The Ethical and Social Environment of Management

The Ethical and Social Environment of Management

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Chapter Learning ObjectivesAfter studying this chapter you should be able to:

1. Discuss the nature of an organization’s environments and identify the components of its general, task, and internal environments.

2. Describe the ethical and social environment of management, including individual ethics, the concept of social responsibility, and how organizations can manage social responsibility.

3. Discuss the international environment of management, including trends in international business, levels of international business activities, and the context of international business.

4. Describe the importance and determinants of an organization’s culture, as well as how organization culture can be managed.


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FIGURE 1.4 The Systems Perspective of Organizations

Based on interaction with the external

ENVIRONMENT of the system

Remember Systems Theory?


Owners

Employees

Physical environment

Board of directors

Culture

Competitors

Political-legal

dimension

Technologicaldimension

Economicdimension

Regulators Customers

Strategicpartners

Suppliers

Internal environment

Task environment ExternalenvironmentGeneral environment

The Organization and Its Environments

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The Ethical Environment

Social Responsibility

The International Environment


Individual Ethics In Organizations

• Ethics– An individual’s personal beliefs regarding what is right

or wrong or good or bad.

• Ethical Behavior– Behavior that is acceptable in the eye of the beholder.– Behavior that conforms to accepted social norms.

• Examples of Unethical Behavior? Or is it?– “Borrowing” office supplies for personal use.– Checking Facebook on company time.

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© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-6

Three Domains of Human Action

Amount of

Explicit ControlHigh Low

Domain of Certified Law

(Legal Standard)

Domain of Ethics

(Social Standard)

Domain of Free Choice

(Personal Standard)


Determinants of Individual Ethics

Individual Ethics

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Family Influences

Values andMorals

ExperiencesPeer

InfluencesSituational

Factors

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Three Levels of Personal Moral Development

SOURCES: Based on L. Kahlberg, “Moral Stages and Moralization: The Cognitive-Developmental Approach, in Moral Development and Behavior: Theory, Research, and Social Issues, ed. T. Lickona (New York: Holt, Rinehart, and Winston, 1976), 31-53; and Jill W. Graham, “Leadership, Moral Development and Citizenship Behavior,” Business Ethics Quarterly 5, no. 1 (January 1995), 43-54.


Managerial Ethics Employees Organization

• Conflicts of interest• Secrecy and

confidentiality• Honesty

• Hiring and firing• Wages and working

conditions• Privacy and respect

Subject to ethical ambiguities• Advertising and promotions• Ordering and purchasing• Bargaining and negotiation• Financial disclosure• Shipping and solicitation• Other business relationships

Economic Agents• Customers• Competitors• Stockholders• Suppliers• Dealers• Unions

Areas of concern for managerial ethics:

•How the firm treats the employee.

•How the employee treats the firm.

•How the firm treats other economic agents.

•How the firm handles its financial reporting

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Fostering Ethical Organization Behavior

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Train Employees

Written Code of Ethics

Individual Issues:Behavior, Conscience, Privacy

Top Management Involvement

Managing Ethical Behavior


Ethics in Organizations

• Managing Ethical Behavior–Begins with top management that:

• Establishes a strong culture and defines what will and will not be acceptable behavior.

• Provides ethical leadership by serving as ethical role models.

–Includes• Training on how to handle ethical dilemmas.• Developing a code of ethics.

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Emerging Ethical Issues

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Ethical Leadership(Integrity)

Ethics and Information Technology (Privacy)

Corporate Governance(Sarbanes-Oxley Act)

Ethical Issues in Organizations


A Guide for Ethical

Decision Making

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© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-14

Guidelines for Ethical Decision Making

1. What is the “60 Minutes” test?

2. List three additional practical criteria for use in deciding if your behavior is ethical or unethical.

a. __________________________

b. __________________________

c. __________________________

The Environment of Social Responsibility

Read “Is Fair Trade a Fair Trade-Off”, page 34-36.

1. What is Fair Trade?

2. Are US companies legally required to participate in Fair Trade?

3. What do Fair Trade agreements do to product pricing?

4. Why would a company participate in Fair Trade?

5. Green Mountain Coffee Roasters, "Heart of the Cup"

http://www.greenmountaincoffee.com/Our-Story

http://www.greenmountaincoffee.com/Our-Story


Social Responsibility

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The Stakeholders

The General Social Welfare

The Environment

Social Responsibility of Organizations


Social Responsibility in Organizations

• Social Responsibility–The set of obligations (to behave responsibly) that an

organization has to protect and enhance the social context in which it functions.

• Areas of Social Responsibility–Stakeholders: customers, employees, and investors.–The natural environment: environmentally sensitive

products, recycling, and public safety.–The general social welfare: charitable contributions,

and support for social issues such as child labor and human rights.

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FIGURE 2.2 Arguments for and against Social Responsibility

Arguments for Social Responsibility

Arguments against Social Responsibility

SocialResponsibility


Approaches to Social Responsibility

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Proactive Stance

Accommodative Stance

Defensive Stance

Obstructionist Stance

Highest Degree of Social Responsibility

Lowest Degree of Social Responsibility


How Business and GovernmentInfluence Each Other

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Managing Social Responsibility

Legal compliance

Ethical compliance

Philanthropic giving

Formal OrganizationalDimensions

Organization leadership and culture

Whistle Blowing

Informal OrganizationalDimensions

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Managing Social Responsibility:Formal Organizational Dimensions

• Legal Compliance – Extent to which the organization conforms to local,

state, federal, and international laws.

