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CHAPTER 5
Management’s Social and Ethical
Responsibilities

CHAPTER OBJECTIVES
• Define the term corporate social responsibility (CSR), and specify the four levels in Carroll’s
global CSR pyramid.
• Contrast the classical economic and socioeconomic models of business, and summarize the
arguments for and against CSR.
• Identify and describe the four social responsibility strategies, and explain the concept of
enlightened self-interest.
• Summarize the four practical lessons from business ethics research.
• Distinguish between instrumental and terminal values, and explain their relationship to business
ethics.
• Identify and describe at least four of the ten general ethical principles.

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 Chapter 5: Management’s Social and Ethical Responsibilities 87

• Discuss what management can do to improve business ethics.

OPENING CASE
The Changing Workplace: The Two Faces of Pfizer
• THE BAD: In the largest health care fraud settlement in history – Pfizer paid $2.3 billion to
resolve criminal and civil allegations. $102 million of that will be divided among six
whistleblowers. Half of it going to the first employee to file a whistleblower lawsuit, former
Pfizer sales representative John Kopchinski, who was fired by Pfizer.

• THE GOOD: Free drug program implemented for people who have lost their jobs. Although
this effort demonstrates social responsibility it also was a conscious effort to repair the
company’s damaged public image.

Ask students:
- is Pfizer the standard bearer for social responsibility?
- or are they the corporate bad guy?
- If you worked for Pfizer and you knew they were illegally promoting uses of four of its drugs
would you blow the whistle? Explain why or why not.
- Was Kopchinski’s reward fair and appropriate?
88 Chapter 5: Management’s Social and Ethical Responsibilities

LECTURE OUTLINE
Today it is far less acceptable for businesses to have profit as their only goal.
Managers in all types of organizations are expected to make a wide variety of economic and social
contributions.
I. SOCIAL RESPONSIBILITY: DEFINITION AND PERSPECTIVES
Companies are involved in a wide variety of social programs, many of which have no impact on
their bottom line. These programs include everything from helping to feed the hungry to the arts,
urgan renewal, education reform and environmental protection. Regardless of the program, the key
is for managers to implement social responsibility in an effective and efficient manner.

A. What Does Social Responsibility Involve?

Social responsibility is a relatively new concern in the business community—and the idea is
evolving. Corporate social responsibility (CSR) is “the notion that corporations have an
obligation to constituent groups in society . . . beyond that prescribed by law or union
contract.”
• CSR for Global and Transnational Corporations
Today’s global and transnational companies have four areas of responsibility: economic,
legal, ethical, and philanthropic. This means the global corporation should
o Make a profit consistent with expectations for international business.
o Obey the law of host countries as well as international law.
o Be ethical in its practices, taking host-country and global standards into
consideration.
o Be a good corporate citizen, especially as defined by the host country’s
expectations.
All four responsibilities are intertwined and need to be fulfilled if a company is to be called
socially responsible. However, in the long term, a company must consistently satisfy the
bottom three levels before exercising philanthropic responsibility.
Figure 5.1 shows Carroll’s Global Corporate Responsibility Pyramid.
• CSR Requires Voluntary Action
One key factor in CSR is that the actions taken must be voluntary to qualify as socially
responsible actions – rather than reluctant compliance with new laws or court orders, nor a
reaction to public pressures.
 Chapter 5: Management’s Social and Ethical Responsibilities 89

Annotation 5a
Personal Social Responsibility
Questions:
Would you vote to cancel the party for charity? Explain.
Students’ comments will likely be split just as the survey results were, indicating a clear
difference of opinions. Consider suggesting a compromise. Many organizations have a
holiday party that includes opportunities for employees to donate food and\or money. One
company offers a wide variety of games designed by different departments. Prizes are
donated. Employees who wish to take a chance or participate in the game make a small
donation ($2 or $3). Another company has a silent auction for baked goods prepared by
employees – the proceeds support a scholarship program.
Why do people who unselfishly donate their time and money find it so personally
rewarding?
Although our class discussion about motivation is not covered until chapter…, now is a
good time to introduce some of these concepts. Whether it is to be part of a group, improve
self-esteem or simply feel like you are making a difference in the world. Volunteers from
across the world will share that they get more in return than they give. What a concept to
ponder!
What is your experience (and future plan) as a donor or volunteer?
Various answers. Remind students that volunteering is not only a good thing to do; it may
lead to a job or at least a positive reference. It is of course a great opportunity to learn
new skills, gain experience and have something tangible to add to their resume.

B. What Is the Role of Business in Society?

Is business an economic entity responsible only for making a profit for its stockholders? Or is
it a socioeconomic entity obligated to make both economic and social contributions to society?
• The Classical Economic Model
Adam Smith, father of the classical economic model, believed that an “invisible hand”
promoted the public welfare. Smith believed that the public interest was served best by
individuals pursuing their own self-interests. This model has survived into modern times.
• The Socioeconomic Model
In this model, business is seen as one subsystem among many in a highly interdependent
society. This model recognizes that companies have stakeholders other than their
stockholders. A stakeholder audit allows companies to systematically identify all
parties that could possibly be impacted by the company’s performance (see Figure 5.2).
According to this view, business has an obligation to respond to the needs of all
stakeholders while pursuing a profit.
90 Chapter 5: Management’s Social and Ethical Responsibilities

ETHICS: Character, Courage and Values

Cleaning Up in a Socially Responsible Way
For Discussion:
Why is this unique business strategy an example of the socioeconomic model?
Soap Hope’s annual lending program to non-profits is a perfect example of the
socioeconomic model. Soap Hope is clearly part of an interdependent society.
Their short term investment helps fight poverty which in turn boosts the
community providing economic and social benefits for the greater good –
society. Soap Hope’s sacrifice is simply differing profits for a year. It is
apparent that they feel this is a worthwhile program as they have bigger plans
for the future.

