Managing Ethics and

Social Responsibility
CHAPTER 4

Will You Be A
chapter4
Courageous Manager?
- Managers frequently face complex ethical
situations in which it is difficult to
determine what is right.
- Many managers have no training in ethics
or ethical decision making
- Moral lapses and financial scandals has
made ethical and courageous behavior an
important trait for today’s managers

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chapter4

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Copyright ©2010 by South-Western, a division of Cengage
Learning. All rights reserved.

chapter4 What is Ethics

The code of moral principles and values that

govern the behaviors of a person or group with
respect to what is right or wrong.

✓ Ethics tells us whether our behavior is moral or immoral

✓ Ethics aims to answer the question, “What should I do?”

It’s a process of reflection in which people’s decisions are
shaped by their values, principles and purpose
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chapter4

Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. 5

chapter4 Ethics and Law

• Although often used interchangeably, 'legal'
and 'ethical' are not the same thing.

• Law is defined as legal requirements, which

are written down and enforced by courts.

• On the other hand, ethics is defined as

moral guidelines that govern our behaviors.
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• The law cannot codify all ethical

requirements. It just sets the minimum
standards necessary (exp: environmental
regulations, minimum wage...)
• Ethical people (companies) go beyond the
laws.
• Sometimes obeying the law would require
us to act against our ethics

chapter4 What is Ethics

• Human behaviors falls into three categories
• 1) Codified law: in which standards are written into
the legal system and enforceable in the courts.
• 2) Free Choice: pertains to behaviors about which
the law has no say and for which you enjoy complete
freedom.
• 3) Between these domains lies the domain of Ethics
which has no specific laws, but it does have standards
of conduct based on shared values about moral
conduct
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chapter4 Ethics fall between law
and free choice

chapter4 Sources of Ethics

• Notions of right and wrong come from

many sources:
-Religious beliefs Create a concept of
ethics, morality, and
-Family background socially acceptable
-Education behavior in each person.

-Community/ Acts as a moral

neighborhood compass to guide an
individual when ethical
-Media influences dilemmas arise 10
Copyright ©2010 by South-Western, a division of Cengage
Learning. All rights reserved.

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chapter4 Ethical Relativism

• Ethical issues can be complex. People

may hold divergent views about
right/wrong
• The meaning given to ethics would be
relative to time, place, circumstance, and
the person/s involved
• There would be no universal ethical
standards on which people around the
globe could agree
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Why Business Should Be

chapter4
Ethical
1) To improve company image and
reputation
• There is a growing societal concern for
ethical behavior (exp: boycotting unethical
firms products )

• Employee's satisfaction and pride are

associated with the ethical performance of
their employers
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 Why Business Should Be
chapter4
Ethical
2) To improve business performance
• Research shows linkage between ethically
responsible behavior and favorable
corporate financial performance
• Imparts trust, promoting positive alliances
among business partners

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Why Business Should Be

chapter4
Ethical
3) To comply with legal requirements
• Many legal requirements provide direction
for companies interested in being more
ethical in their business operations

• Legal requirements that apply to firms in a

particular country, may also provide a
model for firms that operate in other
countries
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 Why Business Should Be
chapter4
Ethical
4) To prevent or minimize harm to the
general public and other stakeholders
• Examples include not harming society with
toxic waste, protecting business from
unethical employees and unethical
competitors

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chapter4

If businesses have
so many reasons
to be ethical, why
do ethical
problems occur ?
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 Unethical Organizational
chapter4
Behaviors
• Bribery
• Discrimination and Harassment. ...
• Misusing company assets
• Employing child labor
• Illegally using copyrighted materials.
• Non-Office Related Work
• Unfair treatment of custmers or employees…

• The Violation of ethical practices may lead to:

• Fines / Jail / License Revoked /Termination of
employment…

chapter4 Globalization and Ethics

• Globalization makes ethical issues more complex

• Bribes are common practice in many countries

• Transparency International ranks countries based on
Bribe Payers Index 19

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 Main sources of Ethical
chapter4
Problems in Business
1) Competitive pressure :
• when companies are squeezed by hard competition
they sometimes engage in unethical behavior.

2) The pressure of achieving results:

The desire to secure a promotion, to keep investors
happy, the fear of failure, the fear of losing his job or the
fear of disappointing the boss may cause ethical
misconduct.
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Main sources of Ethical

chapter4
Problems in Business
3) Cross-cultural contradictions:
• different cultures may have different or
contradictory ethical standards

• 4) Conflicts of interest:
• Occurs when an individual's personal interests
could compromise his judgment.
• For example, an employee who has a
friendship with a supplier and allows that
supplier to go around the bidding process. 21

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 Sources of Ethical
chapter4
Problems in Business
Other sources of ethical problems
• Lack of accountability
• Weak leadership
• Unclear policies or rules
• Time pressure

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chapter4 Ethical Dilemmas

• An ethical dilemma arises in a situation concerning

right or wrong when values are in conflict.

