MGMT Ch 3 Test 1

Influences on Ethical Decision Making include: • The ethical Intensity of the Decision • The Moral Development of the Manager • Approach taken to Ethical Decision-Making

- The ethical Intensity of the Decision - The Moral Development of the Manager - Approach taken to Ethical Decision-Making

A subset of justice that deals with the distribution of wealth among members of a society. - Healthcare Reform Act - Minimum Wage - Taxes - CEO Pay

Distributive justice

While some ethical issues are easily solved, for many there are no clearly right or wrong answers. The ethical answers that managers choose depend on the ethical intensity of the decision, the moral development of the manager, and the ethical principles used to solve the problem. Influences on _____________include: •The ethical Intensity of the Decision •The Moral Development of the Manager •Approach taken to Ethical Decision-Making

Ethical Decision Making

Ethical behavior follows accepted principles of right and wrong. Managers must be mindful of unethical behavior. Areas of unethical behavior are? authority and power, handling information, influencing the behavior of others, and setting goals.

-authority and power, -handling information, --influencing the behavior of others, - the goals they set (source of much unethical behavior).

- Joe Whinney exudes a sense of mission in everything he does. After a trip to cacao farms in Central America, Whinney decided to build the first organic fair trade chocoloate factory in the U.S. By building the first sustainable chocolate maker in the nation, Whinney hoped to help solve social and environmental issues by operating a profitable and ethical business. While Theo Chocolate is finding good success in the organic foods industry, perhaps the most exciting thing for "Theonistas" is that the company is being hailed as a voice for change. Employees say they have gained a loyal following for their efforts in the developing world, and business success has opened up new opportunities for sharing their vision of a better world.

1. Which of the four strategies for responding to social responsibility best reflects Theo Chocolate? 2. How does Theo Chocolate's business practices reflect the stakeholder model of social responsibility? 3. What would happen if fair trade goals conflicted with a company's primary responsibility to be profitable?

o Reactive: A company using a reactive strategy will do less than society expects. It may deny responsibility for a problem or fight any suggestions that the company should solve a problem. o Defensive: A company using a defensive strategy would admit responsibility for a problem but would do the least required to meet societal expectations. o Accommodative: A company using an accommodative strategy will accept responsibility for a problem and take a progressive approach by doing all that could be expected to solve the problem. o Proactive:Finally, a company using a proactive strategy will anticipate responsibility for a problem before it occurs, do more than expected to address the problem, and lead the industry in its approach.

CSR Response Strategies

o The relationship between CSR activities and financial performance is uncertain, but generally thought to be positive. Early studies suggested a negative relationship (increased CSR activities negatively impact financial performance). More recent studies suggest a slightly positive relationship (increased CSR activities improve financial performance). o Thus, while it typically does pay to be socially responsible, there is no guarantee that CSR activities will translate into immediate profits. o Should be viewed as an investment that will lead to: Improved efficiency Innovation Long-term financial success o EX: Does being Ethical Pay?

CSR and Financial Performance

Using CSR for a Competitive Advantage. -Supporting Core Business Activities: CSR is strategic when it supports core business activities that contribute to a firm's mission, vision, and strategy. Creating a Strategic CSR Platform strategic CSR: Corporate social responsibility activities that are directly related to business activities so that they can combine social welfare with financial welfare.

CSR and Strategy

Environmental Dilemmas Increasing pollution and depletion of natural resources Managers face the question of how much they should conserve o Privacy Dilemmas Privacy: A person's right to determine the type and extent of information that is disclosed about him or her. • A person's right to determine the type and extent of information that is disclosed about him or her • Requires managers to strike balance between respecting privacy and learning about their subordinates

Common Moral Dilemmas Faced by Organizations

An example of an external constituency that can play a role in a moral dilemma is?

Consumer protection

- A century ago, society expected businesses to meet their economic and legal responsibilities and little else. Today, however, when society judges whether businesses are socially responsible, ethical and discretionary responsibilities are considerably more important than they used to be. - Historically, economic responsibility, making a profit by producing a product or service valued by society, has been a business's most basic social responsibility. Organizations that don't meet their financial and economic expectations come under tremendous pressure. - Legal responsibility is the expectation that companies will obey a society's laws and regulations as they try to meet their economic responsibilities. - Ethical responsibility is society's expectation that organizations will not violate accepted principles of right and wrong when conducting their business. Because different stakeholders may disagree about what is or is not ethical, meeting ethical responsibilities is more difficult than meeting economic or legal responsibilities. - Discretionary responsibilities pertain to the social roles that businesses play in society beyond their economic, legal, and ethical responsibilities. o A business's decision to be a good corporate citizen.

