Give 2 examples of corporations ignoring an aspect of social responsibility and describe the results.
Levels of social responsibility As the previous chapter material painted the a general picture of business social responsibility issues, this CTR helps define specific terms and activities. Obligations and responsiveness Social responsibility is defined as an obligation, beyond that required by the law and economics, for a firm to pursue long-term goals that are good for society. Two key assumptions of this definition are that (1) all firms obey the law; and, (2) a company differentiates between right and wrong in determining what is good for society. Social obligation is defined as the requirement of a business to meet its economic and legal responsibilities. This concept means that a firm does the minimum the law requires. Social goals are pursued if and only if they contribute to direct economic goals of the firm. Social responsiveness is defined as the capacity of a firm to adapt to changing societal conditions. Social responsive firms identify prevailing social norms and change their involvement to respond to changing societal conditions. Social responsibility and economic performance. As the text observes, the relation between social responsibility and economic performance is hard to measure. The short-term nature of objective economic indicators and the long-term nature of socially responsible business practices make valid measure of cause-and-effect impossible to determine at this time. Discussion note: Logically, it makes good sense to be socially responsible as a precautionary strategy to “bank” good will and ward off increased regulation. The other arguments for and against socially responsible behaviour tend to cancel each other out. Cause-related marketing or the performing of social actions that are motivated directly by profits may be a transcendent argument between the classical and socioeconomic perspectives for social responsibility. From figure 5.2
Consider how the last dot point against is being addressed in modern business activity. From table 5.1
Can you name two stocks trading on their reputation as a socially responsible company. Which companies score best at http://www.stoxx.com/data/change_files_sustain.html# ?
Stages of social responsibility Overview Determining socially responsible behaviour begins by identifying to whom the company is to be accountable. The progressive view maintains that companies are responsible to shareholders or any constituency in the environment that is affected by an organisation’s decisions and policies. Stages of social responsibility Stage 1. Managers promote the shareholder’s interest by seeking to minimise costs and maximise profits. Stage 2. Managers accept responsibility for employees welfare and focus on human resources concerns. Because good workers and low turnover are more efficient and effective, managers work to improve conditions, increase job security and employee rights, train, and motivate employees. Stage 3. Managers expand their goals to include fair prices, high-quality products and services, safe products, good supplier relations, and similar practices. Managers at this stage perceive that meeting shareholder obligations can only be achieved indirectly by meeting the needs of these other constituencies. Stage 4. Managers align with the extreme socioeconomic definition of social responsibility. Managers at this stage see their businesses as public properties and actively support social justice, preserving the environment, and supporting social and cultural activities, even at the expense of profits. As the text notes, evaluation of companies and management practices along the continuum outlined above is seldom an easy task. Most managers face situations where decisions have both good and bad consequences in varying degrees.
Table 5.2 describes how social responsibility requires business to determine what is right or wrong and to make ethical decisions and engage in ethical business activities A socially responsible organisation does what is right because it has an ‘obligation’ to act that way. On the other hand social responsiveness refers to the capacity of a firm to adapt to changing societal conditions. The idea of social responsiveness stresses that managers make practical decisions about the societal actions in which they engage.
Until the late 1960’s people (and organisations) paid little attention to the environmental consequences of their decisions and actions. As a result of a number of ecological problems and environmental disasters, a new awareness and spirit of environmentalism began to emerge amongst individuals groups and organisations. This recognition of the close link between an organisation’s decisions and activities and its impact on the natural environment is referred to as the greening of management .
There are a number of issues that managers need to consider when they ‘go green’. One major green issue that managers must deal with as they become more involved in preserving the natural environment is recognising the main global environmental problems and how these problems are changing. The list of global problems is extensive. This CTR identifies some of the major one which include natural resource depletion, global warming, pollution, industrial accidents and toxic wastes. Global environmental problems can be expected to worsen however many organisations have accepted their responsibility to respect and protect the natural environment.
Organisations can take at least 4 approaches to environmental issues. 1. Legal Approach - Under this approach , organisations exhibit little environmental sensitivity. They simply do what is required legally. These organisations are a good example of social obligation; they simply follow their legal obligations of pollution prevention and environmental protection. 2. Market approach - Here organisations are more aware of and sensitive to environmental issues and respond to environmental preferences of its customers. Whatever customers demand in terms of environmentally friendly products will be what the organisation provides. 3. The stakeholder approach - Here the organisation chooses to respond to multiple demands made by stakeholders. Under this approach the green organisation will work to meet the environmental demands of such groups as employees, suppliers, investors and the community. 4. An activist approach - This type of organisation looks for ways to respect and preserve the earth and its natural resources. The activist approach exhibits the highest degree of environmental sensitivity and is a good illustration of social responsibility.
