Chapter 5 SOCIAL RESPONSIBILITY AND MANAGERIAL ETHICS 5.1© 2003 Pearson Education Canada Inc.

Chapter 5

SOCIAL RESPONSIBILITY

AND MANAGERIALETHICS

5.15.1© 2003 Pearson Education Canada Inc.

© 2003 Pearson Education Canada Inc.

LEARNING OBJECTIVES• You should be able to:

– Explain the classical and socioeconomic views of social responsibility

– List the arguments for and against business’s being socially responsible

– Differentiate among social obligation, social responsiveness, and social responsibility

– Explain the relationship between corporate social responsibility and economic performance

– Describe values-based management and how it is related to organizational culture

5.25.2


LEARNING OBJECTIVES (continued)

• You should be able to:– Explain what the “greening” of management is

and how organizations are “going green”– Differentiate among the four views of ethics– Identify the factors that affect ethical behaviour– Discuss various ways organizations can

improve the ethical behaviour of their employees

5.35.3


WHAT IS SOCIAL RESPONSIBILITY?

• Two Opposing Views of Social Responsibility– Classical view - management’s only social

responsibility is to maximize profits• doing “social good” adds to the cost of doing

business• costs have to be passed on to consumers

5.45.4


WHAT IS SOCIAL RESPONSIBILITY? (continued)• Two Opposing Views of Social Responsibility (continued)

– Socioeconomic view - businesses are not just economic institutions

• management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare

• businesses have responsibility to a society• more organizations around the world have increased

their social responsibility

5.55.5


WHAT IS SOCIAL RESPONSIBILITY? (continued)

• From Obligations to Responsiveness– Social responsibility - a business’s obligation

to pursue long-term goals that help society– Social obligation - obligation of a business to

meet its economic and legal responsibilities– Social responsiveness - capacity of a firm to

adapt to changing societal conditions

5.65.6


LEVELS OF SOCIAL INVOLVEMENT (Exhibit 5.2)

Social Obligation

SocialResponsibility

SocialResponsiveness

5.75.7


SOCIAL RESPONSIBILITY vs. SOCIAL RESPONSIVENESS

(Exhibit 5.3)

Major considerationFocusEmphasisDecision framework

SocialResponsibility

EthicalEndsObligationLong term

SocialResponsiveness

PragmaticMeansResponsesMedium and short term

5.85.8


SOCIAL RESPONSIBILITY AND ECONOMIC PERFORMANCE

• Most Research Shows a Positive Relationship• Evaluation of Socially Conscious Mutual Stock

Funds– social screening - applying social criteria to

investment• Conclusion

– a company’s socially responsible actions do not hurt its long-term economic performance

5.95.9


VALUES-BASED MANAGEMENT

• Definition– An approach to managing in which managers

establish, promote, and practice an organization’s shared values

• Purposes of Shared Values– Act as guideposts for managerial decisions and

actions– Influence marketing efforts– Build team spirit

5.105.10

PURPOSES OF SHARED VALUES (Exhibit 5.4)

SharedOrganizational

Values

Guide Managers’Decisions and

Actions

InfluenceMarketing

Efforts

Build Team Spirit

Shape Employee Behaviour



VALUES-BASED MANAGEMENT (continued)

• Developing Shared Values– It is difficult to establish shared values– Managers are responsible for shaping the

organization so that its values, norms, and ideals appeal strongly to employees

– Companies that practice values-based management have broad commitment to being socially responsible and socially responsive

5.125.12


SUGGESTIONS FOR CREATING A GOOD CORPORATE VALUES

STATEMENT (Exhibit 5.5)

5.135.13


THE “GREENING” OF MANAGEMENT

• Definition – Recognition of the close link between an organization’s

decisions and activities and its impact on the natural environment

• Global Environmental Problems– There are many global environmental problems– Economically developed nations are blamed for the

problems– Problems expected to increase as emerging countries

become more developed

5.145.14


THE “GREENING” OF MANAGEMENT (continued)

• How Organizations Go Green– Products and production processes have become cleaner

– Shades of green - describe different approaches that organizations may take

• legal approach - follow legal obligations• market approach - organizations respond to the environmental

preferences of customers• stakeholder approach - organization chooses to respond to

multiple demands made by stakeholders• activist approach - looks for ways to respect and preserve the

earth and its natural resources

5.155.15

APPROACHES TO BEING GREEN (Exhibit 5.6)

LegalApproach

(Light Green)

