Ethics Social Responsibility Don Hellriegel Susan E Jackson
Ethics & Social Responsibility Don Hellriegel Susan E. Jackson John W. Slocum, Jr. MANAGING: A COMPETENCY BASED APPROACH 11 th Edition Chapter 3—Ethics and Social Responsibility Prepared by Argie Butler Texas A&M University
Ethics & Social Responsibility CHAPTER 3—ETHICS AND SOCIAL RESPONSIBILITY LEARNING GOALS 1. State the importance of ethics for individual employees and organizations 2. Describe four influences that shape the ethical behavior and decisions of individuals and organizations 3. Describe three approaches that people use when making ethical judgments 4. Explain stakeholder social responsibility and how it influences managers’ ethical decisions and behavior Chapter 3: Power. Point 3. 1
Ethics & Social Responsibility IMPORTANCE OF ETHICS: SNAPSHOT “While the majority of corporate CEOs are honest leaders dedicated to building their companies, far too many got caught up in the quest for personal gain and wound up sacrificing their values and their stakeholders. Call it greed, because that’s what it is. It threatens the very fabric of our system. ” William W. George, Former CEO and Chairman, Medtronic, Inc. Ethics The set of values, principles, and rules that define right and wrong conduct Chapter 3: Power. Point 3. 2
Ethics & Social Responsibility LONG-TERM ORGANIZATIONAL EFFECTIVENESS q Stronger financial performance over the long run q Greater sales, brand image, and reputation q More employee loyalty and commitment q Less vulnerability to activist pressure and boycotts q Fewer or no fines, court-imposed remedies, and criminal charges Chapter 3: Power. Point 3. 3
Ethics & Social Responsibility Cultural Influences Legal and Regulatory Influences Organizational Influences Individual Influences Ethical Conduct § Individual § Organization Chapter 3: Power. Point 3. 4 (Figure 3. 1)
Ethics & Social Responsibility Cultural Influences q Culture The dominant pattern of living, thinking, and believing that is developed and transmitted by people, consciously or unconsciously, to subsequent generations q Culture Values Those consciously and subconsciously deeply held beliefs that specify general preferences and behaviors, and define what is right and wrong Chapter 3: Power. Point 3. 5
Ethics & Social Responsibility Personal Values Core Values in North American Culture Chapter 3: Power. Point 3. 6 Honesty Family Integrity Achievement Trustworthiness Reliability Respect for Other People Fairness Self-respect Loyalty
Ethics & Social Responsibility Legal and Regulatory Influences At one time U. S. organizations could legally discriminate against women and minorities Legality doesn’t always mean ethical Laws: Society’s values and standards that are enforceable in the courts Chapter 3: Power. Point 3. 7
Ethics & Social Responsibility Legal and Regulatory Influences q Examples of Lawful Reasons for Dismissing Employees Ø Incompetence in performance that does not respond to training or to accommodation Ø Gross or repeated insubordination Ø Civil rights violations such as engaging in harassment Ø Illegal behavior such as theft or physical violence Ø Repeated lateness or unexcused absences Ø Drug activity or drunkenness on the job Chapter 3: Power. Point 3. 8
Ethics & Social Responsibility Legal and Regulatory Influences q Examples of Unlawful Reasons for Dismissing Employees ü Blowing the whistle about illegal conduct by the employer ü Reporting Occupational Safety and Health Administration violations ü Filing discrimination charges with the Equal Employment Opportunity Commission or a state or municipal fair employment agency ü Filing unfair labor practice charges with the National Labor Relations Board or a state agency ü Engaging in union activities, provided there is no violence or unlawful behavior ü Complaining or testifying about violations of equal pay, wage, or hour law Chapter 3: Power. Point 3. 9 (Adapted from Table 3. 1)
