Contemporary management

issues
(Business Ethics, corporate and
social responsibility)

GBS 550 – Management Theory & Practice

 Outline
• Ethics
• Corporate Social responsibility
• Corporate governance
 Lesson outcome
• Describe what ‘ethics’ means in business
terms
• Present reason why organisations should
behave ethically
• Explain what ethical decision making entails
 Introduction
• This lesson deals with ethics, CSR as much debated
contemporary management issues in Zambia, Africa &
world wide
• Why the debate? The actions of organisations affect the
prosperity of all stakeholders and the health of people
and the environment in which they operate
• Organisations and managers have area or potential
impact on a wide variety of issues that extend beyond
normal business & which affect individuals, communities,
the environment, countries & the entire world
 Introduction
• Do business decisions have an ethical component?
• What is the appropriate balance between profits
and the public good?
• The public is wary of the abuse of power and the
betrayal of trust, and business managers and
managers of all types of organisations are
expected to make a wide variety of economic and
social contributions.
• See examples -
 Cases
• Zambeef
• KCM
• Shoprite
• Case of asbestos at Manville – inhalation of
asbestos components was a major cause of
asbestosis, a fatal lung diseases; Favoring
Profits over Health of Workers
 The Ethical dimension of management

• Highly publicized accounts of corporate

misconduct in recent years have led to
widespread cynicism about business ethics.
• What sort of role models do senior-level
business executives as powerful people make?
 Definition of Ethics
• Where does ethics fall? Prescribed law vs free
Choice
• Definition: Ethics
– Is the study of moral obligation involving the
distinction between right and wrong
• Business Ethics
– The study of the complex business practices and
behaviors that give rise to ethical issues in
organizations
 Business Ethics
• Business ethics is concerned with truth and justice,
and has a variety of aspects, such as the expectations
of society, fair competition, advertising, public
relations, social responsibility, consumer autonomy,
and corporate behaviour
• Business ethics examines ethical principles and
morals that can arise in a business environment
• Business ethics promote non-economic values under
a variety of headings (e.g. ethics code, social
responsibility, charters)

9
 Business Ethics
• In this section, we want to look at the ethical dimension of
managerial decisions.
• Many decisions that managers make require looking at the
ethical dimension of managerial decisions.
• Many decisions that managers make require them to consider
who may be affected in terms of the results as well as the
process.
• We will consider four different views of ethics and look at the
factors that influence a manager’s ethics. We will conclude by
offering some suggestions for what organisations can do to
improve the ethical behaviour of employees.
 Four Different Approaches to Ethical decision-making

• Utilitarian approach
• Rights approach
• Theory of Justice approach
• Integrative social contracts approach
 Utilitarian view of ethics

• Decisions are made solely on the basis of their outcomes or consequences.

• A manager studies the effects of a particular action on the people directly affected by
it and takes a decision that will benefit most people
• The goal of utilitarianism is to provide the greatest good for the greatest number.
• Following the utilitarian view, a manager can conclude that laying off 20 percent of
the workforce in her plant is justified because it will increase the plant’s profitability,
improve job security for the remaining 80 percent, and be in the best interest of
stockholders.
• On the one hand, utilitarianism encourages efficiency and productivity and is
consistence with the goal of profit maximization.
• On the other hand, however, it can result in biased allocations of resources,
especially when some of those affected by the decision lack representation or a voice
in the decision.
• Utilitarian can also result in the rights of some stakeholders (minority) being ignored.
 Rights view of ethics

• According to the human rights approach, the individual is entitled to

fundamental freedom and rights that another cannot take away
• An ethically correct decision is one that protects the rights of those affected
by it (e.g. human rights, bill of rights)
• This position is concerned with respecting and protecting individual liberties
and privilege, including the rights to privacy freedom of conscience, free
speech, and due process.
• This would include for example, protecting the rights of employees to free
speech when they report violations of laws by their employers.
• The positive side of the rights perspective is that it protects individuals’
freedom and privacy.
• But it has a negative side in organisations. It can present obstacles to high
productivity and efficiency by creating a work that is more concerned with
legally protecting individual’s rights than getting the job done.
 Theory of Justice approach