Core Responsibilities of Business in Society

A business's obligation to pursue policies, decisions, and actions that align with the objectives and values of society.

Corporate Social Responsibility(CSR)

The practice of businesses responding to pressure from society to engage in socially responsible ways. o Responsive firms are characterized by three behaviors: they monitor and assess environmental conditions on a constant basis, they seek to identify the needs of their stakeholders, and they design plans and policies to respond to changing conditions.

Corporate Social Responsiveness

Whole Foods' value proposition is to sell organic, natural, and healthy food to customers who are passionate about food and the environment. This is an example of what step in the Four-Step Process of Implementing CSR?

Create a social dimension to the value proposition

holds that the only social responsibility that businesses have is to maximize profits. By maximizing profit, the firm maximizes shareholder wealth and satisfaction. More specifically, as profits rise, the company stock owned by shareholders generally increases in value

Shareholder model

conflict of interest: Conflicts that occur when employees or managers engage in activities on behalf of the company and have a personal interest in the outcome of those activities. • EVERY ETHICAL DILEMMA INVOLVES A CONFLICT OF INTEREST! trade secret: Any type of information used in conducting business that is not commonly known by others. It often provides a strategic advantage for a company over its competitors Bribery: Offering something valuable to a party to act on his or her behalf, often to an unfair advantage. • Bribery is common in certain countries, but generally illegal in the U.S. • Walmart Whistle-blowing: The release of information by a member of an organization that is evidence of illegal or immoral conduct to executives in a company or regulating agencies outside a company. • going to the government or the media to report illegal or immoral conducts of a company

Ethical Dilemmas Faced by individuals:

The study of moral standards and their effect on behavior and conduct.

Ethics

A person who is entrusted with property, information, or power to act on behalf of a beneficiary.Duty: board of directors, lawyers, the frat mentor example. Ex: frat brother and mentor will not cheat with his "younger" brother(falls under Kantianism)

Fiduciary

- Identify points of intersection between company and society -Select social issues to address -Create a corporate social agenda (incorporate with Strategy) -Create a social Dimension to the value proposition.

Four step process to implementing strategic CSR

______________is another area in which managers must be careful to behave ethically. Information is a key part of management work. Managers collect it, analyze it, act on it, and disseminate it. However, they are also expected to deal in truthful information and, when necessary, to keep confidential information confidential. Leaking company secrets to competitors, "doctoring" the numbers, wrongfully withholding information, or lying are some possible misuses of the information entrusted to managers.

Handling information

o from a single store in Austin, Texas, in 1978, to an $11 billion Fortune 300 company, and a top U.S. supermarket with more than 340 stores and 70,000 Team Members worldwide. o For 15 consecutive years, FORTUNE magazine has included Whole Foods Market on its "100 Best Companies to Work For" list. o Mackey has been the visionary for many successful programs at the core of Whole Foods Market. Founded Whole Planet Foundation to help end poverty in developing nations; Launched the Local Producer Loan Program to help local farmers and food producers expand their businesses; Created the Global Animal Partnership to set standards for humane farm animal treatment; and he laid the foundation for the company's Health Starts Here initiative, which encourages health and wellness among customers and Team Members. o He has been recognized for his work over the years by being named Ernst & Young's "United States Entrepreneur of the Year," Institutional Investor's "Best CEO in America," Barron's "World's Best CEO," MarketWatch's "CEO of the Year," FORTUNE's "Businessperson of the Year," and Esquire's "Most Inspiring CEO," among many others. o Cut his pay to $1 in 2006.