What are the pros and cons of this particular strategy?

The pros are that society at large will benefit from this partnership between
corporations and non-profit organizations. When companies act like good
corporate citizens they are also setting an example for their employees,
customers, and other businesses. From an internal perspective, employees
have a greater sense of loyalty, commitment and pride when their employer
supports social causes. This has a positive impact on corporate culture and
employee retention.
The cons highlighted by investors are that the business loses focus on the
primary mission and profits. The obvious concern is that the company will
allocate resources to the philanthropic cause with potential opportunity costs
impacting the bottom line. Another concern is that corporations are doing the
work that taxpayer dollars should be doing in supporting non-profit
organizations. The challenge is for companies to find the balance. When
companies like UPS leverage their strengths to support a humanitarian effort –
they are providing a great service with efficiency and effectiveness. Logistics
management is what they do every day, by encouraging their employees to
volunteer during disasters the cost is minimal but the positive impact is
significant.

C. Arguments For and Against Corporate Social Responsibility

• Arguments For
• Business is unavoidably involved in social issues.
• Business has the resources to tackle today’s complex societal problems.
• A better society means a better environment for doing business.
• Corporate social action will prevent government intervention.
• Arguments Against
• Profit maximization ensures the efficient use of society’s resources.
 Chapter 5: Management’s Social and Ethical Responsibilities 91

• As an economic institution, business lacks the ability to pursue social goals.

• Business already has enough power.
• Because managers are not elected, they are not directly accountable to the people.
These arguments are based on the assumption that business should stick to pursuing a
profit- leave social goals to governments, schools, and religious organizations.

II. TOWARD GREATER SOCIAL RESPONSIBILITY

It has been said that business is bound by an iron law of responsibility, which states that “in the
long run, those who do not use power in a way that society considers responsible will tend to lose
it.”
If the clear demand by society for business to act more responsibly is not met voluntarily,
government reform legislation will probably force business to meet it.
A. Social Responsibility Strategies
There are four strategies that run along a continuum for management’s response to the issue of
social responsibility (see Figure 5.3).
1. Reaction: Businesses that follow a reactive social responsibility strategy will deny
responsibility while striving to maintain the status quo.
2. Defense: A defensive social responsibility strategy uses legal maneuvering and/or a
public relations campaign to avoid assuming additional responsibilities.
3. Accommodation: The organization that follows an accommodative social
responsibility strategy must be pressured into assuming additional responsibilities.
4. Proaction: A proactive social responsibility strategy involves taking the initiative to
formulate a program that serves as a model for the industry in addressing related social
issues.
Advocates for social responsibility would like to see proactive strategies become management’s
preferred response in both good times and bad.

Annotation 5b
Back to the Opening Case
Question:
Where would you plot Pfizer on the social responsibility continuum? Explain.
To repair their tarnished image, Pfizer implemented the free drug program for people
who lost their jobs. Pfizer executives would like the public to believe that this was a
proactive social responsibility strategy critics would argue that this is simply a public
relations effort and at best they are following the accommodation strategy. However,
the fact that Pfizer agreed to a $2.3 billion settlement to resolve allegations that they
illegally promoted uses of four of its drugs is an indication they have also used a
defensive social responsibility strategy.
92 Chapter 5: Management’s Social and Ethical Responsibilities

B. Who Benefits from Corporate Social Responsibility?

There is a question as to whether social responsibility has to be a hardship for the organization.
For those who see social responsibility as an expense, altruism, an unselfish devotion to the
interests of others, is seen as the motivation for social responsibility.
• Enlightened self-interest is the realization that business ultimately helps itself by
helping to solve societal problems. Advocates of this approach say that social
responsibility expenditures are motivated by profit.
• Corporate philanthropy, the charitable donation of company resources, supports this
contention. Researchers have concluded that corporate giving is actually a form of profit-
motivated advertising.
• An Array of Benefits for the Organization
• Tax-free incentives to employees
• Retention of talented managers by satisfying their altruistic motives
• Help in recruiting talented and socially conscious personnel
• Swaying public opinion against government intervention
• Improved community living standards for employees
• Attracting socially conscious investors
• Matching funds giving a nontaxable benefit for employees
Social responsibility can be a “win-win” proposition for both society and the socially
responsible organization.