• States that ethical decisions are equitable, fair, and impartial

distribution of benefits and costs among individuals and groups
• This calls for managers to impose and enforce rules fairly and
impartially.
• A manager would be using a theory-of justice perspective in deciding to
pay a new entry-level employee K7.50 an hour over the minimum wage
because he or she believes that the minimum wage is inadequate to
allow employees to meet their basic financial obligations.
• Imposing standards of justice also comes with pluses and minuses.
• It protects the interests of those stakeholders who may be under
represented or lack of power; but it can encourage a sense of
entitlement that might make employees reduce risk taking, innovation,
and productivity.
 Integrative social contracts theory

• This view proposes combining empirical (what is) and

normative (what should be) approaches to business ethics.
• This view of ethics is based on the integration of two
“contracts”: the general social contract among economic
participants that defines the ground rule for doing business
and a more specific contract among specific members of a
community that covers the acceptable ways of behaving.
• This view of business ethics differ from the other three in
that it suggests managers need to look at existing ethical
norms in industries and corporations in order to determine
what is right and wrong.
 What's the best ethical approach?
• Capitalists and managers follow utilitarian approach
• However, the emphasis on individual rights and social
justices forcing managers to use new approaches
• Maintain right balance depending situation &
stakeholders
• Shortcut ethical test – based on common sense
• Treat others as you would want to be treated
• Intuition ethics – people have a moral sense of what is
right or wrong
 Ethical Issues in organisations
• Many people with limited business experience find
themselves making decision about product quality,
advertising, pricing, hiring practices, and pollution control
• The values learn from family, church, and school may not
provide specific guidelines for these complex business
decisions
• Examples?
Is a particular advertisement deceptive?
Should a gift from a customer be considered a bribe, or is it a
special promotional incentive?
• Many business ethics decisions are close calls.
 Practical Lessons From Business Ethics
Research
• a) Ethical Hot Spots: Research reveals that
employees from all levels across industries
performed at least one illegal or unethical act from a
list of 25 questionable practices. E.g calling sick when
well, cheating on expenses accounts, forging
signatures, and giving or accept in kickbacks, to
ignoring violation of environmental laws.
• The top 10 workplace hot spots responsible for
triggering unethical and illegal conduct are:
 Practical Lessons from
Business Ethics Research
• Ethical Hot Spots – Need to meet sales,
– Balancing work and budget, or profit goals
family – Little or no
– Poor internal recognition of
communications achievements
– Poor leadership – Company politics
– Work hours, work – Personal financial
load worries
– Lack of management – Insufficient resources
support
 Practical Lessons From Business Ethics
Research (Cont’d)
• (b) Pressure from Above
– A number of studies have uncovered the problem of superiors
pressuring subordinates to achieve results is widespread. (E.g.
Walt Pavlo, Zambeef)
• Excessive pressure to achieve results is a serious problem,
because it can cause otherwise good and decent people to take
ethical shortcuts just to keep their jobs.
• The challenge for managers is to know where to draw the line
between motivation to excel and undue pressure.
– Managers’ responses to pressure from above
1. Consciously avoid putting undue pressure on subordinates
(who may act unethically to relieve the pressure).
2. Prepare to deal with excessive organizational pressure.
 Practical Lessons From Business Ethics
Research (Cont’d)
• c) Ambiguous Situations: These are situations
in which there are no clear-cut ethical
guidelines. Ethical codes can satisfy this need
for guidelines.
• Surveys of purchasing managers and field sales
personnel showed that the respondents were
uncomfortable with ambiguous situations in
which there were no clear-cut ethical
guidelines.
 Practical Lessons From Business Ethics
Research (Cont’d)
• d) A Call to Action: Each manager needs to
understand her own personal code of ethics: what
is fair; what is right; what is wrong? Where is the
ethical line that I draw, the line beyond which I
shall not go? And where is the line beyond which I
shall not allow my organization to go?
• Rationalization: How Good People End Up Doing
Bad Things
– Perceiving an objectively questionable action as normal
and acceptable
How Employees Tend to Rationalize Unethical
Conduct
Personal Values as Ethical Anchors
• Definition: Values are abstract ideals that shape an individual's
thinking and behaviour.
• (Rokeach, 1973) (pp.5) defined value as “an enduring belief that a
specific mode of conduct or end-state of existence is personally or
socially preferable to an opposite or converse mode of conduct or
end-state of existence.”
• Schwartz et al., (2001) view values as desirable, transitional goals,
varying in importance, which serve as guiding principles in
people’s lives.
• Personal values play a pivotal role in managerial decision making
and ethics.
• Instrumental and Terminal Values
Instrumental and Terminal Values
• Def.: An instrumental value is an enduring belief that a certain
way of behaving is appropriate in all situations (e.g. honesty).
• Def.: A terminal value is an enduring belief that a certain end-
state of existence is worth striving for and attaining (e.g.
freedom).
• Individual value systems are like fingerprints, hence each one
of us has a unique set.
• This is because a person can hold a number of different
instrumental and terminal values. Thus, it is important that
each person identifies his own values and rank them
accordingly.
Personal Values as Ethical Anchors
• Values
– Abstract ideals that shape one’s thinking and behavior
• Instrumental value: Enduring belief that a certain way
(mode) of behaving is appropriate in all situations
• Terminal value: Enduring belief that a certain end-state of
existence (being admired) is worth striving for
• Identifying Your Own Values
– Basic personal values are taken for granted.
– They are not arranged consciously in order of priority.
 Managerial Ranking of Values
• Terminal Values • Instrumental Values
– Self-respect – Honesty
– Family security – Responsibility
– Freedom – Capability
– A sense of – Ambition
accomplishment – Independence
– Happiness
Schwartz’s value theory
 Schwartz’s value theory
Table 1
Definitions of Motivational Types of Values in Terms of their Goals and the Single Values that Represent Them

