© 2008 prentice-hall business publishing chapter 3: ethics and social responsibility
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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
Efficiency PerspectiveManagerially Irresponsible
Social ResponsibilityPerspective
Managerially Responsible
Efficiency PerspectiveManagerially Irresponsible
Social ResponsibilityPerspective
Managerially Irresponsible
Efficiency PerspectiveManagerially Irresponsible
Social ResponsibilityPerspective
Managerially Irresponsible
Efficiency PerspectiveManagerially Responsible
Social ResponsibilityPerspective
Managerially Responsible
Efficiency PerspectiveManagerially Responsible
Social ResponsibilityPerspective
Managerially Responsible
Efficiency PerspectiveManagerially Responsible
Social ResponsibilityPerspective
Managerially Irresponsible
Efficiency PerspectiveManagerially Responsible
Social ResponsibilityPerspective
Managerially Irresponsible
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
12
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
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“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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Page 72 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
23
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