MGT420 Ch03

© 2007 Thomson/South-Western. All rights reserved.© 2007 Thomson/South-Western. All rights reserved.
PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook
The University of West AlabamaThe University of West Alabama
SocialSocial
ResponsibilityResponsibility
and Ethicsand Ethics
ChapterChapter
33
Part 1 Meeting the Challenges of the 21st CenturyPart 1 Meeting the Challenges of the 21st Century

© 2007 Thomson/South-
Western. All rights reserved. 3–2
1.1. Discuss the stakeholder view of the firm and theDiscuss the stakeholder view of the firm and the
impact of the globalization of business on socialimpact of the globalization of business on social
responsibility and ethics.responsibility and ethics.
2.2. Describe the concept of corporate socialDescribe the concept of corporate social
responsibility and the primary premises on which itresponsibility and the primary premises on which it
is based.is based.
3.3. Distinguish between the four perspectives ofDistinguish between the four perspectives of
corporate social responsibility.corporate social responsibility.
4.4. Identify and evaluate approaches for responding toIdentify and evaluate approaches for responding to
social issues.social issues.
LEARNING OBJECTIVESLEARNING OBJECTIVES
When you have finished studying this chapter, youWhen you have finished studying this chapter, you
should be able to:should be able to:

5.5. Explain what values are, how they form the basis ofExplain what values are, how they form the basis of
an individual’s ethical behavior, and how they mayan individual’s ethical behavior, and how they may
vary in a global business environment.vary in a global business environment.
6.6. Describe how advances in information technologyDescribe how advances in information technology
have created new ethical challenges.have created new ethical challenges.
7.7. Identify and discuss the differences in the utility,Identify and discuss the differences in the utility,
human rights, and justice approaches to ethicalhuman rights, and justice approaches to ethical
dilemmas.dilemmas.
8.8. Explain the methods used by organizations toExplain the methods used by organizations to
encourage ethical organizational behavior.encourage ethical organizational behavior.
LEARNING OBJECTIVESLEARNING OBJECTIVES (cont’d)(cont’d)

9.9. Describe the different approaches used in ethicsDescribe the different approaches used in ethics
training programs.training programs.
10.10. Discuss what is meant by whistle-blowing inDiscuss what is meant by whistle-blowing in
monitoring ethical behavior.monitoring ethical behavior.
LEARNING OBJECTIVESLEARNING OBJECTIVES (cont’d)(cont’d)

Organizational Stakeholders in aOrganizational Stakeholders in a
Global EnvironmentGlobal Environment
• StakeholdersStakeholders
 All those who are affected by or can affect theAll those who are affected by or can affect the
activities of the firm.activities of the firm.
• Primary StakeholdersPrimary Stakeholders
 Those who have a formal, official, or contractualThose who have a formal, official, or contractual
relationship with the organization.relationship with the organization.
• Secondary StakeholdersSecondary Stakeholders
 Other societal groups who are affected by theOther societal groups who are affected by the
activities of the firm.activities of the firm.

Figure 3.1Figure 3.1 The Stakeholder View of the FirmThe Stakeholder View of the Firm
Source: Business & Society: Ethics and Stakeholder Management, 3rd edition, by A. B. Carroll. © 1996.
Reprinted with permission of South-Western, a division of Thomson Learning. Fax 800-730-2215.

Stakeholder PerspectiveStakeholder Perspective
• Social ResponsibilitySocial Responsibility
 Relates to the obligation of business to society.Relates to the obligation of business to society.
• EthicsEthics
 Ethical issues are most relevant at an individual level,Ethical issues are most relevant at an individual level,
for ethics are maintained by people.for ethics are maintained by people.
• Corporate Social ResponsibilityCorporate Social Responsibility
 The interaction between business and the socialThe interaction between business and the social
environment in which it exists.environment in which it exists.

The Social Responsibility DebateThe Social Responsibility Debate
• What does social responsibility mean?What does social responsibility mean?
 Does it mean the corporation’s actions must not harmDoes it mean the corporation’s actions must not harm
society or does it mean a corporation’s actions shouldsociety or does it mean a corporation’s actions should
benefit society?benefit society?
• Social contractSocial contract
 An implied set of rights and obligations that areAn implied set of rights and obligations that are
inherent in social policy and assumed by business.inherent in social policy and assumed by business.
• Moral agentMoral agent
 The obligation of a business to act honorably and toThe obligation of a business to act honorably and to
reflect and enforce values that are consistent withreflect and enforce values that are consistent with
those of society.those of society.

