MGT 331 Ch. 4 Ethics and Social Responsibility

4 sources of ethics --> 4 main determinants of differences in ethics between people, employees, companies, and countries

- Societal Ethics - Occupational Ethics - Organizational Ethics - Individual Ethics

Stakeholders

-->The people and groups that supply a company with its productive resources and so have a claim on and stake in the company. -->When the law does not specify how companies should behave, managers must decide what is the right or ethical way to behave toward the people and groups affected by their actions

Dealing with Ethical issues: There are no ___ or ___ rules or principles that can be

-->There are no absolute or indisputable rules or principles that can be developed to decide if an action is ethical or unethical -->Neither laws nor ethics are fixed principles -->Managers must confront the need to decide what is appropriate and inappropriate as they use a company's resources to produce goods and services -->Ethical beliefs lead to the development of laws and regulations to prevent certain behaviors or encourage others

Stockholders

-->Want to ensure that managers are behaving ethically and not risking investors' capital by engaging in actions that could hurt the company's reputation -->Want to maximize their return on investment

Ethics Ombudsman

-Responsible for communicating ethical standards to all employees -Designing systems to monitor employees conformity to those standards -Teaching managers and employees at all levels of the organization how to appropriately respond to ethical dilemmas

Practical Decision Model

1. Does my decision fall within the acceptable standards that apply in business today? 2. Am I willing to see the decision communicated to all people and groups affected by it? 3. Would the people with whom I have a significant personal relationship approve of the decision?

Practical Rule

An ethical decision should be one that a manager has no hesitation about communicating to people outside the company because the typical person in a society would think the decision is acceptable

Justice Rule

An ethical decision should distribute benefits and harm among people in a fair, equitable, and impartial manner

Moral Rights Rule

An ethical decision should maintain and protect the fundamental rights and privileges of people

Utilitarian Rule

An ethical decision should produce the greatest good for the greatest number of people

Accommodative approach

Companies behave legally and ethically and try to balance the interests of different stakeholders against one another so that the claims of stockholders are seen in relation to the claims of other stakeholders

Obstructionist approach

Companies choose not to behave in a social responsible way and behave unethically and illegality

Why Be Socially Responsible?

Demonstrating its social responsibility helps a company build a good reputation If all companies in a society act socially, the quality of life as a whole increases

Role of Organizational Culture

Ethical values and norms help members -Resist self-interested action -Realize they are part of something bigger than themselves

Employees

Expect to receive rewards consistent with their performance Companies can act ethically toward employees by creating an occupational structure that fairly and equitably rewards employees for their contributions

According to the moral rights rule, managers should choose the course of action that best protects and upholds their personal rights.

False

Business ethics are only important because the failure of a company can solely have catastrophic effects on the goals of the company.

False

Employees are much more likely to act ethically when a credo does not exist or is avoided.

False

Laws and regulations lead to the development of ethical beliefs.

False

The standards that govern how members of a profession should conduct themselves are called organizational ethics.

False

Trust refers to the esteem or high repute that people or organizations gain when they behave ethically.

False

Under the moral rights rule, an ethical decision is one that distributes benefits and harms among people and groups in an equitable way.

False

When making business decisions, managers must consider the claims of stockholders exclusively.

False

Proactive approach

Managers actively embrace the need to behave in socially responsible ways and go out of their way to learn about the needs of different stakeholder groups and are willing to use organizational resources to promote the interests not only of stockholders but also of the other stakeholders such as their employees and communities.

Customers

Most critical stakeholder Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones

4 approaches to social responsibility

Obstructionist Approach (lowest social responsibility) Defensive Approach Accommodative Approach Proactive Approach (highest social responsibility)

Ethics and Nonprofit Organizations

Over 200 nonprofits pay their top executives more than $1 million a year in salary Laws governing disclosure are far weaker for non-profits Many states and the federal government are considering new laws that would subject nonprofits to strict Sarbanes-Oxley-type regulations that force the disclosure of issues related to managerial compensation and financial integrity

Community

Physical locations like towns or cities in which companies are located Provides a company with the physical and social infrastructure that allows it to operate A company contributes to the economy of the town or region through salaries, wages, and taxes

Which approach to social responsibility is being implemented by a company that actively embraces the need to behave in socially responsible ways?

Proactive

Managers

Responsible for using a company's financial capital and human resources to increase its performance Have the right to expect a good return or reward by investing their human capital to improve a company's performance Frequently juggle multiple interests --> agency problem

Occupational Ethics

Standards that govern how members of a profession, trade, or craft should conduct themselves when performing work-related activities medical and legal ethics

Societal Ethics

Standards that govern how members of a society should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individual People behave ethically because they have internalized certain values, beliefs, and norms

ethical dilemma

The quandary people find themselves in when they have to decide if they should act in a way that might help another person or group even though doing so might go against their own self-interest.

Why should managers behave ethically?

The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way

Social Responsibility

The way a company's managers and employees view their duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole

Trust

The willingness of one person or group to have faith or confidence in the goodwill of another person, even though this puts them at risk.

A company's stance on social responsibility is the way its managers and employees view their obligation to make decisions that promote the well-being of stakeholders and society as a whole.

True

Ethical beliefs lead to the development of laws and regulations.

True

Moral principles or beliefs about what is the right or appropriate way to behave are known as ethics.

True

Stakeholders benefit in the long run from companies making the right choices.

True

Steve has noticed that there has been an error in his weekly pay stub and the company has unknowingly paid him too much. Steve is pondering whether to report this issue or not. This is an example of an ethical dilemma.

True

The way a company's managers view their duty to make decisions that enhance the well-being of stakeholders is called organizational ethics.

True

When one person starts to profit by behaving unethically, it encourages other people to act in the same way.

True

Some Effects of Ethical/Unethical Behavior

Unethical behavior ruins business commerce and society has a lower standard of living because fewer goods and services are produced, as Figure 4.3 illustrates.

4 ethical rules

Utilitarian, Justice, Practical, Moral Rights Rules

Defensive approach

companies and managers stay within the law and abide strictly with legal requirements but make no attempt to exercise social responsibility

A company that expects its managers to behave ethically to the degree that they stay within the law is acting with a(n) ________ approach.

defensive

Reputation

esteem or high repute that individuals or organizations gain when they behave ethically

Dianna has noticed that there has been an error in her weekly pay stub and the company has unknowingly paid her too much. This example illustrates a(n) ________.

ethical dilemma

The moral principles and beliefs about what is the right or appropriate way to behave are known as ________.

ethics

Suppliers

expect to be paid fairly and promptly for their inputs

Distributors

expect to receive quality products at agreed-upon prices

Individual Ethics

personal standards and values that determine how people view their responsibilities to others and how they should act in situations when their own self-interests are at stake How they should act in situations when their own self-interests are at stake

The utilitarian rule states that an ethical decision is a decision that:

produces the greatest good for the greatest number of people.

Types of Company Stakeholders

stockholders; managers; employees; suppliers and distributors; customers; and community, society, and nation-state

Organizational ethics

the guiding practices and beliefs through which a particular company and its managers view their responsibility toward their stakeholders Top managers are especially important in shaping the organization's code of ethics

ethics

the inner guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the right or appropriate way to behave