CHAPTER 3

THE MANAGER’S WORK

ENVIRONMENT AND ETHICAL
RESPONSIBILITIES
Doing the Right Thing

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 LEARNING OBJECTIVES
3.1 Describe the triple bottom line of people, planet, and profit.
3.2 Identify important stakeholders inside the organization.
3.3 Identify important stakeholders outside the organization.
3.4 Explain the importance of ethics and values in effective
management.
3.5 Describe the concept of social responsibility and its role in
today’s organizations.
3.6 Discuss the role of corporate governance in assessing
management performance.
3.7 Describe how to develop the career readiness competency
of professionalism/work ethic.

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The TRIPLE BOTTOM LINE: PEOPLE, PLANET, PROFIT
Triple bottom line
• Represents people, planet, and profit (the 3 Ps).
• Measures an organization’s social, environmental, and
financial performance.
Success can be measured through a social audit
• A systematic assessment of a company’s performance in
implementing socially responsible programs.

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 The COMMUNITY of STAKEHOLDERS

Figure 3.1.
Source: From
Diverse Teams
at Work by Lee
Gardenswartz.
Published by
the Society for
Human
Resource
Management.

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 INTERNAL STAKEHOLDERS
Internal stakeholders
• Consist of employees, owners, and the board of directors.
Owners
• Consist of all those who can claim the organization as
their legal property.
Board of directors
• Members elected by the stockholders to see that the
company is being run according to their interests.

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 EXTERNAL STAKEHOLDERS
External stakeholders
• People or groups in the organization’s external
environment that are affected by it.
The task environment
• Consists of 10 groups that present an organization with
daily tasks to handle.
The general environment
• Refers to the macroenvironment, such as economic,
technological, and sociocultural.

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 The TASK ENVIRONMENT (1 of 3)
Customers
• Those who pay to use an organization’s goods or services.
Competitors
• People or organizations that compete for customers or
service.
Supplier
• Provides raw materials, services, equipment, labor, or
energy to other organizations.
Distributor
• A person or organization that helps another organization
sell its goods and services to customer.

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 The TASK ENVIRONMENT (2 of 3)
Strategic allies
• The relationship of two organizations who join forces to
achieve advantages neither can perform as well alone.
Employee organizations
• Labor unions and professional associations.
Local communities
• May institute clawbacks: rescinding tax breaks when
firms don’t deliver promised jobs.

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 The TASK ENVIRONMENT (3 of 3)
Financial institutions
• Banks, savings and loans, and credit unions.
• May engage in crowdfunding, raising money for a project
by obtaining many small amounts of money from many
people (the crowd).
Government regulators
• Regulatory agencies that establish ground rules under
which organizations may operate.
Special-interest groups
• Groups whose members try to influence specific issues.

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 QUESTION #1
Two drug companies agree to work together to pool
their research and development funds to develop a
new drug for arthritis. In doing so, these two
organizations have
A. formed a union.
B. formed a strategic alliance.
C. analyzed their internal environment.
D. influenced the mass media.

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 QUESTION #2
ChemTech International is being picketed by a group of
people who live by their biggest plant. The group is
concerned about ChemTech’s disposal of waste
products into nearby waterways. In this instance,
ChemTech is dealing with the ____ part of its ____
environment.
A. special-interest groups; task
B. local communities; task
C. sociocultural; general
D. sociocultural; task

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 QUESTION #3
The Environmental Protection Agency (EPA) administers
environmental standards in the U.S. The EPA
represents the ______ part of organizations' ______.
A. local communities; task environment
B. financial institutions; internal environment
C. government regulators; task environment
D. special interest groups; external environment

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 The GENERAL ENVIRONMENT (1 of 2)
Economic forces
• Consist of the general economic conditions and trends:
unemployment, inflation, interest rates, economic
growth.
Technological forces
• New developments in methods for transforming
resources into goods and services.
Sociocultural forces
• Influences and trends originating in a country’s, a
society’s, or a culture’s human relationships and values
that may affect an organization.

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 The GENERAL ENVIRONMENT (2 of 2)
Demographic forces
• Influences on an organization arising from changes in the
characteristics of a population, such as age, gender, or
ethnic origin.
Political-Legal forces
• Changes in the way politics shape laws and laws shape
the opportunities for and threats to an organization.
International forces
• Changes in the economic, political, legal, and
technological global system that may affect an
organization.

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 The ETHICAL RESPONSIBILITIES REQUIRED of
YOU as a MANAGER

Ethical dilemma
• Situation in which you have to decide whether to pursue
a course of action that may benefit you or your
organization but that is unethical or even illegal.

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 DEFINING ETHICS and VALUES
Ethics
• Standards of right and wrong that influence behavior.
• May vary among countries and cultures.
Values
• Relatively permanent and deeply held underlying beliefs
and attitudes that help determine a person’s behavior.

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 FIVE MOST COMMON
UNETHICAL BEHAVIORS at WORK
1. Misusing company time.
2. Abusive behavior.
3. Employee theft.
4. Workplace cheating.
5. Violating corporate Internet policies.

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 CONFLICTING VALUES
Organizations may have two value systems that
conflict.
1. The value system stressing financial
performance.
2. The value system stressing cohesion and
solidarity in employee relationships.

