Download Corporate social responsibility

Ethics and
Corporate
Responsibility
Chapter 05
McGraw-Hill/Irwin
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
LO1 Describe how different ethical perspectives guide
decision making
LO2 Explain how companies influence their ethics
environment
LO3 Outline a process for making ethical decisions
LO4 Summarize the important issues surrounding corporate
social responsibility
LO5 Discuss reasons for businesses’ growing interest in the
natural environment
LO6 Identify actions managers can take to manage with the
environment in mind
5-2
Ethics
 Ethics
 The system of rules
that governs the
ordering of values
5-3
Telling the Truth and Lying: Possible
Outcomes
5-4
It’s a Personal Issue
 Most of us believe we are ethical but most
have unconscious biases that favor ourselves
and their own group
5-5
It’s a Personal Issue
 Managers often:




Hire people who are like them
Think they are immune to conflicts of interest
Take more credit than they deserve
Blame others when they deserve some blame
themselves
5-6
It’s a Personal Issue
 Is it ethical to:
 Shop online during company time?
 Using office equipment for personal use?
 Read personal emails while at work?
5-7
It’s a Personal Issue
 One suggestion is to change your vocabulary
 The word “ethics” is too loaded
 Substitute “responsibility” or “decency” instead
 Act accordingly
5-8
Ethics
 Ethical issue
 Situation, problem, or opportunity in which an
individual must choose among several actions that
must be evaluated as morally right or wrong
 Business ethics
 The moral principles and standards that guide
behavior in the world of business.
5-9
Ethical Systems
 Moral philosophy
 Principles, rules, and values people use in deciding
what is right or wrong
 Universalism
 The ethical system stating that all people should
uphold certain values that society needs to
function.
5-10
Caux Principles
 Kyosei
 living and working
together for the
common good,
allowing cooperation
and mutual
prosperity to coexist
with healthy and fair
competition
 Human dignity
 concerns the value of
each person as an
end, not a means to
the fulfillment of
others’ purposes
5-11
Question
Which ethical system bases ethical behavior on
the opinions and behaviors of relevant other
people?
A. Egoism
B. Utilitarianism
C. Relativism
D. Virtue ethics
5-12
Ethical Systems
 Egoism
 An ethical system defining acceptable behavior as
that which maximizes consequences for the
individual
 Utilitarianism
 An ethical system stating that the greatest good
for the greatest number should be the overriding
concern of decision makers.
5-13
Ethical Systems
 Relativism
 Philosophy that bases ethical behavior on the
opinions and behaviors of relevant other people
 Virtue ethics
 Classification of people based on their level of
moral judgment.
5-14
Ethical Systems
 Kohlberg’s model of cognitive moral
development
 Perspective that what is moral comes from what a
mature person with “good” moral character would
deem right.
5-15
Question
What act passed into law by Congress in 2002
established strict accounting and reporting
rules?
A. Wagner Act
B. Sarbanes-Oxley Act
C. Chapin Act
D. GAAP Act
5-16
The Ethics Environment
 Sarbanes-Oxley Act
 An act passed into law by Congress in 2002 to
establish strict accounting and reporting rules in
order to make senior managers more accountable
and to improve and maintain investor confidence
5-17
Some Ethical Issues in
Business
Table 5.2
5-18
Business Ethics
 Ethical climate
 In an organization,
the processes by
which decisions are
evaluated and made
on the basis of right
and wrong
5-19
Danger Signs
1. Excessive emphasis on short-term revenues over
longer-term considerations.
2. Failure to establish a written code of ethics.
3. A desire for simple, “quick fix” solutions to ethical
problems.
4. An unwillingness to take an ethical stand that may
impose financial costs.
5-20
Danger Signs (cont.)
5. Consideration of ethics solely as a legal issue or a
public relations tool
6. Lack of clear procedures for handling ethical
problems.
7. Responding to the demands of shareholders at the
expense of other constituencies
5-21
Danger Signs
 Ethical leader
 One who is both a moral person and a moral
manager influencing others to behave ethically.
5-22
Ethics Programs
 Compliance-based ethics programs
 Company mechanisms typically designed by
corporate counsel to prevent, detect, and punish
legal violations.
5-23
Ethics Programs
 Integrity-based
ethics programs
 Company
mechanisms
designed to instill in
people a personal
responsibility for
ethical behavior
5-24
A Process for Ethical Decision Making
Figure 5.1
5-25
Ethical Decision Making
Making ethical decisions takes:
 Moral awareness
 realizing the issue has ethical implications
 Moral judgment
 knowing what actions are morally defensible
 Moral character
 the strength and persistence to act in accordance
with your ethics despite the challenges
5-26
Courage
 Why might employees lack courage in ethical
issues?
 A belief that the company would not take
corrective action
 A fear that management would retaliate against
the employee for speaking up
 Doubt that the employee’s report would be kept
confidential
5-27
The Business Costs of Ethical Failure
Figure 5.2
5-28
Corporate Social Responsibility
 Corporate social
responsibility (CSR)
 Obligation toward
society assumed by
business.
5-29
Corporate Social Responsibility
 Economic
responsibilities
 To produce goods and
services that society
wants at a price that
perpetuates the
business and satisfies
its obligations to
investors.
 Legal responsibilities
 To obey local, state,
federal, and relevant
international laws
5-30
Corporate Social Responsibility
 Ethical responsibilities
 Meeting other social expectations, not written as
law.
5-31
Corporate Social Responsibility
 Philanthropic
responsibilities
 Additional behaviors
and activities that
society finds
desirable and that
the values of the
business support.
5-32
Pyramid of Global Corporate Social
Responsibility and Performance
Figure 5.3
5-33
Corporate Social Responsibility
 Transcendent education
 An education with five higher goals that balance
self-interest with responsibility to others
 Empathy, generativity, mutuality, civil aspiration,
intolerance of ineffective humanity
5-34
Contrasting Views
First - holds that managers act as agents for
shareholders and, as such, are obligated to
maximize the present value of the firm
Second - managers should be motivated by
principled moral reasoning
5-35
Reconciliation
 Profit maximization and corporate social
responsibility used to be regarded as
antagonistic, leading to opposing policies. But
the two views can converge
 Recent attention has also been centered on
the possible competitive advantage of socially
responsible actions
5-36
Ecocentric Management
 Ecocentric management
 Goal is the creation of sustainable economic
development and improvement of quality of life
worldwide for all organizational stakeholders.
5-37
Ecocentric Management
 Sustainable growth
 Economic growth and development that meet
present needs without harming the needs of
future generations
5-38
Ecocentric Management
 Life-cycle analysis (LCA)
 A process of analyzing all inputs and outputs,
though the entire “cradle-to-grave” life of a
product, to determine total environmental impact
5-39
Destination CEO: Bank of America
 What
 Discuss the ethics of
communication
job cutting that
pitfalls might exist at
result when mergers
Bank of America?
or acquisitions
occur.
5-40