Management Ethics Management Ethics and Social and Social

ResponsibilityResponsibility

MGMT 370MGMT 370

Chapter 5Chapter 5

Ethical BehaviorEthical Behavior EthicsEthics

– The system of rules that governs the The system of rules that governs the ordering of valuesordering of values

ValuesValues– Terminal Terminal – InstrumentalInstrumental

PerspectivesPerspectives– IndividualismIndividualism– UtilitarianismUtilitarianism– Moral-RightsMoral-Rights– JusticeJustice

Telling the Truth and Lying: Telling the Truth and Lying: Possible OutcomesPossible Outcomes

Personal EthicsPersonal Ethics

Most of us believe we are ethical but Most of us believe we are ethical but most have most have unconsciousunconscious biases that favor biases that favor ourselves and our own groupourselves and our own group

Managers oftenManagers often: : – Hire people who are like themHire people who are like them– Think they are immune to conflicts of Think they are immune to conflicts of

interestinterest– Take more credit than they deserveTake more credit than they deserve– Blame others when they deserve some Blame others when they deserve some

blame themselvesblame themselves

Is it ethical to:Is it ethical to:

Shop online during company time?Shop online during company time? Using office equipment for personal Using office equipment for personal

use?use? Read personal emails while at work?Read personal emails while at work?

Cultural Issues and EthicsCultural Issues and Ethics

Dimensions of justice Dimensions of justice perceptionsperceptions– ProceduralProcedural– DistributiveDistributive– InteractionalInteractional

Cultural RelativismCultural Relativism UniversalismUniversalism Ethical ImperialismEthical Imperialism

Ethical SystemsEthical Systems Moral philosophyMoral philosophy

– Principles, rules, and values people use Principles, rules, and values people use in deciding what is right or wrongin deciding what is right or wrong

UniversalismUniversalism– The ethical system stating that all The ethical system stating that all

people should uphold certain values that people should uphold certain values that society needs to function.society needs to function.

Ethical SystemsEthical Systems

EgoismEgoism– An ethical system defining acceptable An ethical system defining acceptable

behavior as that which maximizes behavior as that which maximizes consequences for the individualconsequences for the individual

UtilitarianismUtilitarianism– An ethical system stating that the An ethical system stating that the

greatest good for the greatest number greatest good for the greatest number should be the overriding concern of should be the overriding concern of decision makers.decision makers.

Ethics SystemsEthics Systems

RelativismRelativism– Philosophy that bases ethical behavior Philosophy that bases ethical behavior

on the opinions and behaviors of on the opinions and behaviors of relevant other peoplerelevant other people

Virtue ethicsVirtue ethics– Classification of people based on their Classification of people based on their

level of moral judgment.level of moral judgment.

Ethics SystemsEthics Systems

Kohlberg’s model of Kohlberg’s model of cognitive moral developmentcognitive moral development– Perspective that what is moral Perspective that what is moral

comes from what a mature person comes from what a mature person with “good” moral character would with “good” moral character would deem right.deem right.

Ethics in the WorkplaceEthics in the Workplace

Ethical dilemmasEthical dilemmas RationalizingRationalizing FactorsFactors

– IndividualIndividual– OrganizationOrganization– External environmentExternal environment

Ethics in the WorkplaceEthics in the Workplace

Ethical issueEthical issue– Situation, problem, or opportunity Situation, problem, or opportunity

in which an individual must choose in which an individual must choose among several actions that must be among several actions that must be evaluated as morally right or wrongevaluated as morally right or wrong

Business ethicsBusiness ethics– The moral principles and standards The moral principles and standards

that guide behavior in the world of that guide behavior in the world of business.business.

Dangerous PracticeDangerous Practice

1.1. Excessive emphasis on short-term Excessive emphasis on short-term revenues over longer-term revenues over longer-term considerations.considerations.

2.2. Failure to establish a written code of Failure to establish a written code of ethics.ethics.

3.3. A desire for simple, “quick fix” A desire for simple, “quick fix” solutions to ethical problems.solutions to ethical problems.

4.4. An unwillingness to take an ethical An unwillingness to take an ethical stand that may impose financial stand that may impose financial costs.costs.

