IOM-MODULE-5 Social Responsibility and Managerial Ethics PDF

# Module 5 - Social Responsibility and Managerial Ethics ## A. Module Number Module 5 ## B. Time Frame 2 weeks - 6 hours (Week 10 & 11) ## I. Desired Learning Outcomes At the end of this module, the learner should be able to: 1. Contrast the classical and socioeconomic views of social responsib...

# Module 5 - Social Responsibility and Managerial Ethics ## A. Module Number Module 5 ## B. Time Frame 2 weeks - 6 hours (Week 10 & 11) ## I. Desired Learning Outcomes At the end of this module, the learner should be able to: 1. Contrast the classical and socioeconomic views of social responsibility. 2. Discuss the role that stakeholders play in the four stages of social responsibility. 3. Differentiate between social obligation, social responsiveness, and social responsibility. 4. Explain what research studies have shown about the relationship between an organization's social involvement and its economic performance. 5. Define social screening. 6. Explain what conclusion can be reached regarding social responsibility and economic performance. 7. Describe how organizations can go green. 8. Relate the approaches to being green to the concepts of social obligation, social responsiveness, and social responsibility. 9. Discuss what purposes shared values serve. 10. Describe the relationship of values-based management to ethics. 11. Discuss the factors that affect ethical and unethical behavior. 12. Describe the important roles managers play in encouraging ethical behavior. 13. Explain why ethical leadership is important. 14. Discuss how managers and organizations can protect employees who raise ethical issues or concerns. 15. Explain what role social entrepreneurs play. 16. Describe social impact management. ## II. Content/Discussion ### What Is Social Responsibility? #### The Classical View * Management's only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation). * Expending the firm's resources on doing "social good" unjustifiably increases costs that lower profits to the owners and raises prices to consumers. #### The Socioeconomic View * Management's social responsibility goes beyond making profits to include protecting and improving society's welfare. * Corporations are not independent entities responsible only to stockholders. * Firms have a moral responsibility to larger society to become involved in social, legal, and political issues. * "To do the right thing." ### To Whom is Management Responsible? | Lesser Social Responsibility | Greater Social Responsibility | |---|---|---| | Stage 1: Owners and Management | Stage 2: Employees | Stage 3: Constituents in the Specific Environment | Stage 4: Broader Society | ### Arguments For and Against Social Responsibility #### For * Public expectations * Long-run profits * Ethical obligation * Public image * Better environment * Discouragement of further governmental regulation * Balance of responsibility and power * Stockholder interests * Possession of resources * Superiority of prevention over cure #### Against * Violation of profit maximization * Dilution of purpose * Costs * Too much power * Lack of skills * Lack of accountability ### From Obligation to Responsiveness to Responsibility * **Social Obligation:** The obligation of a business to meet its economic and legal responsibilities and nothing more. * **Social Responsiveness:** When a firm engages in social actions in response to some popular social need. * **Social Responsibility:** A business's intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. ### Social Responsibility versus Social Responsiveness | Social Responsibility | Social Responsiveness | |---|---| | Major consideration: Ethical | Focus: Ends | Emphasis: Obligation | Decision framework: Long term | Pragmatic | Means | Responses | Medium and short term | ### Does Social Responsibility Pay? * Studies appear to show a positive relationship between social involvement and the economic performance of firms. * Difficulties in defining and measuring "social responsibility" and "economic performance raise issues of validity and causation in the studies. * Mutual funds using social screening in investment decisions slightly outperformed other mutual funds. * A general conclusion is that a firm's social actions do not harm its long-term performance. ### The Greening of Management * The recognition of the close link between an organization's decision and activities and its impact on the natural environment. * Global environmental problems facing managers: * Air, water, and soil pollution from toxic wastes * Global warming from greenhouse gas emissions * Natural resource depletion ### How Organizations Go Green * **Legal (or Light Green) Approach:** Firms simply do what is legally required by obeying laws, rules, and regulations willingly and without legal challenge. * **Market Approach:** Firms