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Management, 9/eJohn R. Schermerhorn, Jr.

Prepared by: Jim LoPresti University of Colorado, Boulder

Published by: John Wiley & Sons, Inc.

Chapter 2: Management Ethics and Social

Responsibility

Management 9/e - Chapter 2 2

Planning Ahead — Chapter 2 Study Questions

What is ethical behavior? How do ethical dilemmas

complicate the workplace? How can high ethical standards be

maintained? What is social responsibility and

governance?

Management 9/e - Chapter 2 3

Ethics Code of moral principles. Set standards of “good” or “bad” or

“right” or “wrong” in one’s conduct.

Ethical behavior What is accepted as good and right in

the context of the governing moral code.

Study Question 1: What is ethical behavior?

Management 9/e - Chapter 2 4

Law, values, and ethical behavior:Legal behavior is not necessarily ethical

behavior.

Personal values help determine individual ethical behavior.Terminal values

Instrumental values

Study Question 1: What is ethical behavior?

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Study Question 1: What is ethical behavior?

Utilitarian view of ethics — greatest good to the greatest number of people.

Individualism view of ethics — primary commitment is to one’s long-term self-interests.

Moral-rights view of ethics — respects and protects the fundamental rights of all people.

Justice view of ethics — fair and impartial treatment of people according to legal rules and standards.• Procedural justice• Distributive justice• Interactional justice

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Figure 2.1 Four views of ethical behavior.

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Cultural issues in ethical behavior:Cultural relativism

Ethical behavior is always determined by cultural context.

Cultural universalism Behavior unacceptable in one’s home

environment should not be acceptable anywhere else.

Considered by some to be ethical imperialism

Study Question 1: What is ethical behavior?

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Figure 2.2 The extremes of cultural relativism and ethical

imperialism in international business ethics.

Source: Developed from Thomas Donaldson, “Values in Tension: Ethics Away from Home,” Harvard Business Review, vol. 74 (September-October 1996), pp. 48-62.

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Study Question 1: What is ethical behavior?

How international businesses can respect core or universal values:

Respect for human dignity• Create culture that values employees, customers, and

suppliers.• Keep a safe workplace.• Produce safe products and services.Respect for basic rights• Protect rights of employees, customers, and communities.• Avoid anything that threatening safety, health, education, and

living standards.Be good citizens• Support social institutions, including economic and

educational systems.• Work with local government and institutions to protect

environment.

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An ethical dilemma occurs when choices, although having potential for personal and/or organizational benefit, may be considered unethical.

Ethical dilemmas include: Discrimination Sexual harassment Conflicts of interest Customer confidence Organizational resources

Study Question 2: How do ethical dilemmas complicate the workplace?

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Study Question 2: How do ethical dilemmas complicate the workplace?

Ethical behavior can be rationalized by

convincing yourself that:

Behavior is not really illegal.

Behavior is really in everyone’s best interests.

Nobody will ever find out.

The organization will “protect” you.

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Factors influencing ethical behavior include: The person

Family influences, religious values, personal standards, and personal needs.

The organizationSupervisory behavior, peer group norms and

behavior, and policy statements and written rules. The environment

Government laws and regulations, societal norms and values, and competitive climate in an industry.

Study Question 2: How do ethical dilemmas complicate the workplace?

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Figure 2.3 Factors influencing ethical managerial behavior—the person, organization, and environment.

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Ethics training:Structured programs that help

participants to understand ethical aspects of decision making.

Helps people incorporate high ethical standards into daily life.

Helps people deal with ethical issues under pressure.

Study Question 3: How can high ethical standards be maintained?

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Whistleblowers

Expose misdeeds of others to: Preserve ethical standards Protect against wasteful, harmful, or

illegal acts

Laws protecting whistleblowers vary

Study Question 3: How can high ethical standards be maintained?

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Study Question 3: How can high ethical standards be maintained?

Barriers to whistleblowing include: Strict chain of command Strong work group identities Ambiguous priorities

Organizational methods for overcoming whistleblowing barriers:Ethics staff units who serve as ethics

advocatesMoral quality circles

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Study Question 3: How can high ethical standards be maintained?

