Chapter 4: Managing Ethics and Social Responsibility

Conventional Level of Personal Moral Development

People learn to conform to the expectations of good behavior as defined by colleagues, family, friends, and society

Three levels of Personal Moral Development

Preconventional, conventional, postconventional

Discretionary Responsibility

Purely voluntary; guided by a company's desire to make social contributions not mandated by economics, law, or ethics

Distributive Justice

Requires that different treatment of people not be based on arbitrary characteristics (ex: men and women should not receive different salaries if they have the same qualifications and are performing the same job)

Procedural Justice

Requires that rules be administered fairly; they should be clearly stated and impartially enforced

Practical Approach

Sidesteps debates about what is right, good, or just, and bases decisions on prevailing standards of the profession and the larger society, taking the interests of all stakeholders into account

Principle-Based Statements

Statements that are designed to affect corporate culture; they define fundamental values and contain general language about company responsibilities, quality of products, and treatment of employees

Policy-Based Statements

Statements that generally outline the procedures to be used in specific ethical situations

Ethics

The code of moral principles and values that governs the behavior of a person or group with respect to what is right or wrong

Moral Agent

The individual who must make an ethical choice in an organization

Economic Responsibility

A business firm's responsibility to produce the goods and services that society wants and to maximize profits for its owners and shareholders

Chief Ethics Officer

A company executive who oversees all aspects of ethics and legal compliance, including establishing and broadly communicating standards, ethics training, dealing with exceptions or problems, and advising senior managers in the ethical and compliance aspects of decisions

Code of Ethics

A formal statement of the company's values concerning ethics and social issues; it communicates to employees what the company stands for

Ethics Committee

A group of executives (and sometimes lower-level employees) appointed to oversee company ethics

Ethical Dilemma

A situation in which all alternative choices or behaviors have potentially negative consequences; right and wrong cannot be clearly distinguished

Stakeholder Mapping

A systematic way to identify the expectations, needs, importance, and relative power of various stakeholders, which may change over time; helps managers identify or prioritize the key stakeholders related to a specific issue or project

Stakeholder

Any group or person within or outside the organization that has some type of investment or interest in the organization's performance and is affected by the organization's actions (employees, customers, shareholders, etc.)

Moral-Rights Approach

Approach to ethical decision making which asserts that human beings have fundamental rights and liberties that cannot be taken away by an individual's decision; an ethically correct decision is one that best maintains the rights of those affected by it

Justice Approach

Approach to ethical decision making which holds that moral decisions must be based on standards of equity, fairness, and impartiality

Compensatory Justice

Argues that individuals should be compensated for the cost of their injuries by the party responsible, and individuals should not be held responsible for matters over which they have no control

Legal Responsibility

Defines what society deems as important with respect to appropriate corporate behavior

Sustainability

Economic development that generates wealth and meets the needs of the current generation, while preserving the environment and society so future generations can meet their needs as well

Criteria used to evaluate a company's social performance

Economic, legal, ethical, and discretionary

Whistle-Blowing

Employee disclosure of illegal, unethical, or illegitimate practices on the employer's part

Corporate Credos

General statements of principle

Ethical Responsibility

Includes behaviors that are not necessarily codified into law and may not serve the corporation's direct economic interests

Preconventional Level of Personal Moral Development

Individuals are concerned with external rewards and punishments and obey authority to avoid detrimental personal consequences

Postconventional (Principled) Level of Personal Moral Development

Individuals are guided by an internal set of values based on universal principles of justice and right and will even disobey rules or laws that violate those principles

Corporate Social Responsibility (CSR)

Management's obligation to make choices and take actions that will contribute to the welfare and interests of society, not just the organization

Triple-Bottom Line

Measuring an organization's social, environmental, and financial performance

Individualism

• Approach to ethical decision making that suggests that actions are ethical when they promote the individual's best long-term interests, because with everyone pursuing self-interest, the greater good is ultimately served • Not considered appropriate today because it is easily misused to support one's personal gain at the expense of others

Utilitarian Approach

• Approach to ethical decision making where moral behavior produces the greatest good for the greatest number; a decision maker is expected to consider the effect of each decision alternative on all parties and select the one that optimizes the benefits for the greatest number of people • Jeremy Bentham & John Stuart Mill

Profit-Maximizing View

• Argues that a corporation should be operated on a profit-oriented basis, with its sole mission to increase its profits so long as it stays within the rules of the game • Milton Friedman