respond to the preferences of their customers for environmentally friendly products. * **Stakeholder Approach:** Firms work to meet the environmental demands of multiple stakeholders - employees, suppliers, and the community. * **Activist Approach:** Firms look for ways to respect and preserve environment and be actively socially responsible. ### Approaches to Being Green | | Environmental Sensitivity | |---|---| | Low | Legal Approach (Light Green) | Market Approach | Stakeholder Approach | High: Activist Approach (Dark Green) | ### Evaluating the Greening of Management Organizations become "greener" by: * Using the Sustainability Reporting Guidelines to document "green" actions. * Adopting ISO 14001 standards for environmental management. * Being named as one of the 100 Most Sustainable Corporations in the World. ### Values-Based Management * **Values-Based Management:** An approach to managing in which managers establish and uphold an organization's shared values. ### The Purposes of Shared Values * Guiding managerial decisions * Shaping employee behavior * Influencing the direction of marketing efforts * Building team spirit ### The Bottom Line on Shared Corporate Values * An organization's values are reflected in the decisions and actions of its employees. ### Purposes of Shared Values ``` SHARED ORGANIZATIONAL VALUES Guide Managers' Decisions and Actions <------> Shape Employee Behavior <------> Influence Marketing Efforts <------> Build Team Spirit ``` ### Managerial Ethics * **Ethics Defined:** Principles, values, and beliefs that define what is right and wrong behavior. ### Factors That Affect Ethical and Unethical Behavior ``` Ethical Dilemma <------> Stage of Moral Development <------> Individual Characteristics <------> Issue Intensity <------> Moderators <------> Ethical/Unethical Behavior Structural Variables <------> Organizational Culture ``` ### Factors That Affect Employee Ethics * **Moral Development:** A measure of independence from outside influences - Principled level - Stage of moral development interacts with: * Individual characteristics * The organization's structural design * The organization's culture * The intensity of the ethical issue ### Stages of Moral Development | Level | Description of Stage | |---|---| | Principled | 6. Following self-chosen ethical principles even if they violate the law. <br> 5. Valuing rights of others and upholding absolute values and rights regardless of the majority's opinion. | | Conventional | 4. Maintaining conventional order by fulfilling obligations to which you have agreed. <br> 3. Living up to what is expected by people close to you. | | Preconventional | 2. Following rules only when doing so is in your immediate interest. <br> 1. Sticking to rules to avoid physical punishment. | ### Moral Development * **Research Conclusions:** * People proceed through the stages of moral development sequentially. * There is no guarantee of continued moral development. * Most adults are in Stage 4 ("good corporate citizen"). ### Determinants of Issue Intensity ``` How much agreement is there that this action is wrong? How many people will be harmed? How concentrated is the effect of the action on the victims? Greatness of Harm <------> Consensus of Wrong <------> Issue Intensity <------> Proximity to <------> Victim(s) <------> Probability <------> of Harm <------> Immediacy of <------> Consequences <------> How close are the potential victims? How likely is it that this action will cause harm? Will harm be felt immediately? ``` ### Ethics in an International Context * Ethical standards are not universal. * Social and cultural differences determine acceptable behaviors. * **Foreign Corrupt Practices Act:** Makes it illegal to corrupt a foreign official yet "token" payments to officials are permissible when doing so is an accepted practice in that country. ### The Global Compact * **Human Rights** * Principle 1: Support and respect the protection of international human rights within their sphere of influence. * Principle 2: Make sure business corporations are not complicit in human rights abuses. * **Labor Standards** * Principle 3: Freedom of association and the effective recognition of the right to collective bargaining. * Principle 4: The elimination of all forms of forced and compulsory labor. * Principle 5: The effective abolition of child labor. * Principle 6: The elimination of discrimination in respect of employment and occupation. * **Environment** * Principle 7: Support a precautionary approach to environmental challenges. * Principle 8: Undertake initiatives to promote greater environmental responsibility. * Principle 9: Encourage the development and diffusion of environmentally friendly technologies. ### How Managers Can Improve Ethical Behavior in An Organization 1. Hire individuals with high ethical standards. 2. Establish codes of ethics and decision rules. 