NEW ERA OF

MANAGEMENT

RICHARD L. DAFT
10th edition
ETHICS AND SOCIAL
RESPONSIBILITY

CHAPTER 05
Chapter5 Learning Plan
I. What Is Managerial Ethics? VII. Evaluating Corporate Social
Responsibility
II. Ethical Management Today A. Economic Responsibilities
B. Legal Responsibilities
C. Ethical Responsibilities
III. Ethical Dilemma D. Discretionary Responsibilities

IV. Criteria for Ethical Decision Making VIII. Managing Company Ethics and Social
Responsibility
A. Code of Ethics
V. Manager Ethical Choices B. Ethical Structures
C. Whistle-Blowing

VI. What Is Social Responsibility? IX. The Business case for Ethics and Social
A. Organizational Stakeholders Responsibility
B. The Green Movement

3
Principles of Management_Teamwork
Chapter5 Learning Objectives
 Define ethics and explain how ethical behavior relates to
behavior governed by law and free choice.

 Explain the utilitarian, individualism, moral-rights, and justice

approaches for evaluating ethical behavior.

 Describe how both individual and organizational factors

shape ethical decision making.

 Define corporate social responsibility and how to evaluate it

along economic, legal, ethical, and discretionary criteria.
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Chapter5 Learning Objectives (contd.)
 Describe four organizational approaches to environmental
responsibility, and explain the philosophy of sustainability.

 Discuss how ethical organizations are created through

ethical leadership and organizational structures and
systems.

 Identify important stakeholders for an organization and

discuss how managers balance the interests of various
stakeholders.

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Chapter5 PART 1
• MANAGERIAL ETHICS

6
Copyright ©2010 by South-Western, a division of Cengage
Learning.  All rights reserved.
 I. What is Managerial
Chapter5
Ethics?
 Ethics is the code of moral principles and values
that govern the behaviors of a person or group
with respect to what is right or wrong.

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 I. What is Managerial
Chapter5
Ethics?
 An ethical issue is present in any situation when
the actions of an individual or organization may
harm or benefit others
 Managers sometimes need courage to stand up
and do the right thing
 Ethics is about making choices

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 Three Domains of Human
Chapter5
Action

Domain of Codified Law Domain of Ethics Domain of Free Choice

(Legal Standard) (Social Standard) (Personal Standard)

Amount of

Explicit Control
High Low

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 II. Ethical Management Today
Chapter5
Toward Customers
False or deceptive sales
Submitting misleading
invoices
Fabricating product quality
data

Toward Employees Toward Financiers

Discriminating against
employees Falsifying financial reports
Creating a hostile work Breaching database controls
environment Using confidential information
Violating health and safety rules

Toward Suppliers Toward Society

Accepting favors or kickbacks
Violating contract terms
Paying without accurate records
or invoice
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Violating environmental
standards
Exposing public to safety risks
Violating international human
rights
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Adapted from Daft, 2012
Chapter5 III. Ethical Dilemma
• DILEMMAS: WHAT WOULD YOU DO?

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Adapted from Daft, 2012
Chapter5 III. Ethical Dilemma

• A situation that arises when all alternative

choices or behaviors have been deemed
undesirable because...

• Of potentially negative ethical consequences,

making it difficult to distinguish right from wrong

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Adapted from Daft, 2012
 IV. Criteria For Ethical
Chapter5 Decision Making
Most ethical dilemmas involve
Conflict between needs of the part & whole
- Individual versus the organization
- Organization versus society as a whole

Managers benefit from a normative strategy

to guide their decision making - norms and
values
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Chapter5 Ethical Decision Making
Approaches
• Utilitarian Approach: Moral behavior produces the
greatest good for the greatest number
• Individualism Approach: Acts are moral when they
promote the individual's best long-term interests,
which ultimately leads to the greater good
• Moral-Rights Approach: Humans have fundamental
rights and liberties that cannot be taken by an
individual’s decision
• Justice Approach: Moral decisions must be based on
standards of equity, fairness and impartiality
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Adapted from Daft, 2012
Chapter5 Utilitarian Approach

 Moral behavior produces the greatest good for

the greatest number

 A decision maker is expected to consider the

effect of each decision alternative on all parties
and select the one that optimizes the benefits for
the greatest numbers of people

 Example – recent trend among companies to

monitor employee use of the Internet

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Adapted from Daft, 2012
Chapter5 Individualism Approach

● Acts are moral when they promote the individual's

best long-term interests, which ultimately leads to
the greater good
● Individual self-direction paramount
● Individualism is believed to lead to honesty &
integrity since that works best in the long run
● However, top executives from WorldCom, Enron,
Tyco demonstrate flaws of approach

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Chapter5 Moral-Rights Approach

• Moral decisions are those that best maintain

the rights of those people affected by them.
• An ethical decision is one that avoids
interfering with the fundamental rights of
others.
• E.g.. To monitor employee’s nonwork
activities violates the right to privacy

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Adapted from Daft, 2012
Chapter5 Six Moral Rights

1. The right of free consent

2. The right to privacy
3. The right of freedom of conscience
4. The right of free speech
5. The right to due process
6. The right to life and safety

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Chapter5 Justice Approach

Moral Decisions must be based on standards of

equity, fairness, impartiality

Three types of Justice Approaches:

 Distributive Justice
 Procedural Justice
 Compensatory Justice

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Adapted from Daft, 2012
Chapter5 Justice Approach

Distributive Justice
• Different treatment of people should not be
based on arbitrary characteristics
• In case of substantive differences, people should
be treated differently in proportion to the
differences among them

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Chapter5 Justice Approach

Procedural Justice
• Rules should be clearly stated

• Rules should be consistently and impartially

enforced

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Chapter5 Justice Approach

Compensatory Justice
● Individuals should be compensated for the cost of
their injuries by the party responsible

