MGT420 Ch03

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  • LEARNING OBJECTIVESDiscuss the stakeholder view of the firm and the impact of the globalization of business on social responsibility and ethics.Describe the concept of corporate social responsibility and the primary premises on which it is based.Distinguish between the four perspectives of corporate social responsibility.Identify and evaluate approaches for responding to social issues.When you have finished studying this chapter, you should be able to:

  • LEARNING OBJECTIVES (contd)Explain what values are, how they form the basis of an individuals ethical behavior, and how they may vary in a global business environment.Describe how advances in information technology have created new ethical challenges.Identify and discuss the differences in the utility, human rights, and justice approaches to ethical dilemmas.Explain the methods used by organizations to encourage ethical organizational behavior.When you have finished studying this chapter, you should be able to:

  • LEARNING OBJECTIVES (contd)Describe the different approaches used in ethics training programs.Discuss what is meant by whistle-blowing in monitoring ethical behavior.When you have finished studying this chapter, you should be able to:

  • Organizational Stakeholders in aGlobal EnvironmentStakeholders

    All those who are affected by or can affect the activities of the firm.Primary Stakeholders

    Those who have a formal, official, or contractual relationship with the organization.Secondary Stakeholders

    Other societal groups who are affected by the activities of the firm.

  • Figure 3.1 The Stakeholder View of the FirmSource: Business & Society: Ethics and Stakeholder Management, 3rd edition, by A. B. Carroll. 1996. Reprinted with permission of South-Western, a division of Thomson Learning. Fax 800-730-2215.

  • Stakeholder PerspectiveSocial Responsibility

    Relates to the obligation of business to society.Ethics

    Ethical issues are most relevant at an individual level, for ethics are maintained by people.Corporate Social Responsibility

    The interaction between business and the social environment in which it exists.

  • The Social Responsibility DebateWhat does social responsibility mean?

    Does it mean the corporations actions must not harm society or does it mean a corporations actions should benefit society?Social contract

    An implied set of rights and obligations that are inherent in social policy and assumed by business.Moral agent

    The obligation of a business to act honorably and to reflect and enforce values that are consistent with those of society.

  • Table 3.1 Four Perspectives of Social ResponsibilitySource: A. Carroll and A Bucholtz, Business & Society: Ethics and Stakeholder Management, 6th ed. (Mason, OH: Thomson South-Western, 2006), 38.Type of Societal Responsibility Expectation Explanations

    Economic Required by society Be profitable. Make sound strategic decisions. Provide adequate and attractive returns on investment.

    Legal Required by society Obey all laws and regulations. Fulfill all contractual obligations. Honor warranties and guarantees.

    Ethical Expected by society Avoid questionable practicesRespond to spirit as well as letter of law.Assume law is floor of behavior and operate above minimum required. Do what is right, fair, and just.

    Philanthropic Desired/expectedBe a good corporate citizen.by societyGive back. Improve quality of life overall.

  • Perspectives on Social ResponsibilityEconomic Responsibility

    The only responsibility of business is to make a profit within the rules of the game. (Milton Friedman)Organizations cannot be moral agents.Only individuals can serve as moral agents.Public Responsibility Perspective

    Businesses should act in a way that is consistent with societys view of responsible behavior, as well as with established laws and policies.

  • Perspectives on Social Responsibility (contd)Social Responsiveness

    Business should proactively seek to contribute to society in a positive way.Organizations should develop an internal environment that encourages and supports ethical behavior at an individual level.

  • Figure 3.2 The Four Faces of Social ResponsibilitySource: D. R. Dalton and R. A. Cosier, The Four Faces of Social Responsibility. Printed with permission from Business Horizons (May/June 1982): 1927. Copyright 1982 by the Trustees of Indiana University, Kelley School of Business.Legal/ResponsibleIllegal/Irresponsible

  • Social Responsibility StrategiesA continuum of possible strategies based on the organizations tendency to be socially responsible or responsive.

