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Lesson 2 Ethics and Corporate Social Responsibility
Management Theory And Leadership Practice (MGT3304)
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Objectives: ● Define business ethics and moral philosophy and explain what an ethical issue is. ● Describe several basic ethical theories, including universalism, egoism, utilitarianism, relativism, and virtue ethics. ● Discuss ethical leadership and the ways that managers can encourage ethical behavior in their organizations, such as with a code of ethics. ● Describe the ethical decision making process. ● Define social responsibility in the context of a modern organization and identify key organizational stakeholders.
What is business ethics? What is an ethical issue? ● Ethics: study of standards of behavior which promote human welfare and good ○ Business ethics: study of standards of business behavior which promote human welfare and good ● Ethics is about how we behave, about standards we hold ourselves to ○ How we treat each other, even those we don’t know ● Ethics is not: just feelings or conscience, not same as religion, following law, following “what everyone does”, technology or science (what can be done) ● Ethics is: ○ How we act as individuals ○ How we structure our organizations and their work ○ How we structure our society, our laws, our system ● Business ethics is: ○ How we act as individuals in business ○ How we structure our business organizations and way they work ○ How we structure our business society, our laws aecting business, our system
Chapter 5: Ethics, Corporate responsibility, and Sustainability ● Ethics: system of rules that governs ordering of values ○ Managers, organizations, and communities thrive over long term when they apply ethical standards that direct them to act with integrity ● Organizations and managers have responsibility to meet social obligations ● Temptation exists in every type of work and every organization and at every level ● When corporations behave badly, it’s often not top executives but rank and file employees who suer most ● Knowing you have biases may help you try to overcome them ● Minor ethical lapses may lead to major problems
What are some of the basic ethical theories? ● Moral realism: belief that there are moral facts, any moral proposition can only be true or false ○ Moral absolutism: there are absolute standards against which moral questions can be judged (universal and constant) ○ Moral relativism: more than 1 moral position on a given topic can be correct ■ cultural relativism: ● Descriptive cultural relativism: people’s moral beliefs dier from culture to culture ● normative cultural relativism: it's not your belief, but moral facts that dier from culture to culture ○ Is every culture is sole arbiter of what's right for it, that means no culture can actually be wrong ● Grounding problem of ethics is search for a foundation for our moral beliefs, something solid that would make them true in a way that is clear, objective, and unmoving ● Moral antirealism: belief that moral propositions don’t refer to objective features of the world at all, no moral facts ○ Moral subjectivism: moral statements can be true and false but they refer only to people’s attitudes rather than their actions ● Ethical theories: moral foundations that help you come up with consistent answers about right and wrong conduct ● Moral principles: building blocks that make up theories
● Aim of ethics is to identify both rules that should govern people’s behavior and values or “goods” worth pursuing ● Ethical decisions are guided by underlying values of individual
○ Values are principles of conduct (caring, being honest, keeping promises, pursuing excellence, showing loyalty, being fair, acting with integrity, respecting others, and being a responsible citizen ● Ethics becomes more complicated issue when a situation dictates that you must choose 1 value over others ● Ethical issue is a situation, problem, or opportunity in which an individual must choose among several actions that must be evaluated as morally right or wrong ● Business ethics comprise moral principles and standards that guide behavior in world of business ● Moral philosophy refers to principles, rules, and values people use in deciding what is right and wrong ● Universalism: all people should uphold certain values that society needs to function ○ Universal values are principles so fundamental to human existence that they are important in all societies ● Caux principles: ○ Kyosei: living and working together for the common good, allowing cooperation and mutual prosperity to coexist with healthy and fair competition ○ Human dignity: value of each person as an end, not a means to fulfillment of other’s purpose ● Universal principles can be powerful and useful, but what people say, hope, or think they would do is often dierent from what they really do ○ Dierent individuals in dierent circumstances apply dierent moral philosophies ● Egoism: acceptable behavior is that which maximizes benefits for individual ○ If everyone follows this system, well being of society as a whole should increase ○ If every organization follows its own economic self