Social Responsibility and Ethics

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Chapter 3
Social Responsibility and Ethics
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Stakeholders
Stakeholders are all those who are affected by or
can affect the activities of the firm.
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Primary and Secondary Stakeholders

• Primary Stakeholders
• Those who have a formal, official, or contractual
  relationship with the organization.
• Secondary Stakeholders
• Other societal groups that are affected by the
  activities of the firm.

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The Stakeholder View of the Firm
Secondary Stakeholders
Environmental Group
Consumer Group
Primary Stakeholders
Local Community Group
Other Special Interest Groups
Suppliers
Owners
Organization
Employees
Customers
Media
ACLU
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Corporate Social Responsibility Defined Slide 1
of 2
The interaction between business and the social
environment in which it exists.
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Corporate Social Responsibility Defined Slide 2
of 2
What specifically does social responsibility mean?
Does it mean that the corporations actions must
not harm society?
Does it mean that a corporations actions
should benefit society?
or
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The Premises of the Social Responsibility Debate

• Social contract
• An implied set of rights and obligations that are
  inherent in social policy and assumed by
  business.
• Moral agent
• The obligation of a business to act honorably and
  to reflect and enforce values that are consistent
  with those of society.

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Three Perspectives of Social Responsibility
Slide 1 of 2

• Economic Perspective
• The responsibility of business is to make a
  profit within the rules of the game.
• Organizations cannot be moral agents. Only
  individuals can serve as moral agents.
• Public Responsibility
• Businesses should act in a way that is consistent
  with societys view of responsible behavior, as
  well as with established laws and policies.

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Three Perspectives of Social Responsibility
Slide 2 of 2

• Social Responsiveness
• Business should proactively seek to contribute to
  society in a positive way.
• Organizations should develop an internal
  environment that encourages and supports ethical
  behavior at an individual level.

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The Four Faces of Social Responsibility
Legal/Responsible
Legal/Irresponsible
Illegal/Responsible
Illegal/Irresponsible
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Social Responsibility Strategies Slide 1 of 3
Continuum of strategies based on the
organizations tendency to be socially
responsible or responsive.
Reaction Defense
Accommodation Proaction
Do Nothing
Do Much
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Social Responsibility Strategies Slide 2 of 3

• Reaction
• An organization that assumes a reaction stance
  simply fails to act in a socially responsible
  manner.
• Defense
• Organizations that pursue a defense strategy
  respond to social challenges only when it is
  necessary to defend their current position.

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Social Responsibility Strategies Slide 3 of 3

• Accommodation
• Corporations with an accommodation strategy
  readily adapt behaviors to comply with public
  policy and regulation where necessary and, more
  importantly, attempt to be responsive to public
  expectations.
• Proaction
• Organizations that assume a proaction strategy
  subscribe to the notion of social responsiveness.

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Ten Commandments of Social Responsibility Slide
1 of 4

• Commandment I
• Thou shall take corrective action before it is
  required.
• Commandment II
• Thou shall work with affected constituents to
  resolve mutual problems.
• Commandment III
• Thou shall work to establish industry-wide
  standards and self-regulation.

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Ten Commandments of Social Responsibility Slide
2 of 4

• Commandment IV
• Thou shall publicly admit your mistakes.
• Commandment V
• Thou shall get involved in appropriate social
  programs.
• Commandment VI
• Thou shall help correct environmental problems.

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Ten Commandments of Social Responsibility Slide
3 of 4

• Commandment VII
• Thou shall monitor the changing social
  environment.
• Commandment VIII
• Thou shall establish and enforce a corporate code
  of ethics.
• Commandment IX
• Thou shall take needed public stands on social
  issues.

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Ten Commandments of Social Responsibility Slide
4 of 4

• Commandment X
• Thou shall strive to make profits on an ongoing
  basis.

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Ethics

• Ethics
• The established customs, morals, and fundamental
  human relationships that exist throughout the
  world.
• Ethical Behavior
• Behavior that is morally accepted as good or
  right as opposed to bad or wrong.

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Foundations of Ethics
Values The relatively permanent and deeply held
preferences of individuals or groups.
Instrumental Values
Terminal Values
Standards of conduct or methods for attaining an
end.
Goals an individual will ultimately strive to
achieve.
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Business Ethics Defined
The application of the general ethical rules to
business behavior.
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Ethical Dilemma Defined
A situation in which a person must decide whether
or not to do something that, although beneficial
to oneself or the organization, may be considered
unethical and perhaps illegal.
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Examples of Ethical Dilemmas Faced by Managers
Should I conduct personal business on company
time?
If I find out that my boss took a bribe, should
I tell someone?
Should we spend more on pollution control?
Is it O.K. to give a friend a special rate?
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Managerial Guidelines for Ethical Dilemmas Slide
1 of 2

• Utility Approach
• A situation in which decisions are based on an
  evaluation of the overall amount of good that
  will result.
• Human Rights Approach
• A situation in which decisions are made in light
  of the moral entitlements of human beings.

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Managerial Guidelines for Handling Ethical
Dilemmas Slide 2 of 2

• Justice Approach
• A situation in which decisions are based on an
  equitable, fair, and impartial distribution of
  benefits and costs among individuals and groups.

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Fostering Improved Business Ethics
To foster improved business ethics in an
organization, action must be directed at five
levels
International
Organizational
Societal
Individual
Association
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Ways In Which Organizations Foster Business
Ethics Slide 1 of 2

• Code of Ethics
• Describes the general value system, ethical
  principles, and specific ethical rules that a
  company tries to apply.
• Ethics Training Programs
• Training designed to help managers clarify their
  ethical framework and practice self-discipline
  when making decisions in difficult circumstances.

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Ways In Which Organizations Foster Business
Ethics Slide 2 of 2

• Whistleblowing
• A whistleblower is someone who exposes
  organizational misconduct or wrongdoing to the
  public.

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Checklist for Managers To Use When Facing Ethical
DilemmasSlide 1 of 2

• Recognize and clarify the dilemma.
• Get all possible facts.
• List all your options.
• Test each option by asking
• Is it legal? It is right? Is it beneficial?
• Make your decision.

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Checklist for Managers To Use When Facing Ethical
DilemmasSlide 2 of 2

• Double-check your decision by asking
• How would I feel if my family found out about
  this? How would I feel if my decision was printed
  in the local newspaper?
• Take action.