Ethics

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Ethics & Social Responsibility

Ethics and Stakeholders: 

Ethics and Stakeholders Stakeholders: people or groups that have an interest in the organization. Stakeholders include employees, customers, shareholders, suppliers, and others. Stakeholders often want different outcomes and managers must work to satisfy as many as possible. Ethics: a set of beliefs about right and wrong. Ethics guide people in dealings with stakeholders and others, to determine appropriate actions. Managers often must choose between the conflicting interest of stakeholders.

Ethics: 

Ethics It is difficult to know when a decision is ethical. Here is a good test: Managerial ethics : If a manager makes a decision falling within usual standards, is willing to personally communicate the decision to stakeholders, and believes friends would approve, then it is likely an ethical decision.

Ethical Models: 

Ethical Models Social Ethics: Legal rules, customs Professional Ethics: Values in workplace Individual Ethics: Family influence Organization’s Code of Ethics Figure 5.2

Ethical Origins: 

Ethical Origins Societal Ethics: standards that members of society use when dealing with each other. Based on values and standards found in society’s legal rules, norm, and mores. Codified in the form of law and society customs. Norms dictate how people should behave. Societal ethics vary based on a given society. Strong beliefs in one country may differ elsewhere. Example: bribes are an accepted business practice in some countries.

Ethical Origins: 

Ethical Origins Professional ethics: values and standards used by groups of managers in the workplace. Applied when decisions are not clear-cut ethically. Example: physicians and lawyers have professional associations that enforce these. Individual ethics: values of an individual resulting from their family& upbringing. Ethics of top managers set the tone for firms.

Ethical Decisions: 

Ethical Decisions A key ethical issue is how to separate harm and benefits among stakeholders . If a firm is very profitable for two years, who should receive the profits? Employees, managers and stockholders all want a share. Should we keep the cash for future slowdowns? What is the ethical decision? What about the reverse, when firms must layoff workers. Final point: stockholders are the legal owners of the firm!

Ethical Decisions: 

Ethical Decisions Some other issues managers must consider. Should you hold payment to suppliers as long as possible to benefit your firm? This will harm your supplier who is a stakeholder. Should you buy goods from overseas firms that hire children? If you don’t the children might not earn enough money to eat.

Why Behave Ethically?: 

Why Behave Ethically? Managers should behave ethically to avoid harming others. Managers are responsible for protecting and nurturing resources in their charge. Unethical managers run the risk for loss of reputation. This is a valuable asset to any manager! Reputation is critical to long term management success. All stakeholders are judged by reputation.

Corporate Social Responsibility (CSR): 

Corporate Social Responsibility (CSR) Preliminary definitions of CSR The impact of a company’s actions on society Requires a manager to consider his acts in terms of a whole social system, and holds him responsible for the effects of his acts anywhere in that system

Corporate Social Responsibility (CSR): 

Corporate Social Responsibility (CSR) Corporate Citizenship Concepts Corporate social responsibility – emphasizes obligation and accountability to society Corporate social responsiveness – emphasizes action, activity Corporate social performance – emphasizes outcomes, results

Social Responsibility: 

Social Responsibility Social Responsibility: the manager’s duty to nurture, protect and enhance the welfare of stakeholders. There are many ways managers respond to this duty: Obstructionist response: managers choose not to be socially responsible. Managers behave illegally and unethically. They hide and cover-up problems.

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Defensive response: managers stay within the law but make no attempt to exercise additional social responsibility. Put shareholder interest above all other stakeholders. Managers say society should make laws if change is needed. Accommodative response: managers realize the need for social responsibility. Try to balance the interests of all stakeholders. Proactive response: managers actively hold social responsibility. Go out of their way to learn about and help stakeholders.

Levels of Responsibility: 

Levels of Responsibility Obstruction response Defensive response Accommodative response Proactive response Low High Social responsibility Figure 5.3

Why be Responsible?: 

Why be Responsible? Managers build up benefits by being responsible. Workers and society benefit. Quality of life in society will improve. It is the right thing to do. Whistleblowers: a person reporting illegal or unethical acts. Whistleblowers now protected by law in most cases. Social audit: managers specifically take ethics and business into account when making decisions.

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Social Responsibility Management’s consideration of profit , consumer satisfaction , and societal well-being of equal value in evaluating the firm’s performance. Contributions to the overall economy, job opportunities , and charitable contributions and service . Organizations measure through social audits . Acting Responsibly to Satisfy Society

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Areas of Responsibility

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Public Health Issues. What to do about inherently dangerous products such as alcohol, tobacco etc. Protecting the Environment. Using resources efficiently, minimizing pollution. Recycling . Reprocessing used materials for reuse. Developing the Quality of the Workforce. Enhancing quality of the overall workforce through education and diversity initiatives. Corporate Philanthropy. Cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees. Responsibilities to the General Public

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The Right to Be Safe. Safe operation of products, avoiding product liability. The Right to Be Informed. Avoiding false or misleading advertising and providing effective customer service. The Right to Choose. Ability of consumers to choose the products and services they want. The Right to Be Heard. Ability of consumers to express legitimate complaints to the appropriate parties. Responsibilities to Customers

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Workplace Safety. Monitored by Occupational Safety and Health Administration . Quality-of-Life Issues. Balancing work and family through flexible work schedules, subsidized child care, and regulation such as the Family and Medical Leave Act of 1993. Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees without discrimination; many aspects regulated by law. Age Discrimination. Age Discrimination in Employment Act of 1968 protects workers age 40 or older. Sexual Harassment. Avoiding unwelcome actions of a sexual nature; equal pay for equal work without regard to gender. Responsibilities to Employees

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Obligation to make profits for shareholders. Expectation of ethical and moral behavior. Investors protected by regulation by the Securities and Exchange Board and state regulations. Responsibilities to Investors

Corporate Social Responsibility (CSR) Arguments Against: 

Corporate Social Responsibility (CSR) Arguments Against Restricts the free market goal of profit maximization Business is not equipped to handle social activities Dilutes the primary aim of business Increase business power Limits the ability to compete in a global marketplace

Corporate Social Responsibility (CSR) Arguments For: 

Corporate Social Responsibility (CSR) Arguments For Addresses social issues business caused and allows business to be part of the solution Protects business self-interest Limits future government intervention Addresses issues by using business resources and expertise Addresses issues by being proactive

Corporate Social Responsibility (CSR) Business Responsibilities in the 21st Century: 

Corporate Social Responsibility (CSR) Business Responsibilities in the 21 st Century Demonstrate a commitment to society’s values and contribute to society’s social, environmental, and economic goals through action. Insulate society from the negative impacts of company operations, products and services. Share benefits of company activities with key stakeholders as well as with shareholders. Demonstrate that the company can make more money by doing the right thing.