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Management by hitt back porter CH05

Chapter 5
Ethics and
Social
Responsibility
PowerPoint slides by
R. Dennis Middlemist
Colorado State University


Learning Objectives
After studying this chapter, you should be
able to:






2

Describe why an understanding of basic

approaches to ethical decision making and
corporate social responsibility is important.
Explain the basic approaches to ethical
decision making.
Identify the different implications of each
approach in real-life situations.

©2005


Learning Objectives
After studying this chapter, you should be
able to:




3

Explain the basic approaches to corporate
social responsibility.
Develop different implications for each
approach to corporate social responsibility

©2005


Some Observations
 Managers in large companies usually act as

agents of the owners
 Implied obligation to act in best

interest of the owners or
shareholders
 Actions that benefit only
themselves are likely to be
unethical
 Ethics and strategy begin at the top
of the organization


4

©2005


Ethics in Business Award
Winners
2000 Winners
The Bureau of National Affairs, Inc.
For over a half-century of dedication to employee
ownership, despite pressures to sell the company.
Iceland, Inc.
For a precedent-setting move in the U.K. toward the sale
of all-organic store-brand food at not-organic prices.
Whole Foods Market
For a broad-based commitment to customer, stockholder,
employee, community, and environmental service.
5

©2005

Adapted from Exhibit 5.1: Excellence in Business Ethics Award Winners


Ethics in Business Award
Winners
1999 Winners
St. Lukes
For creating a visionary model of employee ownership,
out of the crisis of an unwanted merger.
Equal Exchange
For its path-breaking approach to fair trade, defining
supplier welfare as part of business success.
Fetzer Vineyards
For a broad-based approach to environmental
sustainability, combined with financial excellence.
6

©2005

Adapted from Exhibit 5.1: Excellence in Business Ethics Award Winners


Ethics in Business Award
Winners
1998 Winners
SmithKline Beecham
For its $1 billion commitment to disease eradication.
Wainwright Bank
For dedication to social justice, internally and externally.
S.C. Johnson
For its focus on sustainable community development.

7

©2005

Adapted from Exhibit 5.1: Excellence in Business Ethics Award Winners


The Development of
Individual Ethics
 Family
 Friends
 Peers
 Teachers
 Religion
 Job experiences
 Life experiences
8

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Basic Approaches to Ethics
 Ethical dilemmas
 The choice between two

arguably

competing but
valid options

 Frameworks for ethical decision making
 Utilitarian approach
 Moral rights approach
 Universalism approach
 Justice approach

9

©2005


Basic Approaches to Ethics
Utilitarian Approach
 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

10

©2005


Basic Approaches to Ethics
Moral Rights Approach
 Focused on an examination of the moral

standing of actions, independent of their
consequences

 Some actions are simply “right” or they are “wrong”
 When two actions both have moral standing, then

the positive or negative consequences of each will
determine which is the more ethical decision or
action

11

©2005


Basic Approaches to Ethics
Universal Approach
 “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

12

©2005


Basic Approaches to Ethics
Justice Approach
 How equitably are the costs and

benefits of actions distributed?
 Costs and benefits should be

equitably distributed
 Rules should be impartially applied
 Those damaged because of inequity or
discrimination should be compensated
 Distributive justice
 Equitable distribution is based on performance
13

©2005


Basic Approaches to Ethics
Justice Approach
 Procedural justice
 Ensure that people affected by
managerial decisions consent to the
decision-making process
 Ensure that the process is
impartially
 Compensatory justice

administered

 If distributive and procedural justice fail, those hurt

by inequitable distribution of rewards are
compensated

14

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Moral Intensity in Ethical
Decision Making
 Moral intensity
 The degree to which

issue as
 Six components




15

©2005

Magnitude of the
consequences
Social consensus
Probability of effect

people see an
an ethical one

 Temporal

immediacy

 Proximity
 Concentration

of effect


Moral Intensity in Ethical
Decision Making
 Magnitude of the

consequences
 Level of impact

anticipated
 Impact is independent of
whether consequences
are positive or negative

16

©2005

Ma
g
Co nitu
ns de
eq
ue of th
nc e
es

Moral
Intensity

Adapted from Exhibit 5.2: Factors of Moral Intensity


Moral Intensity in Ethical
Decision Making
 The extent to which

members of a society
agree that an act is
either good or bad
 Population diversity
weakens social
consensus

17

©2005

Ma
g
Co nitu
ns de
eq
ue of th
nc e
es

Social
Consequences

 Social consensus

Moral
Intensity

Adapted from Exhibit 5.2: Factors of Moral Intensity


Moral Intensity in Ethical
Decision Making
 How likely people think

the consequences are
 The higher the
probability of the
consequence, the more
intense the sense of
ethical obligation

18

©2005

Ma
g
Co nitu
ns de
eq
ue of th
nc e
es

Social
Consequences

 Probability of effect

y
ili t
b
a
t
ob ec
Pr f Eff
o

Moral
Intensity

Adapted from Exhibit 5.2: Factors of Moral Intensity


Moral Intensity in Ethical
Decision Making
 Interval between the

time the action occurs
and the onset of its
consequences
 The greater the time
interval, the less
intensity people typically
feel toward the issue