• Ethical Compliance– Extent to which members of the organization follow

basic ethical/legal standards of behavior.

• Philanthropic Giving– Awarding of funds or gifts to charities or other social

programs.

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Managing Social Responsibility:Informal Organizational Dimensions

• Organizational Leadership and Culture–Leadership practices and the culture of the

organization define the social responsibility stance an organization and its members will adopt.

• Whistle Blowing–The organizational response to the disclosure by an

employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

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The International Environment of Management

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What are the patterns or trends that emerge from this list?

Sourcehttp://money.cnn.com/magazines/fortune/global500/2013/full_list/


Who are most PROFITABLE global firms?

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1.Exxon Mobil2.Apple3.Gazprom4.Industrial and Commercial Bank of China5.China Construction Bank6.Volkswagen7.Royal Dutch Shell8.Chevron9.Agricultural Bank of China10.Bank of China

http://money.cnn.com/gallery/magazines/fortune/2013/07/08/global-500-most-profitable.fortune/index.html

Source:


Trends in International Business

• Economic Recovery–Europe and Asia have rebuilt their economic systems

devastated in WWII.

• Decreasing Isolation from Foreign Competition–U.S. markets are open to overseas competitors.

• Increasing Globalization of World Markets–Volume of international trade has increased more than

3,000% from 1960 to 2010.–Larger percentages of U.S. firms’ profits are now

earned in international markets.

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International Business Activity

Types of International

Business Activity

Importing

Exporting

Licensing

Direct Investment Alliances and Joint Ventures

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Levels of International Business Activity

• Exporting– Making a product in the firm’s domestic market and

selling it in another country.• Importing

– Bringing a good, service, or capital into a home country from abroad.

• Licensing– Allowing a foreign company to manufacture or market

the products and use a firm’s brand name, trademark, technology, patent, copyright, or other assets in exchange for a royalty based on sales.

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Levels of International Business… (cont’d)

• Strategic Alliance and Joint Ventures– Firms jointly cooperate for mutual gain, by sharing

costs and/or sharing ownership of a new enterprise.

• Direct Investment– Occurs when a firm headquartered in one country

builds or purchases operating facilities or subsidiaries in a foreign country.

– Maquiladoras• Light-assembly plants in northern Mexico which are

given special tax breaks by the Mexican government.

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Table 2.1 Advantages and Disadvantages of Different Approachesto Internationalization

Approach to Internationalization Advantages Disadvantages

Importing or Exporting

1. Small cash outlay 2. Little risk 3. No adaptation necessary

1. Tariffs and taxes 2. High transportation costs 3. Government restrictions

Licensing 1. Increased profitability 2. Extended profitability

1. Inflexibility2. Competition

Strategic Alliances or Joint Ventures

1. Quick market entry2. Access to materials and

technology

Shared ownership(limits control and profits)

Direct Investment

1. Enhanced control 2. Existing infrastructure

1. Complexity2. Greater economic and

political risk3. Greater uncertainty


Forms of International Business Activity

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The Context of International Management

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International Management Functions

Political/Legal Environment

Government stability

Incentives for international trade

Controls on international trade

Economic communities

EconomicEnvironment

Economic system

Natural resources

Infrastructure

CulturalEnvironment

Values, symbols, beliefs, and language

Individual differences across cultures


The Cultural Environment

• Language–The Japanese word “hai” can mean either “yes” or “I

understand.”–General Motors’ brand name “Nova” pronounced as

“no va” in Spanish means “doesn’t go.”

• The Meaning of Colors–Green is popular in Muslim countries, yet it signifies

death in other countries.–Pink is associated with feminine characteristics in the

U.S.; yellow is the most feminine color in other countries.

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Controls on International Trade

• Key Concepts–Tariffs are taxes collected on goods shipped across

national boundaries.

–Quotas are limits placed on the number or value of goods that can be traded as exports or imports.

–Export restraint agreements are voluntary limits on the volume or value of goods exported to, or imported from, another country.

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The Structure of the Global Economy

• Economic Communities–Sets of countries that engage in high levels

of trade with each other through the elimination of trade barriers such as quotas and tariffs.• European Union (EU)• North American Free Trade Agreement (NAFTA)• Latin American Integration Association• Caribbean Common Market

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The Role of the GATT and the WTO

• General Agreement on Trade and Tariffs (GATT)– A trade agreement that promoted international trade

by lowering trading barriers and tariffs.

• World Trade Organization (WTO)– Encourages adoption of nondiscriminatory and

predictable trade policies.– Seeks to reduce trade barriers through multilateral

negotiations.– Attempts to resolve trade disputes through impartial

procedures

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Other Environments of Management

1. Why does the Ethical environment matter to organizations and managers?

2. Why do Social Responsibility issues matter to organizations and managers?

3. What does the International Environment matter to organizations and managers?

4. Why do YOU need to be aware of these issues?

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The Ethical and Social Environment of Management