Ethics Flashcards
The Classical View of Social Responsibility
- Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests 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
The SocioEconomic View of Social Responsibility
- 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”
Social Responsibility: Economic
Required by society • Be profitable • Make sound strategic decisions • Provide adequate and attractive returns on investments
Social Responsibility: Legal
Required by society
• Obey all laws and regulations
• Fulfill all contractual obligations
• Honor warranties and guarantees
Social Responsibility: Ethical
Expected by society • Avoid questionable practices • Respond to spirit as well as letter of law • Assume law is floor of behavior and operate above minimum required • Do what is fair, right, and just
Social Responsibility: Philanthropic
Desired/expected by society
• Be a good corporate citizen • Give back
• Improve quality of life overall
Arguments for social responsibility
Public expectations 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
Arguments against social responsibility
Violation of profit maximisation Dilution of purpose Costs Too much power Lack of skills Lack of accountability
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
Value-Based Management
An approach to managing in which managers establish and uphold an organization’s shared values
The Bottom Line on Shared Corporate Values
An organization’s values are reflected in the decisions and actions of its employees
Purposes of Shared Values
- Guiding managerial decisions
- Shaping employee behavior
- Influencing the direction of marketing efforts
- Building team spirit
Definition of Ethics
- The established customs, morals, and fundamental human relationships that exist throughout the world
- Principles, values, and beliefs that define what is right and wrong behavior
Ethical Behaviour
• Behaviour that is morally accepted as good or right as opposed to bad or wrong such as
- Corruption (e.g., bribery and improper payments)
- Inadequate labour conditions
- Environmental responsibility
Ethical Dilemma
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
• Should I conduct personal business on company time?
• Should we spend more on pollution control?
• Is it okay to give a friend a special rate?
• If I find out that my boss took a bribe, should I tell someone?
Moral development
• A measure of independence from outside influences
• Research conclusions
- People proceed through the stages of moral development sequentially
- There is no guarantee of continued moral development
- Most adults are in Stage 4 (“good corporate citizen”)
Stages of Individual Moral Development
• Preconventional level • Conventional level • Principled level Interacts with • Individual characteristics • The organization’s structural design • The organization’s culture • The intensity of the ethical issue
Values
Basic convictions about what is right or wrong on a broad range of issues
Personality Variables
- Ego strength
* Locus of Control
Ego Strength
A personality measure of the strength of a person’s convictions
Locus of Control
A personality attribute that measures the degree to which people believe they control their own life
Internal locus
the belief that you control your destiny
External locus
the belief that what happens to you is due to luck or chance
Structural Variables
Organizational characteristics and mechanisms that guide and influence individual ethics
• Performance appraisal systems
• Reward allocation systems
• Behaviours (ethical) of managers
Determinants of Issue Intensity
• Greatness of Harm - How many people will be harmed? • Consensus of Wrong - How much agreement is there that this action is wrong? • Probability of Harm - How likely is it that this action will cause harm? • Immediacy of Consequences - Will harm be felt immediately? • Proximity of Victim(s) - How close are the potential victims? • Concentration of Effect - How concentrated is the effect of the action on the victim(s)?
Ethical Leadership
Managers must provide a good role model by:
• Being ethical and honest at all times
• Telling the truth; don’t hide or manipulate information
• Admitting failure and not trying to cover it up
• Communicating shared ethical values to employees through symbols, stories,
and slogans
• Rewarding employees who behave ethically and punish those who do not
• Protecting employees (whistleblowers) who bring to light unethical behaviours or
raise ethical issues.
How Managers Can Improve Ethical Behaviour in An Organization
- Hire individuals with high ethical standards
- Establish codes of ethics and decision rules
- Leadbyexample
- Set realistic job goals and include ethics in performance appraisals
- Provide ethics training
- Practical application of ‘tests’ - Conduct independent social audits
- Provide support for individuals facing ethical dilemmas
Subjects Addressed by Most Codes of Ethics
- Bribery/improper payments
- Conflict of interest
- Security of proprietary information
- Receiving gifts
- Discrimination/equal opportunity
- Giving gifts
- Environment
- Sexual harassment
- Antitrust
- Workplace safety
- Political activities
- Community relations
- Confidentiality of personal information
- Human rights
- Employee privacy
- Whistle-blowing
- Substance abuse
- Nepotism
- Child labour
Tests to Guide Ethical Decision Making
- Harm test: Do the benefits outweigh the harms, short term and long term?
- Reversibility test: Would I think this choice was good if I traded places?
- Colleague test: What would professional colleagues say?
- Legality test: Would this choice violate a law or a policy of my employer?
- Publicity test: How would this choice look on the front page of a newspaper?
- Common practice test: What if everyone behaved in this way?
- Wise relative test: What would my wise old aunt or uncle do?
Harm test
Do the benefits outweigh the harms, short term and long term?
Reversibility test
Would I think this choice was good if I traded places?
Colleague test
What would professional colleagues say?
Legality test
Would this choice violate a law or a policy of my employer?
Publicity test
How would this choice look on the front page of a newspaper?
Common practice test
What if everyone behaved in this way?
Wise relative test
What would my wise old aunt or uncle do?
ECSA Rules of Conduct: Ethics
- Competency
- Integrity
- Public Interest
- Environment
- Dignity of the Profession
What is Business Ethics?
The study of proper business policies and practices regarding potentially controversial issues
- Corporate governance
- Insider trading
- Bribery
- Discrimination
- Corporate social responsibility
- Fiduciary responsibility
- Data protection
Why is Business Ethics important?
It enables you to make responsible decisions and maintain highly ethical behavior when running a business (and running projects)
