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Inc. All rights reserved.

5 - 1
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5 - 2
Chapter
5
Ethics And
Corporate
Responsibility
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5 - 3
Learning Objectives
After studying Chapter 5, you will know:
how different ethical perspectives guide decision making
how companies influence the ethics environment
the options you have when confronting ethical issues
the important issues surrounding corporate social
responsibility
how the political and social environment affects your firms
competitive position and legitimacy
the strategies corporations use to manage the political and
social environment
the role of managers in our natural environment
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Ethics
Ethics
the system of rules that governs the ordering of values
affects peoples behavior and the goods that are worth seeking
values - principles of conduct
ethics becomes more complicated when a situation dictates that one
value overrules another
ethical issue - a situation, problem, or opportunity in which an
individual must choose among several actions that must be
evaluated as right or wrong
business ethics - the moral principles and standards that guide
behavior in the world of business
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5 - 5
Ethics (cont.)
Ethical systems
moral philosophy - the principles, rules, and values people
use in deciding what is right and wrong
universalism - individuals should uphold certain values,
regardless of the immediate result
the important values are those that society needs to function
teleology - an act is morally right if it produces a desired
result
egoism - acceptable behavior maximizes consequences for the
individual
utilitarianism- seeks the greatest good for the greatest number
of people, thereby maximizing total utility
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Ethics (cont.)
Ethical systems (cont.)
deontology - focuses on the rights of individuals
ensures that equal respect is given to all persons
concentrates on means to particular ends
relativism - ethical behavior defined by the opinions and
behavior of relevant other people
acknowledges the existence of different ethical viewpoints
group consensus is sought
positive consensus signifies that an action is right, ethical, and
acceptable
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Ethics (cont.)
Ethical systems (cont.)
virtue ethics - morality defined by what a mature person with
good moral character would deem right
societys rules provide a moral minimum
moral individuals can transcend rules by applying personal standards
Kohlbergs model of cognitive moral development
preconventional stage - decisions based on concrete rewards,
punishments, and immediate self-interest
conventional stage - actions conform to societal expectations
ethical behavior deemed appropriate by groups or institutions
principled stage - follow self-chosen ethical principle
see beyond authority, laws, and norms
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Business Ethics
Current
Ethical
Issues
Wages
Brands
Commercialism
in Schools
Artistic
Control
CEO Pay
Consumerism
Frankenfoods
Globalization Politics
Sweatshops
Urban
Sprawl
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Ethics (cont.)
The ethics environment
Ethical climate - processes by which decisions are evaluated
and made on the basis of right and wrong
unethical corporate behavior may be the responsibility of an
unethical individual
often the companys culture that is ethically lax
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Climate Factors Conducive To
Unethical Behavior
Financial concerns
take precedence over
ethical considerations
Ethics considered
from legal or public
relations viewpoint
Emphasis on short-
term revenues
Danger
Signs
No written code
of ethics
Shareholders concerns
take precedence over
other constituencies
Lack clear procedures
for dealing with ethical
problems
Desire for quick
fix solutions
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Ethics (cont.)
The ethics environment (cont.)
Ethics codes - most visible sign of corporate commitment to
ethical behavior
must be tailored to individual companys philosophies
address subjects such as employee conduct, community and
environment, shareholders, customers, political activity
Ethics programs
compliance-based - designed by corporate counsel to prevent,
detect, and punish legal violations
increases surveillance and controls
integrity-based - guiding principles that instill personal
responsibility for ethical behavior
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Define the
issue clearly
Identify the
relevant values
in the
situation
Weigh conflicting
values and choose
option that
balances them
Ethical
Decision
Making
Ethical Decision Making
Implement
the
decision
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Corporate Social Responsibility
Corporate social responsibility
the obligation toward society assumed by business
maximizes it positive effects on society and minimizes it
negative effects
economic responsibilities - produce goods and services that
society wants at a price that perpetuates the business
legal responsibilities - obey local, state, federal and relevant
international laws
ethical responsibilities - meeting other societal expectations,
not written as law
voluntary responsibilities - additional behaviors that society
finds desirable and that the values of the business support
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Voluntary
Responsibilities
Be a good corporate
citizen
Ethical
Responsibilities
Be ethical
Legal
Responsibilities
Obey the law
Economic
Responsibilities
Be profitable
Pyramid Of Corporate Social
Responsibility
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Corporate Social Responsibility (cont.)
Contrasting views
profit maximization view
managers act as agents for shareholders
obligated to maximize the present value of the firm
economic performance is an organizations primary social
responsibility
principled moral reasoning view
ethical actions are not optional, but mandatory
organizations have a wider range of responsibilities that extend
beyond the production of goods and services for a profit
organizations should actively and responsibly participate in the
community and the larger environment
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Corporate Social Responsibility (cont.)
Reconciliation
based on the idea that ethical behavior is both right and more
profitable
there are competitive advantages of socially responsible
actions, especially over the long-term
avoid unnecessary and costly regulation
pay dividends to the reputation of the company
profits can be made from attempts to solve societys problems
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Corporate Social Responsibility (cont.)
Corporate social responsiveness
the process companies follow and the actions they take in the
domain of corporate social responsibility
CSR1 (corporate social responsibility) - principles, philosophies,
and beliefs
CSR2 (corporate social responsiveness) - processes companies
follow and the actions they take
stakeholder management - managers do not manage
relationships with society but with stakeholders
company issues supplier issues
employee issues public issues
shareholder issues
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Performance Approach Posture or Strategy
Do less than required