Table 3.Table 3.11 Four Perspectives of Social ResponsibilityFour Perspectives of Social Responsibility
Source: A. Carroll and A Bucholtz, Business & Society: Ethics and Stakeholder Management, 6th ed. (Mason, OH: Thomson South-Western, 2006), 38.
Type of Societal
Responsibility Expectation Explanations
Economic Required by society Be profitable. Make sound strategic
decisions. Provide adequate and
attractive returns on investment.
Legal Required by society Obey all laws and regulations.
Fulfill all contractual obligations.
Honor warranties and guarantees.
Ethical Expected by society Avoid questionable practices
Respond to spirit as well as letter of law.
Assume law is floor of behavior and
operate above minimum required.
Do what is right, fair, and just.
Philanthropic Desired/expected Be a good corporate citizen.
by society Give back. Improve quality of life overall.

Perspectives on Social ResponsibilityPerspectives on Social Responsibility
• Economic ResponsibilityEconomic Responsibility
 The only responsibility of business is to make a profitThe only responsibility of business is to make a profit
within the “rules of the game.” (Milton Friedman)within the “rules of the game.” (Milton Friedman)
 Organizations cannot be moral agents.Organizations cannot be moral agents.
 Only individuals can serve as moral agents.Only individuals can serve as moral agents.
• Public Responsibility PerspectivePublic Responsibility Perspective
 Businesses should act in a way that is consistent withBusinesses should act in a way that is consistent with
society’s view of responsible behavior, as well as withsociety’s view of responsible behavior, as well as with
established laws and policies.established laws and policies.

Perspectives on Social ResponsibilityPerspectives on Social Responsibility
(cont’d)(cont’d)
• Social ResponsivenessSocial Responsiveness
 Business should proactively seek to contribute toBusiness should proactively seek to contribute to
society in a positive way.society in a positive way.
 Organizations should develop an internal environmentOrganizations should develop an internal environment
that encourages and supports ethical behavior at anthat encourages and supports ethical behavior at an
individual level.individual level.

Figure 3.Figure 3.22 The Four Faces of Social ResponsibilityThe Four Faces of Social Responsibility
Source: D. R. Dalton and R. A. Cosier, “The Four Faces of Social Responsibility.” Printed with permission from Business
Horizons (May/June 1982): 19–27. Copyright © 1982 by the Trustees of Indiana University, Kelley School of Business.
Legal/Responsible
Illegal/Irresponsible

Social Responsibility StrategiesSocial Responsibility Strategies
• A continuum of possible strategies based on theA continuum of possible strategies based on the
organization’s tendency to be sociallyorganization’s tendency to be socially
responsible or responsive.responsible or responsive.
Do NothingDo Nothing Do MuchDo MuchDo NothingDo Nothing Do MuchDo Much
ReactionReaction DefenseDefense AccommodationAccommodation ProactionProaction

Social Responsibility StrategiesSocial Responsibility Strategies (cont’d)(cont’d)
• ReactionReaction
 An approach to corporate social responsibility thatAn approach to corporate social responsibility that
includes an organization denying responsibility for itsincludes an organization denying responsibility for its
actions.actions.
• DefenseDefense
 Organizations that pursue a defense strategy respondOrganizations that pursue a defense strategy respond
to social challenges only when it is necessary toto social challenges only when it is necessary to
defend their current position.defend their current position.

Social Responsibility StrategiesSocial Responsibility Strategies (cont’d)(cont’d)
• AccommodationAccommodation
adapts to public policy in doing more than theadapts to public policy in doing more than the
minimum required.minimum required.
• ProactionProaction
includes behaviors that improve society.includes behaviors that improve society.
 Organizations that assume a proaction strategyOrganizations that assume a proaction strategy
subscribe to the notion of social responsiveness.subscribe to the notion of social responsiveness.

Table 3.Table 3.44 The Ten Commandments of Corporate Social ResponsibilityThe Ten Commandments of Corporate Social Responsibility
I. Take corrective action before it is required. Compliance with self-imposed
standards is almost always preferable to compliance with standards that
are imposed by outside constituencies.
II. Work with affected constituents to resolve mutual problems.
III. Work to establish industry-wide standards and self-regulation.
IV. Publicly admit your mistakes. Few things are worse for a company’s image
than being caught trying to cover up socially irresponsible behavior.
V. Get involved in appropriate social programs.
VI. Help correct environmental problems.
VII. Monitor the changing social environment.
VIII. Establish and enforce a corporate code of conduct.
IX. Take needed public stands on social issues.
X. Strive to make profits on an ongoing basis. An organization cannot
provide jobs and employ workers if it is not in a position to make
consistent profits.
Source: L. Alexander and W. Mathews, “The Ten Commandments of Corporate
Social Responsibility,” Business and Society Review 50 (1984): 62–66.

