Corporate Social Responsibility and Managerial Ethics

Chapter 5

What Is Corporate Social Responsibility?

The Classical View

Maximize profits for the benefit of the stockholders Doing social good unjustifiably increases costs

What Is Corporate Social Responsibility?

The Socio-economic View

Management should also protect and improve societys welfare Corporations are responsible not only to stockholders Firms have a moral responsibility to larger society to do the right thing

Arguments For and Against Social Responsibility

For

Against

Public expectations Long-run profits Ethical obligation Public image Better environment Discouragement of further governmental regulation Balance of responsibility and power Stockholder interests Possession of resources Superiority of prevention over cure

Violation of profit maximization Dilution of purpose Costs Too much power Lack of skills Lack of accountability

Purposes of Shared Values

SHARED ORGANIZATIONAL VALUES

Guide Managers' Decisions and Actions

Shape Employee Behavior

Influence Marketing Efforts

Build Team Spirit

The Greening of Management

The recognition by business of the close link between its decisions and activities and their impact on the natural environment.

Managerial Ethics

The rules and principles that define right and wrong conduct.

Factors That Affect Ethical and Unethical Behavior

Individual Characteristics Issue Intensity

Ethical Dilemma

Stage of Moral Development

Moderators

Ethical/Unethical Behaviour

Structural Variables

Organizational Culture

Factors That Affect Employee Ethics

Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity

Stages of Moral Development

Lev el Principled Description of Stage 6. Following self -chosen ethical principles ev en if they v iolate the law 5. Valuing rights of others and upholding absolute v alues and rights regardless of the majority s opinion Conv entional 4. Maintaining conv entional order by f ulf illing obligations to which y ou hav e agreed 3. Liv ing up to what is expected by people close to y ou Preconv entional 2. Following rules only when doing so is in y our immediate interest 1. Sticking to rules to av oid phy sical punishment

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Factors That Affect Employee Ethics

Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity
Stage of moral development interacts with: Individual characteristics The organizations structural design The organizations culture The intensity of the ethical issue

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Factors That Affect Employee Ethics

Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity
Research Conclusions:
People proceed through the stages of moral development sequentially There is no guarantee of continued moral development Most adults are in Stage 4 (good corporate citizen)

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Factors That Affect Employee Ethics

Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity
Values
Basic convictions about what is right or wrong on a broad range of issues

Ego strength
A personality measure of the strength of a persons convictions
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Factors That Affect Employee Ethics

Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity
Locus of Control A personality attribute that measures the degree to which people believe they control their own life
Internal locus: the belief that you control your destiny External locus: the belief that what happens to you is due to luck or chance

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Factors That Affect Employee Ethics moral development Stages of

Individual characteristics Structural variables Organizational culture Issue intensity
Performance appraisal systems Reward allocation systems Behaviours (ethical) of managers An organizations culture Intensity of the ethical issue

Organizational characteristics and mechanisms that guide and influence individual ethics:

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Factors That Affect Employee Ethics

Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity

Good structural design minimizes ambiguity and uncertainty and fosters ethical behavior
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Factors That Affect Employee Ethics

Stages of moral development Individual characteristics Structural variables Organizational culture Issue intensity

Cultures high in risk tolerance, control, and conflict tolerance are most likely to encourage high ethical standards
Weak cultures have less ability to encourage high ethical standards
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Determinants of Issue Intensity

How much agreement is there that this action is wrong? How many people will be harmed? How likely is it that this action will cause harm?

Consensus of Wrong

Greatness of Harm
Issue Intensity Concentration of Effect
How concentrated is the effect of the action on the victim(s)?

Probability of Harm

Immediacy of Consequences Proximity to Victim(s)

Will harm be felt immediately?

How close are the potential victims?

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Ethics in an International Context

Ethical standards are not universal

Social and cultural differences determine acceptable behaviors

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The Global Compact

Human Rights

Principle 1: Support and respect the protection of international human rights within their sphere of influence Principle 2: Make sure business corporations are not complicit in human rights abuses

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Labor Standards

Principle 3: Freedom of association and the effective recognition of the right to collective bargaining Principle 4: Eliminate all forms of forced and compulsory labor Principle 5: Abolish child labor Principle 6: Eliminate discrimination in respect of employment and occupation

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The Global Compact

Environment

Principle 7: Support a precautionary approach to environmental challenges Principle 8: Undertake initiatives to promote greater environmental responsibility Principle 9: Encourage the development and diffusion of environmentally friendly technologies Principle 10: Work against all forms of corruption, including extortion and bribery
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Anticorruption

How Managers Can Improve Ethical Behavior in an Organization

Hire individuals with high ethical standards.

Establish codes of ethics and decision rules. Lead by example

Delineate job goals and performance appraisal mechanisms

Provide ethics training Conduct independent social audits Provide support for individuals facing ethical dilemmas
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Code of Ethics
A formal statement of an organizations primary values and the ethical rules it expects its employees to follow

Be a dependable organizational citizen Dont do anything unlawful or improper that will harm the organization Be good to customers

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Effective Use of a Code of Ethics

Develop a code of ethics to guide decision making Communicate the code regularly Have all levels of management show commitment to the code Publicly reprimand and consistently discipline those who break the code
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Examining Ethics?

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Ethical Leadership

Managers must provide a good role model by:

Being ethical and honest at all times Telling the truth Admitting failure and not trying to cover it up Communicating shared ethical values to employees through symbols, stories, and slogans

Rewarding employees who behave ethically and punishing those who do not
Protecting employees (whistleblowers) who bring to light unethical behaviors or raise ethical issues

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The Value of Ethics Training

Training can make a difference in ethical behaviors Training increases employee awareness of ethical issues in business decisions Training clarifies and reinforces the standards of conduct Employees are more confident of support when taking unpopular but 28 ethically correct stances