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Chapter 5

Ethics and Social Responsibility

What is Ethics?

• Definition
  • Code of moral principles and values that
  • Govern behavior of individuals and organizations
  • With respect to what is right or wrong
• Codified law at one end and free will at the other
• Ethics lie between the two extremes
  • Law – written code of values Enforced by society in courts
  • Free will- established code of ethics by the individual
  • Ethics – the space in between is based on shared values of the organization and the people in it.
  • Room for disagreement within broad value systems

Normative Ethics-How do you make an

Ethical Decision?

• There is frequently wiggle room so whatever

fits best compared with the norm, wins

Implications of Normative Ethics

• If the norms of ethical behavior are

established by the members of the

organization, and they fit between law and

free will, can an organization’s norms of

ethical behavior be unethical?

• Is there an absolute value system?

Factors that affect ethical choices

• The Manager

• The Organization

Factors that affect ethical choices

• The Manager
  • Brings specific set of values to the game
  • Based on Personal needs, family influence, religious background, cultural background
  • The moral stage of development
    • Preconventional level-External rewards and punishment
    • Conventional Level- external expectations of colleagues, friends and family
    • Post Conventional-internal standards and values

Characteristics of

a Moral Manager

• Dedicated to high standards of ethical behavior in
  • Own actions
  • How the company’s business is to be conducted
• Considers it important to
  • Be a steward of ethical behavior
  • Demonstrate ethical leadership
• Pursues business success
  • Within confines of both letter and spirit of laws
  • With a habit of operating well above what laws require

Characteristics of

an Immoral Manager

• Actively opposes ethical behavior in business
• Willfully ignores ethical principles in making decisions
• Views legal standards as barriers to overcome
• Pursues own self-interests
• Is an example of capitalistic greed
• Ignores interests of others
• Focuses only on bottom line – making one’s numbers
• Will trample on others to avoid being trampled upon

Characteristics of an Unintentionally

Amoral Manager

• Is blind to or casual about ethics of decision-making and business actions
• Displays lack of concern regarding whether ethics applies to company actions
• Sees self as well-intentioned or personally ethical
• Typical beliefs
  • Do what is necessary to comply with laws and regulations
  • Government provides legal framework stating what society will put up with—if it is not illegal, it is allowed

Factors that affect ethical choices

• The Organization

– Explicit Rules-no bribes

– Reward System-Don’t incentivize immoral

behavior

– The selection system-who you pick to be in the

organization

– Ethical and professional standards

– Leadership

Company Culture Places Profits and Good Performance Ahead of Ethical Behavior

• In an ethically corrupt or amoral work climate,

people have a company-approved license to

• Ignore “what’s right”
• Engage in most any behavior or employ most any strategy they think they can get away with
• Play down the relevance of ethical strategic actions and business conduct
• Pressures to conform to the norms of the corporate culture

can prompt otherwise honorable people to

• Make ethical mistakes
• Succumb to the many opportunities around them to engage in unethical practices

Business Ethics

in the Global Community

• Notions of right and wrong, fair and unfair, moral and

immoral, ethical and unethical exist in all societies

• Two schools of thought
  • Ethical universalism
    • Holds that human nature is the same everywhere and ethical rules are cross-cultural
  • Ethical relativism
    • Holds that different societal cultures and customs give rise to divergent values and ethical principles of right and wrong

Ethical vs. Unethical Conduct

• What constitutes ethical or unethical conduct can vary according to - Time - Circumstance - Local cultural norms - Religion
• Thus, no objective way exists to prove that some cultures are correct and others wrong about proper business ethics
• Therefore, there is merit in the ethical relativism view that proper business ethics has to be viewed in the context of each country’s societal norms

Approaches to Managing a Company’s

Ethical Conduct

Unconcerned or non-issue approach

Damage control approach

Compliance approach

Ethical culture approach