EthicsEthics
• EthicsEthics
 The established customs, morals, and fundamentalThe established customs, morals, and fundamental
human relationships that exist throughout the world.human relationships that exist throughout the world.
• Ethical BehaviorEthical Behavior
 Behavior that is morally accepted as good or right asBehavior that is morally accepted as good or right as
opposed to bad or wrong such as:opposed to bad or wrong such as:
 Corruption (for example, bribery and improperCorruption (for example, bribery and improper
payments)payments)
 Inadequate labor conditionsInadequate labor conditions
 Environmental responsibilityEnvironmental responsibility

Foundations of EthicsFoundations of Ethics
• ValuesValues
 the relatively permanent, deeply held preferences ofthe relatively permanent, deeply held preferences of
individuals or groups.individuals or groups.
• Instrumental ValuesInstrumental Values
 The standards of conduct or methods (means) forThe standards of conduct or methods (means) for
attaining an end.attaining an end.
• Terminal ValuesTerminal Values
 Goals (ends) that an individual will ultimately achieve.Goals (ends) that an individual will ultimately achieve.

Business Ethics DefinedBusiness Ethics Defined
• The application of the general ethical rules toThe application of the general ethical rules to
business behavior.business behavior.
 If a society deems dishonesty to be unethical andIf a society deems dishonesty to be unethical and
immoral, then anyone in business who is dishonestimmoral, then anyone in business who is dishonest
with employees, customers, creditors, stockholders,with employees, customers, creditors, stockholders,
or competition is acting unethically and immorally.or competition is acting unethically and immorally.

Ethics And Information TechnologyEthics And Information Technology
• Employee PerspectiveEmployee Perspective
 Concerns about organizations andConcerns about organizations and
government agencies gaining greater accessgovernment agencies gaining greater access
to private information about individuals.to private information about individuals.
• Organizational PerspectiveOrganizational Perspective
 Concerns over unethical acts by employeesConcerns over unethical acts by employees
as a result of access to information technologyas a result of access to information technology
in the workplace.in the workplace.
• Societal PerspectiveSocietal Perspective
 Concerns raised in regard to businesses providingConcerns raised in regard to businesses providing
customer information to other organizations.customer information to other organizations.

Ethical DilemmaEthical Dilemma
• A situation in which a person must decideA situation in which a person must decide
whether or not to do something that, althoughwhether or not to do something that, although
beneficial to oneself or the organization, may bebeneficial to oneself or the organization, may be
considered unethical and perhaps illegal.considered unethical and perhaps illegal.
• Examples of Ethical DilemmasExamples of Ethical Dilemmas
 Should I conduct personal business on companyShould I conduct personal business on company
time?time?
 Should we spend more on pollution control?Should we spend more on pollution control?
 Is it O.K. to give a friend a special rate?Is it O.K. to give a friend a special rate?
 If I find out that my boss took a bribe, should I tellIf I find out that my boss took a bribe, should I tell
someone?someone?

Guidelines for Deciding Ethical DilemmasGuidelines for Deciding Ethical Dilemmas
• Utility ApproachUtility Approach
 Decisions are based on an evaluation of the overallDecisions are based on an evaluation of the overall
amount of good that will result.amount of good that will result.
• Human Rights ApproachHuman Rights Approach
 Decisions are made in light of the moral entitlementsDecisions are made in light of the moral entitlements
of human beings.of human beings.
• Justice ApproachJustice Approach
 Decisions are based on an equitable, fair, andDecisions are based on an equitable, fair, and
impartial distribution of benefits and costs amongimpartial distribution of benefits and costs among
individuals and groups.individuals and groups.

Table 3.Table 3.55 Developing Employee Awareness of EthicsDeveloping Employee Awareness of Ethics
1. Enable the ethical component of a decision to be recognized.
2. Legitimize the consideration of ethics as part of decision making.
3. Avoid variability in decision making caused by lack of awareness
of rules or norms.
4. Avoid ambivalence in decision making caused by an
organizational reward system that psychologically pulls a person
in opposite directions.
5. Avoid ambivalence in decision making caused by confusion as to
who is responsible for misdeeds, particularly when the employee
has received an order from a superior.
6. Provide decision-making frameworks for analyzing ethical choices
and helping employees to apply such frameworks.
Source: S. J. Harrington, “What Corporate America Is Teaching about Ethics,”
Academy of Management Executives 5 (1991): 21–29.

Fostering Improved Business EthicsFostering Improved Business Ethics (cont’d)(cont’d)
• Code of EthicsCode of Ethics
 Describes the general value system, ethicalDescribes the general value system, ethical
principles, and specific ethical rules that a companyprinciples, and specific ethical rules that a company
tries to apply.tries to apply.
• Ethics Training ProgramsEthics Training Programs
 Training designed to help managers clarify theirTraining designed to help managers clarify their
ethical framework and practice self-discipline whenethical framework and practice self-discipline when
making decisions in difficult circumstances.making decisions in difficult circumstances.
• WhistleblowingWhistleblowing
 Whistleblower:Whistleblower: someone who exposes organizationalsomeone who exposes organizational
misconduct or wrongdoing to the public.misconduct or wrongdoing to the public.