interest, total wealth of society will be maximized ● Utilitarianism: greatest good for greatest number of people ● Relativism: defines ethical behavior based on opinions and behaviors of relevant other people, according to how others behave ○ Acknowledges existence of dierent ethical viewpoints ■ Norms (standards of expected and acceptable behaviors) vary from one culture to another ● Virtue ethics: perspective that goes beyond conventional rules of society by suggesting that what is moral must come also from what a mature person with good moral character would deem right ○ Society’s rules provide a moral minimum and moral individuals can transcend rules by applying their personal virtues (faith, honesty, and integrity) ● Kohlberg’s model of cognitive moral development: ○ Preconventional stage: make decisions based on rewards and punishments and immediate self-interest ○ Conventional: conform to expectations of ethical behavior held by groups or institutions (society, family, peers) ○ Principled: see beyond authority, laws, and norms, and follow their self-chosen ethical principles ● Over time and through education and experience, people may change their values and ethical behaviors
can a manager lead their organization ethically? ● Sarbanes-Oxley Act (2002): requires companies to have more independent board directors, to adhere strictly to accounting rules, and to have senior managers personally sign o on financial results ○ Requirement for company and their auditors to provide reports to financial statement users about eectiveness of internal controls over financial reporting process ● Volcker rule: restrictions implemented in aftermath of 2008 financial crisis, putting customers’ assets at risk ● International companies→ dierent cultures and countries may have dierent standard of behaviors, and managers have to decide when relativism is more appropriate than adherence to firm standards ● Unethical corporate behavior may be responsibility of an unethical individual and reveals a company culture that is ethically lax ● Ethical climate: processes by which decisions are evaluated and made on basis of right and wrong ● Danger signs of unethical behavior in organizations: ○ Excessive emphasis on short term revenues over longer term considerations ○ Failure to establish a written code of ethics ○ Desire for simple, quick fix solutions to ethical problems ○ Unwillingness to take an ethical stand that imposes financial costs ○ Consideration of ethics solely as a legal issue or a public relations tool ○ Lack of clear procedures for handling ethical problems ○ Responding to demands of shareholders at expense of other constituencies ● Your reputation is your most precious asset ● Ethical leader: one who is both a moral person and a moral manager influencing others to behave ethically
○ Fundamental sources of risk in modern society are excessive production of hazards and ecologically unsustainable consumption of natural resources ● Industrial pollution risks include air pollution, smog, global warming, ozone depletion, acid rain, toxic waste sites, nuclear hazards, obsolete weapons arsenals, industrial accidents, and hazardous products. ● The institutions that create environmental technological risk (corporation and gov agencies) are responsible for controlling and managing the risks. ● Some of the world’s worst environmental problems are in China because of its rapid industrialization and is huge population size. ● Developing countries are often seen as sustainability laggards, focused solely on raising people out of poverty. Regulatory agencies can be weak and hesitant to impose restrictions, but visionary individuals the world over can pioneer successful sustainability eorts. ● Sustainable growth: economic growth and development that meet the organizations present needs without harming the ability of future generations to meet their needs. Sustainability is fully compatible with the natural ecosystems that generate and preserve life. ● Life-cycle analysis (LCA): process of analyzing all inputs and outputs, through the entire cradle to grave life of a product, to determine the total environmental impact of the production and use of a product. LCA quantifies the total use of resources and the releases into the air, water, and land. Reporting worldwide carbon footprints is a big step in environmental reporting in that industry. ● Rather than the linear take-make production model described earlier, a fully sustainable model applies a circular borrow use return approach. Whereas the former model engages in harmful extraction, generates huge quantities of waste and pollution, and depletes natural resources ( a process in which resources move from cradle to grave), the cradle to cradle approach is ecological benign and restorative. ○ Extracts energy and raw materials without harm, phases out the use of nonrenewable resources, designs processes and products that recirculate so they don’t cause environmental or socioeconomic harm, keeps toxic substances in closed loop industrial cycles, and recirculates biological back. ● Companies also can acquire others first with sustainability (and image) in mind. ● Many began striving for low impact. Now