    Do NothingDo Much ReactionDefenseAccommodationProaction

  • Social Responsibility Strategies (contd)Reaction

    An approach to corporate social responsibility that includes an organization denying responsibility for its actions.Defense

    Organizations that pursue a defense strategy respond to social challenges only when it is necessary to defend their current position.

  • Social Responsibility Strategies (contd)Accommodation

    An approach to corporate social responsibility that adapts to public policy in doing more than the minimum required.Proaction

    An approach to corporate social responsibility that includes behaviors that improve society.Organizations that assume a proaction strategy subscribe to the notion of social responsiveness.

  • Table 3.4 The Ten Commandments of Corporate Social ResponsibilityTake corrective action before it is required. Compliance with self-imposed standards is almost always preferable to compliance with standards that are imposed by outside constituencies.Work with affected constituents to resolve mutual problems. Work to establish industry-wide standards and self-regulation.Publicly admit your mistakes. Few things are worse for a companys image than being caught trying to cover up socially irresponsible behavior.Get involved in appropriate social programs.Help correct environmental problems.Monitor the changing social environment.Establish and enforce a corporate code of conduct.Take needed public stands on social issues.Strive to make profits on an ongoing basis. An organization cannot provide jobs and employ workers if it is not in a position to make consistent profits.

    Source: L. Alexander and W. Mathews, The Ten Commandments of Corporate Social Responsibility, Business and Society Review 50 (1984): 6266.

  • EthicsEthics

    The established customs, morals, and fundamental human relationships that exist throughout the world.Ethical Behavior

    Behavior that is morally accepted as good or right as opposed to bad or wrong such as:Corruption (for example, bribery and improper payments)Inadequate labor conditionsEnvironmental responsibility

  • Foundations of EthicsValues

    the relatively permanent, deeply held preferences of individuals or groups.Instrumental Values

    The standards of conduct or methods (means) for attaining an end.Terminal Values

    Goals (ends) that an individual will ultimately achieve.

  • Business Ethics DefinedThe application of the general ethical rules to business behavior.

    If a society deems dishonesty to be unethical and immoral, then anyone in business who is dishonest with employees, customers, creditors, stockholders, or competition is acting unethically and immorally.

  • Ethics And Information TechnologyEmployee Perspective

    Concerns about organizations and government agencies gaining greater access to private information about individuals.Organizational Perspective

    Concerns over unethical acts by employees as a result of access to information technology in the workplace.Societal Perspective

    Concerns raised in regard to businesses providing customer information to other organizations.

  • Ethical DilemmaA situation in which a person must decide whether or not to do something that, although beneficial to oneself or the organization, may be considered unethical and perhaps illegal.Examples of Ethical Dilemmas

    Should I conduct personal business on company time?Should we spend more on pollution control?Is it O.K. to give a friend a special rate?If I find out that my boss took a bribe, should I tell someone?

  • Guidelines for Deciding Ethical DilemmasUtility Approach

    Decisions are based on an evaluation of the overall amount of good that will result.Human Rights Approach

    Decisions are made in light of the moral entitlements of human beings.Justice Approach

    Decisions are based on an equitable, fair, and impartial distribution of benefits and costs among individuals and groups.

  • Table 3.5 Developing Employee Awareness of EthicsEnable the ethical component of a decision to be recognized.Legitimize the consideration of ethics as part of decision making.Avoid variability in decision making caused by lack of awareness of rules or norms.Avoid ambivalence in decision making caused by an organizational reward system that psychologically pulls a person in opposite directions.Avoid ambivalence in decision making caused by confusion as to who is responsible for misdeeds, particularly when the employee has received an order from a superior.Provide decision-making frameworks for analyzing ethical choices and helping employees to apply such frameworks.

    Source: S. J. Harrington, What Corporate America Is Teaching about Ethics, Academy of Management Executives 5 (1991): 2129.

  • Fostering Improved Business Ethics (contd)Code of Ethics

    Describes the general value system, ethical principles, and specific ethical rules that a company tries to apply.Ethics Training Programs

    Train