Chapter 3 Management

Copyright 2005 by South-Western, a division of Thomson Learning.
All rights reserved

1
CHAPTER THREE
CHAPTER THREE
Management
3rd Edition
Chuck Williams
Ethics and Social Responsibility
Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved
2
CHAPTER THREE
Chapter Focus?
This chapter examines ethical behavior in the
workplace and how the sentencing guideline for
organizations make ethical behavior which is much
more important for businesses.
We also examine the influences on ethical decision
making and review practical steps that managers can
take to improve ethical decision making.
We finish by considering to whom organization are
socially responsible, what organizations are socially
responsible for, how they can respond to societal
expectations for social responsibility, and whether
social responsibility hurts or helps an organization's
economic performance.
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CHAPTER THREE
Learning objectives
After discussing this chapter, you should be able to:
1. discuss how the nature of management jobs creates the
possibility for ethical abuses.
2. identify common kinds of workplace deviance (turn aside from a
course of action, rules etc.).
4. describe what influences ethical decision making.
5. explain what practical steps managers can
take to improve ethical decision making.
6. to whom organizations are socially responsible.

7. for what organizations are socially responsible.

8. how organizations can choose to respond to societal demands for
social responsibility.
9. whether social responsibility hurts or helps an organizations
economic performance.

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CHAPTER THREE
Ethics
Ethics: set of moral principles or values that defines right and
wrong for a person or group.
Ethical Behavior: behavior that conforms to a societys accepted
principles of right and wrong.
Unethical behavior is rising in businesses. (such as deceptive
sales practices, unsafe working conditions, environmental
breaches, and mishandling of confidential or proprietary
information)
However, people want to be ethical, and when they believe they
work in an ethical environment, they are more likely to be loyal to
the company.
Different studies shows when people are convinced that they work
in an ethical work environment, they are six times more likely to
stay with that company than:
If they believe they work in an unethical environment.
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CHAPTER THREE
Ethics and the Nature of Management Jobs
1
Unethical Managerial Behavior
(unethical behavior occurs when managers violate the principle
Three areas in which managers encounter ethical dilemma)
Authority and Power (managers can be tempted by
authority and power since they control company resource)
Handling Information (misuse the information for its own
purposes)
Influencing the Behavior of Others (tell subordinates
to engage in unethical behavior)
Setting Goals (set unrealistic goals, the pressure to perform
and achieve those goals can influence employees to engage in
Unethical business behaviors, if they are just short of meeting their
Goals)

More
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CHAPTER THREE
Ethics and the Nature of Management Jobs
1

Managers can encourage ethical behaviors by
using resources for company
handling information confidentially
not influencing others to engage in
unethical behavior
not creating policies that reward employees
for unethical behavior
setting reasonable goals
Ethics: the set of moral principles or
values that define right and wrong.
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CHAPTER THREE

Workplace Deviance

workplace deviance: unethical behavior that violates organizational norms
about right and wrong. Different kinds of workplace deviance are:
2
Personal Aggression
Political Deviance
Property Deviance
Production Deviance
Types of
Workplace
Deviance
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CHAPTER THREE
Workplace Deviance
Workplace deviance can be categorized by how deviant the behavior
is, from minor to serious, and by the target of the deviant behavior,
either the organization or particular people in the workplace.

There different kinds of workplace deviance:
Production deviance: unethical behavior that hurts the quality and
quantity of work (leaving early, taking long breaks, purposely working
slower, or intentionally wasting resources
Property deviance: unethical behavior aimed at the organizations
property
Example: sabotaging, stealing, shrinkages
Political deviance: using ones influence to harm others in the
company
Example: favoritism, rumor-spreading, falsely blaming
Personal aggression: hostile or aggressive behavior towards
others.
Example: Sexual harassment, verbal abuse, threatening behavior.
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CHAPTER THREE

Influences on Ethical Decision Making

The ethical answers that manager choose depend on ethical intensity of the
decision, the moral development of the manager, and the ethical principles
used to solve the problem.
4

Ethical
Answers
Depend
on

Ethical Intensity of Decision
Moral Development of Manager
Ethical Principles Used
More
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CHAPTER THREE

Ethical Intensity
The degree of concern people have about an unethical issue. It depends on 6 factors
4.1
Concentration of effect
Magnitude of consequences
Social consensus
Probability of effect
Proximity of effect
Temporal immediacy
Factors
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CHAPTER THREE
Ethical Intensity
Magnitude of consequences: is the total harm or
benefit derived from an ethical decision.
Social consensus: is agreement on whether behavior
is bad or good.
Probability of effect: is the chance that something will
happen and then result in harm to others.
Temporal immediacy: is the time between an act and
the consequences the act produces. (to lay off workers
next week as opposed to three months from now)
Proximity of effect: is the social, psychological,
cultural, or physical distance of a decision maker to
those affected by his or her decisions.
Concentration of effect is how much an act affects the
average person.

