Managing Social Responsibility and Ethics

Management Sixteenth Edition, Global Edition Chapter 7: Managing Social Responsibility and Ethics

Importance of the Topic

  • The topic is crucial as it relates to the assessment scheme for learning outcomes.

  • Specifically addresses Topic Four (R&C Ch. 7): Social Responsibility and Ethics.

Learning Objectives

  1. Discuss what it means to be socially responsible and what factors influence that decision.

  2. Explain green management and how organizations can go green.

  3. Discuss the factors that lead to ethical and unethical behavior.

  4. Describe management’s role in encouraging ethical behavior.

    • Know how to make good decisions about ethical dilemmas.

  5. Discuss current social responsibility and ethics issues.

Understanding Social Responsibility and Ethics

From Obligation to Responsiveness to Responsibility

  • Social Obligation:

    • Definition: The obligation of a business to meet its economic and legal responsibilities and nothing more.

    • Classical View:

    • Management’s only social responsibility is to maximize profits.

    • Socioeconomic View:

    • Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.

    • Social Responsiveness:

      • When a firm engages in social actions in response to some popular social need.

    • Social Responsibility:

      • A business’s intention, beyond its legal and economic obligations, to do right and act in ways that are good for society.

Should Organizations Be Socially Involved?

  • Social Screening:

    • Definition: Applying social criteria (screens) to investment decisions.

    • Socially Responsible Investing (SRI):

    • Funds usually avoid investing in companies involved in:

      • Liquor

      • Gambling

      • Tobacco

      • Nuclear power

      • Weapons

      • Price fixing, fraud

      • Companies with poor product safety, employee relations, and environmental records.

Green Management and Sustainability

Green Management

  • Definition: Managers consider the impact of their organization on the natural environment.

How Organizations Go Green

  1. Legal (or Light Green) Approach:

    • Firms comply with laws, rules, and regulations willingly without legal challenge.

  2. Market Approach:

    • Firms respond to customer preferences for environmentally friendly products.

  3. Stakeholder Approach:

    • Firms meet the environmental demands of multiple stakeholders, including employees, suppliers, and the community.

  4. Activist Approach:

    • Firms actively seek ways to respect and preserve the environment and engage in social responsibility.

Managers and Ethical Behavior

  • Ethics:

    • Definition: Principles, values, and beliefs that define right and wrong behavior.

    • Many managerial decisions require consideration of both the process and affected parties.

Factors Determining Ethical and Unethical Behavior

  1. Stages of Moral Development:

    • Preconventional Level:

      • Choices between right or wrong based on personal consequences from external sources (Stages 1 & 2).

    • Conventional Level:

      • Ethical decisions rely on maintaining expected standards and meeting others' expectations (Stages 3 & 4).

    • Principled Level:

      • Individuals define moral values independently of group authority or societal norms (Stages 5 & 6).

  2. Individual Characteristics:

    • Values: Basic convictions about right and wrong.

    • Ego Strength: Personality measure of a person's conviction strength. (= indicating how firmly they hold their beliefs and values, particularly in the face of challenges or opposition. A high ego strength typically means an individual is more confident in their convictions and is more likely to act upon them, while a lower ego strength might indicate susceptibility to external pressures or doubts about one's beliefs.)

    • Locus of Control: Personality trait measuring the extent to which individuals believe they control their fate.

  3. Structural Variables: (elements within an organization that influence employees' behavior and ethical decision-making)

    • Influences from:

      • Organizational structural design

      • Goals

      • Performance appraisal system

      • Reward allocation

  4. Issue Intensity:

    • Six characteristics determine issue intensity:

      • Greatness of Harm: The number of people harmed influences importance.

      • Consensus of Wrong: The agreement level on the action's wrongness increases intensity.

      • Probability of Harm: Likelihood of the action causing harm; greater probability increases intensity.

      • Immediacy of Consequences: Faster onset of consequences heightens intensity.

      • Proximity to Victim(s): Familiarity with victims increases intensity.

      • Concentration of Effect: The more concentrated the impact on victims, the greater the intensity.

Ethics in an International Context

  • Ethical Standards:

    • Variations occur due to social and cultural differences which determine acceptable behaviors.

  • Foreign Corrupt Practices Act:

    • Makes it illegal to corrupt a foreign official, while “token” payments may be permissible if accepted in that country.

Encouraging Ethical Behavior

  1. Employee Selection:

    • Opportunity to assess individual’s moral development, personal values, ego strength, and locus of control.

    • Pre-employment integrity testing may filter out dishonest candidates.

    • Background checks and references should be conducted.

    • Ethical questions should be included in the interview process.

  2. Code of Ethics:

    • A formal statement outlining an organization’s primary values and the ethical rules expected from employees.