Power: Social status and prestige, control or dominance over people and resources (social power security, authority, wealth, preserving my
public image)
Achievement: Personal success through demonstrating competence according to social standards (successful, capable, ambitious,
influential)
Hedonism: Pleasure and sensuous gratification for oneself (pleasure, enjoying life)
Stimulation: Excitement, novelty, and challenge in life (darling, a varied life, an exciting life)
Self-direction: Independent thought and action choosing, creating, exploring (creativity, freedom, independent, curious, choosing own
goals)
Universalism: Understanding, appreciation, tolerance, and protection for the welfare of all people and for nature (broad-minded, wisdom,
social justice, equality, a world at peace, a world of beauty, unity with nature, protecting the environment)
Benevolence: Preservation and enhancement of the welfare of people with whom one is in frequent personal contact (helpful, honest,
forgiving, loyal, responsible)
Tradition: Respect, commitment, and acceptance of the customs and ideas that traditional culture or religion provide the self (humble,
accepting my portion in life, devout, respect for tradition, moderate)
Conformity: Restraint of actions, inclinations, and impulses likely to upset or harm others and violate social expectations or norms
(politeness, obedient, self-discipline, honoring parents and elders)
Security: Safety, harmony, and stability of society, or relationships, and of self (family security, national security, social order, clean,
reciprocation of favors)
 General Ethical Principles
• Like your highly personalized value system, your ethical beliefs have been
shaped by many factors, including (1) family and friends, (2) the media, (3)
culture, (4) schooling, (5) religious instructions, and (6) general life
experiences.
• Ten ethical principles (generally unstated taken-for-granted ethical beliefs) are
 self-interests,
personal virtues,
religious injunctions,
 government requirements –
utilitarian benefits,
universal rules,
individual rights,
 economic efficiency,
distributive justice and contributive liberty.
 General Ethical Principles
• 1. Self-interests. “Never take any action that is not in the long-term self-
interests of yourself and/or of the organization to which you belong.”
• 2. Personal virtues. “Never take any action that is not honest, open,
and truthful and that you would not be proud to see reported idely in
national newspapers and on television.”
• 3. Religious injunctions. “Never take any action that is not kind and that
does not build a sense of community, a sense of all of us working
together for a commonly accepted goal.”
• 4. Government requirements. “Never take any action that violates the
law, for the law represents the minimal moral standards of our society.”
• 5. Utilitarian benefits. “Never take any action that does not result in
greater good than harm for the society of which you are a part.”
 General Ethical Principles
• 6. Universal rules. “Never take any action that you would not be
willing to see others, faced with the same or a closely similar
situation, also be free to take.”
• 7. Individual rights. “Never take any action that abridges the
agreed-upon and accepted rights of others.”
• 8. Economic efficiency. “Always act to maximize profits subject to
legal and market constraints, for maximum profits are the sign of
the most efficient production.”
• 9. Distributive justice. “Never take any action in which the least
[fortunate people] among us are harmed in some way.”
• 10. Contributive liberty. “Never take any action that will interfere
with the right of all of us [to] self development and self-fulfillment.”
 Encouraging Ethical Conduct
• Four specific ways to encourage ethical
conduct within the organization are:
1. Ethics training
2. Ethical advocates
3. Ethics codes
4. Whistle-Blowing
 Ethics training

