Business and
Personal Ethics
Outline – Business Ethics
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Overview of Ethics and Business Ethics
Who makes Un-Ethical Decisions and Why?
Corp...
What are business ethics?
• Ethics are principles that explain what is good and
right and what is bad and wrong and that p...
Recent International Examples of HighProfile Ethical Scandals
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United States: Enron, Worldcom, Global Cros...
Why Study Business Ethics?
• To obtain a better understanding of:
– Ethical decision-making
– Frequently occurring dilemma...
Levels at Which Ethical Issues May Be
Addressed
• Personal level—situations faced in personal life
(income tax, doing kid’...
Levels at Which Ethical Issues May Be
Addressed
• Industrial level—situations confronted as
professionals (the practices o...
Ethical Leadership
• Managers must provide a good role model by:
– Being ethical and honest at all times.
– Telling the tr...
What Typical “Moral Dilemmas” Do
Managers Face?
• Making phone calls, surfing the internet, playing computer
games, doing ...
What Typical “Moral Dilemmas” Do
Managers Face?
• Failing to act when one observes unethical behavior
• Carrying out decis...
Typical Dilemmas
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End Results/Performance
Quality vs schedule
Quality vs budget
Quality vs health ...
Most Common Types of Misconduct
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Lying to employees/customers/vendors
Withholding information
Intimidation...
Why Do Managers Bend the Rules?
• 111 executives were surveyed regarding reasons
for breaking company rules
• Three common...
Principal Causes of Ethical Compromise
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Meeting aggressive financial objectives
Meeting schedule pressures
Hel...
Managing Organizational Ethics
Personal and Managerial Ethics
Justifications for Unethical Behavior
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Moral justification:
– In terms of a higher purpose
Displacement of r...
Reasons for Not Reporting Observed
Misconduct
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Afraid of not being deemed a team player
Didn’t believe correctiv...
Purposes of Shared Values
Stated Values of
Organizations

Stated Value

Percentage of
Respondents

Customer satisfaction

77%

Ethics/integrity

76%...
Managing Organizational Ethics
Factors Affecting the Morality of Managers
Society’s Moral Climate
Business’s Moral Climate...
Managing Organizational Ethics
Factors Influencing Unethical Behavior
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Behavior of superiors
Ethical practices o...
Organizational Influences
- Ethical codes
- Organizational culture
- Role models
- Perceived pressure for results
- Reward...
Factors That Affect Ethical and Unethical
Behavior
Individual Characteristics Affecting
Ethical Behaviors
• Values
– Basic convictions about what is right or wrong
on a broa...
Moral Development and Ethics
• Understanding right from wrong
• Three levels
– Preconventional: Based on self-interests
– ...
Stages of Moral Development

Source: Based on L. Kohlberg, “Moral Stages and Moralization: The CognitiveDevelopment Approa...
Factors That Affect Employee Ethics
(cont’d)
• Moral Development
– Research Conclusions:
• People proceed through the stag...
Very few people see themselves
as unethical!
Individual Characteristics
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Personality Variables
– Ego strength
• A personality measure of the strength of a pe...
Ethical Issues in
Perception, Attitudes,
and Personality
• Stereotypes and workforce diversity
– Can have inaccurate stere...
Ethical Issues in
Perception, Attitudes,
and Personality (Cont.)
• Self–presentation
– Deliberately managing self–presenta...
Leadership Styles Based on Ego and Attitudes

Theory Y Attitudes

Theory X Attitudes

Positive

•Gives and accepts
positiv...
Attitudes
Attitudes
Evaluative
statements or
judgments
concerning
objects,
people, or
events.

Cognitive component

The op...
The Theory of Cognitive Dissonance
Cognitive Dissonance
Any incompatibility between two or more attitudes
or between behav...
Measuring the A-B Relationship
• Recent research indicates that attitudes (A)
significantly predict behaviors (B) when
mod...
Self-Perception Theory
Attitudes are used after the fact to make sense
out of an action that has already occurred.
Values

Values

Basic convictions that a specific
mode of conduct or end-state of
existence is personally or socially
pref...
Importance of Values
• Provide understanding of the attitudes, motivation,
and behaviors of individuals and cultures.
• In...
Types of Values –- Rokeach Value
Survey
Terminal Values
Desirable end-states of
existence; the goals that a
person would l...
Values in
the
Rokeach
Survey

Source: M. Rokeach, The Nature of Human
Values (New York: The Free Press, 1973).

