Principle and Practice of Management MGT

1. Ethics,
Corporate
Responsibility,
and
Sustainability
Chapter Five
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2. 5-2
Learning Objectives
LO1 Describe how different ethical perspectives guide
decision making
LO2 Explain how companies influence their ethics
environment
LO3 Outline a process for making ethical decisions
LO4 Summarize the important issues surrounding corporate
social responsibility
LO5 Discuss reasons for businesses’ growing interest in the
natural environment
LO6 Identify actions managers can take to manage with the
environment in mind

3. 5-3
Ethics
Ethics
 The system of rules
that governs the
ordering of values

4. 5-4
Telling the Truth and Lying:
Possible Outcomes
Table 5.1

5. 5-5
It’s a Personal Issue
Most of us think we are good decision makers,
ethical, and unbiased.
But most people have unconscious biases that
favor themselves and their own group.
Managers often:
 Hire people who are like them
 Think they are immune to conflicts of interest
 Take more credit than they deserve
 Blame others when they deserve some blame
themselves

6. 5-6
It’s a Personal Issue
If the employer pays
for the computer and
the time you spend
sitting in front of it, is
it ethical for you to
use the computer to
do tasks unrelated to
your work?

7. 5-7
Ethics
Ethical issue
 Situation, problem, or opportunity in which an
individual must choose among several actions
that must be evaluated as morally right or wrong
Business ethics
 The moral principles and standards that guide
behavior in the world of business.

8. 5-8
Ethical Systems
Moral philosophy
 Principles, rules, and values people use in
deciding what is right or wrong
Universalism
 The ethical system stating that all people should
uphold certain values that society needs to
function.

9. 5-9
Caux Principles
Caux Principles
 Ethical principles established by international
executives based in Caux, Switzerland, in
collaboration with business leaders from Japan,
Europe, and the United States.

10. 5-10
Caux Principles
Kyosei
 living and working
together for the
common good,
allowing cooperation
and mutual
prosperity to coexist
with healthy and fair
competition
Human dignity
 concerns the value of
each person as an
end, not a means to
the fulfillment of
others’ purposes

11. 5-11
Ethical Systems
Egoism
 An ethical system defining acceptable behavior
as that which maximizes consequences for the
individual
Utilitarianism
 An ethical system stating that the greatest good
for the greatest number should be the overriding
concern of decision makers.

12. 5-12
Ethical Systems
Relativism
 Philosophy that bases ethical behavior on the opinions
and behaviors of relevant other people
Virtue ethics
 Classification of people based on their level of moral
judgment.
Kohlberg’s model of cognitive moral development
 Perspective that what is moral comes from what a
mature person with “good” moral character would deem
right.

13. 5-13
Current Ethical Issues in Business
Table 5.2

14. 5-14
Business Ethics
Ethical climate
 In an organization,
the processes by
which decisions are
evaluated and made
on the basis of right
and wrong

15. 5-15
Danger Signs
1. Excessive emphasis on short-term revenues over longer-
term considerations.
2. Failure to establish a written code of ethics.
3. A desire for simple, “quick fix” solutions to ethical
problems.
4. An unwillingness to take an ethical stand that may impose
financial costs.
5. Consideration of ethics solely as a legal issue or a public
relations tool
6. Lack of clear procedures for handling ethical problems.
7. Responding to the demands of shareholders at the expense
of other constituencies

16. 5-16
Danger Signs
Ethical leader
 One who is both a moral person and a moral
manager influencing others to behave ethically.

17. 5-17
Ethics Programs
Compliance-based ethics programs
 Company mechanisms typically designed by
corporate counsel to prevent, detect, and punish
legal violations.
Integrity-based ethics programs
 Company mechanisms designed to instill in
people a personal responsibility for ethical
behavior

18. 5-18
A Process for Ethical Decision Making
Figure 5.1

19. 5-19
Ethical Decision Making
Making ethical decisions takes:
Moral awareness
 realizing the issue has ethical implications
Moral judgment
 knowing what actions are morally defensible
Moral character
 the strength and persistence to act in accordance
with your ethics despite the challenges

20. 5-20
Courage
Behaving ethically
requires not just moral
awareness and moral
judgment but also
moral character,
including the courage to
take actions consistent
with your ethical
decisions

21. 5-21
Corporate Social Responsibility
Corporate social
responsibility (CSR)
 Obligation toward
society assumed by
business.
 Triple bottom line

22. 5-22
Corporate Social Responsibility
Economic responsibilities
 To produce goods and services that society wants
at a price that perpetuates the business and
satisfies its obligations to investors.
Legal responsibilities
 To obey local, state, federal, and relevant
international laws

23. 5-23
Corporate Social Responsibility
Ethical responsibilities
 Meeting other social expectations, not written as
law.
Philanthropic responsibilities
 Additional behaviors and activities that society
finds desirable and that the values of the
business support.

24. 5-24
Pyramid of Global Corporate Social
Responsibility and Performance
Figure 5.2

25. 5-25
Corporate Social Responsibility
Transcendent education
 An education with five higher goals that balance
self-interest with responsibility to others
 Empathy, generativity, mutuality, civil aspiration,
intolerance of ineffective humanity

26. 5-26
Contrasting Views
First - holds that managers act as agents for
shareholders and, as such, are obligated to
maximize the present value of the firm
Second - managers should be motivated by
principled moral reasoning

27. 5-27
Reconciliation
Profit maximization and corporate social
responsibility used to be regarded as
antagonistic, leading to opposing policies. But
the two views can converge
Recent attention has also been centered on
the possible competitive advantage of socially
responsible actions

28. 5-28
Ecocentric Management
Ecocentric management
 Goal is the creation of sustainable economic
development and improvement of quality of life
worldwide for all organizational stakeholders.

29. 5-29
Ecocentric Management
Sustainable growth
 Economic growth and development that meet
present needs without harming the needs of
future generations
Life-cycle analysis (LCA)
 A process of analyzing all inputs and outputs,
though the entire “cradle-to-grave” life of a
product, to determine total environmental
impact