Weihrich and Koontz

© 2010

An International
Perspective
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Chapter Objectives
After studying this chapter, you should be able to:

 Describe the nature of the pluralistic society and

selected environments
 Explain the social responsibility of managers and the
arguments for and against the social involvement of
business
 Understand the nature and importance of ethics in
managing and ways to institutionalize ethics and raise
ethical standards
 Recognize that some ethical standards vary in different
societies
 Explain the concepts of productivity, effectiveness, and
efficiency
 Realize that trust is the basis for human interaction
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Organization and External Environment

• All managers must deal in varying degree
the elements and forces of their external
environment.

• They must identify, evaluate and react to

the forces outside the enterprise that may
affect their operations.

• The impact of external environment on the

organization is shown in Fig 2-1
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The Organization and Its External Environment

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OPERATING IN A PLURALISTIC SOCIETY
 Managers operate in a pluralistic society, in
which many organized groups represent
various interests (environmentalists, NGOs,
professional associations etc – (Kodangulam)

 There are many stakeholders with divergent

claims on the organization and it is the task
of the manager to integrate the same.

 Each group has an impact on other groups,

but no one group exerts an inordinate
amount of power. Many groups exert some
power over business
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Social responsibility of managers
• In early 1900s the mission of business firms
was exclusively economic. Today, partly
owing to interdependencies of many groups
in our society, social involvement of
businesses have increased.
• This social responsibility embraces all
organizations including universities,
charitable organizations, governments etc.

• Social responsibility means businesses

should consider the social implications of
their decisions.
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THE SOCIAL RESPONSIBILITY

OF MANAGERS

 Corporate social responsibility is

“seriously considering the impact of the
company's actions on society”

 Social responsiveness is "the ability of a

corporation to relate its operations and
policies to the social environment in ways
that are mutually beneficial to the
company and to society”.
 e spo n s ib i l ity
Areas of R
 ib i li ti e s t o
Respons
e ra l P u b li c
the Gen
• Public Health Issues. What to do about inherently dangerous products
such as alcohol, tobacco, vaccines, and steroids.
• Protecting the Environment. Using resources efficiently, minimizing
pollution.
• Recycling. Reprocessing used materials for reuse.
• Developing the Quality of the Workforce. Enhancing quality of the
overall workforce through education and diversity initiatives.
• Corporate Philanthropy. Cash contributions, donations of equipment
and products, and supporting the volunteer efforts of company
employees.
 ibi li ti e s t o
Respons
Cu s to m e r s

• The Right to Be Safe. Safe operation of products, avoiding

product liability.
• The Right to Be Informed. Avoiding false or misleading
advertising and providing effective customer service.
• The Right to Choose. Ability of consumers to choose the
products and services they want.
• The Right to Be Heard. Ability of consumers to
express legitimate complaints to the appropriate parties.
 s ibi li ti es t o
Respon
Employees
• Workplace Safety. Monitored by Occupational Safety and Health
Administration.
• Quality-of-Life Issues. Balancing work and family through flexible
work schedules, subsidized child care, and regulation such as the
Family and Medical Leave Act of 1993.
• Ensuring Equal Opportunity on the Job. Providing equal
opportunities to all employees without discrimination; many aspects
regulated by law.
• Sexual Harassment and Sexism. Avoiding unwelcome actions of a
sexual nature; equal pay for equal work without regard to gender.
 ibi li ti e s t o
Respons
Investors

• Obligation to make profits for shareholders.

• Expectation of ethical and moral behavior.
• Investors protected by regulation by the
Securities and Exchange Commission
and state regulations.
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Operating in a pluralistic society:

• Reaction or pro-action?
• Since no enterprise can be expected to react very
quickly to unforeseen developments, an enterprise
must practice ways of anticipating developments
through forecasts and take prior action.
• Proaction is an essential part of the planning process.
• Role of government:
• There are many instances in which social changes can
be implemented only by the enactment of legislation.
• Social audit: defined as a commitment to systematic
assessment of and reporting of the company’s
activities that have social impact – legal and voluntary.
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THE TECHNOLOGICAL ENVIRONMENT