3. Lead by example. 4. Set realistic job goals and include ethics in performance appraisals. 5. Provide ethics training. 6. Conduct independent social audits. 7. Provide support for individuals facing ethical dilemmas. ### The Value of Ethics Training * Can make a difference in ethical behaviors. * Increases employee awareness of ethical issues in business decisions. * Clarifies and reinforces the organization's standards of conduct. * Helps employees become more confident that they will have the organization's support when taking unpopular but ethically correct stances. ### Clusters of Variables Found in 83 Corporate Codes of Business Ethics **Cluster 1: Be a Dependable Organizational Citizen** 1. Comply with safety, health, and security regulations. 2. Demonstrate courtesy, respect, honesty, and fairness. 3. Illegal drugs and alcohol at work are prohibited. 4. Manage personal finances well. 5. Exhibit good attendance and punctuality. 6. Follow directives of supervisors. 7. Do not use abusive language. 8. Dress in business attire. 9. Firearms at work are prohibited. **Cluster 2: Do Not Do Anything Unlawful or Improper That Will Harm the Organization** 1. Conduct business in compliance with all laws. 2. Payments for unlawful purposes are prohibited. 3. Bribes are prohibited. 4. Avoid outside activities that impair duties. 5. Maintain confidentiality of records. 6. Comply with all antitrust and trade regulations. 7. Comply with all accounting rules and controls. 8. Do not use company property for personal benefit. 9. Employees are personally accountable for company funds. 10. Do not propagate false or misleading information. 11. Make decisions without regard for personal gain. **Cluster 3: Be Good to Customers** 1. Convey true claims in product advertisements. 2. Perform assigned duties to the best of your ability. 3. Provide products and services of the highest quality. ### Twelve Questions for Examining the Ethics of a Business Decision 1. Have you defined the problem accurately? 2. How would you define the problem if you stood on the other side of the fence? 3. How did this situation occur in the first place? 4. To whom and to what do you give your loyalty as a person and as a member of the corporation? 5. What is your intention in making this decision? 6. How does this intention compare with the probable results? 7. Whom could your decision or action injure? 8. Can you discuss the problem with the affected parties before you make the decision? 9. Are you confident that your position will be as valid over a long period of time as it seems now? 10. Could you disclose without qualm your decision or action to your boss, your chief executive officer, the board of directors, your family, society as a whole? 11. What is the symbolic potential of your action if understood? If misunderstood? 12. Under what conditions would you allow exceptions to your stand. ### Effective Use of a Code of Ethics - Develop a code of ethics as a guide in handling ethical dilemmas in decision making. - Communicate the code regularly to all employees. - Have all levels of management continually reaffirm the importance of the ethics code and the organization's commitment to the code. - Publicly reprimand and consistently discipline those who break the code. ### Ethical Leadership * Managers must provide a good role model by: - Being ethical and honest at all times. - Telling the truth; don't hide or manipulate information. - Admitting failure and not trying to cover it up. - Communicating shared ethical values to employees through symbols, stories, and slogans. - Rewarding employees who behave ethically and punish those who do not. - Protecting employees (whistleblowers) who bring to light unethical behaviors or raise ethical issues. ### Managing Ethical Lapses and Social Irresponsibility * Provide ethical leadership * Protect employees who raise ethical issues (whistle-blowers) ### Awareness of Social Issues * **Social Entrepreneurs:** Are individuals or organizations who seek out opportunities to improve society by using practical, innovative, and sustainable approaches. Want to make the world a better place and have a driving passion to make that happen. * **Social Impact Management:** Is the field of inquiry at the intersection of business practice and wider societal concerns that reflects and respects the complex interdependency of those two realities. Seeks to answer the question of how to go about increasing managers' awareness within their decision-making processes of how society is impacted by the conduct and activities of their firms. ### References 1. Robbins, S. P., & Coulter, M. K. (2006). Management (9th ed.). Pearson College Div. 2. Robbins, S. P. (2011). Management: Concepts and applications (10th ed.). Pearson Education Canada. 3. Robbins, S. P., & Coulter, M. K. (2017). Management (14th ed.). Pearson.