MarketApproach

StakeholderApproach

ActivismApproach

(Dark Green)

Low HighEnvironmental Sensitivity

© 2003 Pearson Education Canada Inc. 5.165.16



• Summing Up Social Responsibility– Four-stage progression of an organization’s

social responsibility• each stage implies an increasing level of managerial

discretion• Stage 1 - promote stockholders’ interests by seeking

to minimize costs and maximize profits• Stage 2 - managers accept their responsibility to

employees and focus on human resource concerns

5.175.17



• Summing Up Social Responsibility (continued)– Four-stage progression (continued)

• Stage 3 - expand responsibilities to other stakeholders

• Stage 4 - managers feel responsibility to society as a whole

5.185.18

TO WHOM IS MANAGEMENT RESPONSIBLE? (Exhibit 5.7)

Stage 1Owners andManagement

Stage 2Employees

Stage 3Constituents in the

Specific Environment

Stage 4BroaderSociety

Social ResponsibilityLesser Greater



MANAGERIAL ETHICS

• Ethics– Rules and principles that define right and

wrong conduct• Four Views of Ethics

– Utilitarian view - ethical decisions are made on the basis of their outcomes or consequences

5.205.20


MANAGERIAL ETHICS (continued)

• Four Views of Ethics (continued)– Rights view - respects and protects individual

liberties and privileges– Theory of justice view - managers impose and

enforce rules fairly and impartially– Integrative social contracts theory - decisions

should be based on empirical and normative factors

5.215.21

FACTORS THAT AFFECT ETHICAL AND UNETHICAL BEHAVIOUR

(Exhibit 5.8)

EthicalDilemma

Moderators

Stage of MoralDevelopment

Ethical/UnethicalBehaviour

OrganizationalCulture

StructuralVariables

IndividualCharacteristics

IssueIntensity

© 2003 Pearson Education Canada Inc. 5.225.22

STAGES OF MORAL DEVELOPMENT (Exhibit 5.9)




• Factors That Affect Managerial Ethics (continued)– Individual characteristics

• values - basic convictions about right and wrong

• ego strength - strength of a person’s convictions

• locus of control - degree to which people believe that they control their own fate

5.245.24



• Factors That Affect Managerial Ethics (continued)

– Structural variables• design of organization affects ethical behaviour• rules and regulations• behaviour of superiors• performance appraisal systems that focus on means as

well as ends• reward systems that punish failure to achieve ends is

likely to compromise ethics

5.255.25



• Factors That Affect Managerial Ethics (continued)

– Organizational culture• strong culture more influential than a weak culture• high ethical standards result from a culture that is high

in risk tolerance, control, and conflict tolerance

– Issue intensity• importance of an ethical issue• more intense issues prompt greater ethical behaviour

5.265.26

DETERMINANTS OF ISSUE INTENSITY (Exhibit 5.10)




• Ethics in an International Context– social and cultural differences determine

ethical and unethical behaviour– Global Compact - United Nations

document containing principles for doing business globally in the areas of human rights, labour, and environment

5.285.28


THE GLOBAL COMPACTHuman Rights

Principle 1:support and respect the protection of international human rights within their sphere of influence; andPrinciple 2: make sure their own corporations are not complicit in human rights abuses.

Labour

Principle 3: freedom of association and the effective recognition of the right to collective bargaining;Principle 4: the elimination of all forms of forced and compulsory labour;Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: support a precautionary approach to environmental challenges;Principle 8: undertake initiatives to promote greater environmental responsibility; andPrinciple 9: encourage the development and diffusion of environmentally friendly technologies.

5.295.29



• Toward Improving Ethical Behaviour– Comprehensive ethics programs have the

potential to improve an organization’s ethical climate

– Employee selection - eliminate ethically questionable applicants

– Codes of ethics - formal statement of an organization’s primary values and ethical rules

5.305.30


MANAGERIAL ETHICS (continued)• Toward Improving Ethical Behaviour (continued)

– Top management’s leadership - what they do is far more important than what they say

– Job goals and performance appraisal - goals should be clear and realistic and must focus on ethical standards

– Ethics training - an increasing number of organizations use training to encourage ethical behaviour

– Independent social audits - evaluation of decisions in relation to code of ethics

– Formal protective mechanisms - protect employees who face ethical dilemmas

5.315.31

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Chapter 5 SOCIAL RESPONSIBILITY AND MANAGERIAL ETHICS 5.1© 2003 Pearson Education Canada Inc.

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