Griffin MGMT 13e Ch04

Management
Chapter Four: Responding to the Ethical

and Social Environment
Griffin, Management, 13e©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1
Learning Objectives (1 of 2)
By the end of this chapter, you should be able to:
4-1: Discuss managerial ethics, three areas of special ethical

concern for managers, and how organizations manage
ethical behavior.
4-2: Describe key emerging ethical issues in organizations today.
4-3: Discuss the concept of social responsibility, to whom

or what an organization might be considered
responsible, and four types of organizational
approaches to social responsibility.
Learning Objectives (2 of 2)
By the end of this chapter, you should be able to:
4-4: Explain the relationship between the government and

organizations regarding social responsibility.
4-5: Describe some of the activities organizations may

engage in to manage social responsibility.
4-1 Individual Ethics in Organizations
• Ethics:
• It is defined as one’s personal beliefs about whether a
behavior, action, or decision is right or wrong.
• People have ethics; organizations do not!
• Ethical behavior varies from person to person.
• Ethical behavior:
• Behavior that conforms to generally accepted social norms
• Unethical behavior:
• Behavior that does not conform to generally accepted social
norms
Figure 4.1
Managerial Ethics
Managerial ethics:
Managers need to approach
each set of relationships from
an ethical and moral
perspective.
4-1a Managerial Ethics (1 of 2)
• How an organization treats its employees
• Includes policies such as hiring and firing, wages and
working conditions, and employee privacy and respect
• How employees treat the organization

• Conflicts of interest, secrecy and confidentiality, and honesty
• Conflict of interest occurs when a decision potentially
benefits the individual to the possible detriment of the
organization
• Trade secret, use of technology, social media activity, calling
in sick when not really sick, falsification of resumés and
references
4-1a Managerial Ethics (2 of 2)
• How other economic agents are treated
• Includes customers, competitors, stockholders, suppliers,
dealers, and unions
• Advertising and promotions, financial disclosures, ordering
and purchasing, shipping and solicitations, bargaining and
negotiations
• Ethical responses
• Peer managers and top managers, organizational culture all
contribute to ethical context
• Includes personal standards of ethics
• Managerial responses to unethical behavior
• High levels of competition contribute to context for ethics
4-1c Managing Ethical Behavior (1 of 3)
• Emphasizing ethical behavior takes many forms but starts
with top management
• Committees and training are options
• Three common options:

• Creating ethics codes
•Written statements of the values of ethical standards that
guide the firms’ actions
• Must be adhered to if they are to be of value
• Applying moral judgment
• Maintaining organizational justice
• Applying Moral Judgment • Other Principles
− Gather the relevant factual − Ethical norms, including:
information. − Utility—does the act optimize
− Determine the most outcomes?
appropriate moral values. − Rights—does the act respect the
− Make an ethical judgment rights of all involved?
based on the rightness or − Justice—is it consistent and fair?
wrongness of the proposed
− Caring—is the act consistent with
activity or policy.
people’s responsibilities to each
other?
• Organizational justice:
• The perception of people in an organization regarding
fairness
• Four basic forms of organizational justice:

1. Distributive
2. Procedural
3. Interpersonal
4. Informational
4-1c Organizational Justice
• Distributive justice is people’s perceptions of the fairness with
distribution of rewards.
• Procedural justice is individual’s perceptions of the fairness used to

determine outcomes.
• Interpersonal justice is the fairness people see in how they are

treated by others.
• Informational justice is the perceived fairness of information used

for decisions.
Figure 4.2 A Guide
for Ethical
Decision Making
• The resulting analysis

allows a manager to make
a clear assessment of
whether a decision or
policy is ethical.
Discussion Question #1
• Who is ultimately responsible for ethical organizational

