Ethical Issues in Management

1. Ethical Issues in Management Ethical Issues in Management

2. Ethical Issues in Management • Ethical perspectives and moral development • Ethical decision making • Social responsibility Ethical Issues in Management

3. What Are Ethics? • The area of philosophy concerned with human behavior in the social context • Based on a consideration of values, rather than facts (although it is necessary to determine the facts) • Both individual and shared values important • Not the same as legal considerations (although laws overlap with society’s agreed-upon ethical standards) • Social and economic factors are not part of ethical decisions (although many ethical decision have social or economic implications) • Morality vs. legality vs. social/economic forces Ethical Issues in Management

4. Ethical Perspectives: Utilitarian • Jeremy Bentham (1748 – 1832) • Decisions are made on the basis of outcomes • Maximize benefits for the greatest number • Example: Oregon & health care Ethical Issues in Management

5. Ethical Perspectives: Individualism • Adam Smith (1723-1790) • At the most basic level, “What’s in it for me?” • However, there’s a long-term equilibrium; the invisible hand Ethical Issues in Management

6. The problem arises with how these are to be put into action Ethical Perspectives: Moral Rights • John Locke (1632 – 1704) • Respect individual’s inherent rights and liberties • Natural rights of mankind • “The right of life, liberty, and the pursuit of happiness” • Rights? • Free consent • Privacy • Freedom of conscience • Free speech • Due process • Life and safety Ethical Issues in Management

7. Immanuel Kant (1724 – 1804) • For Kant, what is right is based on the categorical imperative, which is the notion that every person should act on only those principles that he or she, as a rational person, would prescribe as universal laws to be applied to the whole of humankind. Ethical Issues in Management

8. Ethical Perspectives: Justice • Decisions made with equity and impartiality • Types of justice • Distributive • Procedural • Compensatory Ethical Issues in Management

9. Social Justice Perspective • Value placed on human dignity • Work for the common good • Human rights • Dignity of work • Society judged by treatment of poor and vulnerable Ethical Issues in Management

10. Levels of Moral Development • Preconventional • Obey to avoid physical punishment • Follow rules if it is in your immediate interest • Conventional • Live up to what your family and friends expect • Maintain order by fulfilling obligations • Principled • Value others’ rights regardless of majority opinion • Follow self-chosen ethical principles even if they violate the law Ethical Issues in Management

11. Ethical Decision Making • Codes of ethics • State basic principles • Can be for a specific organization • Many professions also have an ethical code • Can be very general (credo) or very specific • Leadership • Managers by definition are (or should be) role models • Ethical training Ethical Issues in Management

12. Components of Ethical Training • Provide trainees with an understanding of ethical judgment philosophies and guidelines. • Provide industry/profession-specific areas of ethical concern. • Provide trainees with organizational ethical expectations and rules. • Provide trainees with an understanding of their own ethical tendencies. • Take a realistic view–elaborate on the difficulties of ethical decision making. • Get the trainees to practice and role-play. Ethical Issues in Management

13. How is Business Viewed by Society? • The Simple Life Folks • Large organizations, by their very existence, are destructive of human values • We should adopt a simpler lifestyle, freeing ourselves of the need for large businesses • We are interested in maximizing human potential • Redemption-May-Be-Possible • Large organizations exploit those without power (especially multinational firms and indigenous peoples) • Don’t abolish business firms, but major reform is needed • Critics from Within • Businesses have done a lot to earn their bad reputation • Responsible business leaders must begin cleaning out the stables Ethical Issues in Management

14. Do the Facts Justify Criticism ?? • Of the globe’s 100 largest economic entities, 51 are corporations; only 49 are countries • The 300 largest global corporations hold one-quarter of the entire globe’s productive assets • 72% of Americans say business has too much power over too many aspects of American life Ethical Issues in Management

15. The Top Ten

16. Social Responsibility Social Obligations School • Maximize profits • Stay within boundaries of law Social Reaction School • Maximize profits, and at the same time…. • Ensure the organization’s survival by responding to "currently prevailing social norms, values, and performance expectations." Social Responsiveness School • Corporations should prevent and solve social problems • Corporations can prevent and solve social problems The Friedman view Ethical Issues in Management

17. Milton Friedman • “The Social Responsibility of Business is to Increase its Profits” • A corporation is an “artificial” person – thus, unlike a real person, it has no ethical or moral obligations • Managers are responsible to owners: “That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embedded in ethical custom Ethical Issues in Management

18. Freidman’s Reasoning, continued • Individual managers fulfill their private ethical / moral obligations from their personal resources • If managers are to spend money on public uses, they must be accountable, just as are politicians. The analogy here is with taxation; by spending money pf public uses, the manger is in effect taxing employees, customers and owners for the benefit of society as a whole • For Freidman, this is “socialist” -- using “political mechanisms, not market mechanisms…the appropriate way to determine the allocation of scare resources to alternate uses” Ethical Issues in Management

19. Friedman, Finale • Further, if business social spending (the specific expenditures) were a good ides (accepted by society), it would be a public responsibility and funded through taxes • However, an organization may legitimately spend money on what may be perceived as social responsibility, but where there is a benefit to the firm (for example, funding education) • Thus, corporations are judged solely by financial performance, as defined by the owners / shareholders Ethical Issues in Management

20. The Stakeholder Approach • How do we solve the problem of the free rider? • Organizations and people are bound together in a network of mutual relationships • Stakeholders • Those people or groups essential to an organization’s success • Those people or groups affected by what an organization does • People with a “legitimate interest” • An organization is obligated (duty) to consider the interests of stakeholders Ethical Issues in Management

21. Who Are the Stakeholders? • Primary and secondary (how close are they to the organization?) • Who? • Management • Employees • Owners • Local community • Suppliers • Customers Ethical Issues in Management

22. Taking a Stand • Looking at costs • Short term vs. the long term • Examples: • Doing well by doing good: Costco • Public relations: Sara Lee • Environmental cost savings • Obligation to just the stockholders or to employees, and society as a whole ?????? • Management values Ethical Issues in Management

23. Levels of Social Obligation Obstructionist Fight all the way Defensive Do only what is legally required Proactive Take social initiatives Accommodating Accept ethical responsibility Ethical Issues in Management

24. Values-Based Management • Using shared values as a basis for management decision-making • Examples • Levi Strauss • Body Shop • ServiceMaster Ethical Issues in Management