● Individuals should not be held responsible for

matters they have no control over

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Chapter5 Virtue Ethics Approach

● The moral behavior stems from personal virtues

● Managers develop their ability to do the right

thing and motivation to do right rather than wrong

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Chapter5 Practical Approach

● Sidesteps debates about what is right, good, or

just, and bases decisions on prevailing standards
of the profession and the larger society, taking
the interests of all stakeholders into account

● Managers may combine elements of the

utilitarian, moral rights, justice, and virtue ethics
approaches in their thinking and decision making

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V. Manager Ethical Choices
• The Manager
• Levels or stages of moral
development
• Pre-conventional
• Conventional
• Post-conventional

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 Levels of Personal Moral Development
Chapter5

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Chapter5 The Organization

• Rarely can ethical or unethical corporate actions be

attributed solely to the personal values of a single
manager
• Values adopted within the organization are highly
important
• Most people believe their duty is to fulfill obligations
and expectations of others

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Chapter5 Questions
1. Develop the topic: Green Environment and
Ethical Issues in Vietnam
2. Analyze ethical issues in the drug Market.
3. Choose a company and analyze ethical issues
of its industry and organization
4. Distribution market and its ethics and Social
responsibility
5. Choose a company and analyze social
responsibility
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Chapter5 VI. What is Corporate
Social Responsibility

• Organization’s obligation to make decisions and

take actions that will enhance the welfare and
interests of society and organization
• Being a good corporate citizen
• Difficulty in understanding – issues can be
ambiguous with respect to right and wrong

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Chapter5 Organizational Stakeholders

• Any group within or outside the organization

that has a stake in the organization’s
performance
• Each stakeholder
– Has a different criterion of responsiveness
– Has a different interest in the company

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Chapter5 The Green Movement

• Is a special interest group of particular importance

today
• Sustainability refers to economic development that
generates wealth and meets the needs of the
current population while preserving the environment
for the needs of future generations (General
Electric, Nike, Wal-Mart, interface)

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 Environmental Responsibility
Chapter5 Commitment
The Shades of Corporate Green
To search for ways to
Activist conserve the Earth’s
Approach resources

to answer the
Stakeholder environmental concerns of
Approach
various stakeholder groups

a growing awareness of and

Market Approach sensitivity to environmental
concerns, primarily to satisfy
customers

To do only what is
Legal Approach necessary to satisfy legal
requirements

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 VII. Evaluating Corporate
Chapter5 Social Responsibility

A. Economic responsibilities
B. Legal responsibilities
C. Ethical responsibilities
D. Discretionary responsibilities

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Chapter5

Defines what society

is purely voluntary
deems acceptable
includes behaviors and guided by a
with respect to
Profit maximizing not necessarily being company’s desire to
appropriate corporate
codified into law and make social
view behavior
not serve the contributions not
(Milton Friedman) Businesses are
corporation’s direct mandated by
expected to fulfill their
economic interests economics, law, or
economic goals within
ethics
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Adapted from Daft, 2012
 VIII. Managing company Ethics &
Chapter5 Social Responsibility

A. Code of Ethics
B. Ethical Structures
C. Whittle- Blowing

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Chapter5 The Ethical Organization
The Three Pillars of an Ethical Organization

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Chapter5 VIII. Managing company Ethics &
Social Responsibility
– Code of ethics: a formal statement of the
company’s values concerning ethics and social issues.
Including two types:
 Principle‑based statements: designed to affect
corporate culture (define fundamental values, company
responsibilities, quality of products, and treatment of
employees)
 Policy‑based statements outline the procedures to be
used in specific ethical situations (marketing, conflicts
of interest, observance of laws, proprietary information,
political gifts, and equal opportunities)
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Adapted from Daft, 2012
 VIII. Managing company Ethics &
Chapter5 Social Responsibility

– Ethical structures: represent the various

systems, positions, and programs a company can
undertake to implement ethical behavior:
 An ethics committee: a group of executives
appointed to oversee the organization’s ethics by ruling
on questionable issues and disciplining violators.
 A chief ethics officer: a company executive who
oversees all aspects of ethics and legal compliance.
 Ethics training programs help employees deal with
ethical questions and translate the values stated in a
code of ethics into everyday behavior.
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Chapter5 VIII. Managing company
Ethics & Social Responsibility

– Whistle-Blowing: the disclosure

by an employee of illegal, immoral,
or illegitimate practices by the
organization

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 IX. The business case for ethics
Chapter5 and social responsibility

 the combination of a turbulent domestic environment, the

globalization of business, and the increasing public
scrutiny convinces many managers that paying attention
to ethics and social responsibility is as much of a
business issue as paying attention to costs, profits, and
growth
 Social responsibility efforts can be targeted in ways that
also benefit the business. Doing so makes good business
sense at the same time it builds the image of the
company as a good corporate citizen

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Chapter5 Practices (NEM 2012)
• Discussion questions:
Ethical Questions:
3, 8
CSR Questions: 4, 6

• Case for Critical Analysis:

Southern Discomfort (p.394)

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Chapter5Case Empress Luxury Lines

Q1- When determining what his obligations are to his subordinate, Kevin Pfeiffer,
what decision would Antonio Menlendez, most likely reach if he applied the
utilitarian approach to decision making? What conclusions would probably result
in if he employed the individualism approach?

Q2- Put yourself in Antonio’s position and decide realistically what you would do. Is
your response at a preconventional, conventional, or postconventional level of
moral development? How do you feel about your response?

Q3- If Antonio or Kevin were fired because they reported Empress’s fraud, would
they be justified in removing all traces of their employment at the cruise line from
their resumes so they don’t have to explain to a prospective employer why they
were fired? Why or Why not?

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