E X H I B ...
Values in
the
Rokeach
Survey
(cont’d)

Source: M. Rokeach, The Nature of Human
Values (New York: The Free Press, 1973).

E...
Mean Value Rankings
of Executives, Union
Members, and
Activists
Source: Based on W. C. Frederick and J. Weber, “The Values...
Dominant Work Values in Today’s
Workforce
Structural Variables
• Organizational characteristics and mechanisms that guide
and influence individual ethics:
– Perform...
Determinants of Issue Intensity
What Is Social Responsibility?
• The Classical View
– Management’s only social responsibility is to
maximize profits (crea...
What Is Social Responsibility? (cont’d)
• The Socioeconomic View
– Management’s social responsibility goes beyond
making p...
To Whom is Management Responsible?

Exhibit 5.1
Arguments For and Against Social Responsibility
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For
– Public expectations
– Long-run profits
– Ethical obligation
– Pub...
From Obligation to Responsiveness to
Responsibility
• Social Obligation
– The obligation of a business to meet its economi...
Social Responsibility versus Social
Responsiveness
Social Responsibility

Social Responsiveness

Major consideration

Ethi...
Does Social Responsibility Pay?
• Studies appear to show a positive relationship between
social involvement and the econom...
Benefits of social responsibility:
• Pursuit of social responsibility as a goal may
ultimately lead to survival of the org...
Disadvantages of social responsibility:
• Socially responsible firms are likely to be less
efficient and may be driven out...
Business Practices and Social Issues
• Social Impact Management
– The field of inquiry at the intersection of business
pra...
The Greening of Management
• The recognition of the close link between an
organization’s decision and activities and its i...
How Organizations Go Green
• Legal (of Light Green) Approach
– Firms simply do what is legally required by obeying laws, r...
Approaches to Being Green

Source: Based on R.E. Freeman. J. Pierce, and R. Dodd. Shades of Green: Business
Ethics and the...
Ethics in an International Context
• Ethical standards are not universal.
– Social and cultural differences determine
acce...
Ethical Issues in the Global Economy
• Sexual Discrimination
• Racial Discrimination
• Human Rights (i.e. poor working con...
Some Causes of Bribery
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Matching competitor’s bribes
Vendor pressure for bribes
Gaining entrance to new markets
Pr...
Corruption Perceptions Index 2004
145 nations

1. Finland
2. New Zealand
3. Denmark
3. Iceland
5. Singapore
6. Sweden
7. S...
Corruption Perceptions Index 2002
102 nations

1. Finland
2. Denmark
3. New Zealand
4. Iceland
5. Singapore
6. Sweden
7. C...
Factors that affect a Nation’s
Ethical Climate
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Wealth (income per capita)
Government (form, size, reputatio...
Ethical Relativism vs.
Moral Absolutism
• Ethical Relativism - Ethical standards vary from
culture to culture
• Moral abso...
The Global Compact
Human Rights
Principle 1: Support and respect the protection of international human rights within their...
Why Have an Ethical Compliance
Program?
• To increase morale
• To minimize a the threat of a negative public
perception
• ...
Minimum Requirements for Ethical
Compliance Programs (FSG)
• A Code of Ethics
• A High-level Ethics Officer or staff
• Aut...
Why Ethical Codes
• In the absence of a code of ethics,
– There is usually a lack of consensus about
appropriate ethical b...
Developing a Code of Ethics
• A formal statement of firm’s moral
expectations
• Should emphasize overall values of firm
• ...
A company needs to ensure agreement about the relevant
criteria on which to judge the ethics of a business decision so
tha...
Managing Ethics
Ethics Training

Ethical Structures
Whistleblower
Policies
Whistleblower policies
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The policy encourages reporting unethical conduct.
Meaningful procedure to deal fair...
Core Corporate Abilities of the
Managing Ethics Competency
• Identify and describe the principles of ethical decision maki...
Managerial Actions to Promote
Ethical Attitudes

