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Ethics and Corporate Social Responsibility

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Title: Ethics and Corporate Social Responsibility


1
Chapter 6
  • Ethics and Corporate Social Responsibility

2
Ethics
  • A set of rules and values that define right and
    wrong conduct.
  • They indicate when behavior is acceptable and
    when it is unacceptable.

3
Moral Principles
  • Moral principles prescribe rules of acceptable
    behavior that are intended to be impartial.
  • Moral Principles dive the rules of ethics

4
Ethical vs. Unethical Decisions
  • Ethical decision reasonable and acceptable
    because it aids stakeholders, organization, and
    society.
  • Unethical decision- decision that a manager would
    prefer to disguise or hide from other people
    because of individual gain is placed above others
    needs.
  • Rules of thumb

5
Ethical Perspectives for Evaluating Behavior
Societal
Organizational
Legal
Individual
Adapted from Figure 6.1
6
Societal Perspective
  • Societal Ethics standards that govern how
    members of a society are to deal with each other
    on issues of fairness, justice, poverty, and
    individual rights.
  • -         The idea of what is ethical behavior is
    largely influenced by the society in which the
    behavior occurs.
  • Various public opinion surveys suggest a growing
    disenchantment with the lack of ethical behavior

7
Legal Perspective
  • Laws societys values and standards that are
    enforceable in the courts.
  • Employment-at-will a traditional common-law
    concept holding that employers are free to
    discharge employees for any reason at any time
    and that employees are free to quit their jobs
    for any reason at any time.

8
Legal Perspective (Ctd.)
  • Ethics are not laws by any means, simply beliefs
    about what is right or wrong.
  • Legality of actions and decisions doesnt make
    them ethical
  • Laws move with the current culture and moral
    principles
  • -         Lag behind because they are written and
    set
  • -         Do no ensure or even promote ethical
    behavior
  • Often laws and ethics are in conflict

9
Examples of Law/Ethical Difference
  • Students borrowing and investing money
  • Caveat emptor-buyer beware
  • Reputation-costs and benefits

10
Organizational Perspective
  • To provide guidance for employees, an
    organization can define ethical and unethical
    behaviors.
  • Organizations can also guide employee actions
    both formally and informally.
  •  

11
Individual Perspective
  • Despite prevalent societal, legal, and
    organizational interpretations of what is
    ethical, individuals have their own values and a
    sense of what is right or wrong.
  • Lawrence Kohlberg
  • -         Suggested people develop morally, much
    as they do physically, from early childhood to
    adulthood.
  • As they develop, their ethical criteria and
    patterns of moral reasoning go through stages of
    moral development

12
Individual Perspective (Ctd.)
  • Stages of moral development according to
    Kohlberg, people develop morally by going through
    six stages of moral development obedience and
    punishment, instrumental, interpersonal, law and
    order, social contract, and universal
    principles.

13
Kohlbergs Stages of Moral Development
Universal Principles
Social Contract
Law Order
Interpersonal
Instrumental
Obedience Punishment
Childhood--------------Through-----------------Adu
lthood
Adapted from Figure 6.2
14
Kohlbergs Stages (Ctd.)
Obedience and punishment person does the right
thing mainly to avoid punishment or to obtain
approval. Instrumental person becomes aware tha
t others also have needs and begins to defer to
them to get what the individual wants.
Interpersonal person considers appropriate
behavior as what pleases, helps, or is approved
by friends or family.
15
Kohlbergs Stages (Ctd.)
Law Order person recognizes that ethical
behavior is not determined only by reference to
friends, family, co-workers, or others whose
opinions the individual might value.
Social Contract person is aware that people
hold a variety of conflicting personal views that
go beyond the letter of the law.
Universal Principles person views appropriate
conduct as determined by a persons conscience,
based on universal ethical principles.
16
Ethical Models
Justice
Utilitarian
Moral Rights
IDEAL Outcome
Adapted from Fig 6.5
17
Utilitarian Model
  • Greatest good for the greatest number, but many
    hurt a few.
  • Milton Friedman is the best-known advocate of
    this approach.
  • All employees should strive to increase the
    companys profits.

18
Parts to Utilitarian Model
(Organizational Goals) focusing on maximizing
profits. Profits are seen as the reward for
satisfying customers. (Efficiency) achieved by b
oth minimizing inputs (e.g. labor, land, and
capital) and maximizing productive outputs.
(Conflicts of Interest) by having a financial
interest in a supplier a purchasing agent might
be more likely to buy from his supplier even if
its not in the companies best interest.
19
Moral Rights Model
  • Judging decisions and behavior by their
    consistency with fundamental personal and group
    liberties and privileges.
  • (Life and Safety) Employees, customers, and
    public have the right not to have their lives and
    safety endangered.
  • (Truthfulness) They have the right not to be
    intentionally deceived on matters about which
    they should be informed.
  • (Privacy) Citizens have the right to control
    access to personal information.

20
Moral Rights Model (Ctd.)
  • (Free Speech) Employees have the right to
    criticize the ethics or legality of their
    employers actions.
  • (Private Property) This right allows people to
    acquire, use, and dispose of shelter and have
    lifes basic necessities.

21
Justice Model
  • Judging decisions an behavior by their
    consistency with an equitable, fair, and
    impartial distribution of benefits (rewards) and
    costs among individuals and groups.
  • Distributive Justice Principle moral requirement
    that individuals not be treated differently
    because of arbitrarily defined characteristics.

