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Lecture 4
Ethics and Social Responsibility
Ethics
The set of moral principles or values
that defines right and wrong for a
person or group.
Ethics • A society of Human Resources Management Survey showed
that:
• only 27% of employees felt that their organization’s
leadership was ethical
• 48% of respondents admitted to actually committing an
unethical or illegal act in the pervious year
• cheating on an expense account
• discriminating against coworkers
• forging signatures
• paying or accepting kickbacks
• looking the other way when environmental laws were
broken
Ethics • On the other hand, there are also good news:
• when people believe their work environment is ethical,
they are 6 times more likely to stay with the company than
if they believe they work in an unethical environment
• One study asked 570 white-collar workers which of 28
qualities were important in company leaders
• The results: honesty and integrity/morals/ethics ranked
by far the highest
• caring/compassion was the third
Ethics and the nature of management jobs
• Ethical behavior follows accepted principles of right
and wrong
• By contrast, unethical management behavior occurs
when managers personally violate accepted principles
of right and wrong • e.g. lying about corporate profits
• knowingly producing an unsafe product
• exploiting workers
• bribing a potential customer
• using corporate funds for extravagant personal parties
Unethical management behavior
Unethical Managerial Behavior
Authority and Power
Handling Information
Influencing the Behavior of Others
Setting Goals
How to encourage ethical behavior
• Managers can encourage ethical
behaviors by…
using resources for company business only
handling information confidentially
not influencing others to engage in
unethical behavior
not creating policies that reward employees
for unethical behavior
setting reasonable goals
Workplace deviance
• Depending on which study you look at, 1/3 to 3/4 of all
employees admit that they have:
stolen from their employers
committed computer fraud
embezzled funds
vandalized company property
faked injuries to receive workers’ compensation benefits
We define workplace deviance as unethical behavior that violates
organizational norms of right and wrong
Types of Workplace Deviance
Influences on ethical decision making
• In making ethical decisions, the answers
that managers give to ethical questions
depends on:
• Ethical Intensity of Decision (managers don’t
treat all ethical decisions the same)
• Moral Development of Manager
• Ethical Principles Used
Tall and slender, Richard Addessi, and IBM employee, was an
apparently healthy man.
On Feb. 11, 1994, despite a heavy snowstorm that crippled
workplaces, he prepared to go to work. In his garage, he suffered a
massive heart attack and died at 48.
He was only four months short of full retirement.
With the 30-year pension, Joan Addessi and her children would get
almost $1,800 a month and free lifetime medical care.
Without it, she gets $340 a month and has to pay $473 a month for
medical benefits.
As VP in charge of benefits, you have to decide whether to award full
retirement benefits to Joan and her children
Ethical Intensity Depends on…
• Magnitude of consequences
• total harm or benefit derived from an ethical decision
• Social consensus
• agreement on whether the behavior is bad or good
• Probability of effect
• the chance that something will happen and then result in
harm to others
• Temporal immediacy
• the time elapsed between the act and the consequences
the act produces
• Proximity of effect
• the social, psychological, cultural or physical distance of
the decision maker from those affected by his decision
• Concentration of effect
• how much an act affects the average person
Kohlberg’s Stages of Moral
Development
Principles of Ethical Decision Making (think
of Addessi case for application example)
Long-term self-interest
Personal virtue
Religious injunctions
Government requirements
Utilitarian benefits
Individual rights
Distributive justice
Principle of long-term self interest
Never take any action that is not in
your organization’s long-term self-
interest
Principle of Personal Virtue
Never do anything that is not honest,
open, and truthful and that you would
not be glad to see reported in the
news.
Principle of Religious Injunctions
Never take any action that is not
kind and that does not build a
sense of community.
Principle of Government
Requirements
Never take any action that violates
the law, for the law represents
the minimal moral standard.
Principle of Utilitarian Benefit
Never take any action that does not
result in greater good for society.
Principle of Individual Rights
Never take any action that infringes on
others’ agreed-upon rights.
Principle of Distributive Justice
Never take any action that harms the
least fortunate among us:
the poor, the uneducated,
the unemployed.
Practical Steps to
Ethical Decision Making
Select and hire ethical employees
Establish a Code of Ethics
Train employees to make ethical decisions
Create an ethical climate
Code of Ethics
Communicate code of ethics to both inside and outside the company
Develop ethical standards and procedures specific to business
Ethics Training
Develops employee awareness of ethics
Achieves credibility with employees
Teaches a practical model of ethical
decision making
A basic model of ethical decision making
1. Identify the problem: What makes it an ethical problem ?
Think in terms of rights, obligations, fairness, relationships, and
integrity. How would you define the problem if you stood the
other side of the fence ?
2. Identify the constituents: Who has been hurt ? Who could
be hurt ? Who could be helped ? Are they willing players, or are
they victims ? Can you negotiate with them ?
3. Diagnose the situation: How did it happen in the first place
? What could have prevented it ? Is it going to get worse or
better ? Can the damage now be undone ?
A basic model of ethical decision making
4. Analyze your options: Imagine the range of possibilities.
Limit yourself to the two or three most manageable. What are
the likely outcomes of each ? What are the likely costs ? Look
to the company mission statement or statement of core
values/code of ethics for guidance
5. Make your choice: What is your intention in making this
decision ? How does it compare with the probable results ?
Can you discuss the problem with the affected parties before
you act ? Could you disclose without qualm your decision to
your boss, the CEO, the Board of Directors, your family, or
society as a whole ?
6. Act: Do what you have to do. Don’t be afraid to admit errors.
Be as bold in confronting a problem as you were in causing it.
Ethical Climate – part of organizational culture
Managers:
1. Act ethically
2. Are active in company ethics programs
3. Report potential ethics violations
4. Punish those who violate the code of ethics
5. Show leadership in the ethical sphere
What Is Social Responsibility?
A business’s obligation to…
• pursue policies
• make decisions • take actions that benefit society
To Whom Are Organizations
Socially Responsible?
Stakeholder
Model
Satisfy Interests
of Multiple Stakeholders
Shareholder
Model
Maximize Profits
Shareholder Model
Pros
Firm maximizes
shareholder wealth and
satisfaction
The company stock
increases in value
Cons
• Organizations cannot act
effectively as moral agents
for shareholders
• Time, money, and
attention diverted to social
causes undermine market
efficiency
Stakeholder Model
Primary
Stakeholders:
Shareholders
Employees
Customers
Suppliers
Governments
Local Communities
Secondary
Stakeholders:
Media
Special Interest Groups
Trade Associations
Social Responsibilities
Social Responsiveness
Social Responsibility and
Economic Performance
• No trade-off
• Small, positive relationship
• Social reputation
Relevant videos
Business ethics
https://www.youtube.com/watch?v=ghokREsbaoI
https://www.youtube.com/watch?v=R7sPDHrHj8c
Corporate social responsibility
https://www.youtube.com/watch?v=E0NkGtNU_9
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https://www.youtube.com/watch?v=XWNol3TxvtI
Home assignment
Form a team of 2-3 persons and each read the
McKinsey case carefully. Choose a team member to play
the role of Dominic Barton, the other team mates to play
the role of members of the Crisis Management Team
Then get together, discuss the case and analyze the
issues based on what you learned in class, specifically
the BASIC MODEL OF ETHICAL DECISION MAKING
Be prepared to present and discuss the issues and your
decision next class
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