behavior? Leadership? Managers? Employees? Why?
Let’s consider the classroom as an organization. If a
student is cheating on an exam, who is ethically
responsible for that action? The student? You, because
you are aware of the cheating? Your professor? Why did
you identify this person as being responsible?
4-2a Ethical Leadership (1 of 2)
• Ethical leadership
• The Sarbanes–Oxley Act of 2002 requires CEOs and CFOs to
personally vouch for the truthfulness and fairness of their firm’s
financial disclosures.
• Corporate governance
• Boards of directors must be independent
• Ensures the business is being properly managed and that
decisions are in the best interest of shareholders
• Boards increasingly being criticized even when implicated in
wrongdoing
• Bribery charges, paying CEOs bonuses even though
performance is poor
4-2a Ethical Leadership (2 of 2)
Information technology
• Online privacy an important ethical concern for customers and
for employees
• Balance between individual rights and corporate rights
• Potential for abuse of information technology by individuals
• Gathering data on searches, keystrokes, and amount of time
on websites
• Use of company technology for personal use
• Who owns that data?
Poll 1
Many people are concerned about their right to privacy
and the information collected about them. How many
social media accounts and apps do you have?
A. Fewer than 5
B. Between 5 and 10
C. More than 10
Poll 1 Debrief
Online privacy has become a hot topic as companies sort
out ethical and management issues. Facebook and other
firms have the ability to collect data on the habits of their
users, and the restrictions on how it can and cannot use
that information are ambiguous at best.
Surveys show that people are troubled by the amount of

information being collected and who gets to see it. Yet,
social media sites regularly collect data from users. One
way management can address these concerns is to post a
privacy policy on their website.
4-3a Areas of Social Responsibility
• Social responsibility: The set of obligations an organization
has to protect and enhance the societal context in which it
functions
− Stakeholder: Person or organization who is directly affected
by the practices of an organization and has a stake in its
performance
− The natural environment: Waste management, climate
change, disastrous environmental accidents
− General social welfare: Promote the general welfare of
society
Figure 4.3 Organizational Stakeholders
• Most companies
focus on three
main groups:
customers,
employees, and
investors.
4-3a Social Responsibility
• The natural environment
− Laws now regulate how businesses treat the natural
environment.
− Disposal of hazardous waste, climate change, and sustainability
are all concerns.
− Much remains to be done.
• General social welfare

− Organizations contribute to charities, philanthropic organizations,
and not-for-profit foundations, among other ways.
Figure 4.4 Arguments For and Against
Social Responsibility
4-3c Approaches to Social
Responsibility (1 of 2)
• Obstructionist stance: Firm does as little as possible
• Defensive stance: Does only what is legally required, nothing
more
• Installs equipment but not more expensive equipment that
is better
• Accommodative stance: Meets legal requirements and goes
beyond sometimes
• Donates to community groups
• Proactive stance: Views itself as a citizen and seeks
opportunities to contribute
Figure 4.5 Approaches to Social Responsibility
(2 of 2)
Americans are dependent on their jobs to sustain their standard of living. People
buy stock in companies to make a high return on investment. Other companies
and stakeholders rely on a company to be ethical and profitable. The local
community relies on the organization to improve the quality of the community.
The global community asks organizations to move beyond this and support the
global perspective.
• Ultimately, who are organizations responsible to? Can an organization be

profitable, provide good jobs to workers, and support the demands of other
stakeholders? How? What should their priority be? Why?
Figure 4.6 How Business and the Government
Influence Each Other
4-4a How Government Influences
Organizations
• Through direct regulation
• Establishment of laws and rules that dictate what
organizations can and cannot do
• Often based on societal beliefs about what business should
or should not be allowed to do
• Through indirect regulation

• For example, providing tax incentives for companies who
opened new training centers
4-4b How Organizations Influence
Government
• Personal contacts
• Lobbying
• Uses persons or groups to formally represent an organization
before political bodies
• A political action committee (PAC)
• Created to solicit and distribute money to political candidates
• Favors and other influence tactics
Knowledge Check 1
• In what way can an industry, such as all automotive
companies, best influence the government?
A. Personal contacts
B. Lobbying
C. Political action committees
D. Favors
Knowledge Check 1: Answer
• In what way can an industry, such as all automotive companies, best
influence the government?
b. Lobbying
• Lobbying, or the use of persons or groups to formally represent an

organization or group of organizations before political bodies, is an
effective way to influence the government. Lobbyists work to represent
an industry’s position and influence members of Congress when they
vote on legislation that affects that industry. This is different than a
political action committee, which influences by supporting specific
candidates that might be favorable to the PAC’s cause.
4-5a Formal Organizational Actions
• Legal compliance
• The extent to which the organization complies with local, state,
federal, and international laws
• Following the law not a guarantee of ethical behavior
• Ethical compliance
• The extent to which the firm and its members follow basic
ethical standards of behavior
• Establishment of formal ethics committees to evaluate current
practices
• Philanthropic giving
• The awarding of funds or other gifts to charities or other social
programs
4-5b Informal Organizational Actions
• Organizational leadership and culture
− Can define the social responsibility stand adopted by the
organization
− Sets the tone for the entire organization
• Whistle-blowing
• The disclosure by an employee of illegal or unethical conduct on
the part of others within the organization