  3. Leadership:

    • Top managers must uphold shared values, setting the cultural tone, and serving as role models for ethical actions.

  4. Job Goals and Performance Appraisal:

    • Stress of unrealistic goals may push ethical employees to unethical actions to meet targets.

    • Both results and means of achieving goals should be evaluated, ensuring adherence to the code of ethics.

  5. Ethics Training:

    • Seminars, workshops, and programs to encourage ethical behavior.

  6. Independent Social Audits:

    • Evaluate decisions and management practices concerning the organization's code of ethics.

Social Responsibility and Ethics Issues in Today’s World

  • Ethical Leadership:

    • Managers’ actions strongly influence employees' ethical decisions.

  • Protection of Whistle-Blowers:

    • Definition: Individuals who raise ethical concerns within the organization.

    • Protective Mechanisms:

    • Allow employees facing ethical dilemmas to act correctly without fear of reprisal.

Current Social Responsibility and Ethics Issues

  • Social Entrepreneur:

    • An individual or organization that pursues opportunities to improve society through practical, innovative, and sustainable means.

  • Corporate Philanthropy:

    • Charitable initiatives that effectively address societal problems.

  • Employee Volunteering Efforts:

    • Increasingly popular way for businesses to promote social change.

Reviews of Learning Objectives

Learning Objective 1

  • Social Responsibility:

    • Social Obligation: Engaging in social actions due to economic and legal responsibilities.

    • Social Responsiveness: Engaging in actions in response to popular social needs.

Learning Objective 2

  • Green Management Approaches:

    • Light Green: Compliance with legal requirements.

    • Market Approach: Responding to customer demand for green products.

    • Stakeholder Approach: Addressing the demands of various stakeholders.

    • Activist or Dark Green Approach: Actively finding ways to protect the environment.

Learning Objective 3

  • Factors Leading to Ethical Behavior:

    • Individual moral development levels

    • Personal characteristics

    • Structural variables in the organization

    • Organizational culture

    • Issue intensity.

Learning Objective 4

  • Management’s Role:

    • Managers are the most significant influence on decisions to act ethically.

    • Include systems for employee selection, code of ethics, goal setting, and ethics training.

Learning Objective 5

  • Current Issues:

    • Ethical leaders promote honesty and shared values.

    • Protection for whistle-blowers should be encouraged.

    • Social entrepreneurship can contribute to solving global challenges.

    • Corporate philanthropy benefits both society and organizations.

Quiz Questions

  1. The _____ view of social responsibility holds that management’s only social responsibility is to maximize profits.
    a) Socioeconomic
    b) Classical-
    c) Contemporary
    d) Sociolegal

  2. Under what approach is the organization driven to look for ways to respect and preserve the earth?
    a) Stakeholder approach
    b) Market approach
    c) Legal approach
    d) Activist approach-

  3. True or false: The higher the stage an individual reaches, the more likely that he or she will behave ethically.

  4. _____ is defined as the principles and beliefs that define right and wrong decisions and behaviors.
    a) Whistle-blowing
    b) Entrepreneurship
    c) Ethics
    d) Values-

  5. Six characteristics determine issue intensity; examples include __________.
    a) Concentration of effect
    b) Greatness of wrong
    c) Consensus of harm-
    d) Probability of right

  6. When a person claims that “I control my own destiny and not even god can change it,” this is an example of __________.
    a) Internal locus of control -
    b) Ego strength
    c) External locus of control
    d) Self-confidence

Terms to Know

  • Social obligation: The obligation of a business to meet its economic and legal responsibilities and nothing more

  • Classical view: Maximize profit

  • Socioeconomic view: Making profit, while protecting & improving society’s welfare

  • Social responsiveness: They act solely to respond to social needs

  • Social responsibility: They act because they have that intention of doing right & act good for society beyond legal & economic obligations

  • Social screening: Companies evaluate the businesses that they will invest in to ensure they share the same values

  • Green management: Managers consider the impact of their organization on the natural environment

  • Ethics: principles, values, and beliefs that delineate right and wrong behavior, guiding how individuals should act in various situations

  • Values: individual convictions about what is right and wrong, often shaped by personal experiences and cultural background

  • Ego strength: when facing challanges, how firmly will the individuals hold their beliefs

  • Locus of control: The believe that individuals will have control over their life and decisions

  • Values-based management: A strategy that emphasizes the importance of aligning an organization’s operations and decisions with its core values, fostering an ethical workplace culture and guiding employees in their day-to-day actions.

  • Code of ethics: An statement outlining the companies’ values

  • Whistle-blower: The people who are not afraid to speak up about unethical practices

  • Social entrepreneur: Individuals who values profit alongside with social impact