some strive for positive impact, eager to sell solutions to world's problems ● By 2050 approximately 5 billion people ( about half of projected global population) may be living in areas of the world with scarce water resources. ● Collaborative eorts will be essential ○ Networks of companies with a common ecological vision can combine their eorts into highly impactful action ● circular economy : regenerative, collaborative economic system that contrasts with linear economy described earlier by minimizing input, waste, emissions, and energy leakage. ● chemical , energy,(for both heating and cooling), water and organic materials flow among companies. Resources are conserved, waste materials generated revenues, and water, air, and ground pollution all are reduced. ● Many now believe that preparing for and adapting to climate change is a major and fast growing challenge. social responsibility ● stewardship: contributing to long term welfare of others ● corporate social responsibility (CSR): obligation toward society assumed by business ○ reflects social imperatives and social consequences of business practices; it consists of broadly of policies and practices that reflect business responsibility for some wider societal good. ○ range from local or small scale problems to issues of politics, diplomacy, international relations, and peace through commerce ● CSR actions and policies take into account stakeholders expectations and often consider triple bottom line of economic, social, and environmental performance. ○ precise policies and practices underlying CSR lie at discretion of corporation ● Economic responsibilities: Business are to produce goods and services that society wants at a price that perpetuates business and satisfies its obligations to investors. ● Economic responsibility may also extend to oering certain products to needy consumers at a reduced price. ● Legal responsibilities: to obey local, state, federal, and relevant international laws ● Ethical responsibilities: include meeting other societal expectation, not written as law ● Philanthropic responsibilities: additional behaviors and activities that society finds desirable and that values of business support ○ Activities can be more than mere altruism; managed properly, strategic philanthropy can become not an oxymoron but a way to build goodwill in a variety of stakeholders and even add to shareholder wealth.
● 21st century education must help students think about responsibilities beyond self interest and profitability. ○ Teaches students to leave a legacy that extends beyond the bottom line a transcendent education. ● Transcendent education: has five higher goals that balance self interest with responsibility to others: ○ Empathy: feeling your decisions as potential victims might feel the, to gain wisdom ○ Generativity: learning how to give as well as take, to others in present as well as to future generation ○ Mutuality: learning how to give as well as take, to others in personal gain, but a common victory ○ Civil aspiration: thinking not just in terms of don'ts (lie, cheat, steal, kill), but also in terms of positive contributions ○ Intolerance of inhumanity: speaking out against unethical actions ● Two basic and contrasting views deceive principles that guide managerial responsibility. The first hold that managers act as agents for shareholders and, as such are obligated to maximize the present value of the firm. ● The social responsibility of business is to increase profits, organizations may help improve the quality of life as long as such actions are directed at increasing profits. ● Second Perspective is that managers should be motivated by principled moral reasoning. ● Sympathy: defined as a proper regard for others, is the basis of civilized society. ● Advocates of corporate social responsibility argue that organizations have a wider range of responsibilities that extend beyond the production of goods and services at a profit. As members of society, organizations should actively and responsibly participate in the community and in the larger environment. ● Profit maximization and corporate social responsibility used to be regarded as antagonistic, leading to opposing polices. The two views seem paradoxical, but they can converge. ● Earlier attention to corporate social responsibility focused on alleged wrongdoing and how to control it. More recently, attention has also centered on the possible competitive advantage of socially responsible actions. ● The relationship between corporate social performance and corporate financial performance is complex: socially responsible organizations are sometimes successful in financial terms. ● Social responsibility is associated with better financial performance. Companies can avoid unnecessary and costly regulation if they are socially responsible. ● Societies problems also can oer business opportunities via vigorous eorts to solve them. ● Firms can perform cost benefit analysis to identify actions that will maximize profits while satisfying the demand for corporate social responsibility from multiple stakeholders.
Lesson 2 Ethics and Corporate Social Responsibility
Course: Management Theory And Leadership Practice (MGT3304)