III. THE ETHICAL DIMENSION OF MANAGEMENT

There is widespread cynicism about business ethics today. Public disgust has surfaced in opinion
polls: “In one annual survey of corporate reputations, 69 percent hold a negative view about banks
and finance corporations and 64 percent hold a negative view of any large firm.
Ethics is the study of moral obligation involving the distinction between right and wrong. Business
ethics narrows the frame of reference to productive organizations.
 Chapter 5: Management’s Social and Ethical Responsibilities 93

Green Management: Toward Sustainability

Beware the Greenwashers!
For Discussion:
What evidence of greenwashing have you detected recently? Not sure? How many times
in the last 24 hours have you seen an advertisement, packaging or other marketing message
claiming a company or product is “green” or “environmentally friendly?” Did they
provide evidence or proof to support their claim?
How did you uncover it? Most consumers trust labels and as the article indicated, 40
percent of consumers do not know how to verify if a company is really green. Consider the
following resources to learn more
http://www.americanbar.org/publications/gp_solo/2011/september/greenwashing_what_yo
ur_clients_should_avoid.html and http://sinsofgreenwashing.org/findings/greenwashing-
report-2010/.
How does greenwashing impact the drive for sustainability and the public’s trust in
business? No one wants to be misled, particularly when there are financial or
environmental consequences. As the topic of greenwashing makes its way into the
mainstream media, consumers will begin to learn more about this common practice.
Obviously this will lead to distrust and could potentially have a negative impact on sales if
the public outcry becomes loud enough. See the article referenced above published by the
American Bar Association. This article provides guidelines for businesses to follow in an
effort to avoid greenwashing practices. This legal brief highlights the potential
consequences for greenwashers which includes harm to a company’s reputation as well as
potential legal proceedings.

A. Practical Lessons from Business Ethics Research

On-the-job research of business ethics has produced four practical insights for managers:
ethical hot spots, pressure from above, discomfort with ambiguity, and the rationalization of
unethical and illegal conduct.
• Ethical Hot Spots: These areas have been found to be responsible for triggering unethical
and illegal conduct:
• Balancing work and family
• Poor internal communications
94 Chapter 5: Management’s Social and Ethical Responsibilities

• Poor leadership
• Work hours, work load
• Lack of management support
• Need to meet sales, budget, or profit goals
• Little or no recognition of achievements
• Company politics
• Personal financial worries
• Insufficient resources
• Pressure from Above
Pressure from superiors can lead to unhealthful conformity. Managers who are aware of
this pressure can
(1) Consciously avoid putting personal pressure on others.
(2) Prepare to deal with excessive organizational pressure.
• Ambiguous Situations
Employees can experience discomfort when they are faced with a situation that has no
clear-cut ethical guidelines. People who face ethically ambiguous situations want formal
guidelines, such as ethical codes, to help sort things out.
• Rationalization: How Good People End Up Doing Bad Things
Rationalizations involve perceiving an objectively questionable action as normal and
acceptable. Employees commonly use six rationalization strategies to justify misdeeds in
the workplace. (See Table 5.1 for more information.)
• Denial of responsibility
• Denial of injury
• Denial of victim
• Social weighting
• Appeal to higher loyalties
• Metaphor of the ledger

• A Call to Action
Every manager needs to draw an ethical line—the line beyond which they will not go and
will not allow their organization to go. People can begin the process of improving
business ethics by looking in the mirror.

B. Personal Values as Ethical Anchors

Values are too often ignored in discussions of management. Values are abstract ideals that
shape an individual’s thinking and behavior.
 Chapter 5: Management’s Social and Ethical Responsibilities 95

Annotation 5c
Survey says…….
Questions:
Has America, as some contend, become a “cheating culture” in which cheating is
expected and tolerated?
If the results of the survey of 43,321 teenagers are any indication…we may have good
reason to be concerned. Did 60 percent of students cheat on an exam because of the
pressure to earn good grades so they can go to college or did they cheat simply because
everyone else does? Perhaps another source of the problem is the large number of
ethical breaches by CEOs and other high ranking officials that get reported but seem to
go unpunished. Ask your students, “What can we do to repair our nation’s reputation as
a cheating culture?” Consider developing a code of conduct for the class that addresses
cheating and unethical student behavior.
Can values and ethics be turned on and off to fit the situation (e.g. cheat in school but be
an honest businessperson later in life)?
Have you ever cheated in school? Do you know others who have? Ask yourself, if someone
would compromise their honor to get a better grade on a test, how much more likely are they
to compromise to get ahead, make lots of money, and even become the CEO? If you want
business ethics to improve, you’ve got to start at the beginning, with today’s students who
will be running tomorrow’s companies. It is highly unlikely that a person can manage a
split ethical personality.

Instrumental and Terminal Values

• An instrumental value is an enduring belief that a certain way of behaving is
appropriate in all situations. (Example: “Honesty is the best policy.”)
• A terminal value is an enduring belief that a certain end-state of existence is worth
striving for and attaining. (Example: Eternal salvation)
• Instrumental values (modes of behavior) help achieve terminal values (desired end-
states).
• Identifying Your Own Values – encourage students to go to the end of the chapter to
complete the Action to Learning exercise that will help them assess their own values.

The top five instrumental values in a survey of 220 eastern U.S. managers were as
follows:
(1) Honest
(2) Responsible
(3) Capable
(4) Ambitious
(5) Independent
The five most common terminal values for the group were as follows:
(1) Self-respect
(2) Family security
(3) Freedom
(4) A sense of accomplishment
(5) Happiness
96 Chapter 5: Management’s Social and Ethical Responsibilities

C. General Ethical Principles

Like your personalized value system, your ethical beliefs have been shaped by many factors.
We use ethical principles both consciously and unconsciously when dealing with an ethical
dilemma. The principles are
1. Self-interests
2. Personal virtues
3. Religious injunctions
4. Government requirements
5. Utilitarian benefits
6. Universal rules
7. Individual rights
8. Economic efficiency
9. Distributive justice
10. Contributive liberty
Sometimes, in complex situations, a combination of principles is applicable.

