Chapter 7: Managing Social Responsibility and Ethics
Learning Objectives of Managing Social Responsibility and Ethics
Social Responsibility Overview: Discuss what it means to be socially responsible and identifies the factors that influence the decision to be socially responsible.
Green Management: Explain the concept of green management and the specific methodologies organizations can utilize to "go green."
Ethical and Unethical Behavior: Discuss the various factors that lead to ethical and unethical behavior within an organizational context.
Management’s Role in Ethics: Describe the role of management in encouraging ethical behavior, including knowledge of how to make good decisions regarding ethical dilemmas.
Current Issues: Discuss contemporary issues related to social responsibility and ethics in today's business environment.
Evolutionary Perspectives: From Social Obligation to Social Responsibility
Social Obligation: This is defined as the obligation of a business to meet its economic and legal responsibilities and nothing more.
Classical View: This is the view that management’s only social responsibility is to maximize profits.
Socioeconomic View: This is the view that management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.
Social Responsiveness: This occurs when a firm engages in social actions in response to some popular social need.
Social Responsibility: This is defined as a business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society.
Organizational Social Involvement and Social Screening
Social Screening: This involves applying social criteria (screens) to investment decisions.
Socially Responsible Investing (SRI): SRI funds usually implement strict criteria for investment and will generally not invest in companies involved in: * Liquor * Gambling * Tobacco * Nuclear power * Weapons * Price fixing * Fraud * Companies with poor product safety records * Companies with poor employee relations * Companies with poor environmental track records
Green Management and Sustainability
Definition of Green Management: Managers consider the impact of their organization on the natural environment.
Approaches to Going Green (Shades of Green): * Legal (or Light Green) Approach: Firms simply do what is legally required by obeying laws, rules, and regulations willingly and without legal challenge. * Market Approach: Firms respond to the preferences of their customers for environmentally friendly products. * Stakeholder Approach: Firms work to meet the environmental demands of multiple stakeholders, including employees, suppliers, and the community. * Activist (or Dark Green) Approach: Firms look for ways to respect and preserve the environment and be actively socially responsible.
Factors Determining Ethical and Unethical Behavior
Definition of Ethics: Principles, values, and beliefs that define right and wrong behavior.
Decision Impact: Many decisions managers make require them to consider both the process and who is affected by the result.
The Three Levels and Six Stages of Moral Development: * Level 1: Preconventional: A person’s choice between right or wrong is based on personal consequences from outside sources. * Stage 1: Sticking to rules to avoid physical punishment. * Stage 2: Following rules only when doing so is in your immediate interest. * Level 2: Conventional: Ethical decisions rely on maintaining expected standards and living up to the expectations of others. * Stage 3: Living up to what is expected by people close to you. * Stage 4: Maintaining conventional order by fulfilling obligations to which you have agreed. * Level 3: Principled: Individuals define moral values apart from the authority of the groups or society in general. * Stage 5: Valuing rights of others and upholding absolute values and rights regardless of the majority's opinion. * Stage 6: Following self-chosen ethical principles even if they violate the law.
Individual Characteristics: * Values: Basic convictions about what is right and wrong. * Ego Strength: A personality measure of the strength of a person’s convictions. * Locus of Control: A personality attribute that measures the degree to which people believe they control their own fate.
Structural Variables: Factors that influence ethical behavior including an organization’s structural design, goals, performance appraisal system, and reward allocation.
Issue Intensity: Six characteristics determine how important an ethical issue is to an individual or how likely employees are to behave ethically: * Greatness of Harm: The larger the number of people harmed, the greater the issue intensity. * Consensus of Wrong: The more agreement that the action is wrong, the greater the issue intensity. * Probability of Harm: The greater the likelihood that the action will cause harm, the greater the issue intensity. * Immediacy of Consequences: The faster the consequences of the action will be felt, the greater the issue intensity. * Proximity to Victim(s): The more familiar the person feels to the victim(s), the greater the issue intensity. * Concentration of Effect: The more focused the effect of the action is on the victim(s), the greater the issue intensity.
Ethics in an International Context
Universal Standards: Ethical standards are not universal. Social and cultural differences determine acceptable behaviors in different regions.
Foreign Corrupt Practices Act (FCPA): This act makes it illegal to corrupt a foreign official. However, "token" payments to officials are permissible when doing so is an accepted practice in that specific country.
Mechanisms for Encouraging Ethical Behavior
Employee Selection: This is an opportunity to learn about an individual’s level of moral development, personal values, ego strength, and locus of control. * Use of pre-employment integrity testing to weed out dishonest applicants. * Requirement to state that background checks will be conducted and references contacted. * Using the interview to pose ethical questions to determine applicant integrity.
Code of Ethics: A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow.
Leadership: Doing business ethically requires a commitment from top managers as they uphold shared values, set the cultural tone, and serve as role models in both words and actions.
Job Goals and Performance Appraisal: * Under the stress of unrealistic goals, ethical employees may feel they have no choice but to do whatever is necessary to meet them. * To encourage ethical behavior, both the result (ends) and the means of goal achievement should be evaluated, including adherence to the code of ethics.
Ethics Training: Includes seminars, workshops, and similar training programs to encourage ethical behavior.
Independent Social Audits: Evaluation of decisions and management practices in terms of the organization’s code of ethics.
Current Issues in Social Responsibility and Ethics
Ethical Leadership: Managers' actions have a strong influence on employees’ decisions regarding ethical behavior.
Protection of Whistle-Blowers: * Whistle-Blower: An individual who raises ethical concerns or issues to others. * Protective Mechanisms: These allow employees facing ethical dilemmas to do what is right without fear of reprimand.
Social Entrepreneur: An individual or organization who seeks out opportunities to improve society by using practical, innovative, and sustainable approaches.
Corporate Philanthropy: Acts of charity can be an effective way for companies to address societal problems.
Employee Volunteering: A popular way for businesses to promote social change.
Review Questions & Discussion
Question 1: The _____ view of social responsibility holds that management’s only social responsibility is to maximise profits. * A) socioeconomic * B) classical * C) contemporary * D) sociolegal
Question 2: Under what approach is the organisation driven to look for ways to respect and preserve the earth and its natural resources? * A) Stakeholder approach * B) Market approach * C) Legal approach * D) Activist approach
Question 3: True or false: The higher the stage an individual reaches, the more likely that he or she will behave ethically. * Answer: True
Question 4: _____ is/are defined as the principals and beliefs that define right and wrong decisions and behaviours. * A) Whistle-blowing * B) Entreprenuering * C) Ethics * D) Values
Question 5: Six characteristics determine issue intensity or how important an ethical issue is to an individual such as __________. * A) concentration of effect * B) greatness of wrong * C) consensus of harm * D) probability of right
Question 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
Individual Assignment Case Study: According to class discussion, students must identify who is the victim in the provided case study.