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