Contemporary Management Chapter 4 Ethics and Social Responsibility PDF

Because learning changes everything. ® Chapter 4 Ethics and Social Responsibility © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of M...

Because learning changes everything. ® Chapter 4 Ethics and Social Responsibility © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.  Learning Objectives 1 1. Explain the relationship between ethics and the law. 2. Differentiate between the claims of the different stakeholder groups affected by managers and their companies’ actions. 3. Describe four rules that can help companies and their managers act in ethical ways. © McGraw Hill 2  Learning Objectives 2 4. Discuss why it is important for managers to behave ethically. 5. Identify the four main sources of managerial ethics. 6. Distinguish among the four main approaches toward social responsibility that a company can take. © McGraw Hill 3  The Nature of Ethics 1 Ethical dilemma: The quandary people find themselves in when they have to decide if they should act in a way that might help another person or group even though doing so might go against their own self-interest. Example: Sharon is offered a high-paying sales position with a pharmaceutical company; however, she disagrees with the money these companies spend in lobbying and elections. © McGraw Hill 4  The Nature of Ethics 2 Ethics: The inner guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the right or appropriate way to behave. © McGraw Hill 5  Ethics and the Law There are no absolute or indisputable rules or principles that can be developed to decide if an action is ethical or unethical. Neither laws nor ethics are fixed principles. Ethical beliefs can change over time. © McGraw Hill 6  Changes in Ethics over Time Changing ethical beliefs influence the law. Examples: Marijuana use. Business behavior. Sometimes no laws are broken, yet are unethical. © McGraw Hill 7  Stakeholders and Ethics Stakeholders: The people and groups that supply a company with its productive resources and so have a claim on and stake in the company. Shareholders, managers, employees, suppliers and distributors, customers, and community, society, and the nation-state. Shareholders want to guard the reputation of their organization. #marchforourlives. © McGraw Hill 8  Figure 4.1 Types of Company Stakeholders © McGraw Hill 9  Shareholders Shareholders are owners. Shareholders want to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation. Shareholders want to maximize their return on investment. © McGraw Hill 10  Managers 1 Managers are responsible for using a company’s financial capital and human resources to increase its performance. Managers have the right to expect a good return or reward by investing their human capital to improve a company’s performance. The frequently juggle multiple interests. Layoffs of employees to reduce costs and benefit shareholders. © McGraw Hill 11  Managers 2 One problem has been that in many companies, corrupt managers focus not on building the company’s capital and shareholder’s wealth but on maximizing their own personal capital and wealth. U.S. CEOs get paid 278 times what the average worker earns, 940% increase over the past 40 years. Average worker saw a 12% pay hike in same period. © McGraw Hill 12  Ethics and Nonprofit Organizations More than 2,700 executives of nonprofit organizations earn more than $1 million a year in salary, bonus, and other benefits. 21% excise tax on nonprofit employers with salaries over $1 million (2017). Laws governing disclosure are far weaker for nonprofits. New laws would subject nonprofits to strict Sarbanes-Oxley-type regulations that force the disclosure of issues related to managerial compensation and financial integrity. © McGraw Hill 13  Employees Employees expect to receive rewards consistent with their performance. Organizational structures with fair and equitable rewards for their employees show an ethical stance. © McGraw Hill 14  Suppliers and Distributors Suppliers expect to be paid fairly and promptly for their inputs. Raw materials, component parts. Distributors expect to receive quality products at agreed-upon prices. Wholesalers and retailers. © McGraw Hill 15  Table 4.1 Some Principles from the Gap’s Code of Vendor Conduct As a condition of doing business with Gap Inc., each and every factory must comply with this Code of Vendor Conduct. Gap Inc. will continue to develop monitoring systems to assess and ensure compliance. If Gap Inc. determines that any factory has violated this Code, Gap Inc. may either terminate its business relationship or require the factory to implement a corrective action plan. If corrective action is advised but not taken, Gap Inc. will suspend placement of future orders and may terminate current production. Code Description I. General Factories that produce goods for Gap Inc. shall operate in full compliance with the laws of