Describe one method of building team spirit that you have experienced.
FOUR views of managerial ethics You may wish to spend additional discussion time on this material as students emphasising a strictly definitional differentiation of each view may not weigh fully the implications that each view has for managerial decision making. Class discussion can help them appreciate ethics more. Four different views on ethics Utilitarian view of ethics Under this perspective, decisions are made solely on the basis on their outcomes or consequences. The goal of utilitarianism is to provide the greatest good for the greatest number. Utilitarianism encourages efficiency and productivity and is consistent with profit maximisation goals. Utilitarianism can result in biased allocations of resources and a disregard for minority positions regardless of their value. Rights view of ethics Under this perspective, decisions are concerned with respecting and protecting the rights of individuals. This view emphasises the rights of privacy, freedom of conscience, free speech, and due process. The rights view encourages individualism. The rights view can present obstacles to high productivity and efficiency if managers adopt an overly legalistic work climate. Theory of justice view of ethics Under this perspective, decisions seek to impose and enforce rules fairly and impartially. The justice view protects stakeholders who may be underrepresented or lack power. The justice view encourages development of a sense of entitlement that may reduce risk-taking, innovation, and productivity. Integrative Social contracts theory This is a view that proposes that decisions should be made on the basis of empirical (what is) and normative (what should be) factors. This view suggests that managers need to look at existing ethical norms in industries and corporations to determine what constitutes what are right and wrong decisions and actions. The challenge for managers today is making decisions using such criteria as individual rights, social justice and community standards, which are so subjective and have so many ambiguities compared with utilitarian criteria such as effects on efficiency and profits. There are 6 people in a life raft that can only hold 5. One person must be sacrificed so the other 5 can be saved. Describe how each view of ethics would arrive at which individual should be put overboard.
Whether an individual acts ethically or unethically is the result of the complex interaction between a manager’s stage of moral development and several moderating variables including individuals characteristics, the organisations structural design, the organisations culture and the intensity of the ethical issue. People who lack a strong morals sense are much less likely to do the wrong thing if they are constrained by rules, policies, job descriptions or strong cultural norms that disapprove of such behaviour. Conversely, very moral individuals can be corrupted by an organisational structure and culture that permits or encourages unethical practices. Moreover managers are more likely to make ethical decisions on issues where high moral intensity is involved.
Every individual enters an organisation with an entrenched set of values. These values are their basic conviction about what is right and wrong. Managers in organisations can hold very different values as well as being at different stages of moral development. Two personality variables have been identified as influencing an individuals actions about what is right or wrong. They are ego strength and locus of control Ego strength is a characteristic which measures the strength of a person’s convictions. People who rate high on ego strength are likely to resist impulses and follow their convictions compared to someone with a low ego strength. Locus of control is a personality attribute that measure the degree to which people believe they are masters of their own fate. People with an internal locus of control believe they control their own fate. People with an external locus of control believe that what happens to them is the result of luck or chance. Managers with an internal locus of control will probably demonstrate more consistency between their moral judgements and moral actions than will ‘external’ managers.
An organisations structural design helps to shape the ethical behaviour of managers. Structural designs which reduce ambiguity are more likely to produce ethical decision making. Appraisal systems which focus on outcomes only put pressure on managers to do whatever is necessary to reach the outcome variables. This pressure is not as evident in those systems which examine the means as well as the ends. Formal rules and regulations reduce ambiguity. Examples of such are codes of ethics and job descriptions. Linked to the performance appraisals are the rewards and punishments of the organisation. The more these depend on specific goal outcomes the more pressure there is on managers to do whatever is required to reach those goals. Structures also differ in the amount of time, competition, cost and similar pressures placed on employees.
The content and strength of an organisation’s culture also influences ethical behaviour. An organisation’s culture that is high in risk tolerance, control and conflict tolerance is more likely to shape high ethical standards. In this environment managers are encouraged to be aggressive and innovative but are aware that unethical practices will be discovered and they feel free to challenge and confront situations they believe are unrealistic or distasteful. A strong culture will exert more influence on managers than a weak one. A strong culture which supports high ethical behaviour should have a powerful and positive influence on a managers ethical behaviour. In a weak culture managers are more likely to rely on subcultural norms as the behavioural guide.