IV. ENCOURAGING ETHICAL CONDUCT

To encourage ethical conduct, words must be supported by action. Four ways to encourage ethical
conduct within the organization are ethics training, ethical advocates, ethics codes, and whistle-
blowing.
A. Ethics Training
Amoral managers are neither moral nor immoral but indifferent to the ethical implications of
their actions. According to ethics researcher Archie B. Carroll, amoral managers far
outnumber both moral and immoral managers. If this contention is correct, there is great need
for ethics training and education, a need that too often is not adequately met.
Key features of effective ethics training programs:
• Top management support
• Open discussion of realistic ethics cases or scenarios
• A clear focus on ethical issues specific to the organization
• Integration of ethical themes into all training
• A mechanism for anonymously reporting ethical violations
• An organizational climate that rewards ethical conduct
B. Ethical Advocates
An ethical advocate is a business ethics specialist who sits as a full-fledged member of the
board of directors and acts as the board’s social conscience. The goal is to have someone
assigned as a critical questioner to test the ethical implications of decisions. See Table 5.2.
C. Codes of Ethics
An organizational code of ethics is a published statement of moral expectations for employee
conduct. Codes of ethics are a step in the right direction but not a cure-all. There are two
requirements for codes to encourage ethical conduct:
• They should refer to specific practices, such as gifts and kickbacks rather in generalities.
• They should be firmly supported by top management and equitably enforced through the
reward-and-punishment system.
 Chapter 5: Management’s Social and Ethical Responsibilities 97

D. Whistle-Blowing
Whistle-blowing is the practice of reporting perceived unethical practices to outsiders such as
the news media, government agencies, or public-interest groups. Many managers see whistle-
blowing as the epitome of disloyalty, but others perceive it as the last recourse of employees
when an organization is behaving in an unethical manner. As we saw in the opening case, John
Kopchinski, was fired by Pfizer for being a whistleblower. However, he was ultimately
rewarded for his ethical actions when he received more than 50 million dollars from the Pfizer
settlement.
Here are some steps that organizations can take to reduce the need for whistle-blowing:
• Encourage the free expression of controversial and dissenting viewpoints.
• Streamline the organization’s grievance procedure so that problems receive a prompt and
fair hearing.
• Find out what employees think about the organization’s social responsibility policies and
make appropriate changes.
• Let employees know that management respects and is sensitive to their individual
consciences.
• Recognize that the harsh treatment of a whistle-blower will probably lead to adverse
public opinion.
In the final analysis, individual behavior makes organizations ethical or unethical, but by
clearly identifying and rewarding ethical conduct, organizational forces can help bring out the
best in people.
98 Chapter 5: Management’s Social and Ethical Responsibilities

Annotation 5d
A Strong Ethical Culture Pays
Questions:
What workplace lessons have you learned from working in either strong or weak ethical
cultures?
Students responses will vary and are likely to be quite interesting. Potential discussion starter:
the ethical decision is rarely the easiest decision. Challenges to a person’s ethics can range from
a cashier giving you too much change to a choice between committing perjury and going to jail
for life.
Most of us would like to think that when a tough decision faces us, we will do the “right thing.”
However, consider the number of students who have cheated on an exam, the number of
consumers who have shoplifted, even the number of drivers who have speeded or thrown away a
parking ticket—it’s not easy to behave ethically even when the pressure is simply saving money or
getting a better grade on a test. What if the pressure involved losing your job or possibly even
destroying your career?
Does teaching ethics in business school make a difference? Probably not to everyone, but it might
to a few. Given that, it’s probably worth doing. However, when faculty and administrators don’t
hold students to high standards of ethics in the classroom, and companies don’t hold employees to
high standards of ethics in the workplace, individual standards will slip. Teaching ethics isn’t
enough. Ethical principles have to be lived. The rules need to be spelled out, with consequences
that are real, easily understood, and always enforced.

In the role of management consultant, what advice would you give present and future
managers about building a strong ethical culture?
First, I would recommend they provide an overview of common ethical issues and hot spots:
(1) Ethical hot spots: Employees engaging in unethical or illegal acts at work. The
number one workplace hot spot responsible for triggering unethical and illegal
conduct was found to be balancing work and family.
(2) Pressure from above: This is the actual or perceived pressure from superiors for
results. This can lead to blind conformity.
(3) Ambiguous situations: Employees feel uncomfortable when faced with ambiguous
situations in which there are no clear-cut guidelines. Ethical codes can satisfy these
needs for guidelines.

