Lecture# 5Management’s

Social and Ethical Responsibilities

Social Responsibility: Definition and Perspectives

• Corporate Social Responsibility (CSR)– The idea that business has:

• Social obligations above and beyond making a profit

• Social obligations to constituent groups in society other than stockholders and beyond that prescribed by law

– Organizations include financial, environmental, and social responsibility in their core business strategies.

Social Responsibility: Definition and Perspectives

• What Does Social Responsibility Involve?

– Voluntary action• Action is taken before lawsuits or other events force a firm to act on a matter.

– An emphasis on means, not ends• Emphasis is on how the decision to act was reached, not on the decision itself.

Figure 1: A Sample Stakeholder Audit for Wal-Mart, the World’s Largest Retailer

Arguments For and Against Corporate Social Responsibility

• Arguments For– Business is unavoidably involved in

social issues.– Business has the resources to

tackle today’s complex societal problems.

– A better society means a better environment for doing business.

– Corporate social action will prevent government action.

Arguments For and Against Corporate Social Responsibility

• Arguments Against– Profit maximization ensures the

efficient use of society’s resources.– As an economic institution, business

lacks the ability to pursue social goals.

– Business already has enough power.– Because business managers are not

elected, they are not directly accountable to society.

Toward Greater Social Responsibility

• Iron Law of Responsibility– Those who do not use power in a

socially responsible way will eventually lose it.

– If business does not meet the challenge of social responsibility, then government reform legislation will force it to meet its obligations.

Social Responsibility Strategies

• Reactive Strategy– Denying responsibility while

striving to maintain the status quo by resisting change

• Defensive Strategy– Resisting additional social

responsibilities with legal and public relations tactics

• Accommodation Strategy– Assuming social responsibility

only in response to pressure from interest groups or the government

• Proactive Strategy– Taking the initiative in

formulating and putting in place new programs that serve as role models for industry

Figure 2: A Continuum of Social Responsibility Strategies

Who Benefits from Corporate Social

Responsibility• Altruism

– The unselfish devotion to the interests of others

• Research Findings– There is a positive correlation

between industry leadership on a socially responsible issue (pollution control) and profitability.

– Corporate social responsibility is a competitive advantage in recruiting.

The Ethical Dimension of Management

• Ethics– The study of moral obligation

involving the distinction between right and wrong

• Business Ethics– The study of the complex

business practices and behaviors that give rise to ethical issues in organizations

Practical Lessons from Business Ethics Research

• Ethical Hot Spots– Balancing work and

family– Poor internal

communications– Poor leadership– Work hours, work load– Lack of management

support

– Need to meet sales, budget, or profit goals

– Little or no recognition of achievements

– Company politics– Personal financial

worries– Insufficient resources

Practical Lessons from Business Ethics Research (cont’d)

• Pressure from Above– The problem of superiors pressuring subordinates to

achieve results is widespread.– Managers’ responses to pressure from above

• Consciously avoid putting undue pressure on subordinates (who may act unethically to relieve the pressure).

• Prepare to deal with excessive organizational pressure.

Practical Lessons from Business Ethics Research (cont’d)

• Ambiguous Situations– Situations where there are no clear-cut ethical

guidelines or ethical codes that can satisfy employees’ need for formal guidelines

• Rationalization: How Good People End Up Doing Bad Things– Perceiving an objectively questionable action as

normal and acceptable

• A Call to Action– The deliberate and conscious action of a manager to

do the right thing is an ethical and personal matter.

Table 5.1: How Employees Tend to Rationalize Unethical Conduct

Personal Values as Ethical Anchors

• Values– Abstract ideals that shape one’s thinking and

behavior• Instrumental value: Enduring belief that a certain way (mode)

of behaving is appropriate in all situations• Terminal value: Enduring belief that a certain end-state of

existence (being admired) is worth striving for

• Identifying Your Own Values– Basic personal values are taken for granted.– They are not arranged consciously in order of priority.

Managerial Ranking of Values

• Terminal Values– Self-respect– Family security– Freedom– A sense of

accomplishment– Happiness

• Instrumental Values– Honesty– Responsibility– Capability– Ambition– Independence

General Ethical Principles

• Self-interests• Personal virtues• Religious injunctions• Government

requirements• Utilitarian benefits

• Universal rules• Individual rights• Economic efficiency• Distributive justice• Contributively liberty

Encouraging Ethical Conduct

• Ethics Training– Amoral managers: Managers who are

neither moral nor immoral, but ethically lazy– Key features of effective ethics programs

• Support of top management • Open discussion• A clear focus on ethical issues• Integration of ethics into the organization• A mechanism for anonymously reporting

ethical violations• Rewarding of ethical conduct

Table 2: Twelve Questions for Examining the Ethics of a Business Decision

Encouraging Ethical Conduct (cont’d)

• Ethical Advocate– An ethics specialist who plays a role in top

management’s decision making• Code of Ethics

– Requirements for an effective code• Describes specific events as unethical• Is supported and equitably enforced by

top management• Whistle-Blowing

– The reporting of perceived unethical matters

Summary

• Corporate responsibility is the idea that management has broader responsibilities than just making a profit.

• The debate over the basic purpose of the corporation is long-standing.

• Management scholars who advocate greater corporate social responsibility cite the iron law of responsibility.

Summary (cont’d)

• Ethics research indicates that many employees have acted unethically, have been pressured to act unethically, desire ethical standards, and engage in rationalization to defend their behaviors.

• Managers must pay attention to the instrumental and terminal values that comprise employee’s personal value systems.

Summary (cont’d)

• There are at least ten general ethical principles that guide behavior are self-interests, personal virtues, religious injunctions, government requirements, utilitarian benefits, universal rules, individual rights, economic efficiency, distributive justice, and contributive liberty.

• The typical manager is considered to be amoral--neither moral nor immoral—just ethically lazy or indifferent.