Issue intensity You may wish to expand the examples from the text with personal issues from your own research in management. Characteristics determining issue intensity 1. Greatness of harm - How great a harm (or benefit) is done to victims (or beneficiaries) of the ethical act in question? The greater the number of people affected, the more intense the issue. 2. Consensus of evil - How much agreement is there that the act is bad (or good)? Is the evil universal or situational? The more universal the agreement, the more intense the issue. 3. Probability of harm - How likely is it that the ethical act in question will actually take place? Or if it does, is the harm (benefit) likely to occur? As the probability increases, the issue becomes more intense. 4. Immediacy of consequences - How close in time are the consequences of the ethical act in question? More immediate effects tend to increase the intensity of the issue. 5. Proximity to victim - How close is the manager to those most likely to be affected? Proximity can be physical or socially, psychologically, or emotionally. Close proximity tends to increase issue intensity. 6. Concentration of effect - How concentrated or widespread is the impact of the effect? If those effected bear severe hardship versus diffusing the effect over a larger number of people, the issue is more intense.
Improving ethical behaviour Remind students that including the necessary elements of good ethics in corporate programs is not a sufficient cause of good ethical behaviour. The chapter video example of General Electric is a reminder that a company can have the best ethics program and still engage in unethical behaviour. Elements conducive to improving ethics Selection Careful selection, recruitment, and training of individuals may help screen out those inclined to act unethically. However, many of the complicated situations requiring ethical choices won’t have been faced by applicants, so selection is an imperfect process. Codes of ethics and decision rules A code of ethics - a formal statement of an organisation’s primary values and the ethical rules it expects its employees to follow. Decision rules can be used to aid employees and managers in the ethical processing of information about a problem. It is important to ascertain the company’s behavioural commitment to codes and rules – many are public relations documents. Top management’s leadership The top managers lead the company, not just manage it. They set the cultural tone by their actions. Serious commitment of top management is crucial to implementing a successful ethics program. Job goals Tangible and realistic goals are necessary because explicit goals that are unrealistic can cause employees and managers ethical dilemmas as they “try anything” to meet the goal. Ethics training Organisations train employees constantly in all task areas considered crucial to company performance. Ethics should be no different. Comprehensive performance appraisal Evaluations of employees must include non-economic measures if companies expect them to be embodied. Independent social audits Outside review makes violators more likely to be caught and others less fearful of reporting unethical behaviour. Formal protective mechanisms Fear of reprimand for “whistle-blowing” silences many employees. Official ethics advisors can help.
Relate one recent news item you know of relating to any of these principles.
Hrmg100 week 8.
HRMG100 - MANAGEMENT AND PEOPLE WEEK 8 Corporate Social Responsibility and Managerial Ethics 0
Definitions of social involvement <ul><li>Social responsibility - obligation beyond that of law and economics for a firm to pursue long- term goals that are good for society </li></ul><ul><li>Social obligation - obligation of business to meet economic and legal responsibilities </li></ul><ul><li>Social responsiveness - capacity of firm to adapt to changing societal conditions </li></ul>
What is social responsibility ? <ul><li>The classical view: </li></ul><ul><ul><li>Management’s only social responsibility is to maximise profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation) </li></ul></ul><ul><ul><li>Expending the firm’s resources on doing ‘social good’ unjustifiably increases costs that lower profits to the owners and raises prices to consumers </li></ul></ul><ul><ul><li>Firms doing ‘social good’ can exert too much influence on governments and society </li></ul></ul>
What is social responsibility? (2) <ul><li>The socioeconomic view: </li></ul><ul><ul><li>Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare </li></ul></ul><ul><ul><li>Corporations are not independent entities responsible only to stockholders </li></ul></ul><ul><ul><li>Firms have a moral responsibility to larger society to become involved in social, legal, and political issues </li></ul></ul><ul><ul><li>“ To do the right thing” </li></ul></ul>
Levels of social involvement Social obligations Social responsiveness Social responsibility Figure 5.2
Arguments for and against social responsibility <ul><ul><li>FOR </li></ul></ul><ul><ul><li>Public expectations </li></ul></ul><ul><ul><li>Long-run profits </li></ul></ul><ul><ul><li>Ethical obligation </li></ul></ul><ul><ul><li>Public image </li></ul></ul><ul><ul><li>Better environment </li></ul></ul><ul><ul><li>Discouragement of further governmental regulation </li></ul></ul><ul><ul><li>Balance of responsibility and power </li></ul></ul><ul><ul><li>Stockholder interests </li></ul></ul><ul><ul><li>Possession of resources </li></ul></ul><ul><ul><li>Superiority of prevention over cure </li></ul></ul><ul><li>AGAINST </li></ul><ul><ul><li>Violation of profit maximisation </li></ul></ul><ul><ul><li>Dilution of purpose </li></ul></ul><ul><ul><li>Costs </li></ul></ul><ul><ul><li>Too much power </li></ul></ul><ul><ul><li>Lack of skills </li></ul></ul><ul><ul><li>Lack of accountability </li></ul></ul>
