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Chapter 5

Chapter 5. Social Responsibility and Ethics. What Is Social Responsibility?. The Classical View Maximize profits for the benefit of the stockholders Doing “social good” unjustifiably increases costs. What Is Social Responsibility? (cont’d). The Socio-economic View

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Chapter 5

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  1. Chapter 5 Social Responsibility and Ethics

  2. What Is Social Responsibility? • The Classical View • Maximize profits for the benefit of the stockholders • Doing “social good” unjustifiably increases costs

  3. What Is Social Responsibility? (cont’d) • The Socio-economic View • Management should also protect and improve society’s welfare • Corporations are responsible not only to stockholders • Firms have a moral responsibility to larger society “to do the right thing”

  4. Approaches to Social Responsibility Obstructionist Defensive Accommodative Proactive Approach Approach Approach Approach Disregard Minimal Moderate Strong for social commitment commitment commitment responsibility to social to social to social responsibility responsibility responsibility No Social Responsibility High Social Responsibility Source:Adapted from S.L. Wartick and P.L. Cochran, “The Evolution of the Corporate Social Performance Model,” Academy of Management Review, October 1985, p. 766.

  5. Arguments For and Against Social Responsibility • Against • Violation of profit maximization • Dilution of purpose • Costs • Lack of skills • Lack of accountability • 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

  6. Managerial Ethics • Ethics Defined • The rules and principles that define right and wrong conduct • Four Views of Ethics • Utilitarian view • Rights view • Theory of justice view • Integrative social contracts theory

  7. Managerial Ethics (cont’d) • Utilitarian View • Greatest good is provided for the greatest number • Encourages efficiency and productivity and is consistent with the goal of profit maximization • Rights View • Respecting and protecting individual liberties and privileges • Seeks to protect individual rights of conscience, free speech, life and safety, and due process

  8. Managerial Ethics (cont’d) • The Theory of Justice • Organizational rules are enforced fairly and impartially and follow all legal rules and regulations • Protects the interests of underrepresented stakeholders and the rights of employees • Integrative Social Contracts Theory • Ethical decisions should be based on existing ethical norms in industries and communities • Based on integration of the general social contract and the specific contract between community members

  9. Ethics in an International Context • Ethical standards are not universal • Social and cultural differences determine acceptable behaviours

  10. How Managers Can Improve Ethical Behaviour in an Organization • Hire individuals with high ethical standards. • Establish codes of ethics and decision rules. • Lead by example. • Delineate job goals and performance appraisal mechanisms. • Provide ethics training. • Conduct independent social audits. • Provide support for individuals facing ethical dilemmas.

  11. Code of Ethics • A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow • Be a dependable organizational citizen • Don’t do anything unlawful or improper that will harm the organization • Be good to customers Source:F.R. David, “An Empirical Study of Codes of Business Ethics: A Strategic Perspective.” Paper presented at the 48th Annual Academy of Management Conference, Anaheim, California, August 1988.

  12. Effective Use of a Code of Ethics • Develop a code of ethics to guide decision making • Communicate the code regularly • Have all levels of management show commitment to the code • Publicly reprimand and consistently discipline those who break the code

  13. Ethical Leadership • Managers must provide a good role model by: • Being ethical and honest at all times • Telling the truth • 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 punishing those who do not • Protecting employees (whistleblowers) who bring to light unethical behaviours or raise ethical issues

  14. The Value of Ethics Training • Training can make a difference in ethical behaviours • Training increases employee awareness of ethical issues in business decisions • Training clarifies and reinforces the standards of conduct • Employees are more confident of support when taking unpopular but ethically correct stances

  15. Social Responsibility VS Green Management VS Sustainability

  16. What is Sustainability? • Sustainability is generally defined as using resources to meet the needs of the present without compromising the ability of future generations to meet their own needs (WCED, 1987; Daly and Cobb, 1994). • The triple bottom line, a concept developed by Elkington(1998, 2004) which simultaneously considers and balances economic, environmental and social goals from microeconomic standpoint.

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