Principles their respective countries and with all other applicable laws, rules, and regulations. II. Factories must comply with all applicable environmental laws and regulations. Where such Environment requirements are less stringent than Gap Inc.’s own, factories are encouraged to meet the standards outlined in Gap Inc.’s statement of environmental principles. III. Factories shall employ workers on the basis of their ability to do the job, without regard to Discriminatio race, color, gender, nationality, religion, age, maternity, or marital status. n IV. Forced Factories shall not use any prison, indentured, or forced labor. Labor V. Child Factories shall employ only workers who meet the applicable minimum legal age Labor requirement or are at least 15 years of age, whichever is greater. Factories must also comply with all other applicable child labor laws. Factories are encouraged to develop lawful workplace apprenticeship programs for the educational benefit of their workers, provided that all participants meet both Gap Inc.’s minimum age standard of 15 and the minimum legal age requirement. VI. Wages Factories shall set working hours, wages, and overtime premiums in compliance with all and Hours applicable laws. Workers shall be paid at least the minimum legal wage or a wage that meets local industry standards, whichever is greater. While it is understood that overtime is © McGraw Hill often required in garment production, factories shall carry out operations in ways that limit 16  Customers Customers are the most critical stakeholder. Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones. © McGraw Hill 17  Community, Society, and Nation Community. Physical locations like towns or cities in which companies are located. Provides a company with the physical and social infrastructure that allows it to operate. A company contributes to the economy of the town or region through salaries, wages, and taxes. © McGraw Hill 18  Figure 4.2 Four Ethical Rules Access the text alternative for slide images. © McGraw Hill 19  Practical Decision Model 1. Does my decision fall within the acceptable standards that apply in business today? 2. Am I willing to see the decision communicated to all people and groups affected by it? 3. Would the people with whom I have a significant personal relationship approve of the decision? © McGraw Hill 20  Why Should Managers Behave Ethically? The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way. Tragedy of the commons. Unethical behavior destroys the trust between a company and its customers, suppliers and distributors. © McGraw Hill 21  Figure 4.3 Some Effects of Ethical and Unethical Behavior Access the text alternative for slide images. © McGraw Hill 22  Trust and Reputation 1 Trust: The willingness of one person or group to have faith or confidence in the goodwill of another person, even though this puts them at risk. © McGraw Hill 23  Trust and Reputation 2 Reputation: Esteem or high repute that individuals or organizations gain when they behave ethically. Unethical behavior in the short run may have long-term consequences. Theranos, Siemens, and Wells Fargo have all suffered from unethical behavior. © McGraw Hill 24  Figure 4.4 Sources of Ethics © McGraw Hill 25  Societal Ethics Societal ethics are standards that govern how members of a society should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individual. People behave ethically because they have internalized certain values, beliefs, and norms. © McGraw Hill 26  Occupational Ethics Standards that govern how members of a profession, trade, or craft should conduct themselves when performing work-related activities. Medical and legal ethics. Volkswagen’s rigging of vehicles for diesel emission tests garnered one of the highest fines ever for an automaker. © McGraw Hill 27  Table 4.2 Some Failures in Professional Ethics For manufacturing and materials management managers: Releasing products that are not of a consistent quality because of defective inputs. Producing product batches that may be dangerous or defective and harm customers. Compromising workplace health and safety to reduce costs (for example, to maximize output, employees are not given adequate training to maintain and service machinery and equipment). For sales and marketing managers: Knowingly making unsubstantiated product claims. Engaging in sales campaigns that use covert persuasive or subliminal advertising to create customer need for the product. Marketing to target groups such as the elderly, minorities, or children to build demand for a product. Sponsoring ongoing campaigns of unsolicited junk mail, spam, door-to-door, or telephone selling. For accounting and finance managers: Engaging in misleading financial analysis involving creative accounting or “cooking the books” to hide salient facts. Authorizing excessive expenses and perks to managers, customers, and suppliers. Hiding the level