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Lecture# 5Management’s
Social and Ethical Responsibilities
Social Responsibility: Definition and Perspectives
• Corporate Social Responsibility (CSR)– The idea that business has:
• Social obligations above and beyond making a profit
• Social obligations to constituent groups in society other than stockholders and beyond that prescribed by law
– Organizations include financial, environmental, and social responsibility in their core business strategies.
Social Responsibility: Definition and Perspectives
• What Does Social Responsibility Involve?
– Voluntary action• Action is taken before lawsuits or other events force a firm to act on a matter.
– An emphasis on means, not ends• Emphasis is on how the decision to act was reached, not on the decision itself.
Figure 1: A Sample Stakeholder Audit for Wal-Mart, the World’s Largest Retailer
Arguments For and Against Corporate Social Responsibility
• Arguments For– Business is unavoidably involved in
social issues.– Business has the resources to
tackle today’s complex societal problems.
– A better society means a better environment for doing business.
– Corporate social action will prevent government action.
Arguments For and Against Corporate Social Responsibility
• Arguments Against– Profit maximization ensures the
efficient use of society’s resources.– As an economic institution, business
lacks the ability to pursue social goals.
– Business already has enough power.– Because business managers are not
elected, they are not directly accountable to society.
Toward Greater Social Responsibility
• Iron Law of Responsibility– Those who do not use power in a
socially responsible way will eventually lose it.
– If business does not meet the challenge of social responsibility, then government reform legislation will force it to meet its obligations.
Social Responsibility Strategies
• Reactive Strategy– Denying responsibility while
striving to maintain the status quo by resisting change
• Defensive Strategy– Resisting additional social
responsibilities with legal and public relations tactics
• Accommodation Strategy– Assuming social responsibility
only in response to pressure from interest groups or the government
• Proactive Strategy– Taking the initiative in
formulating and putting in place new programs that serve as role models for industry
Figure 2: A Continuum of Social Responsibility Strategies
Who Benefits from Corporate Social
Responsibility• Altruism
– The unselfish devotion to the interests of others
• Research Findings– There is a positive correlation
between industry leadership on a socially responsible issue (pollution control) and profitability.
– Corporate social responsibility is a competitive advantage in recruiting.
The Ethical Dimension of Management
• Ethics– The study of moral obligation
involving the distinction between right and wrong
• Business Ethics– The study of the complex
business practices and behaviors that give rise to ethical issues in organizations
Practical Lessons from Business Ethics Research
• Ethical Hot Spots– Balancing work and
family– Poor internal
communications– Poor leadership– Work hours, work load– Lack of management
support
– Need to meet sales, budget, or profit goals
– Little or no recognition of achievements
– Company politics– Personal financial
worries– Insufficient resources
Practical Lessons from Business Ethics Research (cont’d)
• Pressure from Above– The problem of superiors pressuring subordinates to
achieve results is widespread.– Managers’ responses to pressure from above
• Consciously avoid putting undue pressure on subordinates (who may act unethically to relieve the pressure).
• Prepare to deal with excessive organizational pressure.
Practical Lessons from Business Ethics Research (cont’d)
• Ambiguous Situations– Situations where there are no clear-cut ethical
guidelines or ethical codes that can satisfy employees’ need for formal guidelines
• Rationalization: How Good People End Up Doing Bad Things– Perceiving an objectively questionable action as
normal and acceptable
• A Call to Action– The deliberate and conscious action of a manager to
do the right thing is an ethical and personal matter.
Table 5.1: How Employees Tend to Rationalize Unethical Conduct
Personal Values as Ethical Anchors
• Values– Abstract ideals that shape one’s thinking and
behavior• Instrumental value: Enduring belief that a certain way (mode)
of behaving is appropriate in all situations• Terminal value: Enduring belief that a certain end-state of
existence (being admired) is worth striving for
• Identifying Your Own Values– Basic personal values are taken for granted.– They are not arranged consciously in order of priority.
Managerial Ranking of Values
• Terminal Values– Self-respect– Family security– Freedom– A sense of
accomplishment– Happiness
• Instrumental Values– Honesty– Responsibility– Capability– Ambition– Independence
General Ethical Principles
• Self-interests• Personal virtues• Religious injunctions• Government
requirements• Utilitarian benefits
• Universal rules• Individual rights• Economic efficiency• Distributive justice• Contributively liberty
Encouraging Ethical Conduct
• Ethics Training– Amoral managers: Managers who are
neither moral nor immoral, but ethically lazy– Key features of effective ethics programs
• Support of top management • Open discussion• A clear focus on ethical issues• Integration of ethics into the organization• A mechanism for anonymously reporting
ethical violations• Rewarding of ethical conduct
Table 2: Twelve Questions for Examining the Ethics of a Business Decision
Encouraging Ethical Conduct (cont’d)
• Ethical Advocate– An ethics specialist who plays a role in top
management’s decision making• Code of Ethics
– Requirements for an effective code• Describes specific events as unethical• Is supported and equitably enforced by
top management• Whistle-Blowing
– The reporting of perceived unethical matters
Summary
• Corporate responsibility is the idea that management has broader responsibilities than just making a profit.
• The debate over the basic purpose of the corporation is long-standing.
• Management scholars who advocate greater corporate social responsibility cite the iron law of responsibility.
Summary (cont’d)
• Ethics research indicates that many employees have acted unethically, have been pressured to act unethically, desire ethical standards, and engage in rationalization to defend their behaviors.
• Managers must pay attention to the instrumental and terminal values that comprise employee’s personal value systems.
Summary (cont’d)
• There are at least ten general ethical principles that guide behavior are self-interests, personal virtues, religious injunctions, government requirements, utilitarian benefits, universal rules, individual rights, economic efficiency, distributive justice, and contributive liberty.
• The typical manager is considered to be amoral--neither moral nor immoral—just ethically lazy or indifferent.