Table 3.Table 3.66 Subjects Addressed by Most Codes of EthicsSubjects Addressed by Most Codes of Ethics
• Bribery/improper paymentsBribery/improper payments
• Conflict of interestConflict of interest
• Security of proprietarySecurity of proprietary
informationinformation
• Receiving giftsReceiving gifts
• Discrimination/equalDiscrimination/equal
opportunityopportunity
• Giving giftsGiving gifts
• EnvironmentEnvironment
• Sexual harassmentSexual harassment
• AntitrustAntitrust
• Workplace safetyWorkplace safety
• Political activitiesPolitical activities
• Community relationsCommunity relations
• Confidentiality of personalConfidentiality of personal
informationinformation
• Human rightsHuman rights
• Employee privacyEmployee privacy
• Whistle-blowingWhistle-blowing
• Substance abuseSubstance abuse
• NepotismNepotism
• Child laborChild labor
Source: R. Berenbeim, “Global Corporate Ethics Problems,”
Conference Board Research Report, 121243-99-RR, 1999.

Table 3.Table 3.88 A Model Whistle-Blower PolicyA Model Whistle-Blower Policy
• Publicize a reporting policy that encourages reporting of
valid complaints of wrongdoing.
• Establish a reporting procedure allows anonymous
complaints (required by Sarbanes–Oxley, at least for
financial wrongdoing) or complaints to someone outside of
the chain of command.
• Investigate the situation immediately.
• Go public. Publicize the outcomes of investigations. This
shows employees and other stakeholders that complaints
are taken seriously.
Sources: N. Swartz, “Whistleblower Complaints Growing,” Information Management Journal 38, no. 3 (May/June
2005): 8; T. Mohr and D. Slovin, “Making Tough Calls Easy,” Security Management 49, no. 3 (March 2005): 51–
56; L. Driscoll, “A Better Way to Handle Whistle-Blowers: Let Them Speak,” BusinessWeek, 27 July 1992, 36.

Implications for LeadersImplications for Leaders
• Explore ways in which the organization can be moreExplore ways in which the organization can be more
socially responsive.socially responsive.
• Recognize the effect of the organization’s actions on itsRecognize the effect of the organization’s actions on its
stakeholders.stakeholders.
• Create an environment in which employees commit toCreate an environment in which employees commit to
behaving in socially responsive and ethical ways.behaving in socially responsive and ethical ways.
• Make sure that a code of ethics is put in place andMake sure that a code of ethics is put in place and
followed.followed.
• Ensure that whistle blowing and ethical concernsEnsure that whistle blowing and ethical concerns
procedures are established for internal problem solving.procedures are established for internal problem solving.

Implications for LeadersImplications for Leaders (cont’d)(cont’d)
• Involve line and staff employees in the identification ofInvolve line and staff employees in the identification of
ethical issues to help them gain understanding andethical issues to help them gain understanding and
resolve issues.resolve issues.
• Determine the link between departments and issuesDetermine the link between departments and issues
affecting the company and make them known toaffecting the company and make them known to
employees in the departments.employees in the departments.
• Integrate ethical decision making into the performanceIntegrate ethical decision making into the performance
appraisal process.appraisal process.
• Publicize, in employee communications and elsewhere,Publicize, in employee communications and elsewhere,
executive priorities and efforts related to ethical issues.executive priorities and efforts related to ethical issues.

Table 3.Table 3.77 A Manager’s Guide for Developing a Strong Ethics PolicyA Manager’s Guide for Developing a Strong Ethics Policy
1. Develop a written policy on ethics and communicate it
regularly to your employees.
2. Make sure that all employees understand the policies and
procedures in place for determining ethical behavior.
3. Establish fair and consistent rules for disciplining
violators.
4. Develop and continually monitor audit systems to prevent
and detect violations of the law or corporate policy.
5. Create a safe environment where employees can report
suspected violations anonymously without fear of
retribution.
6. Allow those accused of violating ethics policies the
opportunity to explain or defend their behavior.

Fostering Improved Business EthicsFostering Improved Business Ethics
• To foster improved business ethics in anTo foster improved business ethics in an
organization, action must be directed at fiveorganization, action must be directed at five
levels:levels:
 InternationalInternational
 SocietalSocietal
 OrganizationalOrganizational
 IndividualIndividual
 AssociationAssociation

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