Encouraging ethical conduct

1. Create an ethics training program, required for all employees. Key features include: top
management support; a clear focus on ethical issues specific to the organization; Integration of
ethics in all training; Hotlines or other ways for employees to report violations anonymously;
create a corporate climate that reward ethical conduct.
2. Identify an ethical advocate that can attend meetings and deliberations with the role of critical
questioner.
3. Develop and provide a copy of a Code of Ethics for every employee.
 Chapter 5: Management’s Social and Ethical Responsibilities 99

END OF CHAPTER FEATURES

• Terms to Understand – encourage students to make use of the flashcards available on the student
website. Also, suggest they visit the Manager’s Toolkit section on the website for tips and
suggestions for aspiring managers.
• Action Learning Exercise – The Rokeach Value Survey. Encourage students to complete the
survey keeping in mind that there are no right or wrong answers. The point of this exercise is to
raise awareness and open a dialogue about personal values and the impact they have on ethical
and unethical behavior. You may want to consider giving this as an assignment where students
complete the survey prior to your class lecture on Personal Values and Ethical Anchors.
• Ethics Exercise – Do The Right Thing, Does Ethics Instruction in College do any Good? After
reading the remarks from Nitin Nohria, dean of the Harvard Business School, have students
respond to the questions that follow. A few possible responses they are likely to offer are
included.
What are the ethical implications of the following interpretations?
1. Ethics instruction in college is probably a waste of time because students’ value systems
solidify earlier in life. What percent of students do you think are fundamentally honest,
trustworthy, and ethical, and what percent are fundamentally dishonest, untrustworthy
and unethical. Of course, responses will vary, however at a minimum the discussion can
point to the survey of teenagers where 60 percent admitted to cheating on a test. Wow!
2. There should be coverage of ethics because at least some students will be positively
influenced. How should ethics instruction be handled for college students? This will be
fun to hear the students’ suggestions for this one! Have them consider the idea that each
class follows the corporate guidelines for an ethics program (see annotation 5d). Would
they use the anonymous whistleblower hotline to report the unethical behavior of one of
their classmates? Would they want a reward if a cheater is caught?
3. Ethics should be emphasized in virtually every college course to increase the likelihood
of better conduct later in life. Will corrupting influences and pressure for results in the
workplace tend to cancel out ethics lessons learned in college? Without question, peer
pressure and family pressure can have a major impact on people’s values and actions.
However, there is still hope that by learning right from wrong and how to make ethical
decisions every student may benefit. Particularly if ethical conduct becomes the norm
and cheaters are shamed and embarrassed by their friends.
4. Your own ethical interpretations?
• Managers-In-Action Video Case Study – Greensburg, Kansas
100 Chapter 5: Management’s Social and Ethical Responsibilities

CHAPTER 5: GREENSBURG, KS - SOCIAL RESPONSIBILITY

Social Responsibility: a Kansas Town Goes Green
Length: 8 minutes and 27 seconds
Topics: Resource Conservation, Green Initiative, Sustainability, Corporate Social
Responsibility, Leadership Vision, Rural America, John Deere.

Company Background
From the Greensburg GreenTown website January 10, 2011
http://www.greensburggreentown.org

Background
At 9:45 pm on May 4th, 2007 an EF5 tornado leveled the rural town of Greensburg, Kansas. Just
days after the storm, the community came together and decided to rebuild sustainably, striving to
become a model green town for the future. Ever since this landmark commitment was made,
Greensburg GreenTown -- a grassroots community-based organization -- has worked side-by-
side with city and county officials, business owners and local residents to incorporate sustainable
principles into their rebuilding process. We serve as an educational resource for the community,
a conduit through which donations can be distributed, and a representative to those outside the
community who are interested in the Green Initiative.

Mission
To provide inspiration and leadership to Kiowa County in order to be a model of sustainable
living for the world.

Vision
Greensburg GreenTown exists to:

• Make it easier for residents to ascribe to, and adhere to, green practices and to make
green living appealing to residents.
• Engage as many residents as possible in the enthusiastic pursuit of making Greensburg a
model green community.
• Establish incentives in order to maximize the participation of businesses and residents in
rebuilding Greensburg as a model green community.
• Bring in resources and support from around the country to make the dreams of
Greensburg as a model green community a reality.
• Make it easier for builders, building supply companies and all local businesses to do
business as green as possible.
• Work to spur economic development with a green emphasis.
• Serve the residents in an unbiased consumer advocate capacity, striving to get them the
best value for their money as they rebuild their homes and businesses.
 Chapter 5: Management’s Social and Ethical Responsibilities 101

Program Plan

Programs undertaken by Greensburg GreenTown are in service to the mission of providing the
residents of Greensburg, Kansas and the surrounding area with the resources, information and
support they need to rebuild Greensburg as a model green community. Greensburg GreenTown
is a grassroots community owned organization that represents the townspeople as Greensburg
rebuilds in a sustainable fashion.

Consulting by Staff and Volunteers - GreenTown provides technical assistance and support for
individuals, businesses, nonprofits and government offices seeking to build and operate
programs guided by green principles. This is done through a volunteer matching program as well
as through staff consulting.

Energy Rater - We work with Certified Energy Rater Brian Wendland to assist homeowners to
maximize energy savings in their homes. This professional is available to both new and existing
homeowners.

Library - We stock and maintain a library of materials so that people can educate themselves in
the green building/living process.

Educational Materials - We write and distribute information that assists people in making their
decisions easier. There is a great quantity of information already available which we sift through,
making the best available to Greensburg residents.

Educational Series - We provide a series of classes and speakers addressing issues related to
sustainable building and green living. These classes are taught at locales in and around
Greensburg as well as through online and telephone courses for those residents with telephone
and computer access.

Website - This is a place where people find information about happenings related to the green
initiative, extensive resources for those seeking education and links to other helpful websites.
There is also a forum where questions about all aspects of green building and living is posted and
responded to.

Outreach - We interview residents as a means of gathering information about what is most

important to them in the green rebuilding of their community. During the interview process we
share information about how a model green town might look.