John Mackey

________-An ethical philosophy that provides the framework for society to judge what is morally right or wrong, fair or unfair, and establishes ways to evaluate or punish those who behave in morally wrong ways. o Distributive justice: A subset of justice that deals with the distribution of wealth among members of a society. Healthcare Reform Act Minimum Wage Taxes CEO Pay o Procedural justice: A subset of justice claiming that rules should be clearly stated, consistently obeyed, and impartially enforced. DUE PROCESS - bedrock principle of American society Employer - Employee Erosion since 9/11 NSA Monitoring of U.S. Citizens Guantanamo Bay Prisoners

Justice

A factor of Ethical intensity ____________is agreement on whether behavior is bad or good.

Social consensus

A third area in which managers must be careful to engage in ethical behavior is the way in which they _________________, especially those they supervise. Managerial work gives managers significant power to influence others. If managers tell employees to perform unethical acts (or face punishment), such as "faking the numbers to get results," then they are abusing their managerial power. This is sometimes called the "move it or lose it" syndrome. "Move it or lose it" managers tell employees, "Do it. You're paid to do it. If you can't do it, we'll find somebody who can."

influence the behavior of others

A factor of Ethical intensity ____________ is the total harm or benefit derived from an ethical decision.

Magnitude of consequences

The standards that people use to judge what is right or wrong, good or evil.

Morality

groups, such as shareholders, employees, customers, suppliers, governments, and local communities, on which the organization depends for long-term survival. So when managers are struggling to balance the needs of different stakeholders, the stakeholder model suggests that the needs of primary stakeholders take precedence over the needs of secondary stakeholders. However, contrary to the shareholder model, no primary stakeholder group is more or less important than another, since all are critical to the firm's success and survival. So managers must try to satisfy the needs of all primary stakeholders.

Primary stakeholders

A factor of Ethical intensity ____________is the chance that something will happen and then result in harm to others.

Probability of effect

Procedural justice: A subset of justice claiming that rules should be clearly stated, consistently obeyed, and impartially enforced. DUE PROCESS - bedrock principle of American society Employer - Employee Erosion since 9/11 NSA Monitoring of U.S. Citizens Guantanamo Bay Prisoners

Procedural justice

A factor of Ethical intensity ____________is the social, psychological, cultural, or physical distance of a decision maker to those affected by his or her decisions

Proximity of effect

-such as the media and special interest groups, can influence or be influenced by the company. Yet in contrast to primary stakeholders, they do not engage in regular transactions with the company and are not critical to its long-term survival. Consequently, meeting the needs of primary stakeholders is usually more important than meeting the needs of secondary stakeholders. While not critical to long-term survival, secondary stakeholders are still important, because they can affect public perceptions and opinions about socially responsible behavior.

Secondary stakeholders

__________is another way that managers influence the behavior of their employees. If managers set unrealistic goals, the pressure to perform and to achieve these goals can influence employees to engage in unethical business behaviors.

Setting goals

People or groups who are interested in and affected by the organization's actions. Example - John Mackey Stakeholders are persons or groups who are interested in and affected by the organization's actions. They are called "stakeholders" because they have a stake in what those actions are. Primary stakeholders are groups on which the organization depends for its long-term survival. They include shareholders, employees, customers, suppliers, governments, and local communities. Secondary stakeholders, such as the media and special interest groups, can influence or be influenced by a company. Unlike the primary stakeholders, however, they do not engage in regular transactions with the company and are not critical to its long-term survival. Nevertheless, secondary stakeholders are still important because they can affect public perceptions and opinions about a company's socially responsible behavior.

Stakeholders

Kohlberg's stages of Moral Development Steps:

Step 1: Punishment and Obedience (Preconventional) Step 2: Instrumental Exchange(Preconventional) Step 3: Good Boy, Nice Girl(Conventional) Step 4: Law and Order(Conventional) Stage 5: Social Contract (Postconventional) Stage 6: Universal Principle(Postconventional)

A factor of Ethical intensity ____________is the time between an act and the consequences the act produces.

Temporal immediacy

o An American economist, statistician, and writer who taught at the University of Chicago for more than three decades. o Recipient of the 1976 Nobel Memorial Prize in Economic Sciences, o A survey of economists ranked Friedman as the second most popular economist of the twentieth century after John Maynard Keynes. o The Economist described him as "the most influential economist of the second half of the 20th century...possibly of all of it." - The Social Responsibility of Business is to Increase Profits, by Milton Friedman o Agency Theory: A corporate executive is an employee—an agent of the corporation's owners. As such, the executive is the agent of shareholders and has a fundamental obligation to maximize profits for the benefit of those who hired them. Any diversion of shareholder money to "social responsibilities" adversely and unjustly affects the owners to whom managers owe their allegiance.