22
Justice Model (Ctd.)
  • Fairness Principle moral requirement that
    employees support the rules of the organization
    when certain conditions are met.
  • Natural Duty Principle moral requirement that
    decisions and behaviors be based on a variety of
    universal obligations.

23
Society and the Environment
  • Sustainable development conducting business in
    a way that protects the natural environment while
    making economic progress.
  • This model of thought has increased environmental
    issues both internally and externally for
    corporations such as 3M, Kodak, and McDonalds.
  • Now include ethical principles of industrial
    ecology in their strategic plans.

24
Example from 3M
  • Solve its own pollution and conservation problems
    beyond compliance requirements.
  • Prevent pollution at the source, whenever
    possible
  • Conserve natural resources through waste
    reclamation and other methods
  • Assist regulatory and government agencies
    concerned with environment
  • Develop products that are ecologically friendlier

25
Stakeholder Theory
  • Stakeholders individuals or groups that have
    interests, rights, or ownership in an
    organization or the activities.
  • A broad category that covers a lot of individuals
    and groups.
  • Some groups are more important to the
    organization and its success.

26
Stakeholders of the Organization
Customers
Employees
Owners
Unions
Suppliers
Government
Local Community
Strategic Partners
Society
Adapted from Figure 6.3
27
Stakeholders Concerns
  • Stakeholder Group
  • Owners and Investors
  • Examples of Concerns
  • Financial Soundness
  • Consistency in meeting shareholder expectations
  • Sustained profitability
  • Average return on assets over five-year period
  • Timely and accurate disclosure of financial
    information

28
Stakeholders Concerns (Ctd.)
  • Examples of Concerns
  • Product/service quality, innovativeness, and
    availability
  • responsible management of defective or harmful
    products/services
  • Safety records for products/services
  • Pricing policies and practices
  • Honest, accurate , and responsible advertising.
  • Stakeholder Group
  • Customers

29
Stakeholders Concerns (Ctd.)
  • Stakeholder Group
  • Employees
  • Examples of Concerns
  • Nondiscriminatory, merit-based hiring and
    promotion
  • Diversity of the workforce
  • Wage and salary levels and equitable
    distribution
  • Availability of training and development
  • Workplace safety and privacy

30
Stakeholders Concerns (Ctd.)
  • Stakeholder Group
  • Community
  • Examples of Concerns
  • Environmental Issues
  • Environmental sensitivity in packaging and
    product design
  • Recycling efforts and use of recycled materials
  • Pollution prevention
  • Global applications of environmental standards

31
Stakeholders Concerns (Ctd.)
  • Examples of Concerns
  • Community Involvement
  • Percentage of profits designated for cash
    contributions
  • Innovation and creativity in philanthropic
    efforts
  • Product donations
  • Availability of facilities and other assets for
    community use
  • Support for employee volunteer efforts.
  • Stakeholder Group
  • Community (Ctd.)

32
Evaluating Corporate Social Performance
  • Fortune magazine founded Ron Brown Award for
    Corporate Leadership in Ethics
  • Demonstrates corporate leadership in Employee and
    Community Relations (Ethics)

33
Affirmative Social Responsibility
  • Ron Brown Award wants corporations and their
    leaders to move away from traditional,
    utilitarian models of business and take a more
    proactive stance with regard to society.

34
Affirmative Social Responsibility (Ctd.)
  • 5 steps
  • 1. Broad Performance Criteria
  • 2. Ethical Norms
  • 3. Operating Strategy
  • 4. Response to Social Pressures
  • 5. Legislative and Political Activities

35
Affirmative Social Responsibilities (Ctd.)
  • Taking this approach requires companies to
    implement five different an expensive behaviors
  • 1. Broad Performance Criteria management and
    employees must recognize broader views to measure
    growth.
  • 2. Ethical norms managers and employees must
    take definite stands on issues of public
    concerns.
  • 3. Operating strategy managers and employees
    should maintain or improve current standards of
    the physical and social environment.

36
Ctd.
  • 4. Response to social pressures management and
    employees should accept responsibilities for
    solving current problems.
  • 5. Legislative and Political Activities
    Managers must show a willingness to work with
    outside stakeholders for enforcement.

Social audit an attempt to identify and
measure, evaluate, report on, and monitor the
effects that an organization is having on its
stakeholders and society.
37
Conflict
  • Difficult to balance all stakeholder problems.
  • Owls vs. Lumber
  • Pollution vs. Jobs
  • Politics vs. Profits
  • Firms might not know of a stakeholder until
    there is a problem

38
Whistle-blowing
  • Reporting unethical or illegal behavior.
  • Has many consequences/risks
  • When should you blow the whistle?
  • Table 6.3 (p. 208)

39
Whistle-blowing (Ctd.)
  • Will not happen if
  • 1. If allegation of wrongdoing has little or no
    merit.
  • 2. Accusations are made to someone outside the
    company.
  • 3. Whistle-blower has no help from middle or top
    management.

40
Sexual Harassment
  • Quid pro quo asking for or forcing sexual
    contact with an employee in exchange for reward
    or to avoid punishment.
  • Hostile work environment lewd jokes,
    pornography, sexually oriented remarks about
    ones appearance making that person uncomfortable.
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