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CHAPTER THREE

Moral Development (three stages of MD)

Your decision should be based on your level of moral development. Three
phases of moral development, with two stages in each phase

4.2
Societal
Expectations
Selfish
(decisions made for
selfish reasons)

Internalized
Principles
Pre-conventional
(general agreement on
social behavior)

Conventional

Post-conventional
More
Mature
More
Selfish
More
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CHAPTER THREE
Stages of Moral Development
4.2
Preconventional

1. Punishment and
Obedience

2. Instrumental
Exchange

Conventional

3. Good boy, nice
girl

4. Law and order
Postconventional

5. Social contract

6. Universal
principle
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CHAPTER THREE
Stages of Moral Development
At the preconventional level of moral development, people decide
based on selfish reasons.
For example, if you were in Stage 1, the punishment and obedience stage,
your primary concern would be not to get in trouble. Yet, in Stage 2, the
instrumental exchange stage, you make decisions that advance your wants
and needs.
People at the conventional level of moral development make decisions
that conform to societal expectations.
In Stage 3, the good boy--nice girl stage, you normally do what the
other good boys and nice girls are doing. In the law and order
stage, Stage 4, you do whatever the law permits.
People at the post conventional level of moral maturity
always use internalized ethical principles to solve ethical
dilemmas.
In Stage 5, the social contract stage, you would consider
the effects of your decision on others.
In Stage 6, the universal principle stage, you make ethical
decisions based on your principles of right and wrong.

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CHAPTER THREE
Principles of Ethical Decision Making
4.3

Principles
of

Long-term self-interest
Personal virtue
Religious injunctions
Government requirements
Utilitarian benefits
Individual rights
Distributive justice
More
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CHAPTER THREE
4.3
Principle of Long-term self-interest

An ethical principle that holds that you should never take
any action not in your or your
organizations long-term self-interest

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CHAPTER THREE
4.3
Principle of Personal Virtue

Never do anything that is not honest, open,
and truthful and that you would not be
glad to see reported in the newspapers
or on TV

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CHAPTER THREE
4.3
Principle of Religious Injunctions

Never take any action that is not kind
and that does not build a
sense of community; a sense of every one working
together for a long commonly accepted goals.

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CHAPTER THREE
4.3
Principle of Government Requirements

Never take any action that violates the law,
for the law represents the minimal
moral standard.

20
CHAPTER THREE
4.3
Principle of Utilitarian Benefit

Never take any action that does not result in
greater good for society

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CHAPTER THREE
4.3
Principle of Individual Rights

Never take any action that infringes (violate) on
others agreed-upon rights

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CHAPTER THREE
4.3
Principle of Distributive Justice

Never take any action that harms the
least among us:
the poor, the uneducated,
the unemployed.

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CHAPTER THREE

Practical Steps to Ethical Decision Making

Managers can encourage more ethical decision making in their organizations by
carefully selecting and hiring new employees, establishing a specific code of ethics,
training employees how to make ethical decisions, and creating an ethical climate.

5
Select and hire ethical employees
Establish a Code of Ethics
Train employees to make ethical decisions
Create an ethical climate
More
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CHAPTER THREE
Overt (unconcealed) Integrity Tests: written tests that
estimate employee honesty by directly asking job applicants
what they think or feel about theft or about punishment of
unethical behavior.
Personality-Based Integrity Tests: written tests that
indirectly estimate employee honesty by measuring
psychological traits such as dependability and
conscientiousness (moral sense of right and wrong).
5.1
Select and hire ethical employees: managers can increase the chance of
Hiring honest job candidates by giving integrity tests.
If you found a wallet containing $50,
would you return it with the money?
Return rate: overall 67% men 62%
Women 72 %
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CHAPTER THREE
What Really Works
Studies show that Integrity Tests

