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Chapter Four
Ethics and Social
Responsibility
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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Learning Objectives
1. Explain the relationship between ethicsand the law
2. Differentiate between the claims of thedifferent stakeholder groups that areaffected by managers and theircompanies actions
3. Describe four rules that can be used tohelp companies and their managers actin ethical ways
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Learning Objectives
4. Discuss why it is important for
managers to behave ethically
5. Identify the four main sources ofmanagerial ethics
6. Distinguish between the four main
approaches toward social responsibility
that a company can take
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The Nature of Ethics
Ethical Dilemma
quandary people find themselves in when they
have to decide if they should act in a way that
might help another person even though doingso might go against their own self-interest
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The Nature of Ethics
Ethics
The inner-guiding moral principles, values, and
beliefs that people use to analyze or interpret
a situation and then
decide what is the
right or appropriate
way to behave
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Dealing with Ethical Issues
There are no absolute or indisputable rules
or principles that can be developed to
decide if an action is ethical or unethical
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Stakeholders and Ethics
Stakeholders
people and groups affected by the way a
company and its managers behave
supply a company with its productive
resources and have a claim on its resources
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Question?
Who has a claim on a companys
resources?
A. EmployeesB. Customers
C. Suppliers
D. Stakeholders
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Types of Company Stakeholders
Figure 4.1
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Stockholders
Want to ensure that managers are
behaving ethically and not risking investors
capital by engaging in actions that couldhurt the companys reputation
Want to maximize their return on
investment
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Managers
Responsible for using a companysfinancial capital and human resources toincrease its performance
Have the right to expect a good return orreward by investing their human capital toimprove a companys performance
Frequently juggle multiple interests
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Employees
Companies can act ethically toward
employees by creating an occupational
structure that fairly and equitably rewardsemployees for their contributions
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Suppliers and Distributors
Suppliers expect to be paid fairly and
promptly for their inputs
Distributors expect to receive quality
products at agreed-upon prices
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Customers
Most critical stakeholder
Company must work to increase efficiency
andeffectiveness in
order to create
loyal customers
and attract new
ones
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Whole Foods Approach to Ethical Business
Figure 4.2
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Community, Society, and Nation
Community
Physical locations like towns or cities in which
companies are locatedA community provides a company with the
physical and social infrastructure that allows it
to operate
A company contributes to the economy ofthe town or region through salaries,
wages, and taxes
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Ethical Decision Making
Figure 4.3
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Question?
Which ethical decision rule produces the
greatest good for the greatest number?
A. Utilitarian RuleB. Moral Rights Rule
C. Justice Rule
D. Practical Rule
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Practical Decision Model
1. Does my decision fall within the acceptablestandards that apply in business today?
2. Am I willing to see the decision communicated
to all people and groups affected by it?3. Would the people with whom I have a
significant personal relationship approve of thedecision?
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Why should managers behave ethically?
The relentless pursuit of self-interest can
lead to a collective disaster when one or
more people start to profit from being
unethical because this encourages other
people to act in the same way
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Trust and Reputation
Trust
willingness of one
person or group tohave faith or
confidence in the
goodwill of another
person
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Effects of Ethical/Unethical Behavior
Figure 4.4
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Trust and Reputation
Reputation
esteem or high repute that individuals or
organizations gain when they behave ethically
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Sources of Ethics
Figure 4.5
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Societal Ethics
Societal Ethics
Standards that govern how members of a
society should deal with one another in matters
involving issues such as fairness, justice,poverty, and the rights of the individual
People behave ethically because they have
internalized certain values, beliefs, and
norms
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Occupational Ethics
Occupational Ethics
Standards that govern how members of a
profession, trade, or craft should conduct
themselves when performing work-relatedactivities
Medical & legal ethics
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Individual Ethics
Individual Ethics
Personal standards and values that determine
how people view their responsibilities to other
people and groupsHow they should act in situations when their
own self-interests are at stake
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Organizational Ethics
Organizational Ethics
Guiding practices and beliefs through which a
particular company and its managers view their
responsibility toward their stakeholdersTop managers play
a crucial role in
determining a
companys ethics
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Social Responsibility
Social Responsibility
Way a company views its duty or obligation to
make decisions that protect, enhance, and
promote the welfare and well-being ofstakeholders and society as a whole
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Approaches to Social Responsibility
Figure 4-6
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Approaches to Social Responsibility
Obstructionist approach
Companies choose not to behave in a social
responsible way and behave unethically and
illegality
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Approaches to Social Responsibility
Defensive approach
companies and managers stay within the law
and abide strictly with legal requirements but
make no attempt to exercise socialresponsibility
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Approaches to Social Responsibility
Accommodative approach
Companies behave legally and ethically and try
to balance the interests of different stakeholders
against one another so that the claims ofstockholders are seen in relation to the claims of
other stakeholders
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Approaches to Social Responsibility
Proactive approach
Companies actively embrace socially
responsible behavior, going out of their way to
learn about the needs of different stakeholdergroups and utilizing organizational resources to
promote the interests of all stakeholders
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Why Be Socially Responsible?
1. Demonstrating its social responsibility
helps a company build a good
reputation
2. If all companies in a society act
socially, the quality of life as a whole
increases
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Role of Organizational Culture
Ethical values and norms help
organizational members:
Resist self-interested actionRealize they are part of something bigger than
themselves
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Johnson & Johnson Credo
Figure 4.7
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Ethics Ombudsman
Responsible for communicating ethical
standards to all employees
Designing systems to monitor employees
conformity to those standards
Teaching managers and employees at all
levels of the organization how to
appropriately respond to ethical dilemmas
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Movie Example: John Q
What should be the
ethical standard in
communicating job status
changes and healthcare
changes to employees?
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Video Case: Whose Life is It Anyway?
Do you think it is ethical for Scotts or other
companies to fire employees who smoke,
even if they only smoke outside of work?
In implementing Scotts health initiatives,does Hagedorn put the interests of one
group of stakeholders above those of
another?
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