 Identifying and developing ethical attitudes that are crucial for
organ...
The Value of Ethics Training
• Training in ethical problem solving can make a difference
in ethical behaviors.
• Training ...
Forms of Ethics Training
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Lectures
Videos
Simulations
Games
Cases
Web-based materials
Managing Across Cultures Competency

• Behavioral Indicators:
– Understand, appreciate, and use cultural factors that can ...
How Managers Can Improve Ethical
Behavior in An Organization
1. Hire individuals with high ethical standards.
2. Establish...
Ethics Audits and Self-Assessment
Improving Ethical Climate
Ethics Programs
& Officers

Realistic
Objectives

Effective
Communication

Top
Management
Leader...
Criteria for ethical decision making:
• Utilitarianism
– A means of making decisions based on what is
good for the greates...
Criteria for ethical decision making: (continued)
• Rights approach
– A means of making decisions based on the
belief that...
Four Major Ethical Systems
Ethical System

Proponent

End-result

John Stuart Mill

Rule

Immanuel Kant

Social Contract

...
Example of End-Result Ethics
If I get married
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Points

Secure sex life
+ 1000
No messing around
-300
Joy of ch...
Summary (consider them all!!)
Ethical Issue
End-result
Rule
Social Contract
Personalistic

Reason

Right-Good
Decisions
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Ethics new

