Management, 13e

Richard L. Daft

Chapter 5
Managing Ethics
and Social Responsibility
 Managerial Ethics
 Ethics: code of moral principles and values
that governs the behaviors of a person or
group with respect to what is right or wrong
 Three categories of behavior
 Codified law: values and standards written into
the legal system and enforceable in the courts
 Free choice: behavior not covered by law and
for which an individual has complete freedom
 Ethics: standards of conduct based on shared
principles and values about moral conduct

2
5.1 Three Domains of
Human Action

3
 Ethical Management Today
(slide 1 of 2)

 Ethical lapses have been pervasive

 Unethical behavior has many causes
 Personal ego
 Greed
 Pressure to increase profit
 Desire to appear successful
 Managers carry a big responsibility for
setting an ethical climate

4
 Ethical Management Today
(slide 2 of 2)

 Ethical managers
 Display honesty and integrity
 Communicate and enforce ethical
standards through their behavior
 Are fair in their decisions and the
distribution of rewards
 Show kindness and concern for others

5
5.2 Four Types of Ethical
Manager Behavior

6
 The Business Case for
Ethics and Social
Responsibility
 Studies have found a positive relationship
between ethical and socially responsible
behavior and a firm’s financial
performance
 People prefer to work for ethical
companies
 Customers would switch brands to do
business with a company that is ethical
and socially responsible

7
 Ethical Dilemmas
 Ethical dilemma: situation concerning
right or wrong when values are in conflict
 Right and wrong cannot be clearly defined
 Ethical issues can be very complex
 Moral agent: the individual who must
make an ethical choice in an organization

8
 Frameworks for Ethical
Decision Making (slide 1 of 3)
 Utilitarian approach: moral behavior
produces the greatest good for the
greatest number
 Individualism approach: acts are moral
if they promote the individual’s best long-
term interests
 Moral-rights approach: humans have
fundamental rights and liberties that
cannot be taken away by an individual’s
decision
9
 Frameworks for Ethical
Decision Making (slide 2 of 3)
 Justice approach: moral decisions must be
based on standards of equity, fairness, and
impartiality
 Distributive justice: different treatment of
people cannot be based on arbitrary
characteristic
 Procedural justice: rules must be
administered fairly
 Compensatory justice: individuals should
be compensated for the cost of their injuries
by the party responsible
10
 Frameworks for Ethical
Decision Making (slide 3 of 3)
 Practical approach: makes decisions
based on prevailing standards, society,
and all stakeholders
 Criteria to be considered ethical
 Acceptable by the professional community
 Manager would not hesitate to publish on
the evening news
 Person would typically feel comfortable
explaining to family and friends

11
 A Manager’s Ethical Choices
 Individuals bring their own personality
and traits to organizations
 Personal needs, family influence, and
religious background shape individuals
 Personality characteristics such as ego,
self-confidence, and independence may
enable managers to make ethical choices

12
5.3 Three Levels of Personal

Moral Development

13
 What Is Corporate Social
Responsibility (CSR)? (slide 1 of 2)
 Corporate social responsibility (CSR):
management’s obligation to make choices
and take actions that will contribute to the
welfare and interests of society, not just
the organization
 Stakeholder: any group within or outside
the organization that has a stake in the
organization’s performance

14
 What Is Corporate Social
Responsibility (CSR)? (slide 2 of 2)
 Stakeholder mapping: technique that
provides a systematic way to identify the
expectations, needs, importance, and
power of stakeholders

15
5.4 Major Stakeholders
Relevant to Gap Inc.

16
 Conscious Capitalism
 Conscious capitalism: organizational
policies and practices that both enhance
the economic success of a company and
advance the economic and social
conditions of the communities in which
the company operates
 Also referred to as a shared value
approach

17
 The Green Movement
 Driving forces
 Shift in social attitudes
 New governmental policies
 Climate change
 Information technology
 Quickly spreads news of bad corporate
decisions
 Greenwashing: company tries to portray
itself as more environmentally minded
than it actually is
18
 The Ethic of Sustainability
 Sustainability: ability to generate
wealth without compromising
environmental responsibility and social
stewardship, thus meeting the current and
future needs of stakeholders while
preserving the environment and society
so that future generations can meet their
needs as well

19
 The Triple Bottom Line
 Triple bottom line: measuring an
organization’s social performance, its
environmental performance, and its
financial performance
 Sometimes called the three Ps
 People: looks at socially responsible
aspects
 Planet: measures aspects such as
commitment to environmental
sustainability
 Profit: looks at success in making 20
5.5 Sustainability and the
Triple Bottom Line

21
 Benefit Corporations and
B Lab
 Benefit corporation: a for-profit
organization that has a stated purpose
that includes creating a material positive
impact on society; is required to consider
the impact of all decisions on
shareholders, employees, the community,
and the environment; and voluntarily
holds itself to high standards of
accountability and transparency
 B Lab is a nonprofit organization that
certifies businesses as B corporations 22
5.6 Building an Ethical
Organization

23
 Code of Ethics
 Code of ethics: a formal statement of
a company’s values concerning ethics
and social issues
 Principle-based statements: define
fundamental values, company
responsibilities, quality of products, and
treatment of employees
 Policy-based statements: outline the
procedures to be used in specific
ethical situations

24
 Ethical Structures
 Ethical structures represent the systems,
positions, and programs a company can
undertake to implement ethical behavior
 Ethics committee: group of executives
appointed to oversee the organization’s
ethics by ruling on questionable issues
and disciplining violators
 Chief ethics officer: a company
executive who oversees all aspects of
ethics and legal compliance
25
 Whistle-Blowing
 Whistle-blowing: employee
disclosure of illegal, unethical, or
illegitimate practices on the employer’s
part
 Company actions to make whistle-
blowing an effective ethical safeguard
 View whistle-blowing as a benefit to the
company
 Make dedicated efforts to protect
whistle-blowers
26