Does social responsibility pay? <ul><li>Studies appear to show a positive relationship between social involvement and the economic performance of firms but: </li></ul><ul><ul><li>Difficulties in defining and measuring ‘social responsibility’ and ‘economic performance’ raise issues of validity and causation in the studies </li></ul></ul><ul><ul><li>Mutual funds using social screening in investment decisions slightly outperformed other mutual funds </li></ul></ul><ul><li>A general conclusion from the research is that a firm’s social actions do not harm its long-term performance </li></ul>
Stages of social responsibility S O C I A L R E S P O N S I B I L I T Y Stage 2 Employees Stage 3 Constituents Stage 4 Broader society Stage 1 Owners/ management Lesser Greater
Social responsibility vs. social responsiveness Social responsibility Social responsiveness Major consideration Ethical Pragmatic Focus Ends Means Emphasis Obligations Responses Decision framework Long term Medium and short term Table 5.2
The ‘greening’ of management - the recognition of the close link between an organisation’s decisions and activities, and its impact on the natural environment
Global issues affecting the environment The “greening” of management Natural Resources Global Warming Toxic Waste Industrial Accidents Pollution Global problems management must address in order to ‘go green’
Values-based management <ul><li>Values-based management </li></ul><ul><ul><li>An approach to managing in which managers establish and uphold an organisation’s shared values </li></ul></ul><ul><li>The purposes of shared values </li></ul><ul><ul><li>Serving as guideposts for managerial decisions </li></ul></ul><ul><ul><li>Shaping employee behavior </li></ul></ul><ul><ul><li>Influencing the direction of marketing efforts </li></ul></ul><ul><ul><li>Building team spirit </li></ul></ul><ul><li>The bottom line on shared corporate values </li></ul><ul><ul><li>An organisation’s values are reflected in the decisions and actions of its employees </li></ul></ul>
ETHICS <ul><li>Basically what is “right” or “wrong”: </li></ul><ul><li>For a person </li></ul><ul><li>For an organisation </li></ul><ul><li>For a community </li></ul><ul><li>For a nation </li></ul><ul><li>For a situation </li></ul>
ETHICS (2) <ul><li>Ethics are influenced by: </li></ul><ul><li>Family </li></ul><ul><li>Extended family </li></ul><ul><li>Schools </li></ul><ul><li>Workplaces </li></ul><ul><li>Friends </li></ul><ul><li>Society </li></ul><ul><li>Local communities </li></ul><ul><li>Religious institutions </li></ul><ul><li>Governments </li></ul>
Managerial ethics: four views Utilitarian view Rights view Theory of justice view Decisions are made solely on the basis of their outcomes or consequences. Decisions are concerned with respecting and protecting individual liberties and privileges. Decision makers seek to impose and enforce rules fairly and impartially and do so by following legal rules and regulations. Integrative social contracts view Decisions should be made on the basis of empirical (what is) and normative (what should be) factors.
Factors that affect ethical and unethical behaviour Figure 5.5
Individual characteristics that affect ethics <ul><li>Values: </li></ul><ul><ul><li>represent basic convictions of what is right and wrong </li></ul></ul><ul><li>Personality variables: </li></ul><ul><ul><li>ego strength - strength of personal convictions </li></ul></ul><ul><ul><li>locus of control - degree to which one believes in control of one’s own fate </li></ul></ul>
Factors affecting managerial ethics Reward System Competitive Pressures Appraisal System Time Pressures Rules and Regulations Structural variables — may help minimise ambiguity and encourage ethical behaviour Cost Constraints
Factors that affect managerial ethics Content and strength of organisational culture: Strong More influence Risk Tolerance Control Methods Conflict Tolerance Weak Less influence
Factors that affect managerial ethics Immediacy of consequences Proximity to victim(s) Consensus of wrong Probability of harm Great- ness of harm Concentration of effect Issue intensity
Improving ethical behaviour Leadership Code of ethics Employee selection Job goals Independent social audits Performance appraisal Ethics training Protection Steps towards improvement
Codes of ethics <ul><li>A formal statement of an organisation’s primary values and the ethical rules that it expects its employees to follow – for example: </li></ul><ul><ul><li>Be a dependable organisational citizen </li></ul></ul><ul><ul><li>Don’t do anything unlawful or improper that will harm the organisation </li></ul></ul><ul><ul><li>Be good to customers </li></ul></ul><ul><ul><li>Most professions and larger businesses have written (often on web-site) Codes of Ethics </li></ul></ul>Source: F.R. David, “An Empirical Study of Codes of Business Ethics: A Strategic Perspective.” paper presented at the 48 th Annual Academy of Management Conference, Anaheim, California August 1988.