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  1. 1. Business and Personal Ethics
  2. 2. Outline – Business Ethics • • • • • • Overview of Ethics and Business Ethics Who makes Un-Ethical Decisions and Why? Corporate Responsibility International Perspective of Ethics Corporate Ethical Codes and Ethics Training Four “ethical systems” for your consideration!
  3. 3. What are business ethics? • Ethics are principles that explain what is good and right and what is bad and wrong and that prescribe a code of behavior based on these definitions. • Business ethics provide standards or guidelines for the conduct and decision making of employees and managers. • Ethical Dilemma: A situation in which an individual or team must make a decision that involves multiple values.
  4. 4. Recent International Examples of HighProfile Ethical Scandals • • • • • • • • United States: Enron, Worldcom, Global Crossing Russia: Mafia, expropriation and extortion France, Italy, South Korea: Bribery Ecuador, Peru: Embezzlement Bangladesh/Pakistan: Child labor Africa/South America: Environmental Degradation Vietnam/China: Software Piracy Numerous others
  5. 5. Why Study Business Ethics? • To obtain a better understanding of: – Ethical decision-making – Frequently occurring dilemmas – Moral philosophies – Preventative measures
  6. 6. Levels at Which Ethical Issues May Be Addressed • Personal level—situations faced in personal life (income tax, doing kid’s homework, etc.) • Organizational level—workplace situations faced as managers and employees (cutting corners, etc.)
  7. 7. Levels at Which Ethical Issues May Be Addressed • Industrial level—situations confronted as professionals (the practices of stockbrokers, accountants, etc.) • Societal and international levels—local-toglobal situations confronted indirectly as a management team
  8. 8. Ethical Leadership • Managers must provide a good role model by: – Being ethical and honest at all times. – Telling the truth; don’t hide or manipulate information. – Admitting failure and not trying to cover it up. – Communicating shared ethical values to employees through symbols, stories, and slogans. – Rewarding employees who behave ethically and punish those who do not. – Protecting employees (whistleblowers) who bring to light unethical behaviors or raise ethical issues.
  9. 9. What Typical “Moral Dilemmas” Do Managers Face? • Making phone calls, surfing the internet, playing computer games, doing personal business on company time • Lying about being sick or late • Stealing office supplies for personal use • Padding expense accounts or stealing monetary resources from the company • Harassment of other employees, including e-mail • Failure to “walk the talk” or the “say-do” gap
  10. 10. What Typical “Moral Dilemmas” Do Managers Face? • Failing to act when one observes unethical behavior • Carrying out decisions/orders that you clearly believe are wrong • Acting unethically because “everyone else is doing it” • Falsifying data to meet deadlines, quality standards, avoid extra work, etc. • Reducing safety and quality standards for products sold in other countries with less strict laws
  11. 11. Typical Dilemmas • • • • • • • • • • • • End Results/Performance Quality vs schedule Quality vs budget Quality vs health & safety Schedule vs budget Schedule vs health & safety Budget vs health & safety Organizational/Stakeholders Customers vs employees Customers vs owners Customers vs community Employee vs owners Employee vs community Owners vs community • • • • • • • • • • • • Societal/Goods and Services Quality vs price Quality vs availability Quality vs health & safety Price vs availability Price vs health & safety Availability vs health & safety Personal/Human Needs Physical vs security needs Physical vs belonging needs Physical vs self-esteem needs Security vs belonging needs Security vs self-esteem needs Belonging vs self-esteem needs
  12. 12. Most Common Types of Misconduct • • • • • • • • Lying to employees/customers/vendors Withholding information Intimidation Misreporting of time worked Discrimination Sexual harassment Stealing/Theft Environmental and safety violations
  13. 13. Why Do Managers Bend the Rules? • 111 executives were surveyed regarding reasons for breaking company rules • Three common themes emerged: 1. Performance-based judgment calls 2. Faulty rules 3. Abiding by socially-embedded norms From Veiga, J.F., Golden, T.D., & Dechant, K. 2004. Why managers bend company rules. Academy of Management Executive, vol. 18, no.2, pp. 84-89.
  14. 14. Principal Causes of Ethical Compromise • • • • • • Meeting aggressive financial objectives Meeting schedule pressures Helping the organization survive Rationalizing that others do it Resisting competitive threats Saving jobs » Source: Ethics Resource Center/SHRM, 1997.
  15. 15. Managing Organizational Ethics
  16. 16. Personal and Managerial Ethics
  17. 17. Justifications for Unethical Behavior • • • • • • • Moral justification: – In terms of a higher purpose Displacement of responsibility: – Blaming your behavior on others Diffusion of responsibility: – A group is responsible, no one person Advantageous comparison: – Others are worse Disregarding or distorting consequences: – Minimizing the harm caused Attribution of blame: – Caused by someone else’s behavior Euphemistic labeling – Covering it with cosmetic words