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 FOUR APPROACHES to RESOLVING ETHICAL DILEMMAS (1 of 4)

The utilitarian approach

• Guided by what will result in the greatest good for the
greatest number of people.
• Often associated with financial performance.

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FOUR APPROACHES to DECIDING ETHICAL DILEMMAS (2 of 4)

The individual approach

• Guided by what will result in the individual’s best long-
term interest, which ultimately is in everyone’s self-
interest.
• Assumes that people will act ethically in the short run to
avoid harm in the long run.
• Flaw is one person’s short-term gain may not be good for
everyone in the long term.

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FOUR APPROACHES to DECIDING ETHICAL DILEMMAS (3 of 4)

The moral-rights approach

• Guided by respect for the fundamental rights of human
beings: the right to life, liberty, privacy, health, safety, and
due process.
• For example, the U.S. Constitution’s Bill of Rights.

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FOUR APPROACHES to DECIDING ETHICAL DILEMMAS (4 of 4)

The justice approach

• Guided by respect for impartial standards of fairness and
equity.
• Policies administered impartially and fairly, regardless of
gender, age, sexual orientation, and the like.

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 QUESTION #4
Pat, a manager at State University, is deciding how to
set up a procedure for registering online that gives
students fair access to courses. Pat is engaged in the
______ approach.
A. utilitarian
B. individual
C. moral-rights
D. justice

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 The SARBANES–OXLEY REFORM ACT
White-collar crime
• Illegal trading, Ponzi schemes, and other white-collar
crimes dominated the headlines in the early 21st century.
Sarbanes-Oxley Act of 2002
• Established requirements for proper financial record
keeping for public companies.
• Penalties of as much as 25 years in prison for
noncompliance.

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 HOW DO PEOPLE LEARN ETHICS?
Kohlberg’s three levels of personal moral
development:
• Level 1, preconventional: follows rules to avoid
unpleasant consequences.
• Level 2, conventional: follows expectations of
others (most managers are at this level).
• Level 3, postconventional: guided by internal
values, they lead by example.

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 HOW ORGANIZATIONS CAN PROMOTE ETHICS

1. Create a strong ethical climate.

2. Screen prospective employees.

3. Institute ethics codes and training programs.

4. Reward ethical behavior: Protecting whistle-

blowers who report organizational misconduct.

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 The SOCIAL RESPONSIBILITIES REQUIRED of
YOU as a MANAGER

Social responsibility
• Manager’s duty to take actions that will benefit the
interests of society as well as of the organization.
Corporate social responsibility
• Notion that corporations are expected to go above and
beyond following the law and making a profit.

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 CARROLL’S GLOBAL CORPORATE SOCIAL
RESPONSIBILITY PYRAMID

Figure 3.3
Source: A. Carroll,
“Managing
Ethically and Global
Stakeholders: A
Present and Future
Challenge,”
Academy of
Management
Executive, May
2004, p. 116.

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 TYPES of SOCIAL RESPONSIBILITY (1 of 2)
Sustainability
• Economic development that
meets the needs of the
present without
compromising the ability of
future generations to meet
their own needs.
Natural Capital
• The value of natural
resources, such as topsoil, air,
water, and genetic diversity,
which humans depend on.
• 2016 poll: 70% of Americans
believe climate change
causes extreme weather, a
rise in sea level.
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 TYPES of SOCIAL RESPONSIBILITY (2 of 2)
Philanthropy
• Making charitable donations to benefit humankind.

• “He who dies rich dies thus disgraced,” Andrew Carnegie.

• 136 billionaires have joined Bill and Melinda Gates in the

Giving Pledge; a commitment to dedicate a majority of
their wealth to philanthropy.

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 HOW DOES BEING GOOD PAY OFF?

From Table 3.1 OUTCOMES RESEARCH FINDINGS

Employees • Millennials more likely to stay with a company when
management is committed to helping society.
Interpersonal • Employees feel confident in doing the right thing when
relationships faced with an ethical situation when the organization has
an effective ethics and compliance culture.
Customers • Believe it’s important to purchase from socially
responsible companies.
Profits • Companies ranked as “America’s Best Corporate
Citizens” by Forbes, outperform their competition by 1 to 4
percentage points.

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 CORPORATE GOVERNANCE
How can I trust a company is doing the right thing?
• The company is governed so that the interests of
corporate owners and other stakeholders are protected.
• More attention paid to strengthening corporate
governance so that directors are clearly separated in
their authority from the CEO.

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 CAREER
CORNER MODEL of CAREER READINESS

Figure 3.4

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 CAREER
CORNER
MANAGING YOUR CAREER
READINESS (1 of 2)
Focus on the greater good and on being more ethical.
1. Reduce your carbon footprint.
2. Foster positive emotions in yourself and others.
3. Spend time in nature.
4. Get the proper amount of sleep.
5. Increase your level of exercise.
6. Expand your awareness of social realities.
7. Fulfill your promises and keep appointments.
8. Avoid people who lack integrity.

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 CAREER MANAGING YOUR CAREER
CORNER
READINESS (2 of 2)
Become an Ethical Consumer.
1. Purchase Fair Trade items.
2. Bring your own grocery bags.
3. Don’t purchase items that aren’t ethically made or
sourced.
4. Don’t buy knockoffs.

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