MGT420 Ch03

© 2007 Thomson/South-Western. All rights reserved.© 2007 Thomson/South-Western. All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

Social Social ResponsibilityResponsibilityand Ethicsand Ethics

ChapterChapter

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Part 1 Meeting the Challenges of the 21st CenturyPart 1 Meeting the Challenges of the 21st Century

© 2007 Thomson/South-Western. All rights reserved. 3–2

1.1. Discuss the stakeholder view of the firm and the Discuss the stakeholder view of the firm and the impact of the globalization of business on social impact of the globalization of business on social responsibility and ethics.responsibility and ethics.

2.2. Describe the concept of corporate social Describe the concept of corporate social responsibility and the primary premises on which it responsibility and the primary premises on which it is based.is based.

3.3. Distinguish between the four perspectives of Distinguish between the four perspectives of corporate social responsibility.corporate social responsibility.

4.4. Identify and evaluate approaches for responding to Identify and evaluate approaches for responding to social issues.social issues.

LEARNING OBJECTIVESLEARNING OBJECTIVESWhen you have finished studying this chapter, When you have finished studying this chapter, you should be able to:you should be able to:


5.5. Explain what values are, how they form the basis of Explain what values are, how they form the basis of an individual’s ethical behavior, and how they may an individual’s ethical behavior, and how they may vary in a global business environment.vary in a global business environment.

6.6. Describe how advances in information technology Describe how advances in information technology have created new ethical challenges.have created new ethical challenges.

7.7. Identify and discuss the differences in the utility, Identify and discuss the differences in the utility, human rights, and justice approaches to ethical human rights, and justice approaches to ethical dilemmas.dilemmas.

8.8. Explain the methods used by organizations to Explain the methods used by organizations to encourage ethical organizational behavior.encourage ethical organizational behavior.

LEARNING OBJECTIVES LEARNING OBJECTIVES (cont’d)(cont’d)When you have finished studying this chapter, When you have finished studying this chapter, you should be able to:you should be able to:


9.9. Describe the different approaches used in ethics Describe the different approaches used in ethics training programs.training programs.

10.10. Discuss what is meant by whistle-blowing in Discuss what is meant by whistle-blowing in monitoring ethical behavior.monitoring ethical behavior.

LEARNING OBJECTIVES LEARNING OBJECTIVES (cont’d)(cont’d)When you have finished studying this chapter, When you have finished studying this chapter, you should be able to:you should be able to:


Organizational Stakeholders in aOrganizational Stakeholders in aGlobal EnvironmentGlobal Environment• StakeholdersStakeholders

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

• Primary StakeholdersPrimary Stakeholders Those who have a formal, official, or contractual Those who have a formal, official, or contractual

relationship with the organization.relationship with the organization.• Secondary StakeholdersSecondary Stakeholders

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


Figure 3.1Figure 3.1 The Stakeholder View of the FirmThe Stakeholder View of the Firm

Source: 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 PerspectiveStakeholder Perspective• Social ResponsibilitySocial Responsibility

Relates to the obligation of business to society.Relates to the obligation of business to society.• EthicsEthics

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

• Corporate Social ResponsibilityCorporate Social Responsibility The interaction between business and the social The interaction between business and the social

environment in which it exists.environment in which it exists.


The Social Responsibility DebateThe Social Responsibility Debate• What does social responsibility mean?What does social responsibility mean?

Does it mean the corporation’s actions must not harm Does it mean the corporation’s actions must not harm society or does it mean a corporation’s actions should society or does it mean a corporation’s actions should benefit society?benefit society?

• Social contractSocial contract An implied set of rights and obligations that are An implied set of rights and obligations that are

inherent in social policy and assumed by business.inherent in social policy and assumed by business.• Moral agentMoral agent

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


Table 3.Table 3.1 1 Four Perspectives of Social ResponsibilityFour Perspectives of Social Responsibility

Source: 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/expected Be a good corporate citizen.by society Give back. Improve quality of life overall.


Perspectives on Social ResponsibilityPerspectives on Social Responsibility• Economic ResponsibilityEconomic Responsibility

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

• Public Responsibility PerspectivePublic Responsibility Perspective Businesses should act in a way that is consistent with Businesses should act in a way that is consistent with

society’s view of responsible behavior, as well as with society’s view of responsible behavior, as well as with established laws and policies.established laws and policies.


Perspectives on Social Responsibility Perspectives on Social Responsibility (cont’d)(cont’d)• Social ResponsivenessSocial Responsiveness

Business should proactively seek to contribute to Business should proactively seek to contribute to society in a positive way.society in a positive way.

Organizations should develop an internal environment Organizations should develop an internal environment that encourages and supports ethical behavior at an that encourages and supports ethical behavior at an individual level.individual level.


Figure 3.Figure 3.2 2 The Four Faces of Social ResponsibilityThe Four Faces of Social Responsibility

Source: D. R. Dalton and R. A. Cosier, “The Four Faces of Social Responsibility.” Printed with permission from Business Horizons (May/June 1982): 19–27. Copyright © 1982 by the Trustees of Indiana University, Kelley School of Business.

