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Chapter 4Ethics and Social Responsibility
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Chuck Williams
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Ethical and Unethical Workplace Behavior
Ethics
The set of moral principles or values that defines right and wrong for a person or group.
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What Is Ethical and Unethical Workplace Behavior?
After reading these sections, you should be able to:
1. identity common kinds of workplace deviance.
2. describe the U.S. Sentencing Commission Guidelines for Organizations and explain how they both encourage ethical behavior and punish unethical behavior by businesses.
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1.11.1
Common Kinds of Workplace Deviance
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Beyond the BookDan Ariely on CheatingIn his studies on factors that lead to cheating, behavioral economist Dan Ariely has found that people are more likely to cheat when they don’t receive the payoff directly. Further cheating can build on itself, once a person takes the first step the next one becomes easier. Sometimes, however, honest behavior just requires a little reminder. In a test in which participants were rewarded for correct answers and allowed to report their own scores, Ariely found that quizzing participants on the Ten Commandments first eliminated cheating.
Source: E. Gibson, “When People Reckon It’s O.K. to Cheat”, Business Week, 5 October 2009. 25.
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U.S. Sentencing Commission Guidelines
Companies can be prosecuted and punished
evenif management didn’t know about
the unethical behavior.
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Who, What, and Why?
• Nearly all businesses are covered
• Punishes a number of offenses
• Encourages businesses to be proactive
2.12.1
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Partial List of Offenses
Invasion of privacyPrice fixingFraudCustoms violationsAntitrust violationsCivil rights violationsTheft
Money launderingConflicts of interestEmbezzlementDealing in stolen goodsCopyright infringementsExtortion…and more
2.12.1
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Steps in determining fine size:
1. Determine the base fine.
2. Compute a culpability score.
3. Multiply the base fine by the culpability score.
Steps in determining fine size:
1. Determine the base fine.
2. Compute a culpability score.
3. Multiply the base fine by the culpability score.
Compliance Program Steps
Proactive companies get smaller fines!
2.22.2
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Compliance Program Steps
1. Establish standards and procedures.
7. Improve program a fter violations .
6. Enforce standards consistently and fairly.
5. Train employees on standards and procedures.
3. Delegate decision-making authority only to ethical employees.
4. Encourage employees to report violations.
2. Assign upper-level managers to be in charge.
2.22.2
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How Do You Make Ethical Decisions?
After reading the next two sections, you should be able to:
4. describe what influences ethical decision making.
5. explain what practical steps managers can take to improve ethical decision making.
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Influences on Ethical Decision Making
EthicalAnswersDepend
on…
EthicalEthicalAnswersAnswersDepend Depend
onon ……
Ethical Intensity of DecisionEthical Intensity of Decision
Moral Development of ManagerMoral Development of Manager
Ethical Principles UsedEthical Principles Used
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Ethical Intensity Depends on…
Concentration of effectConcentration of effect
Magnitude of consequencesMagnitude of consequences
Social consensusSocial consensus
Probability of effectProbability of effect
Proximity of effectProximity of effect
Temporal immediacyTemporal immediacy
3.13.1
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Moral Development
Societal Societal ExpectationsExpectationsSelfishSelfish InternalizedInternalized
PrinciplesPrinciples
PreconventionalPreconventionalPreconventional ConventionalConventionalConventional PostconventionalPostconventionalPostconventional
Kohlberg’s Stages of Moral Development
3.23.2VIDEO
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Stages of Moral Development
PreconventionalPreconventionalPreconventional
1. Punishment andObedience
2. InstrumentalExchange
1. Punishment andObedience
2. InstrumentalExchange
ConventionalConventionalConventional
3. Good boy, nice girl
4. Law and order
3. Good boy, nice girl
4. Law and order
PostconventionalPostconventionalPostconventional
5. Social contract
6. Universalprinciple
5. Social contract
6. Universalprinciple
3.23.2
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Principles of Ethical Decision Making
Long-term self-interestLong-term self-interest
Personal virtuePersonal virtue
Community injunctionsCommunity injunctions
Government requirementsGovernment requirements
Utilitarian benefitsUtilitarian benefits
Individual rightsIndividual rights
Distributive justiceDistributive justice3.33.3
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Principle of long-term self-interestPrinciple of long-term self-interest
Never take any action not in your organization’s long-term self-interest.
Never take any action not in your organization’s long-term self-interest.
Principles of Ethical Decision Making
3.33.3
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Principles of Ethical Decision Making
Principle of Personal VirtuePrinciple of Personal Virtue
Never do anything that is not honest, open, and truthful and that you would not beglad to see reported in the newspapers
or on TV.
Never do anything that is not honest, open, and truthful and that you would not beglad to see reported in the newspapers
or on TV.
3.33.3
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Principles of Ethical Decision Making
Principle of Community InjunctionsPrinciple of Community Injunctions
Never take any action that is not kindand that does not build a
sense of community.
Never take any action that is not kindand that does not build a
sense of community.
3.33.3
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Principles of Ethical Decision Making
Principle of Government RequirementsPrinciple of Government Requirements
Never take any action that violates the law,for the law represents the minimal
moral standard.
Never take any action that violates the law,for the law represents the minimal
moral standard.
3.33.3
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Principles of Ethical Decision Making
Principle of Utilitarian BenefitPrinciple of Utilitarian Benefit
Never take any action that does not result ingreater good for society.
Never take any action that does not result ingreater good for society.