Chain of Eco-Homes - The Chain of Eco-Homes project plans to build up to twelve model
homes in Greensburg. Each home will serve as a “living laboratory” featuring a variety of
building techniques, prices, sizes, energy efficiency features, and green living products and
services. Each will be unique, and will be available both as an informational center and as eco-
lodging where people can experience green living first-hand in homes that interest them.

Planning - Greensburg GreenTown works in concert with the other parties interested in moving
forward with the Green Initiative in Greensburg and the surrounding area. GreenTown serves as
102 Chapter 5: Management’s Social and Ethical Responsibilities

eyes and ears of the city and county leadership in carrying out the vision of Greensburg as a
model green community.

Fundraising - GreenTown brings in funds from outside the community to support innovative
programs and infuse the efforts with energy and resources.

Show and Tell Registry - In order to provide the best examples to residents of what "green"
means, a registry has been established to list those in the area that already have in place the latest
in sustainable or green technologies.

Synopsis of Video
Greensburg Kansas
Social Responsibility: a Kansas town goes green
The town of Greensburg, Kansas was wiped out by a Tornado. Rather than let this
tragedy devastate the community, it bonded residents and business leaders as they
launched a green rebuilding initiative. In this video, city leaders, business owners, and
students share how the rebuilding of Greensburg has impacted them, their city and local
businesses. Social responsibility is evident throughout the town. A John Deere
dealership owner is paving the way for the next generation of green dealers. The newly
formed Greensburg GreenTown non-profit organization is providing resources and
information for residents, business owners and others who are interested in resource
conservation and the green initiative. This is an inspiring story about how one town of
approximately five hundred residents turned a disaster into something great through
social responsibility and a commitment to sustainability.

Previewing Questions
1. How would you describe corporate social responsibility (CSR)?

Nancy Lockwood, from the Society for Human Resource Management

said, “Environmental, financial, and social actions that allow a company to
gain a competitive edge, make a profit, and enhance its reputation, all
while serving others.”

2. Do you think a company can be socially responsible and still profitable?

Explain why or why not.

Students opinions will vary and they are quite likely to use the reasons
presented in this chapter arguing either for or against CSR.
 Chapter 5: Management’s Social and Ethical Responsibilities 103

3. Choose a company that you are familiar with that demonstrates social
responsibility. Describe their corporate policies and practices that
illustrate their commitment to CSR.
Students will have a variety of examples. If they are slow to get started
share the example in the book of Fetzer Vineyards that converted their
2,000 acre vineyard to an all-organic, “zero waste” operation. The owner
voluntarily found a workable balance between profit and the greater good.

Postviewing Questions
4. How have the town of Greensburg and the formation of the Greensburg
GreenTown organization demonstrated social responsibility?
This video illustrates how the town of Greensburg and the Greensburg GreenTown
organization involve all aspects of social responsibility including economic,
environmental and social action. They have involved all stakeholders including
residents, businesses, and students. They took a tragedy and turned it into something
beautiful by rebuilding green.

5. Who was the champion for change and the green initiative? How were
they successful in getting buy-in and support from residents, business
owners, and government officials? Although there were many supporters, Steve
Hewitt, the city administrator was one of the leaders of the green initiative. He gained
buy-in by listening to the concerns of the stakeholders and by incorporating plans for all
aspects of the community from education to business. In addition, he leveraged the
existing culture – the Midwestern mentality that you take of what you’re given. He
persuaded people to embrace the green building initiative as part of the commitment to
taking care of the land and resources they had. He also fostered support from the
business community with companies like the local John Deere dealership committing to
rebuild green. In fact, they view themselves as the green dealership model for others to
follow.

6. What legacy programs have been created, as a result of this initial green
movement in Greensburg, that will provide sustainability for the future?

One of their goals was to begin a new trend in how rural America accepts green. By
rebuilding every structure as green as possible they were demonstrating social
responsibility to the current and future residents of Greensburg. The goal was not simply
a short term solution to the problem of putting roofs over people’s heads. They thought
about the long-term implications and put together a plan to maximize resources and
knowledge to build a sustainable community. The creation of the non-profit GreenTown
organization provides a central source for information that is available to residents and
others interested in the GreenTown initiative. One of the many examples of how
Greensburg is trying to pay it forward and benefit the greater good by sharing what they
have learned from this experience.
104 Chapter 5: Management’s Social and Ethical Responsibilities

7. As a manager, how can you incorporate the lessons learned from the town
of Greensburg to implement more corporate social responsibility at your
work?
The lessons presented in this video can help managers solve both large and small
problems. One of the first things the leaders did was involve the stakeholders. As
they demonstrated, getting people’s buy-in early on made implementing change much
easier. In addition, they discovered benefits that would impact various stakeholders
such as the infusion of green collar jobs and building homes that were more energy
efficient. Finally, managers can actually go to the GreenTown website to access
their resources and benefit from the hundreds of hours of research and expertise that
is shared on the site. Good managers know what they don’t know and they know how
to obtain the information efficiently. To implement corporate social responsibility at
your work, research other successful organizations to see how they did it.

