© 2008 prentice-hall business publishing chapter 3: ethics and social responsibility

© 2008 Prentice-Hall Business Publishing

Chapter 3:Ethics and Social

Responsibility

After studying this chapter, you should be able to answer the following:

Who do corporations have a responsibility to ?

What is the best way to solve an ethical dilemma?

How should companies demonstrate corporate social responsibility?

What is the government’s role in corporate social responsibility?

2

Obligation corporations have to constituencies and the nature and extent of those obligations

Constituencies include shareholders, customers, employees, specific communities, society at large, governments

Issue: constituencies may not share same expectations

3

Efficiency perspective: maximize profits for the owners of the business

4

MANAGERS AS OWNERS

Self-interests of the manager-owner are best achieved by serving the

needs of society

MANAGERS AS AGENTS

Managers have no obligation to act

on behalf of society if it does not

maximize value for the shareholders

Shareholders

Society

Financiers

Communities

Suppliers

Employees

FIRM

5

Social responsibility perspective: firms have responsibilities and obligations to

society as a whole, not just shareholders

Key Stakeholders

6

Efficiency PerspectiveManagerially Irresponsible

Social ResponsibilityPerspective

Managerially Responsible






Managerially Irresponsible




Efficiency PerspectiveManagerially Responsible












Action harms other stakeholdersAction harms other stakeholders

NoNo YesYes

No

No

Yes

Yes

Action harms other share-

holders

Action harms other share-

holders

Adapted from Exhibit 2.1

LifeExperiences

LifeExperiences

JobExperiences

JobExperiences

ReligionReligion TeachersTeachers

PeersPeers

FriendsFriends

FamilyFamily

IndividualEthics

IndividualEthics

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Stealing from your employer Lying about your hours worked Falsifying documents Sexual harassment “Cooking the books”For the above situations termination is

likely. But… What about…using the internet at work, taking

personal calls at work, dating the boss, starting rumors?

Examples

Sometimes the course of action that you would take as a manager is not clear

See how you would handle the following situations.

1. Your boss informs you confidentially that one of your friends is going to be fired. Your friend is about to buy a house. Should you warn your friend that he is about to be fired, even though you promised your boss that you would not?

2. Your colleague has been violating your company’s code of ethics by accepting expensive gifts from sales person who does business with your company. Should you notify your supervisor?

3. One of your employees has been having serious personal problems, and you have tried to be understanding. However, your entire staff is suffering because of poor performance by this key team member. What should you do?

Ones

Twos

Threes

BUSINESS ETHICS TENSIONS

Profit vs. higher wages Production vs. pollution Supplier benefits vs.

consumer prices/lower costs

Having to make a choice between 2 competing but arguable valid options

Ethical Lapses: decisions that are contrary to an individuals stated beliefs and the policies of the company

ETHICAL DILEMMAS

STEPS… COCA COLA CASE STUDY

1. Accurately identify the problem

2. List facts that have most bearing on decision

3. Consider who your decision could injure/harm

4. Explain what each affected person would want you to do about the issue

5. List 3 alternative actions

6. Determine your course of action

Problem: Coca-Cola bottling plant in India has some negative externalities

See article

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© 2008 Prentice-Hall Business Publishing

Day 2 Notes

Ethical dilemmas The choice between

two competing but arguably valid options

Frameworks for ethical decision making:

Utilitarian approach Moral rights approach Universalism

approach Justice approach

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Focused on the consequences of an action

What is the “greatest good?”

Different people may see the outcome differently in terms of good or bad

15

Focused on moral standing of actions, independent of their consequences

Some things are simply “right” or “wrong”

When two actions have moral standing, then the positive or negative consequences of each will determine the more ethical

16

“Do unto others as you would have them do unto everyone, including yourself.”

Choose a course of action you believe can apply to all people under all situations

The issue of rights Rights stem from freedom and autonomy Actions that limit freedom and autonomy

generally lack moral justification

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Costs and benefits of actions:

Costs and benefits should be equitably distributed

Rules should be impartially applied

Those damaged should be compensated

Distributive justice Equitable distribution is

based on performance

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Apply each approach to this Nike case

• What would the Efficiency Perspective Say?

• What would the Social Responsibility Perp. Say?

• What would the Utilitarian approach say?

• What would the Moral Rights approach say?

• What would the Universalism approach say?

• What would the Justice approach say?

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Code of ethics: a formal one-to-three page statement outlining the types of behavior that are and are not acceptable

Codes generally stress: Being a good

“organization citizen” Guiding employee

behavior away from unlawful or improper acts that could harm the organization

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Our Credo

• We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. • In meeting their needs everything we do must be of high quality. • We must constantly strive to reduce our costs in order to maintain reasonable prices. • Customers' orders must be serviced promptly and accurately. • Our suppliers and distributors must have an opportunityto make a fair profit.

We are responsible to our employees, the men and women who work with us throughout the world. • Everyone must be considered as an individual. • We must respect their dignity and recognize their merit. • They must have a sense of security in their jobs. • Compensation must be fair and adequate, and working conditions clean, orderly and safe. • We must be mindful of ways to help our employees fulfilltheir family responsibilities. • Employees must feel free to make suggestions and complaints. • There must be equal opportunity for employment, development and advancement for those qualified. • We must provide competent management, and their actions must be just and ethical.

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Adapted from Exhibit 2.5

47%

18%

31%

53%

82%

69%

Germany

France

United Kingdom

With codes Without codes

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Percentage of FirmsAdapted from Exhibit 2.7

Implementing a Code

of Ethics

Implementing a Code

of Ethics

CommunicationCommunication TrainingTraining Reward &RecognitionReward &

RecognitionWhistle-blowingWhistle-blowing

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Print notes –2 days worth Team Exercise p. 82, “The Limits of

Privacy” Video Clips

• St. Elizabeth College, “Business Ethics Scenarios”

• The Office, “Business Ethics” P. 81 Review Questions #1-9 HW: Read Ch 4: Law & The Legal

Environment of Business

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© 2008 prentice-hall business publishing chapter 3: ethics and social responsibility

Documents

obligation corporations

behalf of society

following situations

course of actionproblem

sales person

personal calls

affected person

situations termination