WEEK 7
ETHICS & SOCIAL RESPONSIBILITY
Özge Can – 07.11.2012
Article on Ethics:
In China, Human Costs Are Built Into an iPad
http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?pagewanted=all
Stakeholders
Stakeholders The people and groups affected by how a
company and its managers behave. They supply a company with its productive
resources and so have a claim on and stake in the company
Stakeholders
Stockholders
They have a claim on company as they buy its stock or shares and become its owners. They;
Want to maximize their return on investment
Want to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation
Managers
Responsible for using a company’s financial, capital and human resources to increase its performance
Bear the responsibility to decide which goals an organization should pursue
Frequently try to balance multiple interests These interest may be in conflict; some
decisions that benefit certain stakeholder groups can harm others
Employees
They expect to receive rewards consistent with their performance
Fair treatment expected from managers:Recruitment and trainingPerformance appraisalReward system
Suppliers and Distributors
Suppliers expect to be paid fairly and promptly for their inputs
Distributors expect to receive quality products at agreed-upon prices
How companies contract and interact with them? How and when payments are made Product quality and safety specifications
Customers
Most critical stakeholder
Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones
Community and Society
Community: Refers to locations like towns or cities
or to social milieus in which companies are located
Provides a company with the physical and social infrastructure that allows it to operate
Ethics
Ethics Inner guiding moral principles, values that
people use to analyze and interpret a situation and then decide what is the right or appropriate way to behave
Ethical dilemma
Business Ethics The moral principles and standards that
guide behavior in the world of business
Rules of Ethical Decision Making
Why Should Managers Behave Ethically?
The relentless pursuit of self-interest can lead to a collective “disaster” when a few people start to profit from being unethical because this encourages other people to act in the same way
Pursuing of self interest with no consideration of societal interests harm both the individual and the society
=> Scarce resources are destroyed
Some Effects of Ethical/ Unethical Behavior:
The Business Costs of Ethical Failure
Sources of Business Ethics:
Business Ethics
Societal Ethics
Individual Ethics
Organizational Ethics
Occupational Ethics
Sources of Business Ethics:
Societal Ethics Standards that govern how members of a
society should deal with each other on issues such as fairness, justice, poverty, and the rights of the individual
Occupational (Professional) Ethics Standards that govern how members of a
profession, trade or craft should conduct themselves when performing work-related activities
Sources of Business Ethics:
Individual Ethics Personal standards and values that
determine how people view their responsibilities to others and how they should act in ethical situations
Organizational Ethics Guiding practices and beliefs through which
a particular company and its managers view their responsibility towards their stakeholders
Major Issues of Business Ethics Unfair wages and violation of employee rights Safety and health violations and poor working
conditions Discriminatory practices Failure of providing safe products Dishonest commonication, lack of transparency Damaging community, society and the
environment Financial frauds, bribery
Organizational Ethics
Code of Ethics: A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow.
Organizational characteristics, mechanisms and culture guide and influence ethics: Organiational structural design
Organization culture
Ethics programs and training
Becoming an Ethical Leader
1. Hire individuals with high ethical standards
2. Establish codes of ethics, decision rules and shared values in the organization
3. Lead by example: Be a good role model by being ethical and honest yourself
4. Include ethics in performance appraisals and the reward system
5. Provide ethics training
6. Conduct independent social audits
7. Provide support for individuals facing ethical dilemmas
Workforce Diversity & Ethics Workforce Diversity
The ways in which people in an organization are different from and similar to one another.
Unethical treatment (discrimination) towards diverse employees: Prejudice (false schemas, perceptions) Stereotyping Biases Overt discrimination, glass ceiling
Social Responsibility
Social Responsibility The way a company’s managers and
employees view their duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of society as a whole
Corporate Social Responsibility (CSR): The idea that businesses have obligations to society beyond the pursuit of profits
I. The Classical View
Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).
Expending the firm’s resources on doing “social good” is not preferable
II. The Socioeconomic View
Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.
Corporations are not independent entities responsible only to stockholders. Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.
Why Be Socially Responsible?
Building good image and reputation Responsibility for bearing the costs of
protecting stakeholders, providing health care and income, paying taxes and etc
Promoting a climate of caring in general Better environment and better society Superiority of prevention over cures
Practice: Take The Test
Assessing your ethical decision-making skills: http://www.mhhe.com/business/managemen
t/buildyourmanagementskills/updated_flash/topic2a/quiz.html
Corporate social responsibility: http://www.mhhe.com/business/managemen
t/buildyourmanagementskills/updatedexercises/quiz_1b.html
Next Week:
Read from your textbook: Chapter 6 – Managing the Global
Environment
Submit your written assignment (2) 2-pages at most Individual or up to 3 persons
Assignment -2 (Due 14.11.2012):
You are an entrepreneuer who has decided to go into business and open an Egean cuisine restaurant. Your business plan requires that you hire people as chefs, waiters and so on.
As the manager, you are drawing up a list of ethical principles that all of you must agree to. These principles outline your view of what is right or acceptable behavior in your business and will be expected both from you and your employees.
Assignment -2:
1. Create a list of the five main ethical rules or principles you will use to govern how the business operates (Please identify them in relation with your restaurant business)
2. Give three specific examples how these principles might relate to your stakeholders. How will you follow them in dealing with particular stakeholders? What will be the benefits for following these rules?
3. Give an example of one ethical dilemma that you might face with while running your business.