Legal/Responsible

Illegal/Irresponsible


Social Responsibility StrategiesSocial Responsibility Strategies• A continuum of possible strategies based on the A continuum of possible strategies based on the

organization’s tendency to be socially organization’s tendency to be socially responsible or responsive.responsible or responsive.

Do NothingDo Nothing Do Much Do Much

ReactionReaction DefenseDefense AccommodationAccommodation ProactionProaction


Social Responsibility Strategies Social Responsibility Strategies (cont’d)(cont’d)

• ReactionReaction An approach to corporate social responsibility that An approach to corporate social responsibility that

includes an organization denying responsibility for its includes an organization denying responsibility for its actions.actions.

• DefenseDefense Organizations that pursue a defense strategy respond Organizations that pursue a defense strategy respond

to social challenges only when it is necessary to to social challenges only when it is necessary to defend their current position. defend their current position.


Social Responsibility Strategies Social Responsibility Strategies (cont’d)(cont’d)

• AccommodationAccommodation An approach to corporate social responsibility that An approach to corporate social responsibility that

adapts to public policy in doing more than the adapts to public policy in doing more than the minimum required.minimum required.

• ProactionProaction An approach to corporate social responsibility that An approach to corporate social responsibility that

includes behaviors that improve society.includes behaviors that improve society. Organizations that assume a proaction strategy Organizations that assume a proaction strategy

subscribe to the notion of social responsiveness.subscribe to the notion of social responsiveness.


Table 3.Table 3.4 4 The Ten Commandments of Corporate Social ResponsibilityThe Ten Commandments of Corporate Social Responsibility

I. Take 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.

II. Work with affected constituents to resolve mutual problems.

III. Work to establish industry-wide standards and self-regulation.

IV. Publicly admit your mistakes. Few things are worse for a company’s image than being caught trying to cover up socially irresponsible behavior.

V. Get involved in appropriate social programs.

VI. Help correct environmental problems.

VII. Monitor the changing social environment.

VIII. Establish and enforce a corporate code of conduct.

IX. Take needed public stands on social issues.

X. 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): 62–66.


EthicsEthics• EthicsEthics

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

• Ethical BehaviorEthical Behavior Behavior that is morally accepted as good or right as Behavior that is morally accepted as good or right as

opposed to bad or wrong such as:opposed to bad or wrong such as:Corruption (for example, bribery and improper Corruption (for example, bribery and improper

payments)payments) Inadequate labor conditionsInadequate labor conditionsEnvironmental responsibilityEnvironmental responsibility


Foundations of EthicsFoundations of Ethics• ValuesValues

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

• Instrumental ValuesInstrumental Values The standards of conduct or methods (means) for The standards of conduct or methods (means) for

attaining an end.attaining an end.• Terminal ValuesTerminal Values

Goals (ends) that an individual will ultimately achieve.Goals (ends) that an individual will ultimately achieve.


Business Ethics DefinedBusiness Ethics Defined• The application of the general ethical rules to The application of the general ethical rules to

business behavior.business behavior. If a society deems dishonesty to be unethical and If a society deems dishonesty to be unethical and

immoral, then anyone in business who is dishonest immoral, then anyone in business who is dishonest with employees, customers, creditors, stockholders, with employees, customers, creditors, stockholders, or competition is acting unethically and immorally.or competition is acting unethically and immorally.


Ethics And Information TechnologyEthics And Information Technology• Employee PerspectiveEmployee Perspective

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

• Organizational PerspectiveOrganizational Perspective Concerns over unethical acts by employees Concerns over unethical acts by employees

as a result of access to information technology as a result of access to information technology in the workplace. in the workplace.

• Societal PerspectiveSocietal Perspective Concerns raised in regard to businesses providing Concerns raised in regard to businesses providing

customer information to other organizations.customer information to other organizations.


Ethical DilemmaEthical Dilemma• A situation in which a person must decide A situation in which a person must decide

whether or not to do something that, although whether or not to do something that, although beneficial to oneself or the organization, may be beneficial to oneself or the organization, may be considered unethical and perhaps illegal.considered unethical and perhaps illegal.

• Examples of Ethical DilemmasExamples of Ethical Dilemmas Should I conduct personal business on company Should I conduct personal business on company

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

someone?someone?


Guidelines for Deciding Ethical Guidelines for Deciding Ethical DilemmasDilemmas• Utility ApproachUtility Approach

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

• Human Rights ApproachHuman Rights Approach Decisions are made in light of the moral entitlements Decisions are made in light of the moral entitlements

of human beings.of human beings.• Justice ApproachJustice Approach

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


Table 3.Table 3.5 5 Developing Employee Awareness of EthicsDeveloping Employee Awareness of Ethics

1. Enable the ethical component of a decision to be recognized.

2. Legitimize the consideration of ethics as part of decision making.

3. Avoid variability in decision making caused by lack of awareness of rules or norms.

4. Avoid ambivalence in decision making caused by an organizational reward system that psychologically pulls a person in opposite directions.