  18. 18. Reasons for Not Reporting Observed Misconduct • • • • • Afraid of not being deemed a team player Didn’t believe corrective action would be taken Fear of retribution No one else cares Didn’t trust firm to keep report confidential – Source: Ethics Resource Center/SHRM, 1997
  19. 19. Purposes of Shared Values
  20. 20. Stated Values of Organizations Stated Value Percentage of Respondents Customer satisfaction 77% Ethics/integrity 76% Accountability 61% Respect for others 59% Open communication 51% Profitability 49% Teamwork 47% Innovation/change 47% Continuous learning 43% Positive work environment 42% Diversity 41% Community service 38% Trust 37% Social responsibility 33% Security/safety 33% Empowerment 32% Employee job satisfaction 31% Have fun 24% Source: “AMA Corporate Values Survey,” (www.amanet.org), October 30, 2002.
  21. 21. Managing Organizational Ethics Factors Affecting the Morality of Managers Society’s Moral Climate Business’s Moral Climate Industry’s Moral Climate Superiors Superiors Policies Policies Individual Individual (One’s (One’s personal personal situation) situation) Peers Peers
  22. 22. Managing Organizational Ethics Factors Influencing Unethical Behavior • • • • • Behavior of superiors Ethical practices of one’s industry or profession Behavior of one’s peers in the organization Formal organizational policy (or lack of one) Personal financial need
  23. 23. Organizational Influences - Ethical codes - Organizational culture - Role models - Perceived pressure for results - Rewards/punishment system Political/legal/ economic influences ion Ro Ex l e pe c ta t Cultural Influences - Family - Education -Religion - Media/entertainment s A Model of Ethical Behavior in the Workplace Individual - Personality - Values - Moral principles - History of reinforcement - Gender Ethical behavior
  24. 24. Factors That Affect Ethical and Unethical Behavior
  25. 25. Individual Characteristics Affecting Ethical Behaviors • Values – Basic convictions about what is right or wrong on a broad range of issues • Stage of Moral Development – A measure of an individual’s independence from outside influences
  26. 26. Moral Development and Ethics • Understanding right from wrong • Three levels – Preconventional: Based on self-interests – Conventional: Based on expectations of others – Postconventional: Based on moral principles regardless of leader or group ethics Source: Adapted from Lawrence Kohlberg, “Moral Stages and Moralization: The Cognitive-Development Approach.” In Thomas Likona (ed.), Moral Development and Behavior: Theory, Research, and Social Issues (Austin, TX: Holt, Rinehart and Winston , 1976), 31-53.
  27. 27. Stages of Moral Development Source: Based on L. Kohlberg, “Moral Stages and Moralization: The CognitiveDevelopment Approach,” in T. Lickona (ed.). Moral Development and Behavior: Theory, Research, and Social Issues (New York: Holt, Rinehart & Winston, 1976), pp. 34–35.
  28. 28. Factors That Affect Employee Ethics (cont’d) • Moral Development – Research Conclusions: • People proceed through the stages of moral development sequentially. • There is no guarantee of continued moral development. • Most adults are in Stage 4 (“good corporate citizen”).
  29. 29. Very few people see themselves as unethical!
  30. 30. Individual Characteristics • • • • Personality Variables – Ego strength • A personality measure of the strength of a person’s convictions Ethics related to need and traits Unethical behavior more likely – Emotionally unstable – Locus of Control • A personality attribute that measures the degree to which people believe they control their own life. • Internal locus: the belief that you control your destiny. • External locus: the belief that what happens to you is due external forces, luck or chance. Individual Perception, Values, Attitudes, and Biases
  31. 31. Ethical Issues in Perception, Attitudes, and Personality • Stereotypes and workforce diversity – Can have inaccurate stereotypes about the ethics of people with different social, racial, and ethnic backgrounds – These stereotypes can affect opinions people develop about the ethical behavior of such people in the workplace
  32. 32. Ethical Issues in Perception, Attitudes, and Personality (Cont.) • Self–presentation – Deliberately managing self–presentations so decisions and behavior appear ethical – Limited experimental evidence suggests one can favorably manage other people's impressions of their ethical attitudes
  33. 33. Leadership Styles Based on Ego and Attitudes Theory Y Attitudes Theory X Attitudes Positive •Gives and accepts positive feedback •Bossy •Pushy SelfConcept •Expects others to succeed •Impatient •Critical Negative •Afraid to make decisions •Pessimistic SelfConcept •Unassertive •Promotes hopelessness •Self-blaming •Autocratic •Lets others do the job their way
  34. 34. Attitudes Attitudes Evaluative statements or judgments concerning objects, people, or events. Cognitive component The opinion or belief segment of an attitude. Affective Component The emotional or feeling segment of an attitude. Behavioral Component An intention to behave in a certain way toward someone or something.
  35. 35. The Theory of Cognitive Dissonance Cognitive Dissonance Any incompatibility between two or more attitudes or between behavior and attitudes. Desire to reduce dissonance Desire to reduce dissonance • •Importance of elements creating dissonance Importance of elements creating dissonance • •Degree of individual influence over elements Degree of individual influence over elements • •Rewards involved in dissonance Rewards involved in dissonance