• There are often complex situations with no clear-cut

resolution, and without a right or wrong answer

• Most ethical dilemmas involve a conflict between the

needs of the part and the whole: the individual versus
the organization or the organization versus society
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chapter4 Ethical Dilemmas

You see a runaway trolley moving toward 5 tied-up people lying on the
tracks. You are standing next to a lever that controls a switch. If you pull
the lever, the trolley will be redirected onto a side track, and the 5 people
on the main track will be saved. However, there is a single person lying
on the side track. You have two options only:

• Do nothing and allow the trolley to kill the five people on the main track.

• Pull the lever, diverting the trolley onto the side track where it will kill
one person.

Which is the more ethical option?

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chapter4

• For example, should products that fail to

meet tough local standards be exported to
other countries where standards are lower,
benefiting the company but being
potentially harmful to world citizens?

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chapter4 Ethical Decision-Making

• Managers and employees are the moral agents who must

make ethical choices. They need a set of guidelines that will
shape their thinking and help them make informed decisions.

• Company leaders are the ones who should develop these

ethical guidelines or standards that managers and employees
in their company will be required to adhere to.

• These guidelines help them identify and analyze the nature of

an ethical problem, and decide which course of action is likely
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to produce an ethical result.

Ethical Standards
chapter4
• Utilitarian approach

• Moral Rights Approach

• Justice Approach

• Virtues Approach

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chapter4 The utilitarian approach

• Ethical actions are those that produce the greatest

benefits and the least harm.

• The ethical action is the one that provides the greatest

good for the greatest number of people.

• The focus here is on the consequences of the action.

The ends justifies the means. It is ok to do a little bit of
harm if the result is a lot of good to many people.
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The moral rights

chapter4
approach
• This approach has its roots in the philosophy of Immanuel Kant
• What makes human beings different from mere things is that people have
the ability to choose freely what they will do with their lives, and they have a
moral right to have these choices respected. Many related rights are thought
to exist such as rights to truth, to privacy, to life, to free consent, etc.

• In deciding whether an action is ethical or no, we must ask,

Does the action respect the moral rights of everyone?

• It doesn’t matter how much good your action would generate,

as long as you are violating one human right.
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chapter4 The virtues approach

• A virtue approach requires people to base their ethical

decisions on universal virtues such as honesty, tolerance,
fidelity, integrity, and many others

• A person who has developed virtues will be naturally disposed

to act in ways consistent with moral principles. The virtuous
person is the ethical person.

• In dealing with an ethical problem using the virtue approach, we

might ask, What kind of person should I be? What is ethical
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is what develops virtues in ourselves and our communities

chapter4 The justice approach

• The justice approach has its roots in the work of

Aristotle.” The basic moral question in this approach
is: How fair is an action? Does it treat everyone in
the same way, or does it show favoritism and
discrimination?

• We should treat people the same unless there are

relevant differences between them.
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chapter4 The justice approach

• In a company, everyone should be treated

equally regardless of their position or
influence. Thus, men and women should
not receive different salaries if they are
performing the same job. However, people
who differ in job skills or responsibilities
can be treated differently in proportion to
the differences in skills or responsibility
among them.
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How can ethical behavior be

chapter4 improved in the workplace?

1. Code of ethics
2. Ethics training
3. Zero tolerance approach
4. Inquiry and reporting mechanisms
5. Inclusion of ethics in employees performance
evaluation
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6. Leadership commitment

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 Managing Company Ethics
chapter4
and Social Responsibility
1) Code of Ethics
• Formal document that establish clear expectations for
all employees. Provides guidelines and resources
(such as FAQs) on how to handle common ethical
dilemmas.

2) Ethics training:
• To make sure all employees understand company
values, policies and codes of conduct (addressing
possible ethical dilemmas by working on a list of 34
specific scenarios that employees might face)

chapter4
• 3) Adopt a zero-tolerance approach:
disciplinary measures against employees who
violate ethical standards
• 4) Inquiry and reporting mechanisms:
• Specify methods to seek ethics advice or
information
• Define ways of reporting anonymously ethical
misconduct without fear of retaliation (Whistle-
Blowing) 35

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 How can ethical behavior be
chapter4 improved in the workplace?

6) Performance evaluation systems and related

compensation and promotion decisions should reward
employees ethical behavior.

7) Strong Ethical Leadership

• Leaders set the tone for ethics in the workplace.

• Ensure that leaders lead by example.

• Weak ethical leadership may result in a “They’re

breaking the rules, so I can, too” mentalities

Ethics and Corporate

chapter4 Social Responsibility (CSR)

• CSR refers to companies integrate social and

environmental concerns in their business
operations and taking actions aimed at
benefiting the society

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chapter4

• Examples:

• Reducing carbon footprint and water pollution.

• Increasing reliance on renewable energy,
sustainable resources, and recycled or partially
recycled materials
• Giving a portion of profits to support charities or
worthy causes.
• Etc. 38

Ethics and Social

chapter4 Responsibility
• To be socially responsible, a company must do more
than act legally and ethically. CSR is not always a
legal necessity, increasingly it is an obligation.

• Studies have found that both investors and consumers

are more likely to support and purchase from a
company that fosters a social cause, such as
engaging in environmentally friendly activities. 39

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