and amount of top management and director compensation. For human resource managers: Failing to act fairly, objectively, and in a consistent manner toward different employees or kinds of employees because of personal factors such as personality and beliefs. Excessively encroaching on employee privacy through non-job-related surveillance or personality, ability, and drug testing. Failing to respond to employee observations and concerns surrounding health and safety violations, hostile workplace issues, or inappropriate or even illegal behavior by managers or employees. © McGraw Hill 28  Individual Ethics Personal standards and values that determine how people view their responsibilities to other people and groups. How they should act in situations when their own self-interests are at stake. © McGraw Hill 29  Organizational Ethics Guiding practices and beliefs through which a particular company and its managers view their responsibility toward their stakeholders. Top managers are especially important in shaping the organization’s code of ethics. © McGraw Hill 30  Figure 4.5 Johnson & Johnson Credo Source: © Johnson & Johnson. Used with permission. Access the text alternative for slide images. © McGraw Hill 31  Social Responsibility The way a company’s managers and employees view their duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole. How a company admits or announces mistakes might be reflects their social responsibilities: Fitbit’s recall of the Fitbit Force. GM and Fords reluctance to admit to mistakes. © McGraw Hill 32  Table 4.3 Forms of Socially Responsible Behavior Managers are being socially responsible and showing their support for their stakeholders when they: Provide severance payments to help laid-off workers make ends meet until they can find another job. Give workers opportunities to enhance their skills and acquire additional education so they can remain productive and do not become obsolete because of changes in technology. Allow employees to take time off when they need to and provide health care and pension benefits for employees. Contribute to charities or support various civic-minded activities in the cities or towns in which they are located (Target and Levi Strauss both contribute 5 percent of their profits to support schools, charities, the arts, and other good works). Decide to keep open a factory whose closure would devastate the local community. Decide to keep a company’s operations in the United States to protect the jobs of American workers rather than move abroad. Decide to spend money to improve a new factory so it will not pollute the environment. Decline to invest in countries that have poor human rights records. Choose to help poor countries develop an economic base to improve living standards. © McGraw Hill 33  Figure 4.6 Approaches to Social Responsibility © McGraw Hill 34  Four Different Approaches 1 Obstructionist approach: Manville Corporation hid Companies and their evidence that managers choose not to asbestos causes behave in a socially responsible way and lung damage. instead, behave unethically and illegally. © McGraw Hill 35  Four Different Approaches 2 Defensive approach: Computer Companies and their Associates, managers behave WorldCom, and ethically to the degree Merrill Lynch gave that they stay within the managers large law and strictly abide stock options and by legal requirements. bonuses as performance was declining. © McGraw Hill 36  Four Different Approaches 3 Accommodative approach: Companies and their Managers make managers behave choices that are legally and ethically reasonable in the and try to balance the eyes of society and interests of different want to do the right stakeholders as the thing. need arises. © McGraw Hill 37  Four Different Approaches 4 Proactive approach: Companies and their managers actively embrace socially responsible behavior, going out of their way to learn Nucor refuses to lay about the needs of different off employees. stakeholder groups and using organizational resources to promote the interests of all stakeholders. © McGraw Hill 38  Why Be Socially Responsible? 1. Demonstrating its social responsibility helps a company build a good reputation. 2. If all companies in a society act socially, the quality of life as a whole increases. © McGraw Hill 39  Role of Organizational Culture Ethical values and norms help organizational members: Resist self-interested action. Realize they are part of something bigger than themselves. © McGraw Hill 40  Ethics Ombudsman Responsible for communicating ethical standards to all employees. Designing systems to monitor employees’ conformity to those standards. Teaching managers and employees at all levels of the organization how to appropriately respond to ethical dilemmas. © McGraw Hill 41  End of Main Content Because learning changes everything. ® www.mheducation.com © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.