  36. 36. Measuring the A-B Relationship • Recent research indicates that attitudes (A) significantly predict behaviors (B) when moderating variables are taken into account. Moderating Variables Moderating Variables • •Importance of the attitude Importance of the attitude • •Specificity of the attitude Specificity of the attitude • •Accessibility of the attitude Accessibility of the attitude • •Social pressures on the individual Social pressures on the individual • •Direct experience with the attitude Direct experience with the attitude
  37. 37. Self-Perception Theory Attitudes are used after the fact to make sense out of an action that has already occurred.
  38. 38. Values Values Basic convictions that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence. Value System A hierarchy based on a ranking of an individual’s values in terms of their intensity.
  39. 39. Importance of Values • Provide understanding of the attitudes, motivation, and behaviors of individuals and cultures. • Influence our perception of the world around us. • Represent interpretations of “right” and “wrong.” • Imply that some behaviors or outcomes are preferred over others.
  40. 40. Types of Values –- Rokeach Value Survey Terminal Values Desirable end-states of existence; the goals that a person would like to achieve during his or her lifetime. Instrumental Values Preferable modes of behavior or means of achieving one’s terminal values.
  41. 41. Values in the Rokeach Survey Source: M. Rokeach, The Nature of Human Values (New York: The Free Press, 1973). E X H I B I T 3–1 E X H I B I T 3–1
  42. 42. Values in the Rokeach Survey (cont’d) Source: M. Rokeach, The Nature of Human Values (New York: The Free Press, 1973). E X H I B I T 3–1 (cont’d) E X H I B I T 3–1 (cont’d)
  43. 43. Mean Value Rankings of Executives, Union Members, and Activists Source: Based on W. C. Frederick and J. Weber, “The Values of Corporate Managers and Their Critics: An Empirical Description and Normative Implications,” in W. C. Frederick and L. E. Preston (eds.) Business Ethics: Research Issues and Empirical Studies (Greenwich, CT: JAI Press, 1990), pp. 123–44. E X H I B I T 3–2 E X H I B I T 3–2
  44. 44. Dominant Work Values in Today’s Workforce
  45. 45. Structural Variables • Organizational characteristics and mechanisms that guide and influence individual ethics: – Performance appraisal systems – Reward allocation systems – Behaviors (ethical) of managers – An organization’s culture – Intensity of the ethical issue • Good structural design minimizes ambiguity and uncertainty and fosters ethical behavior.
  46. 46. Determinants of Issue Intensity
  47. 47. What Is Social Responsibility? • The Classical View – Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation). – Expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers.
  48. 48. What Is Social Responsibility? (cont’d) • The Socioeconomic View – Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare. – Corporations are not independent entities responsible only to stockholders. – Firms have a moral responsibility to larger society to become involved in social, legal, and political issues. – “To do the right thing”
  49. 49. To Whom is Management Responsible? Exhibit 5.1
  50. 50. Arguments For and Against Social Responsibility • For – Public expectations – Long-run profits – Ethical obligation – Public image – Better environment – Discouragement of further governmental regulation – Balance of responsibility and power – Stockholder interests – Possession of resources – Superiority of prevention over cure • Against – Violation of profit maximization – Dilution of purpose – Costs – Too much power – Lack of skills – Lack of accountability
  51. 51. From Obligation to Responsiveness to Responsibility • Social Obligation – The obligation of a business to meet its economic and legal responsibilities and nothing more. • Social Responsiveness – The capacity of a firm to adapt to changing societal conditions through the practical decisions of its managers in responding to important social needs. • Social Responsibility – A firm’s obligations as a moral agent extends beyond its legal and economic obligations, to the pursuit of long-term goals that are good for society.
  52. 52. Social Responsibility versus Social Responsiveness Social Responsibility Social Responsiveness Major consideration Ethical Pragmatic Focus Ends Means Emphasis Obligation Responses Decision framework Long term Medium and short term Source: Adapted from S.L. Wartick and P.L. Cochran, “The Evolution of the Corporate Social Performance Model,” Academy of Management Review, October 1985, p. 766. Exhibit 5.3
  53. 53. Does Social Responsibility Pay? • Studies appear to show a positive relationship between social involvement and the economic performance of firms. – Difficulties in defining and measuring “social responsibility” and “economic performance raise issues of validity and causation in the studies. – Mutual funds using social screening in investment decisions slightly outperformed other mutual funds. • A general conclusion is that a firm’s social actions do not harm its long-term performance.
