Chapter 5: Managing Social Responsibility and Ethics

Question 1

What is social responsibility?

Answer 1

The Classical View
• Management’s only social responsibility is to
maximise 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.
• Organisations are socially responsible to the extent
of maximising profits for shareholders.

The Socioeconomic View
• 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.
• “To do the right thing”

Question 2

What is social obligation, social responsiveness and social responsibility?

Answer 2

• Social Obligation - the obligation of a business to
meet its economic and legal responsibilities and
nothing more.
• Social Responsiveness - when a firm engages in
social actions in response to some popular social
need.
• Social Responsibility - 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 3

What are the factors that affect ethical and unethical behaviour?

Answer 3

• Moral Development
• Individual Characteristics
• Structural Variables
• Organisation’s Culture
• Issue Intensity

Question 4

Explain Moral Development.

Answer 4

• A measure of independence from outside influences
• Levels of Individual Moral Development
– Preconventional level
– Conventional level
– Principled level
• Stage of moral development interact with:
– Individual characteristics
– The organisation’s structural design
– The organisation’s culture
– The intensity of the ethical issue

Question 5

Explain Individual Characteristics.

Answer 5

• Ego Strength - a personality measure of the
strength of a person’s convictions.
• People with high ego strength are likely to resist impulses to
act unethically.
• Locus of Control - a personality attribute that
measures the degree to which people believe
they control their own fate.
• 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 6

Explain Structural Variables.

Answer 6

• Organisational characteristics and mechanisms that
guide and influence individual ethics
• Structural designs that minimise ambiguity and
uncertainty through formal rules and regulations, and
those that continually remind employees of what is
ethical are more likely to encourage ethical behaviour
• Examples include:
– Written code of ethics
– Performance appraisal systems
– Reward allocation systems
– Behaviors (ethical) of managers

Question 7

Explain Organization’s Culture.

Answer 7

• Values-Based Management – the
organisation’s values guide employees in the
way they do their jobs.
• The Purposes of Shared Values
• Guiding managerial decisions
• Shaping employee behavior
• Influencing relationships and reputation
• Building team spirit

Question 8

Explain Issue Intensity.

Answer 8

• Greatness of harm
• Consensus of consequences
• Probability of harm
• Immediacy of consequences
• Proximity of victims
• Concentration of effect.

Question 9

What is involved in protecting employees who raise ethical issues?

Answer 9

• Whistle-Blower - individuals who raise ethical
concerns or issues to others.
• Social Entrepreneur - an individual or
organisation who seeks out opportunities to
improve society by using practical, innovative,
and sustainable approaches.