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©2013 John Wiley & Sons, Inc. All rights reserved. 3-11-1©2013 John Wiley & Sons, Inc. All rights reserved.

JOHN R. SCHERMERHORN, JR.

MANAGEMENT12th Edition

C h a p t e r 3

Ethical Behavior and Social Responsibility


©2013 John Wiley & Sons, Inc. All rights reserved. 3-2

Planning Ahead — Chapter 3 Study Questions

1. What is ethical behavior?

2. How do ethical dilemmas complicate the workplace?

3. How can high ethical standards be maintained?

4. What is social responsibility and governance?



Chapter 3 Learning Dashboard

1. What is ethical behavior?1. Laws and values as determinants of ethical behavior

2. Alternative views of ethics

3. Cultural issues in ethical behavior

2. Ethics in the workplace1. Ethical dilemmas at work

2. Influences on ethical decision making

3. Rationalizations for unethical behavior



Chapter 3 Learning Dashboard

3. Maintaining High Ethical Standards1. Ethics training

2. Codes of ethical conduct

3. Moral management

4. Whistleblower protection

4. Social Responsibility1. Stakeholder management

2. Perspectives on corporate social responsibility

3. Evaluating corporate social performance

4. Corporate governance



Takeaway 1: What Is Ethical Behavior?

• Ethics

– Moral code of principles.

– Set standards of “good” or “bad” or “right” or “wrong” in one’s conduct.

• Ethical behavior

– What is accepted as good and right in the context of the governing moral code.




• Law, values, and ethical behavior:

– Legal behavior is not necessarily ethical behavior.

– Personal values help determine individual ethical

behavior.




• Law, values, and ethical behavior:

– Values - underlying beliefs and attitudes that help

determine individual behavior

• Terminal values - preferences about desired ends

• Instrumental values – preferences regarding the

means to desired ends



Figure 3.1: Four views of ethical behavior




• Four alternative ethical views

– Utilitarian

• Delivers the greatest good to the most people

– Individualism

• Advances long-term self-interests

– Moral rights

• Maintains fundamental rights of all human beings




– Justice view of ethics

• Fair and impartial treatment of people according to legal rules and standards

– Procedural justice – policies and rules fairly applied

– Distributive justice – equal treatment for all people

– Interactional justice – people treated with dignity and respect

– Commutative justice – fairness to all involved




• Cultural issues in ethical behavior:

– Cultural relativism

• Ethical behavior is always determined by cultural context.

– Moral absolutism

• Behavior unacceptable in one’s home environment should not be acceptable anywhere else.

– Ethical imperialism

• Imposing one’s ethical standards on others.

Management 12e/ Chapter 3

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The extremes of cultural relativism and ethical imperialism in international business ethics.



Takeaway 2: Ethics in the Workplace

• An ethical dilemma

– occurs when choices, although having potential for personal and/or organizational benefit, may be considered unethical.




• Ethical dilemmas include:

Discrimination

Sexual harassment

Conflicts of interest

Product Safety

Organizational resources



Checklist for ethical dilemmas

Step 1 Recognize the ethical dilemma.

Step 2 Get the facts and identify your options.

Step 3 Test each option: Is it legal? Is it right? Is it beneficial?

Step 4 Decide which option to follow.

Step 5 Ask the Spotlight Questions: To double check your decision.

• “How would I feel if my family found out about my decision?”

• “How would I feel if my decision was printed in the local paper or posted online?”

Step 6 Take action




• Influences on Ethical Decision Making

– Ethical framework

• Provides personal rules or strategies for ethical decision making

• Includes personal values– Honesty

– Fairness

– Integrity

– Self-respect



Kohlberg’s stages of individual moral development




• Situational Context and Ethics Intensity

– Will the situation pose an important ethic challenge?

• Magnitude of the situation

• Risk of immediate harm

• Proximity and concentration of harm

• Social consensus




• Organizational Culture

– What is considered ethical behavior within the organizational context?

• What are the expectations of management?

• What are the expectations of co-workers?

• Is there a code of ethics?




• External environment

Government laws and regulations

(Sarbanes/Oxley Act of 2002)

Societal norms and values

Competitive climate in an

industry




• Ethical behavior can be rationalized by convincing yourself that:

Behavior is not really illegal.

Behavior is really in everyone’s best interests.

Nobody will ever find out.

The organization will “protect” you.



Takeaway 3: Maintaining High Ethical Standards

•Moral ManagementManagers behave in one of three ways




• Ethics training:

– Structured programs that help participants to understand ethical aspects of decision making.

– Helps people incorporate high ethical standards into daily life.

– Helps people deal with ethical issues under pressure.




• Codes of Ethical Conduct

– Formal statement of an organization’s values and ethical principles regarding how to behave in situations susceptible to the creation of ethical dilemmas




• Areas often covered by codes of ethics:

Bribes and kickbacks

Political contributions

Honesty of books or records

Customer/supplier relationships

Confidentiality of corporate information




• Whistleblowers

– Expose misdeeds of others to:

• Preserve ethical standards

• Protect against wasteful, harmful, or illegal acts

– Laws protecting whistleblowers vary




• Barriers to whistleblowing include:

– Strict chain of command

– Strong work group identities

– Ambiguous priorities



Takeaway 4: Social Responsibility

• Sustainability:

– acting in ways that support a high quality of life for present and future generations

• Alternative energy

• Recycling

• Waste avoidance




• Corporate social responsibility and governance:

– Looks at ethical issues on the organization level.

– Obligates organizations to act in ways that serve both its own interests and the interests of society at large.




• Stewardship

– Taking personal responsibility to always respect and protect the interests of society at large

– Triple bottom line

– 3 P’s of organizational performance – profit, people, and planet




• Stakeholder Management– Stakeholders: persons, groups, and other organizations directly

affected by the behavior of the organization and holding a stake in its performance.

– Stakeholder power: the capacity of the stakeholder to positively or negatively affect the operations of the organization.

– Demand legitimacy: the validity and legitimacy of a stakeholder’s interest in the organization.

– Issue urgency: the extent to which a stakeholder’s concerns need immediate attention.



Figure 3.4: The Many Stakeholders of Organizations




• Perspectives on social responsibility:

– Classical view

• Management’s only responsibility is to maximize profits.

– Socioeconomic view

• Management must be concerned for the broader social welfare, not just profits.




• Perspectives on social responsibility:

– Shared value view

• Approaches business decisions with the understanding that economic and social progress are interconnected

• Virtuous circle-socially responsible behavior improves financial performance which leads to more responsible behavior




Arguments against social responsibility:

• Reduced business profits

• Higher business costs

• Dilution of business purpose

• Too much social power for business

• Lack of public accountability

Arguments in favor of social responsibility:

• Adds long-run profits

• Improved public image

• Avoids more government regulation

• Businesses have resources and ethical obligation



Four strategies of corporate social responsibility—from obstructionist to proactive behavior.




• Corporate governance:

– The oversight of the top management of an organization by a board of directors.

• Corporate governance involves:

– Hiring, firing, and compensating the CEO.

– Assessing strategy.

– Verifying financial records.




• How government influences organizations:

– Businesses required by law to have boards of directors that are elected by stockholders



Figure 3.6: Ethics Self-governance in Leadership and the Managerial Role

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