CLOSING CASE: SOLUTION

A PERSONAL CRUSADE
1. Personal opinion question. Responses will range from, “this is an abuse of power” to “yes, this is
the right thing to do”.
2. DBMC is not compromising profit, simply employee bonuses so he meets the criteria for the first
level. How about the second level? As far as we know his proposal is legal. Moving up the
pyramid to the third level, “Ethical Responsibility” now, here is where it gets interesting. Is
Duncan’s proposal ethical or is he overstepping his boundaries?
3. If anything, Duncan is displaying #2, personal virtues as he probably feels he is being honest, open
and truthful and that he is proud to be a champion for this disease. Distribute justice would be one
of the many principles that should drive any decision about corporate profit sharing.
4. The board should not let him proceed with his plan to direct any of the bonus money to the Batten
disease organization. Rather than imposing his personal values on the company, Duncan could set
up a program where people could choose to donate all or a portion of their bonus to a fund of their
choice, including the Batten disease fund. There are probably other employees who are personally
connected to a cause, to be truly fair he could invite anyone to recommend their non-profit
organization. At bonus time, each cause could have a poster or webpage sharing information about
the organization and why the employee thinks it is important. If Duncan makes the decision to
direct the funds to “his” cause he runs the risk that employees will lose trust and respect for him.
Employee resentment can be toxic to a corporate culture. To be ethical he must find a path that is
fair and equitable rather than supporting his own personal cause. Because he is in a position of
authority, employees will feel forced or coerced into supporting his cause for fear of retribution.
Therefore, any contributions of bonuses need to be private and anonymous.
 Chapter 5: Management’s Social and Ethical Responsibilities 105

INSTRUCTIONAL TIPS
1. One way to personalize the concept of social responsibility for your students is to have them go out
into the community and ask managers to describe what socially responsible actions their
organizations have taken in recent years. Back in class, this field evidence can be analyzed in terms
of the degree of voluntarism (versus coercion, legal obligation, or contractual agreements with
labor).
2. Two organizations that corporations have strongly supported in recent years are the United Way and
Habitat for Humanity. Have students interview members of these groups and come back and report
on what tactics they use to retain the strong support of the business community.
3. Have your students self-select themselves into two groups, one arguing for corporate social
responsibility and the other arguing against it, to see how the evidence stacks up.
4. Your students can gain a better understanding of a stakeholder audit with an in-class analysis of the
stakeholders for a particular company or industry. Another approach would be for them to analyze
the stakeholders involved in their own education. In this analysis, don’t forget future stakeholders,
such as present or future spouses and children, as well as society as a whole.
5. Class Discussion Topic: “Is business ethics instruction a waste of time in the college classroom?”

ADDITIONAL DISCUSSION/ESSAY QUESTIONS

1. Do you think social responsibility will have to be legislated in the future, or will companies
choose to be more socially responsible to meet the expectations of customers and/or other
stakeholders?
2. What is the iron law of responsibility? Do you think it is true?
3. How can a company effectively create an ethical work environment?
4. What is the difference between instrumental values and terminal values? What is your number
one value from each list?
5. What are the ten general ethical principles that guide behavior when ethical questions arise?
Which has the most impact on your decisions?

Discussion Starter: Corporate Social Responsibility and Profitability

Social responsibility has become a PR dream for companies around the world. But how many
companies are truly socially responsible and still profitable? Can you think of a business that
demonstrates positive social action, everybody wins—employees, shareholders, and society at
large? Consider Toms, www.toms.com. They have a one for one shoes and eyeglasses program.
For every pair of shoes or glasses purchased by a customer a pair is donated to someone in need.
And, yes, Toms is still profitable.
For Discussion:
1. Why do you think Toms has been successful incorporating social responsibility into their business
model?
2. Should more companies follow Toms lead? Why or why not?
106 Chapter 5: Management’s Social and Ethical Responsibilities

Discussion Starter: Business Ethics

Lies, lies and more lies. It seems that every day in the media we hear about someone who has
told a lie. At work, at school, maybe even at home we hear people telling lies. Perhaps you have
lied recently…..were you really sick or did you just not feel like going to work?
For Discussion:
1. Is lying a matter of degree (e.g., an acceptable little white lie versus a big bad lie)? Or is it always
wrong to lie? Explain.
2. When, if ever, is it okay for a manager to tell a lie? Explain the circumstances, if any.
3. If lying is more common than in the past, what are the broader implications for business ethics?
4. Generally, what is the connection between telling lies and being trustworthy?

BONUS VIDEOS
BIZFLIX VIDEO CASES FROM THE TEXTBOOK WEBSITE
Discussion Questions and Guide
Video Case: The Emperor’s Club

VIDEO CASE SYNOPSIS

William Hundert (Kevin Kline), a professor at the exclusive Saint Benedict’s Academy for Boys,
believes in teaching his students about living a principled life. He also wants them to learn his
beloved classical literature. A new student, Sedgewick Bell (Emile Hirsch), challenges Hundert’s
principled ways. Bell’s behavior during the seventy-third annual Mr. Julius Caesar Contest
causes Hundert to suspect that Bell leads a less than principled life, a suspicion confirmed years
later during a reenactment of the competition.
Mr. Hundert is the honored guest of his former student Sedgewick Bell (Joel Gretsch) at
Bell’s estate. Depaak Mehta (Rahul Khanna), Bell, and Louis Masoudi (Patrick Dempsey)
compete in a reenactment of the Julius Caesar competition. Bell wins the competition, but
Hundert notices that Bell is wearing an earpiece. Earlier in the film Hundert had suspected that
young Bell wore an earpiece during the competition, but Headmaster Woodbridge (Edward
Herrmann) urged him to ignore his suspicion.
This BizFlix video case appears at the end of the film. The competition reenactment has
just ended, and Bell has announced his candidacy for the U.S. Senate just before he speaks with
Hundert in the bathroom. In his announcement, he carefully described his commitment to
specific values he would pursue if elected.