Ethics & Social Responsibility Legal and Regulatory Influences v Sarbanes-Oxley Act Imposes rigorous auditing, financial disclosure, executive compensation, and corporate governance requirements on publicly traded companies v Snapshot “…today’s compliance challenges are really information challenges. At its core, the Sarbanes-Oxley Act is about ensuring that data is turned into financial information in a way that enables accurate, reliable, transparent and timely financial reporting. ” Lee Dittmar, Principal, Deloitte Consulting LLP Chapter 3: Power. Point 3. 10
Ethics & Social Responsibility Management’s Day-to-Day Behaviors and Decisions are Key Create Formal Ethics System Make It Acceptable to Talk About Ethics Fostering an Ethical Culture Communicate Ethical Expectations Include Ethical Conduct in Performance Evaluations Chapter 3: Power. Point 3. 11
Ethics & Social Responsibility Organizational Influences v Abbreviated Principles in a World Code of Ethics q Fiduciary Principle: Act as a fiduciary (representative) for the company and its investors q. Property Principle: Respect property and the rights of those who own it q Reliability Principle: Honor commitments q Transparency Principle: Conduct business in a truthful and open manner Chapter 3: Power. Point 3. 12 (Adapted from Table 3. 2) (continued)
Ethics & Social Responsibility v Continued: Abbreviated Principles in a World Code of Ethics q Dignity Principle: Respect the dignity of all people; protect the health, safety, privacy, and human rights of others q Fairness Principle: Engage in free and fair competition, deal with all parties fairly and equitably q Citizenship Principle: Act as responsible citizens of the community q Responsiveness Principle: Engage with parties who may have legitimate claims and concerns relating to the company’s activities Source: Adapted from L. Paine, R. Deshpandé, J. D. Margolis, and K. E. Bettcher. Up to code: Does your company’s conduct meet world-class standards? Harvard Business Review, 2005, 82(2), 122 -133. Chapter 3: Power. Point 3. 13 (Adapted from Table 3. 2)
Ethics & Social Responsibility q Kohlberg’s Stages of Moral Development Universal Principles Social Contract Law & Order Interpersonal Instrumental Obedience & Punishment Childhood Through Chapter 3: Power. Point 3. 14 (Figure 3. 2) Adulthood
Ethics & Social Responsibility q Kohlberg’s Stages of Moral Development (cont’d) § Obedience and Punishment Stage: a person does the right thing mainly to avoid punishment or to obtain approval § Instrumental Stage: a person becomes aware that others also have needs and begins to defer to them to get what the individual wants § Interpersonal Stage: a person considers appropriate behaviors as that which pleases or is approved by friends or family Chapter 3: Power. Point 3. 15
Ethics & Social Responsibility q Kohlberg’s Stages of Moral Development (cont’d) § Law and Order Stage: a person considers proper behavior as doing one’s duty (obligation), showing respect for authority, and maintaining the social order for its own sake; loyalty to the nation and its laws are paramount § Social Contract Stage: a person is aware that people hold a variety of conflicting personal views that go beyond the letter of the law; a “greatest good for the greatest number” emphasis § Universal Principles Stage: a person considers appropriate conduct as determined by a person’s conscience, based on universal ethical principles Chapter 3: Power. Point 3. 16
Ethics & Social Responsibility Individual Influences ØWhistle-blowing Whistle-blowers: employees who report unethical or illegal actions by their employers to other people or organizations that are capable of taking corrective action Chapter 3: Power. Point 3. 17 Four questions to ask before whistle-blowing 1. Is this the only way? 4. Am I ready? 2. Do I have the Key evidence? Questions 3. Why am I doing this?