3.33.3
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Principles of Ethical Decision Making
Principle of Individual RightsPrinciple of Individual Rights
Never take any action that infringes on others’ agreed-upon rights.
Never take any action that infringes on others’ agreed-upon rights.
3.33.3
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Principles of Ethical Decision Making
Principle of Distributive JusticePrinciple of Distributive Justice
Never take any action that harms the least among us:
the poor, the uneducated,the unemployed.
Never take any action that harms the least among us:
the poor, the uneducated,the unemployed.
3.33.3
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Practical Steps to Ethical Decision Making
Select and hire ethical employeesSelect and hire ethical employees
Establish a Code of EthicsEstablish a Code of Ethics
Train employees to make ethical decisionsTrain employees to make ethical decisions
Create an ethical climateCreate an ethical climate
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Practical Steps to Ethical Decision Making
• Overt Integrity Tests
• Personality-Based Integrity Tests
Select and hire ethical employeesSelect and hire ethical employees
If you found a wallet containing $50, would you return it with the money?
4.14.1
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Practical Steps to Ethical Decision Making
Establish a Code of EthicsEstablish a Code of Ethics
• Communicate code of ethics both inside and outside the company
• Develop ethical standards and proceduresspecific to business
http://www.nortelnetworks.comWeb Link 4.24.2
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Ethics Training
Ethics TrainingEthics Training
• Develops employee awareness of ethics
• Achieves credibility with employees
• Teaches a practical model of ethical decision making
http://ethics.bellsouth.comWeb Link 4.34.3
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A Basic Model of Ethical Decision Making
1. Identify the problem1. Identify the problem
2. Identify the constituents2. Identify the constituents
3. Diagnose the situation3. Diagnose the situation
4. Analyze your options 4. Analyze your options
5. Make your choice5. Make your choice
6. Act6. Act
4.34.3
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Ethical Climate
Managers establish an ethical climate when they…1. act ethically.
2. are active in company ethics programs.
3. report potential ethics violations.
4. punish those who violate the code of ethics.
Establishing an Ethical ClimateEstablishing an Ethical Climate
http://www.whistleblowers.orgWeb Link 4.44.4
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What Is Social Responsibility?
After reading these sections, you should be able to explain:
6. to whom organizations are socially responsible.
7. for what organizations are socially responsible.
8. how organizations can choose to respond to societal demands for social responsibility.
9. whether social responsibility hurts or helps an organization’s economic performance.
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What Is Social Responsibility?
Social Responsibility
A business’s obligation to…� pursue policies� make decisions� take actions
…that benefit society.
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To Whom Are Organizations Socially Responsible?
StakeholderModel
StakeholderModel
Satisfy Interests of Multiple Stakeholders
Satisfy Interests of Multiple Stakeholders
ShareholderModel
ShareholderModel Maximize ProfitsMaximize Profits
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ProsPros
Shareholder Model
• Firm maximizes shareholder wealth and satisfaction
• The company stock increases in value
ConsCons
• Organizations cannot act effectively as moral agents for shareholders
• Time, money, and attention diverted to social causes undermine market efficiency
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Stakeholder Model
Primary Stakeholders:
ShareholdersEmployeesCustomersSuppliers
GovernmentsLocal Communities
Primary Stakeholders:
ShareholdersEmployeesCustomersSuppliers
GovernmentsLocal Communities
Secondary Stakeholders:
MediaSpecial Interest Groups
Trade Associations
Secondary Stakeholders:
MediaSpecial Interest Groups
Trade Associations
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Organization’s Social Responsibilities
Abide by principlesAbide by principlesof right and wrongof right and wrong
Obey laws andObey laws andregulationsregulations
EthicalEthical
LegalLegal
EconomicEconomic
DiscretionaryDiscretionary
Be profitableBe profitable
Serve a social roleServe a social role
$
?
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Responses to Demands for Social Responsibility
ReactiveReactive DefensiveDefensive Accommo-dative
Accommo-dative ProactiveProactive
Fight all the way
DO NOTHING
DO MUCH
Withdrawal
Do only what is required
Legal Approach
Bargaining ProblemSolving
PublicRelationsApproach
Beprogressive
Lead theindustry
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Beyond the BookGreen Labels at Wal-MartWal-Mart has announced a new environmental labeling
program which will require all of its suppliers to calculate and disclose the full environmental costs of making their products. This plan has been controversial as it would increase costs for Wal-Mart’s 100,000 suppliers. Similar efforts in Europe have proven difficult to implement with sometimes confusing results for consumers. Some experts think customers could start seeing these labels as early as 2011.
Source: M. Bustillo, “Wal-Mart Puts Green Movement Into Stores,” The Wall Street Journal, 16 July 2009. A1.
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Social Responsibility and Economic Performance
Realities ofSocial
Responsibility
No tradeoff between social responsibility and profit
No tradeoff between social responsibility and profit
Usually it does payUsually it does pay
Does not guarantee profitability
Does not guarantee profitability
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Beyond the BookNike’s Green Goes UndercoverNike is quietly incorporating green production methods.
When Nike released an eco-friendly boot in 2005, critics said the earthy looking design detracted from the company’s high-tech image. So while Nike is implementing new measures to help cut costs and improve its bottom line, such as recycling rubber from old shoes into its new ones and investing in faster sewing machines to cut production times and save on electricity costs, Nike’s new greener side might not be apparent on the store shelves.
Source: R. Jana, “Nike Goes Green. Very Quietly”, Business Week, 22 June 2009. 56.