Ethical role models:

Top managers serve as ethical role models.

All managers can influence the ethical behavior

of people who work for and with them.

Excessive pressure can foster unethical behavior.

Managers should be realistic in setting

performance goals for others.

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Codes of ethics: Formal statement of an organization’s values

and ethical principles regarding how to behave in situations susceptible to the creation of ethical dilemmas.

Areas often covered by codes of ethics: Bribes and kickbacks Political contributions Honesty of books or records Customer/supplier relationships Confidentiality of corporate information

Study Question 3: How can high ethical standards be maintained?

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Checklist for dealing with ethical dilemmas:

Recognize the ethical dilemma Get the facts Identify your options Test each option: Is it legal? Is it right? Is it beneficial? Decide which option to follow Double-check decision by asking “spotlight”

questions: “How would I feel if my family found out about my

decision?” “How would I feel about this if my decision were in

the local news?” Take action

Study Question 3: How can high ethical standards be maintained?

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Moral Management How managers act and communicate

as role models Immoral manager Amoral manager Moral manager

Ethics mindfulness Enriched ethical awareness that affects

behavior

Study Question 3: How can high ethical standards be maintained?

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Figure 2.4 How can high ethical standards be maintained?

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Study Question 4: What is social responsibility and governance?

Corporate social responsibility and governance:Looks at ethical issues on the

organization level.

Obligates organizations to act in ways that serve both its own interests and the interests of society at large.

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Study Question 4: What is social responsibility and governance?

Organizational stakeholders Those persons, groups, and other organizations directly

affected by the behavior of the organization and holding a stake in its performance.

Typical organizational stakeholders Employees Customers Suppliers Owners Competitors Regulators Interest groups

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Figure 2.5 Multiple stakeholders in the environment of an organization.

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Study Question 4: What is social responsibility and governance?

Perspectives on social

responsibility:Classical view—

Management’s only responsibility is to

maximize profits.

Socioeconomic view— Management must be concerned for the

broader social welfare, not just profits.

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Study Question 4: What is social responsibility and governance?

Arguments against social responsibility: Reduced business

profits Higher business

costs Dilution of business

purpose Too much social

power for business Lack of public

accountability

Arguments in favor of social responsibility: Adds long-run profits Improved public image Avoids more

government regulation Businesses have

resources and ethical obligation

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Study Question 4: What is social responsibility and governance?

Criteria for evaluating corporate social performance: Is the organization’s …

Economic responsibility met? Legal responsibility met? Ethical responsibility met? Discretionary responsibility met?

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Figure 2.6 Criteria for evaluating corporate social performance.

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Study Question 4: What is social responsibility and governance?

Strategies for pursuing social responsibility:Obstructionist — meets economic

responsibilities.Defensive — meets economic and legal

responsibilities.Accommodative — meets economic, legal,

and ethical responsibilities.Proactive — meets economic, legal,

ethical, and discretionary responsibilities.

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Figure 2.7 Four strategies of corporate social responsibility—from obstructionist to proactive behavior.

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Study Question 4: What is social responsibility and governance?

How government influences organizations:Common areas of government

regulation of business affairs:Occupational safety and healthFair labor practicesConsumer protectionEnvironmental protection

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Study Question 4: What is social responsibility and governance?

How organizations influence

governments: Personal contacts and networks

Public relations campaigns

Lobbying

Political action committees

Sometimes by illegal acts, such as bribery or

illegal financial contributions to political campaigns

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Study Question 4: What is social responsibility and governance?

Leadership beliefs that guide

socially responsible practices: People

Communities

Natural environment

Long term

Reputation

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Figure 2.8 Centrality of ethics and social responsibility in leadership and the managerial role.

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Study Question 4: What is social responsibility and governance?

Corporate governance: The oversight of the top management of an

organization by a board of directors.

Corporate governance involves: Hiring, firing, and compensating the CEO.

Assessing strategy.

Verifying financial records.

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