Ethics and Social Responsibility

Ethics

  • Ethics: Moral code of principles that sets standards of good/bad or right/wrong in conduct.
  • Influenced by family, friends, culture, religion, etc.
  • Ethical behavior: Accepted as good and right within the governing moral code.

Laws and Values

  • Legal behavior is not always ethical.
  • Personal values influence ethical behavior.
  • Values: Underlying beliefs that influence individual behavior.
    • Terminal values: Preferences about desired ends or goals in life.
    • Instrumental values: Preferences about the means to desired ends (e.g., honesty, ambition).

Four Views of Ethical Behavior

  • Utilitarian View: Does the greatest good for the most people.
  • Individualism View: Promotes one's long-term self-interests.
  • Moral Rights View: Maintains the fundamental rights of all human beings.
  • Justice View: Shows fairness and impartiality.
    • Procedural justice: Fair application of policies and rules.
    • Distributive justice: Fair distribution of outcomes.
    • Interactional justice: Treating all persons with dignity and respect.
    • Commutative justice: Fairness of exchanges or transactions.

Cultural Issues in Ethical Behavior

  • Cultural relativism: Ethical behavior is determined by cultural context.
  • Moral absolutism: Behavior unacceptable at home should not be acceptable elsewhere.
  • Ethical imperialism: Imposing one’s ethical standards on others.

Ethics in the Workplace

  • Ethical dilemmas: Choices with potential for personal/organizational benefit but may be unethical.
  • Require action with no clear consensus on right or wrong.

Common Ethical Dilemmas

  • Discrimination
  • Sexual harassment
  • Conflicts of interest
  • Product safety
  • Use of organizational resources

Steps for Resolving Ethical Dilemmas

  1. Recognize the ethical dilemma.
  2. Get the facts and identify options.
  3. Test each option:
    • Is it legal?
    • Is it right?
    • Whom does it affect?
    • Who benefits?
    • Who gets hurt?
  4. Decide which option to follow.
  5. Double-check ethics with spotlight questions:
    • How will I feel if my family finds out?
    • How will I feel if it's reported in the news?
    • What would someone I admire say?
  6. Take action.

Influences on Ethical Decision Making

  • Ethical framework: Personal rules for ethical decision making.
    • Includes personal values like honesty, courage, fairness, integrity, self-respect.

Influences on Ethical Decision-Making

  • Kohlberg’s levels of individual moral development

Situational Context and Ethics Intensity

  • Ethics intensity (issue intensity): The extent to which situations are perceived to pose important ethical challenges
  • Organization Setting: The work environment and organizational culture have a strong influence on the ethics of members

External Environment, Government Regulation, and Industry Norms

  • Laws reflect social values and define appropriate behaviour; regulations help governments monitor these behaviours and keep them within acceptable limits

Rationalizations for Unethical Behavior

  • Behavior is not really illegal
  • Behavior is really in everyone’s best interest
  • Nobody will ever find out
  • The organization will “protect” you

Maintaining High Ethical Standards

  • Moral Management: Managers behave in one of three ways

Ethics Training

  • Structured programs to understand ethical aspects of decision-making.
  • Helps incorporate high ethical standards into behaviors.

Codes of Ethical Conduct

  • Formal statements of an organization’s values and ethical principles.
  • Sets expectations for behavior.

Areas Often Covered by Codes of Ethics

  • Organizational citizenship
  • Illegal or improper acts
  • Customer/coworker relationships
  • Bribes and kickbacks
  • Political contributions
  • Honesty of books and records
  • Confidentiality of corporate information

Whistleblowers

  • Expose misdeeds of others to:
    • Preserve ethical standards
    • Protect against wasteful, harmful, or illegal acts
  • Laws protecting whistleblowers vary across jurisdictions.
  • Legal protection continually tested in court.

Barriers to Whistleblowing

  • Strict chain of command
  • Strong work group identities
  • Ambiguous priorities

Social Responsibility

  • Stakeholder Management
    • Stakeholders: persons, groups, and other organizations directly affected by the behaviour of the organization and holding a stake in its performance
  • Stakeholder power: the capacity of the stakeholder to positively or negatively affect the operations of the organization
  • Demand legitimacy: the validity and legitimacy of a stakeholder’s interest in the organization
  • Issue urgency: the extent to which a stakeholder’s concerns need immediate attention

Corporate Social Responsibility and Governance

  • How organizations behave in relation to stakeholders.
  • Obligates organizations to act in ways that serve the interests of multiple stakeholders.

Stewardship

  • Taking personal responsibility to respect and protect the interests of all stakeholders.

Sustainability

  • Acting in ways that support a high quality of life for present and future generations
    • Clean energy
    • Recycling
    • Water conservation
    • Waste avoidance

Triple Bottom Line

  • Evaluates organizational performance on economic, social, and environmental criteria.
  • 3 P’s of organizational performance – profit, people, and planet

Perspectives on Social Responsibility

  • Classical view: Management’s only responsibility is to maximize profits.
  • Socioeconomic view: Management must be concerned for broader social welfare, not just profits.
  • Shared value view
    • Approaches business decisions with the understanding that economic and social progress are interconnected
  • Virtuous circle - socially responsible behaviour improves financial performance which leads to more responsible behaviour

Arguments against Social Responsibility

  • Reduced business profits
  • Higher business costs
  • Dilution of business purpose
  • Too much social power for business
  • Lack of public accountability

Arguments in Favor of Social Responsibility

  • Adds long-run profits
  • Improves public image
  • Makes organizations more attractive places to work
  • Avoids more government regulation
  • Businesses have resources and ethical obligation

Corporate Governance

  • Active oversight of top management by a board of directors.
  • Involves:
    • Hiring, firing, and compensating executives
    • Assessing strategy
    • Verifying financial records

How Government Influences Organizations

  • Businesses required by law to have boards of directors that are elected by shareholders
  • The Board will hold top management accountable for high -performance leadership

Ethics Self-governance in Leadership and the Managerial Role