5. 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.

6. 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): 21–29.


Fostering Improved Business Ethics Fostering Improved Business Ethics (cont’d)(cont’d)• Code of EthicsCode of Ethics

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

• Ethics Training ProgramsEthics Training Programs Training designed to help managers clarify their Training designed to help managers clarify their

ethical framework and practice self-discipline when ethical framework and practice self-discipline when making decisions in difficult circumstances.making decisions in difficult circumstances.

• WhistleblowingWhistleblowing Whistleblower:Whistleblower: someone who exposes organizational someone who exposes organizational

misconduct or wrongdoing to the public.misconduct or wrongdoing to the public.


Table 3.Table 3.6 6 Subjects Addressed by Most Codes of EthicsSubjects Addressed by Most Codes of Ethics

• Bribery/improper paymentsBribery/improper payments• Conflict of interestConflict of interest• Security of proprietary Security of proprietary

informationinformation• Receiving giftsReceiving gifts• Discrimination/equal Discrimination/equal

opportunityopportunity• Giving giftsGiving gifts• EnvironmentEnvironment• Sexual harassmentSexual harassment• AntitrustAntitrust

• Workplace safetyWorkplace safety• Political activitiesPolitical activities• Community relationsCommunity relations• Confidentiality of personal Confidentiality of personal

informationinformation• Human rightsHuman rights• Employee privacyEmployee privacy• Whistle-blowingWhistle-blowing• Substance abuseSubstance abuse• NepotismNepotism• Child laborChild labor

Source: R. Berenbeim, “Global Corporate Ethics Problems,” Conference Board Research Report, 121243-99-RR, 1999.


Table 3.Table 3.8 8 A Model Whistle-Blower PolicyA Model Whistle-Blower Policy

• Publicize a reporting policy that encourages reporting of valid complaints of wrongdoing.

• Establish a reporting procedure allows anonymous complaints (required by Sarbanes–Oxley, at least for financial wrongdoing) or complaints to someone outside of the chain of command.

• Investigate the situation immediately.

• Go public. Publicize the outcomes of investigations. This shows employees and other stakeholders that complaints are taken seriously.

Sources: N. Swartz, “Whistleblower Complaints Growing,” Information Management Journal 38, no. 3 (May/June 2005): 8; T. Mohr and D. Slovin, “Making Tough Calls Easy,” Security Management 49, no. 3 (March 2005): 51–56; L. Driscoll, “A Better Way to Handle Whistle-Blowers: Let Them Speak,” BusinessWeek, 27 July 1992, 36.


Implications for LeadersImplications for Leaders• Explore ways in which the organization can be more Explore ways in which the organization can be more

socially responsive.socially responsive.

• Recognize the effect of the organization’s actions on its Recognize the effect of the organization’s actions on its stakeholders.stakeholders.

• Create an environment in which employees commit to Create an environment in which employees commit to behaving in socially responsive and ethical ways.behaving in socially responsive and ethical ways.

• Make sure that a code of ethics is put in place and Make sure that a code of ethics is put in place and followed.followed.

• Ensure that whistle blowing and ethical concerns Ensure that whistle blowing and ethical concerns procedures are established for internal problem solving.procedures are established for internal problem solving.


Implications for Leaders Implications for Leaders (cont’d)(cont’d)

• Involve line and staff employees in the identification of Involve line and staff employees in the identification of ethical issues to help them gain understanding and ethical issues to help them gain understanding and resolve issues.resolve issues.

• Determine the link between departments and issues Determine the link between departments and issues affecting the company and make them known to affecting the company and make them known to employees in the departments.employees in the departments.

• Integrate ethical decision making into the performance Integrate ethical decision making into the performance appraisal process.appraisal process.

• Publicize, in employee communications and elsewhere, Publicize, in employee communications and elsewhere, executive priorities and efforts related to ethical issues.executive priorities and efforts related to ethical issues.


Table 3.Table 3.7 7 A Manager’s Guide for Developing a Strong Ethics PolicyA Manager’s Guide for Developing a Strong Ethics Policy

1. Develop a written policy on ethics and communicate it regularly to your employees.

2. Make sure that all employees understand the policies and procedures in place for determining ethical behavior.

3. Establish fair and consistent rules for disciplining violators.

4. Develop and continually monitor audit systems to prevent and detect violations of the law or corporate policy.

5. Create a safe environment where employees can report suspected violations anonymously without fear of retribution.

6. Allow those accused of violating ethics policies the opportunity to explain or defend their behavior.


Fostering Improved Business EthicsFostering Improved Business Ethics• To foster improved business ethics in an To foster improved business ethics in an

organization, action must be directed at five organization, action must be directed at five levels:levels: InternationalInternational SocietalSocietal OrganizationalOrganizational IndividualIndividual AssociationAssociation

MGT420 Ch03

Business

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