  54. 54. Benefits of social responsibility: • Pursuit of social responsibility as a goal may ultimately lead to survival of the organization. • Narrow focus on producing goods and services for profit may impair company performance in the long run. • Corporate responsibility is related to higher financial performance and the ability to recruit better quality job applicants.
  55. 55. Disadvantages of social responsibility: • Socially responsible firms are likely to be less efficient and may be driven out of business by more efficient competitors willing to singlemindedly pursue profits. • Firms that give profits are more likely to fail and become a detriment to society because jobs and stockholders’ investments are lost.
  56. 56. Business Practices and Social Issues • Social Impact Management – The field of inquiry at the intersection of business practice and wider societal concerns that reflects and respects the complex interdependency of those two realities. – The question of how to go about increasing managers’ awareness within their decision-making processes of how society is impacted by the conduct and activities of their firms.
  57. 57. The Greening of Management • The recognition of the close link between an organization’s decision and activities and its impact on the natural environment. – Global environmental problems facing managers: • Air, water, and soil pollution from toxic wastes • Global warming from greenhouse gas emissions • Natural resource depletion
  58. 58. How Organizations Go Green • Legal (of Light Green) Approach – Firms simply do what is legally required by obeying laws, rules, and regulations willingly and without legal challenge. • Market Approach – Firms respond to the preferences of their customers for environmentally friendly products. • Stakeholder Approach – Firms work to meet the environmental demands of multiple stakeholders—employees, suppliers, and the community. • Activist Approach – Firms look for ways to respect and preserve environment and be actively socially responsible.
  59. 59. Approaches to Being Green Source: Based on R.E. Freeman. J. Pierce, and R. Dodd. Shades of Green: Business Ethics and the Environment (New York: Oxford University Press, 1995).
  60. 60. Ethics in an International Context • Ethical standards are not universal. – Social and cultural differences determine acceptable behaviors. • Foreign Corrupt Practices Act – Makes it illegal to corrupt a foreign official yet “token” payments to officials are permissible when doing so is an accepted practice in that country.
  61. 61. Ethical Issues in the Global Economy • Sexual Discrimination • Racial Discrimination • Human Rights (i.e. poor working conditions, low wages ) • Price Discrimination • Bribery • Harmful Products • Pollution • Privacy
  62. 62. Some Causes of Bribery • • • • Matching competitor’s bribes Vendor pressure for bribes Gaining entrance to new markets Pressure to meet sales quotas – Source: Ferrell et al. (2000)
  63. 63. Corruption Perceptions Index 2004 145 nations 1. Finland 2. New Zealand 3. Denmark 3. Iceland 5. Singapore 6. Sweden 7. Switzerland 8. Norway 9. Australia 10. Netherlands 17. USA 122. Bolivia 133. Indonesia 140. Azerbaijan 140. Paraguay 142. Chad 142. Myanmar 144. Nigeria 145. Bangladesh 145. Haiti
  64. 64. Corruption Perceptions Index 2002 102 nations 1. Finland 2. Denmark 3. New Zealand 4. Iceland 5. Singapore 6. Sweden 7. Canada 16. U.S.A. 95. Azerbaijan 96. Indonesia 97. Kenya 98. Angola 99. Madagascar 100. Paraguay 101. Nigeria 102. Bangladesh
  65. 65. Factors that affect a Nation’s Ethical Climate • • • • • • • Wealth (income per capita) Government (form, size, reputation) Culture (religion, values, rituals) Legal system and law enforcement Availability of resources Economic environment Influence of foreign investors
  66. 66. Ethical Relativism vs. Moral Absolutism • Ethical Relativism - Ethical standards vary from culture to culture • Moral absolutism - A universal standard should apply for business conduct • Culture Clusters?
  67. 67. The Global Compact Human Rights Principle 1: Support and respect the protection of international human rights within their sphere of influence. Principle 2: Make sure business corporations are not complicit in human rights abuses. Labor Standards 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 labor. Principle 5: The effective abolition of child labor. 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. Principle 9: Encourage the development and diffusion of environmentally friendly technologies. Source: The Global Compact Web site (www.unglobalcompact.org), August 14, 2000. Exhibit 5.10
  68. 68. Why Have an Ethical Compliance Program? • To increase morale • To minimize a the threat of a negative public perception • To ensure that policies and values of firm are understood by employees • To strengthen long-run competitive advantage • To reduce the potential for penalties
  69. 69. Minimum Requirements for Ethical Compliance Programs (FSG) • A Code of Ethics • A High-level Ethics Officer or staff • Autonomy taken from individuals with a propensity for misconduct • Ethics Training Programs • A system that monitors, audits, and reports misconduct • Enforcement of standards, codes, and punishment • Continual improvement of Ethical compliance program – Source: Federal Sentencing Guidelines Manual