Dangerous PracticesDangerous Practices

5.5. Consideration of ethics solely as a Consideration of ethics solely as a legal issue or a public relations legal issue or a public relations tooltool

6.6. Lack of clear procedures for Lack of clear procedures for handling ethical problems.handling ethical problems.

7.7. Responding to the demands of Responding to the demands of shareholders at the expense of shareholders at the expense of other constituenciesother constituencies

Ethical StandardsEthical Standards

TrainingTraining WhistleblowingWhistleblowing ModelingModeling Code of ethicsCode of ethics Moral managementMoral management

– ImmoralImmoral– AmoralAmoral– MoralMoral

Ethical EnvironmentEthical Environment

Sarbanes-Oxley ActSarbanes-Oxley Act– Act passed into law by Congress in Act passed into law by Congress in

2002 to establish strict accounting 2002 to establish strict accounting and reporting rules in order to and reporting rules in order to make senior managers more make senior managers more accountable and to improve and accountable and to improve and maintain investor confidencemaintain investor confidence

Ethics ProgrammingEthics Programming Compliance-based ethics programsCompliance-based ethics programs

– Company mechanisms typically designed Company mechanisms typically designed by corporate counsel to prevent, detect, by corporate counsel to prevent, detect, and punish legal violations.and punish legal violations.

Integrity-based ethics programsIntegrity-based ethics programs– Company mechanisms designed to instill Company mechanisms designed to instill

in people a personal responsibility for in people a personal responsibility for ethical behaviorethical behavior

Ethical Issues in BusinessEthical Issues in Business

Ethical Decision Making Ethical Decision Making ModelModel

Ethical Decision MakingEthical Decision Making

Moral awareness Moral awareness – realizing the issue has ethical implications realizing the issue has ethical implications

Moral judgmentMoral judgment– knowing what actions are morally knowing what actions are morally

defensible defensible Moral character Moral character

– the strength and persistence to act in the strength and persistence to act in accordance with your ethics despite the accordance with your ethics despite the challengeschallenges

Courage to be EthicalCourage to be Ethical Why might employees lack Why might employees lack

courage in ethical issues?courage in ethical issues?– A belief that the company would not A belief that the company would not

take corrective actiontake corrective action– A fear that management would retaliate A fear that management would retaliate

against the employee for speaking upagainst the employee for speaking up– Doubt that the employee’s report would Doubt that the employee’s report would

be kept confidentialbe kept confidential

Business Costs of Unethical Business Costs of Unethical ActivityActivity

Corporate social Corporate social responsibility (CSR)responsibility (CSR)

Obligation toward society Obligation toward society assumed by business.assumed by business.

Corporate Social Corporate Social ResponsibilityResponsibility

Economic responsibilitiesEconomic responsibilities– Produce goods and services that society Produce goods and services that society

wants at a price that perpetuates the wants at a price that perpetuates the business and satisfies its obligations to business and satisfies its obligations to investors.investors.

Legal responsibilitiesLegal responsibilities– Obey local, state, federal, and relevant Obey local, state, federal, and relevant

international lawsinternational laws

Corporate Social Corporate Social ResponsibilityResponsibility

Ethical responsibilitiesEthical responsibilities– Meeting other social expectations, not Meeting other social expectations, not

written as law.written as law. Philanthropic responsibilitiesPhilanthropic responsibilities

– Additional behaviors and activities that Additional behaviors and activities that society finds desirable and that the society finds desirable and that the values of the business support.values of the business support.

Pyramid of Global Corporate Pyramid of Global Corporate SocialSocial

Responsibility and Responsibility and PerformancePerformance

Contrasting ViewsContrasting Views

First - holds that managers act as First - holds that managers act as agents agents for shareholders and, as for shareholders and, as such, are obligated to such, are obligated to maximizemaximize the present value of the firmthe present value of the firm

Second - managers should be Second - managers should be motivated by motivated by principledprincipled moral moral reasoningreasoning

CSR as Competitive CSR as Competitive AdvantageAdvantage

Profit maximization and corporate Profit maximization and corporate social responsibility used to be social responsibility used to be considered considered antagonisticantagonistic, leading to , leading to opposing policies; the two views can opposing policies; the two views can convergeconverge

Recent attention has also been Recent attention has also been centered on the potential centered on the potential competitive advantagecompetitive advantage of socially of socially responsible actionsresponsible actions

Ecocentric managementEcocentric management

Creation of sustainable economic Creation of sustainable economic development and improvement development and improvement of quality of life worldwide for all of quality of life worldwide for all organizational stakeholders.organizational stakeholders.

Ecocentric ManagementEcocentric Management

Sustainable growthSustainable growth– Economic growth and development that Economic growth and development that

meet present needs without harming meet present needs without harming the needs of future generationsthe needs of future generations

Life-cycle analysis (LCA)Life-cycle analysis (LCA)– A process of analyzing all inputs and A process of analyzing all inputs and

outputs, though the entire “cradle-to-outputs, though the entire “cradle-to-grave” life of a product, to determine grave” life of a product, to determine total environmental impacttotal environmental impact