Effective use of a code of ethics <ul><li>Develop a code of ethics as a guide for handling ethical dilemmas in decision-making </li></ul><ul><li>Communicate the code regularly to all employees (and the general public) </li></ul><ul><li>Have all levels of management continually reaffirm the importance of the ethics code and the organisation’s commitment to the code </li></ul><ul><li>Publicly reprimand and consistently discipline, in a fair procedural way, those who break the code </li></ul>
How managers can improve ethical behaviour in an organisation <ul><li>Hire individuals with high ethical standards </li></ul><ul><li>Establish codes of ethics and decision rules </li></ul><ul><li>Lead by example </li></ul><ul><li>Delineate job goals and performance appraisal mechanisms </li></ul><ul><li>Provide ongoing ethics training </li></ul><ul><li>Conduct independent social audits </li></ul><ul><li>Provide support for individuals facing ethical dilemmas </li></ul>
The value of ethics training <ul><li>Training in ethical problem-solving can make a difference in ethical behaviours </li></ul><ul><li>Training in ethics increase employee awareness of ethical issues in business decisions </li></ul><ul><li>Ethics training clarifies and reinforces the organisation’s standards of conduct </li></ul><ul><li>Employees become more confident that they will have the organisation’s support when taking unpopular but ethically correct stances </li></ul>
Ethical leadership <ul><li>Managers must provide a good role model by: </li></ul><ul><ul><li>Being ethical and honest at all times </li></ul></ul><ul><ul><li>Telling the truth; don’t hide or manipulate information </li></ul></ul><ul><ul><li>Admitting failure and not trying to cover it up </li></ul></ul><ul><ul><li>Communicating shared ethical values to employees through symbols, stories, and slogans </li></ul></ul><ul><ul><li>Rewarding employees who behave ethically and punish those who do not </li></ul></ul><ul><ul><li>Protecting employees (whistleblowers) who bring to light unethical behaviours or raise ethical issues </li></ul></ul>
Business practices and social issues <ul><li>Social Impact Management </li></ul><ul><ul><li>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 </li></ul></ul><ul><ul><li>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 </li></ul></ul>
Ethics in an international context <ul><li>Ethical standards are not universal </li></ul><ul><ul><li>Social and cultural differences determine acceptable behaviours </li></ul></ul><ul><li>Foreign Corrupt Practices Act </li></ul><ul><ul><li>Makes it illegal to bribe a foreign official, yet “token” payments to officials are permissible when doing so is an accepted practice in that country </li></ul></ul>
How ethical are you? <ul><li>“borrowing” - that your parents don’t know about? </li></ul><ul><li>“age” and entry to licensed clubs and premises? </li></ul><ul><li>Driving: </li></ul><ul><li>- speed limits? </li></ul><ul><li>- alcohol limits? </li></ul><ul><li>- talking on a mobile phone? </li></ul><ul><li>using business equipment for personal use? </li></ul><ul><li>starting time/ finishing time/ breaks? </li></ul>
How socially responsible are you? <ul><li>Are you conserving water? </li></ul><ul><li>Do you follow the current water restrictions? </li></ul><ul><li>Do you have a short shower? </li></ul><ul><li>Do you recycle? </li></ul><ul><li>Do you dispose of your bottles and junk food containers responsibly? </li></ul><ul><li>Do you buy tickets for public transport? </li></ul><ul><li>Do you tag graffiti? </li></ul>
How socially responsible are you? (2) <ul><li>Do you discriminate against: </li></ul><ul><li>the aged? </li></ul><ul><li>the physically challenged? </li></ul><ul><li>overseas born people? </li></ul><ul><li>single mothers? </li></ul><ul><li>the unemployed? </li></ul><ul><li>those who do not speak English well? </li></ul><ul><li>sexual minorities? </li></ul>
How ethical are you? <ul><li>DO YOU </li></ul><ul><li>Download music illegally? </li></ul><ul><li>Pirate CDs and DVDs? </li></ul><ul><li>Copy software illegally? </li></ul><ul><li>Engage in “Academic Dishonesty” </li></ul><ul><li>- fail to cite the sources of your information in essays and reports? </li></ul><ul><li>- copy other people’s assignments? </li></ul><ul><li>- ‘buy’ essays and assignments? </li></ul>
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 Labour 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 labour Principle 5: The effective abolition of child labour 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