Download Ethics and Corporate 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
 What about
yourself?
 How are they
formed?
5-3
Ethical Dilemma
 An ethical dilemma arises in a situation
concerning right or wrong when values
are in conflict. Right and wrong cannot be
clearly identified.
© 2006 by South-Western, a
division of Thomson Learning. All
3-4
Criteria for
Ethical Decision Making
 Most ethical dilemmas involve
 A conflict between needs of the part &
whole.
 The individual versus the organization.
 The organization versus society as a
whole.
© 2006 by South-Western, a
division of Thomson Learning. All
3-5
Telling the Truth and Lying: Possible
Outcomes
5-6
It’s a Personal Issue
 Most of us believe we are ethical but most
have unconscious biases that favor ourselves
and their own group
 Competition
 Consequences
 Degrees
 Win-win
5-7
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?
Cheating-code of conduct
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
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.
5-11
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.
• 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.
5-12
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
 Why?
5-13
Some Ethical Issues in
Business
Table 5.2
5-14
Business Ethics
 Ethical climate
 In an organization,
the processes by
which decisions are
evaluated and made
on the basis of right
and wrong
5-15
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.
5-16
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
8. Heroes/rewards
9. Leaders
5-17
Ethics Programs
 Compliance-based ethics programs
 Company mechanisms typically designed by
corporate counsel to prevent, detect, and punish
legal violations.
 Integrity-based ethics programs
 Company mechanisms designed to instill in people
a personal responsibility for ethical behavior
5-18
A Process for Ethical Decision Making
Figure 5.1
5-19
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
5-20
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
 Financial
5-21
The Business Costs of Ethical Failure
Figure 5.2
5-22
Corporate Social Responsibility
 Corporate social
responsibility (CSR)
 Obligation toward
society assumed by
business.
5-23
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
 Public relations
5-24
Pyramid of Global Corporate Social
Responsibility and Performance
Figure 5.3
5-25
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
5-26
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
5-27
Ecocentric Management
 Ecocentric management
 Goal is the creation of sustainable economic
development and improvement of quality of life
worldwide for all organizational stakeholders.
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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
 Sustainable growth
 Economic growth and development that meet
present needs without harming the needs of
future generations
5-29