19

©2005

Ma
g
Co nitu
ns de
eq
ue of th
nc e
es

Social
Consequences

 Temporal immediacy

y
ili t
b
a
t
ob ec
Pr f Eff
o

Moral
Intensity
Te
Im mpo
me ra
dia l
cy

Adapted from Exhibit 5.2: Factors of Moral Intensity


Moral Intensity in Ethical
Decision Making
decision maker feels
to those affected
 Closeness leads to
more consideration of
the consequences
 Closeness increases
feeling that decision
has ethical
implications
20

©2005

y
ili t
b
a
t
ob ec
Pr f Eff
o

Moral
Intensity
Te
Im mpo
me ra
dia l
cy

Proximity

 The closeness the

Ma
g
Co nitu
ns de
eq
ue of th
nc e
es

Social
Consequences

 Proximity

Adapted from Exhibit 5.2: Factors of Moral Intensity


Moral Intensity in Ethical
Decision Making

 Focus of effect on only a

few or disbursed across
many individuals
 Higher concentration
leads to feelings of
greater ethical
responsibility

21

©2005

y
ili t
b
a
t
ob ec
Pr f Eff
o

Moral
Intensity
on
ati
r
t
t
n
ce ffec
n
Co of E

Te
Im mpo
me ra
dia l
cy

Proximity

effect

Ma
g
Co nitu
ns de
eq
ue of th
nc e
es

Social
Consequences

 Concentration of

Adapted from Exhibit 5.2: Factors of Moral Intensity


Making Ethical Decisions
 The manager
 The organization
 Code of ethical conduct
 Formal

statement outlining types
of inappropriate behavior addressing three issues



Being a good “organization citizen”
Guiding employee behavior away from unlawful or
improper acts that could harm the organization

 Addressing directives to be good to customers

22

©2005


Categories Found in
Corporate Codes of Ethics

7.1. Demonstrate
Comply fully with
antitrust
laws honesty,
and tradeand
regulations.
courtesy,
respect,
fairness in relationships
1.
Maintain
confidentiality
of
customer,
employee,
and corporate
1. Exhibit
standardssuppliers,
of personal
integrity and
professional
conduct.
with
customers,
competitors,
and
other
employees.
8. records
Complyand
fullyinformation.
with accepted accounting rules and controls.
2.
ethnic,
religious,
or sexual
harassment
is prohibited.
2. Racial,
Comply
with safety,
health,
and security
regulations.
9.
Do
not
provide
false
or
misleading
information
to the
the performance
corporation,
2. Avoid outside activities that conflict with or impair
its auditors,
or a government
3.
unethical,agency.
illegal
activities
to your manager.
Cluster
1 questionable,
Cluster
2
3. Report
Do
not
use abusive
language
ororactions.
3. of duties. Make decisions objectively without regard to friendship or
10.
Do
not
company
property orinresources
personalunlawful
benefit
or
4.
opportunities
to participate
community
services
and
political
“Be
a dependable
“Don’t
dofor
anything
4. Seek
Dress
inuse
businesslike
attire.
personal
gain.
any other improper
purpose.
activities.
organizational
citizen.”
or improper that will harm the
5.
Possession
of
firearms
on
company
premises
is prohibited.
4. The acceptance of any form of bribe
is prohibited.
organization.”
11.
Each employee
is personally
accountable
company
funds over
5. Conserve
resources
and protect
the quality for
of the
environment
in
1.
Strive
to
provide
products
and
services
of
the
highest
quality.
Follow
directives
fromcontrol.
supervisors.
5.6. areas
Payment
toorany
business,
political organization, or public
whichwhere
he
sheperson,
has
the
company
operates.
official for
unlawfulduties
or unauthorized
purposes
is prohibited.
2.
Perform
assigned
toand
thepunctuality.
bestCluster
of your 3ability
and in the best
Unclustered
Items
7.
Be
reliable
in
attendance
12.
Staff members
not have
anytointerest
in anyattorneys,
competitor or
6. Members
of the should
corporation
are not
recommend
interest
of
the
corporation,
its
shareholders,
and
its
6. accountants,
Conduct
personal
and
business
dealings
in
compliance
with
all
supplier personal
of the
company
unless
such
has
been
fully
insurance
agents,
stockbrokers,
real
estate
agents, or
“Beinterest
good
to
our
customers.”
8. customers.
Manage
finances
in a manner
consistent
with
employment
relevant
laws,
regulations,
and policies.
disclosed
to the
company.
similar
individuals
to customers.
by
a fiduciary
institution.
3. Convey true claims for products.

23

©2005

Adapted from Exhibit 5.4: Categories Found in Corporate Codes of Ethics


Adoption of Codes of Ethics
United
Kingdom

31%
69%
18%

France

82%
47%

Germany
With Codes
Without Codes
24

©2005

53%

0

10

20
30
Number of Firms

40

50

Adapted from Exhibit 5.5: Adoption of Codes of Ethics


Subjects Addressed in
Corporate Codes of Ethics
Employee conduct
Community and environment
Customers
Shareholders
Suppliers and contractors
Political interests
Innovation and technology

25

©2005

Most often for
European firms
Most often for
United States firms
Least often for
European Countries
Least often for
United States firms

Adapted from Exhibit 5.6: Subjects Addressed in Corporate Codes of Ethics


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