Do the least that is required


Do all that is required

Do more than is required
1. Reactive

2. Defensive


3. Accommodative

4. Proactive
Deny responsibility

Admit responsibility
but fight it

Accept responsibility

Anticipate responsibility
Approaches To Corporate Social
Responsiveness
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5 - 19
The Political Environment
Competitive advantage
progressive organizations realize that government may be the
source of competitive advantages for an individual company
or an entire industry
numerous examples of public policy that assists business
Corporate legitimacy
motive for business involvement in the public policy process
organizations are legitimate to the extent that their goals and
methods are consistent with those of society
domain defense - activities intended to counter challenges to
the organizations legitimacy
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The Political Environment (cont.)
Strategies for influencing the political environment
public affairs department - monitors key events and trends,
analyzes their effects on the organization, recommends
organizational responses, and implements political strategies
Lobbying - most traditional form of influence
involves political professionals or company executives who
establish communication channels with regulatory bodies,
legislators, and their staffs
Political action committees (PACs) - make donations to
candidates for political office
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International
relations
Investor and
stockholder
relations
Activities
of
Public
Affairs
Issues
management
Government
relations
Institutional
advertising
Corporate
contributions
Public
relations
Public Affairs Department
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The Political Environment (cont.)
Strategies for influencing the political environment (cont.)
Corporate constituency programs - organizational efforts to
identify, educate, and motivate individuals to take political
action that could benefit the organization
encourage interested stakeholders to take grassroots action on
behalf of the organization
Coalition building - finding other organizations or voter
groups that share political interests on a particular legislative
issue
combine efforts and power to influence the environment
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The Political Environment (cont.)
Strategies for influencing the political environment (cont.)
Stonewalling - use of public relations, legal action, and
administrative processes to prevent or delay the introduction
of legislation and regulation that may have an adverse impact
on the organization
consumes considerable time and money, and may boomerang
Strategic retreat - response to adverse regulatory change
efforts to adapt products and processes to changes in the political
and social environments while minimizing the negative effects of
those changes
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5 - 24
The Natural Environment
Environmental issues
paradigm shift in corporate environmental management
deliberate incorporation of environmental values into
competitive strategies and the design and manufacturing of
products
A risk society
fundamental sources of risk in modern society are excessive
production of hazards and ecologically unsustainable
consumption of natural resources
risk has proliferated due to population explosion, industrial
pollution, and environmental degradation
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5 - 25
The Natural Environment (cont.)
Ecocentric management
has as its goal the creation of sustainable economic
development and improvement of quality of life worldwide
for all organizational stakeholders
seeks to minimize negative environmental impact
design for environment (DFE) - tool for creating products
that are easy to recover, reuse, or recycle
all environmental effects of a product are examined from cradle
to grave
assessments of inputs
analysis of how consumers will use and dispose of the product
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Environmentally
appropriate production
technologies
Products with
ecofriendly
packaging
Use smaller
resource quantities
Products with
recyclable
materials Ecocentric
Management
Encourage low
energy use
Ecocentric Management
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5 - 27
The Natural Environment (cont.)
Environmental agenda for the future
corporations are the only organizations with the resources,
technology, and global power to help create a sustainable
world
webs of companies with a common ecological vision can
combine their efforts into high-leverage, impactful action
companies beginning to acquire the motivation to solve
environmental problems
may represent the biggest opportunity in the history of commerce