financial contributions to political campaigns

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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.

Ethics and Social Responsibility 1. 2 Study Questions What is ethical behavior? How do ethical...

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