Help reduce workplace deviance
Help hire workers who are better performers

However they have a smaller effect
on assessing theft.
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CHAPTER THREE
5.2
Establish a Code of Ethics
Today, nine out of ten large corporations have an ethics code in place.
However, two things must happen if those codes are to encourage ethical
decision making and behavior.
Companies must:
Communicate code of ethics to both inside and outside the company
Develop ethical standards and procedures
specific to business
Example: Nortel Networks has published its 36 codes of ethics on an
internet site. These range from bribes to expense vouchers.

http://www.nortelnetworks.com

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CHAPTER THREE
Ethics Training
5.3
Ethics Training
The objectives of ethic training are to:
Develops employee awareness of ethics
Example: Lockheed Martin developed a game called The Ethics
Challenge that every employee must play at least once a year.
Achieves credibility with employees
Example: Boeing has a vice president of ethics whose responsibility
is to teach employees the difference between right and wrong.
Teaches a practical model of ethical
decision making (identify the problem, diagnose the situation, analyze
your options, make your choice, and act.

http://active.boeing.com
General Info & Images,
Ethics & Business Conduct,
Take the Ethics Challenge

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CHAPTER THREE
A Basic Model of Ethical Decision Making
5.3
1. Identify the problem
2. Identify the constituents
3. Diagnose the situation
4. Analyze your options
5. Make your choice
6. Act
Adapted from Exhibit 3.6
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CHAPTER THREE
A Basic Model of Ethical Decision Making
1. Identify the problem: What makes it an ethical problem? Think in terms of
rights, obligations, fairness, relationships, and integrity. How would you define
the problem if you stood on the other side of the fence?

2. Identify the constituents: Who has been hurt? Who could be hurt? Who
could be helped? Are they willing players, or are they victims? Can you
negotiate with them?

3. Diagnose the situation: How did it happen in the first place? What could have
prevented it? Is it going to get worse or better? Can the damage now be
undone?

4. Analyze your options: Imagine the range of possibilities. Limit yourself to
the two or three most manageable. What are the likely outcomes of each?
What are the likely costs? Look to the company mission statement or code of
ethics for guidance.
Make your choice: What is your intention in making this decision? How does
it compare with the probable results? Can you discuss the problem with the
affected parties before you act? Could you disclose without qualm (uneasy
doubt) your decision to your boss, the CEO, the board of directors, your family
or society as a whole?
6. Act. Do what you have to do. Don't be afraid to admit errors. Be as bold in
confronting a problem as you were in causing it.

30
CHAPTER THREE

Ethical Climate
5.4
Steps that managers can take to create an ethical
climate:
Act ethically themselves (set personal example)
Are active in company ethics programs
Encourage employees to report potential ethics
violations (Whistle-blowing, reporting others ethics
violations to management or legal authorities)
Punish those who violate the code of ethics

Establishing an Ethical Climate
31
CHAPTER THREE
What is Social Responsibility?
Social responsibility: a businesss obligation
to pursue policies, make decisions, and take
actions that benefit society.
Example: PETA (people for the ethical
treatment of animals) believes that Procter
and Gamble should eliminate product testing
involving animals.

32
CHAPTER THREE
To Whom are Organizations Socially
Responsible?
There are two perspectives as to whom organizations are socially responsible

Shareholder
Model

Stakeholder
Model

Maximize Profits

Satisfy Interests
of Multiple Stakeholders

6
More
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CHAPTER THREE
Shareholder Model
6
Shareholder model: holds that managements most important
responsibility, long-term survival, is achieved by satisfying the
interests of multiple corporate stakeholders.
This model developed by Friedman and he believed that:
By maximizing profit, businesses maximize shareholder
wealth and satisfaction
It is socially irresponsible for business to divert their
attention from profit maximization to social causes and
charitable organizations, and it undermine market
efficiency.
Shareholders can then use their increased wealth to
contribute to social causes.
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CHAPTER THREE

Stakeholder Model

persons or groups with a stake, or legitimate interest in a companys actions
6
Primary
Stakeholders:

Shareholders
Employees
Customers
Suppliers
Governments
Local Communities

Secondary
Stakeholders:

Media
Special Interest Groups
Trade Associations

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CHAPTER THREE
Stakeholder Model
Some stakeholders are more important to the firms survival than
others.
Primary stakeholders : are groups, such as shareholders,
employees, customers, suppliers, governments, and local
communities, on which the organization depends for long-term
survival.
So managers must try to satisfy the needs of all primary
stakeholders.
Secondary stakeholders: such as the media and special
interest groups, can influence or be influenced by the company.
Yet in contrast to primary stakeholders, they do not engage in
regular transactions with the company and are not critical to its
long-term survival.
While not critical to long-term survival, secondary stakeholders are
still important, because they can affect public perceptions and
opinions about socially responsible behavior.