The Shareholder View:Dr. Milton Friedman

There are two major perspectives: Shareholder model: the only social responsibility that businesses have is to maximize profits Stakeholder model: management's most important responsibility is not just maximizing profits; firm's long term-survival depends on satisfying the interests of multiple corporate stakeholders (not just shareholders).

To Whom Are Organizations Socially Responsible?

___________- occurs when managers personally violate accepted principles of right and wrong.

Unethical management behavior

Ethical framework

Utaltarianism Kantianism Fiduciary Virtues ethics

The ethical philosophy claiming that behaviors are considered moral if they produce the greatest good, or utility, for the greatest number of people. EX: Apple and others Encrypt Phones Fueling Government Standoff. EX: Vance Argues for Access to Smartphone Data "good out weighing the bad"- cost benefit analysis - cheating with your best friend's girlfriend because the combined happiness will outweigh the friend's unhappiness

Utilitarianism

An ethical philosophy claiming that morality's primary function is to develop virtuous character.

Virtue ethics: (Virtue and character)

The ______________ inherent in some management positions can tempt managers to engage in unethical practices. Since managers often control company resources, there is a risk that some managers will cross over the line from legitimate use of company resources to personal use of those resources. For example, some managers have used corporate funds to pay for extravagant parties, lavish home decorating, jewelry, or expensive pieces of art.

authority and power

A factor of Ethical intensity ____________is how much an act affects the average person, whereas the magnitude of consequences is the total effect across all people

concentration of effect

Managers don't treat all ethical decisions the same. The manager who has to decide whether to deny or extend full benefits to Joan Addessi and her family is going to treat that decision much more seriously than the manager who has to deal with an assistant who has been taking computer diskettes home for personal use. The difference between these decisions is one of _______________, which is how concerned people are about an ethical issue.

ethical intensity

____________is how concerning is this ethical decision or the degree of concern people have about an ethical issue. Factors: •Magnitude of consequences •Social consensus •Probability of effect •Temporal immediacy •Proximity of effect •Concentration of effect

ethical intensity

WEYCO INC. -Weyco, Inc. has completely eliminated tobacco use among its workforce. Its 175 plus employees are required to be entirely tobacco free, as are over 90 percent of the employees' spouses. In 2003, Weyco adopted a policy of not hiring tobacco users, while also prohibiting smoking on campus and not allowing workers to take off-campus smoke breaks. In 2004, they implemented "voluntary testing"—anyone who refused a test was fined $50 a month. In 2005, an employee's refusal to take or failure of a test for smoking resulted in loss of job. Weyco uses random testing. Those who fail a random test are sent home without pay for a month to think about what they have done. If they pass the test on return, they must sign a letter agreeing to daily testing when the company wishes. A subsequent failed test results in termination. In 2006, Weyco started text employee spouses. An employee with a spouse who either refuses the test or fails it is fined $50 a month. - EX: When your Boss Makes you Pay for Being Fat Is this moral and ethical?

no

In part, according to Lawrence Kohlberg, ethical decisions are based on a person's level of moral development. Kohlberg identified three phases of moral development, with two stages in each phase.

o At the preconventional level of moral development, people decide based on selfish reasons. For example, if you were in Stage 1, the punishment and obedience stage, your primary concern would be not to get in trouble. Yet, in Stage 2, the instrumental exchange stage, you make decisions that advance your wants and needs. o People at the conventional level of moral development make decisions that conform to societal expectations. In Stage 3, the good boy--nice girl stage, you normally do what the other "good boys" and "nice girls" are doing. In the law and order stage, Stage 4, you do whatever the law permits. o People at the post conventional level of moral maturity always use internalized ethical principles to solve ethical dilemmas. In Stage 5, the social contract stage, you would consider the effects of your decision on others. In Stage 6, the universal principle stage, you make ethical decisions based on your principles of right and wrong.

By contrast, under the ___________, management's most important responsibility is the firm's long-term survival (not just maximizing profits), which is achieved by satisfying the interests of multiple corporate stakeholders (not just shareholders). Some stakeholders are more important to the firm's survival than others.

stakeholder model