• How an organization responds often indicates its stance on
social responsibility
• First report behavior to boss, then up the chain of command if
nothing is done
4-5c Evaluating Social Responsibility
• A corporate social audit
• It is a formal and thorough analysis of the effectiveness of a
firm’s social performance.
• It is usually conducted by a task force of high-level managers
from within the firm.
• Clearly define all social goals, analyze the resources devoted
to each goal, and determine how well it is achieving the
various goals.
• Make recommendations about areas that need additional
attention.
• Approximately 93 percent of the world’s 250 largest firms
issues annual reports on areas of environmental and social
responsibility.
Why do organizations practice philanthropic giving

practices? Are there any business advantages to this
practice? Disadvantages? What might those be? How
should an organization determine which types of charitable
organizations to support?
Summary (1 of 2)
Now that the lesson has ended, you will have learned how
to:
• Discuss managerial ethics, three areas of special ethical
concern for managers, and how organizations manage
ethical behavior.
• Describe key emerging ethical issues in organizations
today.
• Discuss the concept of social responsibility, to whom or
what an organization might be considered responsible,
and four types of organizational approaches to social
responsibility.
Summary (2 of 2)
Now that the lesson has ended, you will have learned how to:
• Explain the relationship between the government and

organizations regarding social responsibility.
• Describe some of the activities organizations may engage in to

manage social responsibility.
Key Terms
• Accommodative stance: A social responsibility stance in which an organization meets its legal and
ethical obligations but will also go beyond these obligations in selected cases.
• Codes of ethics: A formal, written statement of the values and ethical standards that guide a firm’s
actions.
• Corporate social audit: A formal and thorough analysis of the effectiveness of a firm’s social
performance.
• Defensive stance: A social responsibility stance in which an organization does everything that is
required of it legally, but nothing more.
• Ethical behavior: Behavior that conforms to generally accepted social norms.
• Ethical compliance: The extent to which an organization and its members follow basic ethical
standards of behavior.
Key Terms
• Ethics: One’s personal beliefs about whether a behavior, action, or decision is right or wrong.
• Legal compliance: The extent to which an organization complies with local, state, federal, and
international laws.
• Lobbying: The use of persons or groups to formally represent an organization or group of
organizations before political bodies to influence the government.
• Managerial ethics: Standards of behavior that guide individual managers in their work.
• Obstructionist stance: An approach to social responsibility in which firms do as little as possible to
solve social or environmental problems. Organizational justice: The perceptions of people in an
organization regarding fairness.
• Organizational stakeholder: Person or organization who is directly affected by the practices of an
organization and has a stake in its performance.
• Philanthropic giving: Awarding funds or gifts to charities or other worthy causes.
• Political action committee (PAC): An organization created to solicit and distribute money to
political candidates.
Key Terms
• Proactive stance: A social responsibility stance in which an organization views itself as a citizen in a
society and proactively seeks opportunities to contribute.
• Regulation: Government’s attempts to influence business by establishing laws and rules that
dictate what businesses can and cannot do.
• Sarbanes-Oxley act: A law passed in 2002 that requires CEOs and CFOs to personally vouch for the
truthfulness and fairness of their firms’ financial disclosures.
• Social responsibility: The set of obligations an organization has to protect and enhance the societal
context in which it functions.
• Unethical behavior: Behavior that does not conform to generally accepted social norms.
• Whistle-blowing: The disclosure by an employee of illegal or unethical conduct on the part of
others within the organization.

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Management

Chapter Four: Responding to the Ethical

4-1: Discuss managerial ethics, three areas of special ethical

4-2: Describe key emerging ethical issues in organizations today.

4-3: Discuss the concept of social responsibility, to whom

4-4: Explain the relationship between the government and

4-5: Describe some of the activities organizations may

• How employees treat the organization

• Three common options:

• Four basic forms of organizational justice:

• Procedural justice is individual’s perceptions of the fairness used to

• Interpersonal justice is the fairness people see in how they are

• Informational justice is the perceived fairness of information used

• The resulting analysis

• Who is ultimately responsible for ethical organizational

Surveys show that people are troubled by the amount of

• General social welfare

• Ultimately, who are organizations responsible to? Can an organization be

• Through indirect regulation

• Lobbying, or the use of persons or groups to formally represent an

the part of others within the organization

Why do organizations practice philanthropic giving

• Explain the relationship between the government and

• Describe some of the activities organizations may engage in to

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