  70. 70. Why Ethical Codes • In the absence of a code of ethics, – There is usually a lack of consensus about appropriate ethical behavior; and – Different people use different ethical criteria to determine whether a practice or behavior is ethical or unethical. • Business ethics are not the same things as laws.
  71. 71. Developing a Code of Ethics • A formal statement of firm’s moral expectations • Should emphasize overall values of firm • Should specify certain rules or guidelines • Top management and Legal staff involvement is key • Should be unique; industry and firm specific • Desired corporate culture should be stressed
  72. 72. A company needs to ensure agreement about the relevant criteria on which to judge the ethics of a business decision so that people do not base decisions on personal value systems. Code of Ethics Corporate Credos Ethical Policy Statements
  73. 73. Managing Ethics Ethics Training Ethical Structures Whistleblower Policies
  74. 74. Whistleblower policies • • • • • • • The policy encourages reporting unethical conduct. Meaningful procedure to deal fairly with reported violations. Those who report violations are protected from retaliation. Alternative reporting procedures. Anonymous reporting to an ethics officer/committee. Feedback to employees on ethics violations. Top management support and involvement.
  75. 75. Core Corporate Abilities of the Managing Ethics Competency • Identify and describe the principles of ethical decision making and behavior • Assess the importance of ethical issues in actions • Apply laws, regulations, and organizational rules in making decisions and taking action • Demonstrate dignity and respect for others • Demonstrate honest and open communication limited only by legal, privacy, and competitive considerations
  76. 76. Managerial Actions to Promote Ethical Attitudes  Identifying and developing ethical attitudes that are crucial for organizational operations  Selecting employees with desired ethical attitudes  Incorporating ethics into the performance evaluation process  Establishing a culture that reinforces ethical attitudes
  77. 77. The Value of Ethics Training • Training in ethical problem solving can make a difference in ethical behaviors. • Training in ethics increase employee awareness of ethical issues in business decisions. • Ethics training clarifies and reinforces the organization’s standards of conduct. • Employees become more confident that they will have the organization’s support when taking unpopular but ethically correct stances.
  78. 78. Forms of Ethics Training • • • • • • Lectures Videos Simulations Games Cases Web-based materials
  79. 79. Managing Across Cultures Competency • Behavioral Indicators: – Understand, appreciate, and use cultural factors that can affect behavior – Appreciate the influence of work-related values on decisions, preferences, and practices – Understand and motivate employees with different values and attitudes – Communicate in the local language – Deal effectively with extreme conditions in foreign countries – Utilize a global mindset (use a worldwide perspective to constantly assess threats or opportunities)
  80. 80. How Managers Can Improve Ethical Behavior in An Organization 1. Hire individuals with high ethical standards. 2. Establish codes of ethics and decision rules. 3. Lead by example. 4. Delineate job goals and performance appraisal mechanisms. 5. Provide ethics training. 6. Conduct independent social audits. 7. Provide support for individuals facing ethical dilemmas.
  81. 81. Ethics Audits and Self-Assessment
  82. 82. Improving Ethical Climate Ethics Programs & Officers Realistic Objectives Effective Communication Top Management Leadership Ethics Audit Ethics Training Ethical Decisionmaking Processes Codes of Conduct Discipline of Violators Whistle-blowing Mechanisms (“Hotlines”)
  83. 83. Criteria for ethical decision making: • Utilitarianism – A means of making decisions based on what is good for the greatest number of people. • Individualism – The degree to which a society values individual self-interest over group needs and goals. – Individual self-interest should be promoted as long as it does not harm others.
  84. 84. Criteria for ethical decision making: (continued) • Rights approach – A means of making decisions based on the belief that each person has fundamental human rights that should be respected and protected. • Justice approach – An approach to decision making based on treating all people fairly and consistently when making business decisions.
  85. 85. Four Major Ethical Systems Ethical System Proponent End-result John Stuart Mill Rule Immanuel Kant Social Contract Personalistic Definition Moral rightness of an action is determined by considering its consequences Moral rightness of an action is determined by laws and standards Jean Rousseau Moral rightness of an action is determined by customs and norms Martin Buber Moral rightness of an action is determined by one’s conscience
  86. 86. Example of End-Result Ethics If I get married • • • • • • Points Secure sex life + 1000 No messing around -300 Joy of children +700 Expense of children -300 Old age companionship +400 Responsibility -800 TOTAL = +700 If I don’t marry • • • • • • Points Freedom + 500 Loneliness -300 No children - 800 No responsibly +1000 No ties +400 No one to care -500 TOTAL = +300 Answer = I DO!!
  87. 87. Summary (consider them all!!) Ethical Issue End-result Rule Social Contract Personalistic Reason Right-Good Decisions

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