Ethics & Social Responsibility Making Ethical Judgments: Utilitarian Approach q Focuses on behaviors and their results, not on the motives for such actions q Organizational Goal § Primary managerial obligation is to maximize shareholders’ profits and their long-term interests q Efficiency § Obligation is to minimize inputs and maximize outputs q Conflicts of Interest § Personal interests are not to conflict with achievement of organizational goals Chapter 3: Power. Point 3. 18
Ethics & Social Responsibility Making Ethical Judgments: Utilitarian Approach Profit maximization Competition benefits society and consumers Core Values Sacrifice and hard work Chapter 3: Power. Point 3. 19 Rewards based on abilities and achievements
Ethics & Social Responsibility v Decisions should be consistent with fundamental rights and privileges (e. g. , life, freedom, health, and privacy). Life and Safety Freedom of conscience and speech Moral Rights Privacy Chapter 3: Power. Point 3. 20 (Figure 3. 3) Truthfulness
Ethics & Social Responsibility Ø Snapshot “If you are truly interested in teaching a grand critically important concept like honesty, you must be willing to accept the awkward situations and inevitable flaring of human passions that are certain to occur. However, it’s unquestionably worth the effort. ” Tom Asacker, Business Consultant and Author of Sandbox Wisdom Chapter 3: Power. Point 3. 21
Ethics & Social Responsibility v Decisions and behavior are evaluated with regard to how equitably they distribute benefits and costs among individuals and group v Distributive Justice Principle § Requires that individuals not be treated differently on the basis of arbitrarily defined characteristics § Individuals who are similar in relevant respects should be treated similarly § Individuals who differ in relevant respects should be treated differently in proportion to the differences among them Chapter 3: Power. Point 3. 22
Ethics & Social Responsibility q Fairness Principle § Requires employees to support the rules of the organization as long as the organization is just (or fair) and employees have voluntarily accepted some benefits or opportunities in order to further their own interests § Both the organization and its employees have obligations and both should accept their responsibilities § Procedural justice: formal process for investigating grievances and taking remedial actions Chapter 3: Power. Point 3. 23
Ethics & Social Responsibility Ø Natural Duty Principle § Requires that decisions and behaviors be based on universal principles associated with being a responsible member of society Chapter 3: Power. Point 3. 24 Help others who are Not to harm or in need or jeopardy, injure another without excessive personal risk or loss Universal duties To support and comply with just institutions Not to cause unnecessary suffering
Ethics & Social Responsibility Justice Approach Moral Rights Approach Utilitarian Approach Chapter 3: Power. Point 3. 25 (Figure 3. 4) Ideal in Ethical Decision Making
Ethics & Social Responsibility Stakeholder Social Responsibility q Managers and other employees have obligations to identifiable groups that are affected by or can affect the achievement of an organization’s goals q Rationale § Enlightened self-interest § Sound investment § Inference avoidance Chapter 3: Power. Point 3. 26
Ethics & Social Responsibility Media Political Action Groups/ Activists Secondary Stakeholders Governments (Regulatory Agencies) Primary Stakeholders Customers Suppliers The Employees Organization Shareholders Nongovernmental Organizations Chapter 3: Power. Point 3. 27 (Figure 3. 5) Unions
Ethics & Social Responsibility Examples of Types of Stakeholder Pressures q Employees Ø Pay and benefits Ø Safety and health ØRights at work/global labor standards q Shareholders Ø Demands for efficiency/profitability Ø Viability (sustainability) ØGrowth of investment Chapter 3: Power. Point 3. 28 (Adapted from Table 3. 4)
Ethics & Social Responsibility Examples of Types of Stakeholder Pressures (cont’d) q Customers Ø Competitive prices Ø Quality and safe products Ø Respect for customer’s privacy q Suppliers Ø Meet commitments Ø Repeat business Ø Fair trade practices/ethical treatment Chapter 3: Power. Point 3. 29 (Adapted from Table 3. 4)
Ethics & Social Responsibility Sustainable Development v Conducting business in a way that protects the natural environment while making economic progress, thus meeting the needs of the present generation without compromising the ability of future generations to meet their own needs Chapter 3: Power. Point 3. 30
Ethics & Social Responsibility Sustainable Development q A Few Components of Sustainable Development and Sustainability § Integrated solutions to environmental, social and economic needs § Using resources more efficiently and decoupling growth from environmental damage § Recognizing that decisions and actions taken locally have global impacts § Acting now to address sustainable development concerns, many of which will be global and long-term in nature § Win-win solutions possible, rather than trade-offs between social, environmental and economic issues Chapter 3: Power. Point 3. 31 (Adapted from Table 3. 5)
Ethics & Social Responsibility Evaluating Social Performance Disclosure of Social and Environmental Information Creating Shareholder Value with Corporate Responsibility Communication Major and Themes Engagement with Various Proactive Groups Management Beyond Minimum Requirements Chapter 3: Power. Point 3. 32
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