• Managers lacking ethical awareness are called

amoral: neither moral nor immoral, but
indifferent to the ethical implications of their
actions. Since managers in this category far
outnumber moral or immoral managers, there
is a great need for ethics training.
 Ethical advocates

• Def.: 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.
• This person may also be asked to sit in on top-
management decision deliberations.
• The idea is to assign someone the specific role
of critical questioner (Refer to the Table has
some recommended questions).
Twelve Questions for Examining the Ethics of
a Business Decision
 Ethics codes

• Def.: An organizational code of ethics is a published

statement of moral expectations for employee conduct.
• Some codes specify penalties for offenders.
• To encourage ethical conduct, formal codes of ethics for
organization members must satisfy two requirements.
• First, they should refer to specific practices such as
kickbacks, payoffs, receiving gifts, record falsification, and
misleading claims about products.
• Second, they must be firmly supported by top management
and equitably enforced through the reward-and-punishment
system. `
 Whistle-blowing

• Def.: Whistle-blowing is the practice of reporting perceived unethical practices to

outsiders such as the news media, government agencies, or public-interest groups.
• Not surprisingly, many managers believe that whistle-blowing erodes their
authority and decision-making prerogatives. Because loyalty to the organization is
still a cherished value in some quarters, whistle-blowing is criticized as the epitome
of disloyalty. Whistle-blowing generally means putting one‟s job and/or career on
the line. The challenge for today‟s management is to create an organizational
climate in which the need to blow the whistle is reduced.
• Constructive steps include: encourage the free expression of controversial and
dissenting views; 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; and, recognize that the harsh treatment of a whistle-blower will
probably lead to adverse public opinion.
 Toward Improving Ethical Behaviour

• Selection
• Codes of Ethics and Decisions Rules
• Top Management’s Leadership
• Job Goals
• Ethics Training
• Comprehensive Performance Appraisal
• Independent Social Audits
• Formal Protective Mechanisms
Steps in the ethical decision-making process

• 1. identify the problem (QC drugs for pregnant)

• 2. determine whose interest are involved
• 3. Determine the relevant facts
• 4. determine the expectations of those involved
• 5. weigh up the various interest
• 6. determine the range of choices
• 7. determine the consequences of these choices for
those involved
• 8. make your choices
 Summary
• Ethics research indicates that many employees have
acted unethically, have been pressured to act
unethically, desire ethical standards, and engage in
rationalization to defend their behaviors.
• Managers must pay attention to the instrumental and
terminal values that comprise employee’s personal
value systems.
• There are at least ten general ethical principles that
guide behavior.
• The typical manager is considered to be amoral.
 Discussion Questions
• What can an organisation do to ensure ethical
decision-making?
• Write an essay on the management of ethics
in an organisation. In your essay explain which
approach, in your view, would be the most
effective for shaping long-term ethical
behaviour in an organisation.