Chapter 13 - Ethics

Question 1

What is social responsibility according to the classical view?

Answer 1

Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).

Expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers.

Question 2

What is social responsibility according to the socio-economic view?

Answer 2

• Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.
• Corporations are not independent entities responsible only to stockholders.
• Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.

Question 3

Name some of the arguments for social responsibility

Answer 3

• Public expectation
• 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

Question 4

Name some of the arguments against social responsibility

Answer 4

• Violation of profit maximisation
• Dilution of purpose
• Cost
• Too much power
• Lack of skills
• Lack of accountability

Question 5

Discuss economic social responsibility

Answer 5

Required by society

- Be profitable. Make sound strategic decisions. Provide adequate and attractive returns on investment.

Question 6

Discuss legal social responsibility

Answer 6

Required by society

- Obey all laws and regulations. Fulfill all contractual obligations. Honor warranties and guarantees.

Question 7

Discuss ethical social responsibility

Answer 7

Expected by society

• Respond to spirit as well as letter of law
• Avoid questionable practices
• Assume law is floor of behaviour and operate above minimum required.
• Do what is right, fair, and just.

Question 8

Discuss philanthropic social responsibility

Answer 8

Desired and expected by society

• Be a good corporate citizen
• Give back
• Improve overall quality of life

Question 9

What is social obligation?

Answer 9

The obligation of a business to meet its economic and legal responsibilities and nothing more.

Question 10

What is social responsiveness?

Answer 10

When a firm engages in social actions in response to some popular social need.

Question 11

Shortly define social responsibility

Answer 11

A business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society.

Question 12

It has been shown that social actions do not affect the long-term performance of a firm. Discuss.

Answer 12

Difficulties in defining and measuring “social responsibility” and “economic performance” raise issues of validity and causation in the studies.

Mutual funds using social screening in investment decisions slightly outperformed other mutual funds.

Question 13

What is values-based management?

Answer 13

An approach to managing in which managers establish and uphold an organization’s shared values.

Question 14

What are bottom line shared corporate values?

Answer 14

An organization’s values are reflected in the decisions and actions of its employees.

Question 15

What are the purposes of shared values?

Answer 15

• Guiding managerial decisions
• Shaping employee behaviour
• Influencing the direction of marketing efforts
• Building team spirit

Question 16

Give two different definitions of ethics

Answer 16

The established customs, morals, and fundamental human relationships that exist throughout the world.

Principles, values, and beliefs that define what is right and wrong behaviour.

Question 17

What is ethical behaviour?

Answer 17

Behavior that is morally accepted as good or right.

Question 18

Give some common examples of unethical behaviour

Answer 18

• Corruption
• Inadequate labour conditions
• Environmental responsibility not taken into account (Why is this here?)

Question 19

What is an ethical dilemma?

Answer 19

A situation in which a person must decide whether or not to do something that, although beneficial to oneself or the organization, may be considered unethical and perhaps illegal.

Question 20

What is moral development?

Answer 20

A measure of independence from outside influences

Question 21

Discuss the three levels of moral development

Answer 21

Preconventional:

• Sticking to rules to avoid physical punishment
• Following rules if it is in immediate interest to do so

Conventional:

• Living up to what is expected by people close to you
• Fulfilling obligations to which you have agreed

Principled:

• Valuing rights of others and upholding values regardless of the majority opinion
• Following self-chosen ethics even if it violates the law

Question 22

With what parts of an organisation does moral development interact?

Answer 22

• Individual characteristics
• The organization’s structural design
• The organization’s structural design s culture
• The intensity of the ethical issue

Question 23

What are values?

Answer 23

Basic convictions about what is right or wrong on a broad range of issues

Question 24

What is ego strength?

Answer 24

A personality measure of the strength of a person’s convictions

Question 25

Discuss internal vs external locus of control

Answer 25

Internal locus:
the belief that you control your destiny.

External locus:
the belief that what happens to you is due to luck or chance.

Question 26

What is the locus of control

Answer 26

The degree to which a person believes that they have control over their own life.

Question 27

What are structural variables?

Answer 27

Organizational characteristics and mechanisms that guide and influence individual ethics

Question 28

Name some structural variables

Answer 28

• Performance appraisal systems
• Reward allocation systems
• Ethical behaviours of managers

Question 29

How can managers be ethical role models?

Answer 29

• Be ethical and honest at all times
• Do not hide or manipulate information
• Communicating shared ethical values to employees (for example through slogans)
• Rewarding ethical behaviour
• Protecting whistleblowers

Question 30

How can ethical behaviour be improved in an organisation?

Answer 30

1. Hire individuals with high ethical standards
2. Establish code of ethics and decision rules
3. Lead by example.
4. Set realistic job goals and include ethics in
   performance appraisals.
5. Provide ethics training
6. Conduct independent social audits.
7. Provide support for individuals facing ethical
   dilemmas.

Question 31

What is the ethical decision making procedure?

Answer 31

1. Harm test
   Do the benefits outweigh the harms, short term and long term?
2. Reversibility test
   Would I think this choice was good if I traded places?
3. Colleague test
   What would professional colleagues say?
4. Legality test
   Would this choice violate a law or a policy of my employer?
5. Publicity test
   How would this choice look on the front page of a newspaper?
6. Common practice test
   What if everyone behaved in this way?
7. Wise relative test
   What would my wise old aunt or uncle do?