36
CHAPTER THREE
Organizations Social Responsibilities
7
Dont violate principles
of right and wrong
Obey the Law.
Ethical
Legal
Economic
Discretionary

Make a Profit
Social responsibilities
(voluntary)
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CHAPTER THREE
Organizations Social Responsibilities
Companies can benefit their stakeholders by fulfilling
their economic, legal, ethical, and discretionary
responsibilities.
Economic responsibility: the expectation that a
company will make a profit by producing a valued
product or service.
Legal responsibility: the expectation that a company
will obey societys laws and regulations.
Ethical responsibility: the expectation that a company
will not violate accepted principles of right and wrong
when conducting its business.
Discretionary responsibilities: the expectation that a
will voluntarily serve a social role beyond its
economic, legal and ethical responsibilities.
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CHAPTER THREE
Responses to Demands for Social Responsibility ( how organization
can choose to respond to societal demands for social responsibility)
8

Strategies

Reactive
Defensive
Accommodative
Proactive
More
39
CHAPTER THREE
Responses to Demands for Social Responsibility
(Organizational Strategies)
There are four strategies for responding to social responsibility
problems:
Reactive strategy: a social responsiveness strategy in which a
company chooses to do less than society expects.
Example: Wampler Foods found and failed to report evidence of listeria
that it had found in one of its processing plants. After seven deaths and
39 listeria-related illnesses, the company recalled 27.4 million pounds of
poultry and closed its plant for thorough disinfecting.
Defensive strategy: a social responsiveness strategy in which a
company chooses to admit responsibility for a problem but do the least
required to meet societal expectations.
Proactive strategy: a social responsiveness strategy in which a
company anticipates responsibility for a problem before it occurs and
would do more than society expects to address the problem.
Accommodative strategy: a social responsiveness strategy in which a
company choose to accept responsibility for a problem and do all the
society expects to solve the problem.

40
CHAPTER THREE
Responses to Demands for Social
Responsibility
8
Reactive Defensive
Accommo-
dative
Proactive
Fight all
the way
DO
NOTHING
DO
MUCH
Withdrawal
Do only what
is required
Legal
Approach
Bargaining
Problem
Solving
Public
Relations
Approach
Be
progressive
Lead the
industry
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CHAPTER THREE

Responses to Demands for Social
Responsibility
A company using a reactive strategy will do less than society
expects. It may deny responsibility for a problem or fight all the
way any suggestions that the company should solve a problem.

By contrast, a company using a defensive strategy would admit
responsibility for a problem, but would do the least required to meet
societal expectations.

A company using an accommodative strategy would
accept responsibility for a problem and take a progressive approach
by doing all that was expected to solve the problem.

Finally, a company using a proactive strategy would anticipate
responsibility for a problem before it occurred, do more than
expected to address the problem, and lead the industry in its
approach.

42
CHAPTER THREE
Social Responsibility and Economic Performance
Sometimes it pays to be socially responsible, and
sometimes not, Managers should not expect
economic benefit but choose social responsibility for
the benefits it gives society.
The realities of the relationship between social
responsibility and economic performance:
It can sometimes cost a company significantly if it
chooses to be socially responsible.
Sometimes it does pay to be socially responsible.
Example: Worldwide sells recycled products to retailers
such as Wal-Mart and Target at low prices. The
company has turned a profit through most of its short
history.
While socially responsible behavior may the right
thing to do, it does not guarantee profitability.
43
CHAPTER THREE
Social Responsibility and
Economic Performance
9
Realities of
Social
Responsibility
Can cost a company
Sometimes it does pay
Does not guarantee
profitability

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Copyright 2005 by South-Western, a division of Thomson Learning.

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