VIDEO CASE DISCUSSION QUESTIONS AND SUGGESTED

ANSWERS

1. Does William Hundert describe a specific type of life that one should lead? If so, what are its
elements?
 Chapter 5: Management’s Social and Ethical Responsibilities 107

Mr. Hundert describes a life philosophy built on virtue and principled values. He describes
Sedgewick Bell’s present life as one lived without virtue or principles, Bell reacts to Mr.
Hundert’s observations in his typically arrogant manner. He dismisses Mr. Hundert’s
observations as those of a person who does not live in the “real world.” Bell notes that one does
what one needs to do to reach desired goals, which includes lying and cheating.

2. Does Sedgewick Bell lead that type of life? Is he committed to any specific view or theory of
ethics?

Sedgewick Bell continues his fondness for unethical behavior that he displayed earlier as a
young student at Saint Benedict’s Academy for Boys. Although Bell faced an ethical
dilemma in his decision to cheat, his ethics view or theory lets him quickly dismiss the
dilemma. He simply says, “I live in the real world … where people do what they need to do
to get what they want. And if it’s lying and it’s cheating, then so be it.” Ask your students,
“Do Sedgewick’s ethical standards suggest he is a symbol of a new generation of business
people who will replace equally unethical figures like Bernie Madoff?”

3. What consequences or effects do you predict for Sedgewick Bell because of the way he chooses to
live his life?

Sedgewick Bell’s political life in the U.S. Senate could backfire politically if he engages in
unethical behavior. If he does not get caught, he likely will not experience much harm. If gets
caught, his political career could end. Implicit in Mr. Hundert’s observations, howeve r, is the role
of values and the effect ethical behavior has on our personal lives, our character, and our well -
being. Bell’s response skirts this issue and focuses on external control factors only.
108 Chapter 5: Management’s Social and Ethical Responsibilities

BONUS LECTURE, ACTIVITY AND INDIVIDUAL OR GROUP

ASSIGNMENT
COOPERATIVE LEARNING TOOL: INSTRUCTOR NOTES

Ethical Perceptions
Ever since Ebenezer Scrooge was haunted by ghosts and Little Nell was tied to a railroad track by the evil
landlord, business has been getting unfair treatment when it comes to its image in terms of ethics and fair
play. Studies of television programs and movies indicate that the majority of business-related plots
perpetuate the image of business people as greedy, dishonest, or uncaring about social issues.
Various current events encourage and support this image. Realistically, businesses or managers who are
socially responsible and honest simply don’t make as good a news story as the latest scandal.
Chances are that your students, even though they are in business classes themselves, have similar negative
perceptions of the ethics of business and top-level managers. The following list of questions can be used
as an exercise or as a starting point for a discussion on this topic.
To emphasize the difference in perceptions in various groups, you may want to have your students
administer the test to one of the following groups, in addition to taking it themselves:
• Students who are not business majors
• Individuals who are in entry-level positions in business
• Business managers at various levels
It may be interesting to see the differences in the scores among the various groups.
Another use for the test is to see if your students have any practical evidence to support their attitude.
Chances are they don’t, and they may even have evidence to refute it.

Optional Addition to Cooperative Learning Tool

As part of this analysis, you may want to have students take a look at how much influence the media have
on people’s image of big business. If it is an election year, have students look at what is said about big
business in ads and speeches. If not, have them watch films, made-for-TV movies, or reality TV series
(such as The Apprentice) where big business plays a major part. For each, have them note two things:
• The overall impression given of the big business represented
• Any specific adjectives, phrases, or sentences that relate to the big business represented
How many of these reflect the attitudes outlined in the Ethical Perceptions test?
 Chapter 5: Management’s Social and Ethical Responsibilities 109

COOPERATIVE LEARNING TOOL

Ethical Perceptions
For each of the following statements, indicate your level of agreement, using the scoring system shown
below.
1 2 3 4 5
Totally disagree Disagree Neither agree nor Agree somewhat Totally agree
somewhat disagree

____ 1. In order to get ahead in business, sometimes managers have to compromise their
own beliefs or values for the good of the company.
____ 2. Most top managers will sacrifice the good of the company for their own personal
benefit.
____ 3. Company policies and procedures are for the rank-and-file employees. Most
managers above a certain level don’t view following the rules as important.
____ 4. Corporations often bend or break laws. They just don’t get caught every time.
____ 5. If there weren’t laws and liability factors to consider, most companies would
ignore social responsibility issues such as the environment.
____ 6. Sexual harassment and prejudice in business are a lot more common than the
records show, because people are afraid to file formal reports.
____ 7. Most U.S. firms would use bribes to get business in countries where bribes are
common, if they knew they wouldn’t get caught.
____ 8. Top-level executives are more ruthless and less scrupulous than the average
person.
____ 9. Many business executives would work for a company they didn’t really believe in
if they were paid enough.
____ 10. Most companies are really only interested in profits—the rest is just lip service.
________ TOTAL SCORE