One of the most pervasive factors in the

external environment is technology.
( energy vs climate change, disruptive technologies etc)

The term technology refers to the sum total of

the knowledge we have of ways to do things.
It includes inventions and techniques and the
vast store of organized knowledge.
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THE ECOLOGICAL ENVIRONMENT

Ecology means the relationship of people and other
living things and their environment such as soil,
water, and air.
•Land may be polluted by industrial waste such as
packaging and chemicals.
•Water pollution may be caused, for example, by
hazardous waste and sewer systems
•Air pollution can be caused by acid rain, auto
exhaust fumes, carcinogens from manufacturing
processes, and other causes
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THE ECOLOGICAL ENVIRONMENT

• A variety of federal legislation has been

passed dealing with solid waste, water,
and air pollution.
• Managers must be keenly aware of the
great variety of laws and regulations and
must incorporate ecological concerns in
their decision making.
• ISO 14001 is a standard for eco-
management and audit scheme. It is a
standard to assure that company policies
address environmental issues.
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ETHICS IN MANAGING

 Ethics is the discipline dealing with what is

good and bad and deals with with moral
duty and obligation

 Business ethics is concerned with a

systematic study of morals in a business
environment.
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Ethics in managing:

• Ethics is defined as the discipline dealing with what is

good and bad and with moral duty and obligation.
• Personal ethics has been referred to as the rules by
which an individual lives his or her personal life.
• Accounting ethics pertains to the code that guides
the professional conduct of accountants.
• Business ethics is concerned with truth and justice
and has a variety of aspects such as the expectations of
society, fair competition, advertizing, public relations,
social responsibilities, consumer autonomy, and
corporate behavior in home country as well as abroad.
 ob E t h ic al
On-the-J
Dilemmas

Telling the truth

and adhering to
Situation in which a deeply felt
business decision may ethical principles
be influenced for in business
personal gain. decisions.
Businesspeople expe

Employee’s employees to be loya

disclosure of and truthful, but
illegal, immoral, ethical conflicts may
or unethical arise.
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ETHICAL THEORIES
 The utilitarian theory suggests that plans and
actions should be evaluated by their consequences
– greatest good for greatest number of people.

 The theory based on rights holds that all people

have basic rights – freedom of speech, freedom of
conscience, due process..

 The theory of justice demands that decision

makers be guided by fairness and equity, as well
as impartiality
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INSTITUTIONALIZING ETHICS
Managers have a responsibility to create an
organizational environment that fosters ethical
decision making by institutionalizing ethics.

That is applying and integrating ethical concepts with

daily actions.

•having code of ethics (A code is a statement of

policies, principles, or rules that guide behavior)
•formally appointed ethical committee,
•teaching ethics in management development
programs.
Implementation of policies.
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FACTORS THAT ENHANCE ETHICAL
STANDARDS
 Public disclosure and publicity
 The increased concern of a well‑informed
public
 Following government regulations
 Education to raise the professionalism of
business managers.
 Strict enforcement of the code of ethics.
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Differing Ethical Standards

• Ethical as well as legal standards differ, parti-
cularly among nations and societies . (eg)
• Contributions to political parties, campaigning for
candidates.
• Payments made to government officials for business
favors.
• Paid news.
• “Guanxi” in China / East Asia – exchanging favors,
informal relationships.
• “mamoolu” in Andhra.
• Sreedharan of Delhi Metro – integrity and
competency, timeliness.
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WHISTLE-BLOWING

Black’s Law Dictionary defines a whistle

blower as ‘an employee who refuses to
engage in and/or reports illegal or wrongful
activities of his employer or fellow
employees’.
Morton Thiokol engineer and Challenger
disaster
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TRUST AS THE BASIS FOR CHANGE
MANAGEMENT
 Traditionally, the concept of trust is equated
with integrity, loyalty, caring, and keeping
promises in the relationships between and
among individuals
 Trust should go beyond individual
relationships and extend to the organization
by creating a culture of trust.
 Trust must be at the centre for
communication, collaboration, and the
willingness to change.