Modern Management: Concepts and Skills

Fifteenth Edition, Global Edition

Chapter 3
Society, Ethics, and
Sustainability

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Learning Objectives (1 of 2)
3.1 A thorough understanding of the term social
responsibility
3.2 Insights about the social responsiveness of an
organization
3.3 Insights for meeting social audit challenges

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Learning Objectives (2 of 2)
3.4 Thoughts on how to meet philanthropy challenges
3.5 Ways for building sustainable organizations
3.6 An appreciation for the role that ethics plays in
management

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Fundamentals of Social Responsibility
• Social Responsibility
– The managerial obligation to take action that protects
and improves both the welfare of society as a whole
and the interests of the organization
• Areas of Social Responsibility
– Urban/Consumer Affairs, Community Volunteerism,
Employment Practices
– Ecology Conservation (Going Green)

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Arguments for Social Responsibility
Activities
• Businesses as a whole are a subset of society
• Businesses have a responsibility to help maintain and
improve the overall welfare of society
• Performing social responsibility activities earns greater
organizational profits (a relationship not yet proven by
research)

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Arguments Against Social Responsibility
Activities
• Milton Friedman, Distinguished Economist
– Businesses being socially responsible conflict with
profit interests of business owners
– Socially responsible public activities conflict with private
organizational objectives
– Unethical to use owner profits for society’s interests

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Conclusions About Being Socially
Responsible
• Businesses and managers should
– Perform all legally required social responsibility
activities
– Consider voluntarily performing social responsibility
activities beyond those legally required
– Inform all relevant individuals of the extent to which
organizations will be involved in social responsibility
activities

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Social Responsibility and Federal
Legislation
Table 3.1 Primary Functions of Several Federal Agencies That Enforce
Social Responsibility Legislation
Federal Agency Primary Agency Functions
Equal Employment Opportunity Commission Investigates and conciliates employment discrimination complaints
that are based on race, sex, or creed
Office of Federal Contract Compliance Ensures that employers holding federal contracts grant equal
Programs employment opportunity to people regardless of their race or sex
Environmental Protection Agency Formulates and enforces environmental standards in such areas as
water, air, and noise pollution
Consumer Product Safety Commission Strives to reduce consumer misunderstanding of manufacturers’
product design, labeling, and so on, by promoting clarity of these
messages
Occupational Safety and Health Administration Regulates safety and health conditions in nongovernment
workplaces
National Highway Traffic Safety Administration Attempts to reduce traffic accidents through the regulation of
transportation-related manufacturers and products
Mining Enforcement and Safety Administration Attempts to improve safety conditions for mine workers by enforcing
all mine safety and equipment standards

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Voluntarily Performing Social
Responsibility Activities
• Adhering to legislative mandates is the minimum standard
managers must achieve
• Managers need to ask themselves how far above the
minimum they are willing to go while still maintaining the
success of the organization
• Managers should clearly communicate their involvement in
social responsibility activities to all stakeholders

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Social Responsiveness
• The degree of effectiveness and efficiency an organization
displays in pursuing its social responsiveness
• The greater the degree of effectiveness and efficiency, the
more socially responsive the organization is said to be

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Determining If a Social Responsibility Exists
(1 of 2)

• Management obligations based on

– Business situation
– Impact on stakeholders
• Stakeholders
– Any individual or group that is directly or indirectly
affected by an organization’s decisions

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Determining If a Social Responsibility Exists
(2 of 2)

Table 3.2 Stakeholders of a Typical Modern Organization and Examples

of Social Obligations Managers Owe to Them
Stakeholder Social Obligations Owed
Stockholders/owners of the organization To increase the value of the organization
Suppliers of materials To deal with them fairly
Banks and other lenders To repay debts
Government agencies To abide by laws
Employees and unions To provide a safe working environment and to
negotiate fairly with union representatives
Consumers To provide safe products
Competitors To compete fairly and to refrain from restraints
of trade
Local communities and society at large To avoid business practices that harm the
environment

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Social Responsiveness and Decision Making
(1 of 2)

• An effective and efficient socially responsive organization

works with wasting resources in the process
• Managers must pursue only those responsibilities their
organization possesses and has a right to undertake

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Social Responsiveness and Decision Making
(2 of 2)

Figure 3.1 Flowchart of social

responsibility decision making that
generally will enhance the social
responsiveness of an organization

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Approaches to Meeting Social
Responsibilities (1 of 2)
• Incorporate social goals into annual planning process
• Seek comparative industry norms for social programs
• Present reports to owners and stakeholders
• Experiment with different approaches
• Attempt to measure cost of social programs

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Approaches to Meeting Social
Responsibilities (2 of 2)
• Different managerial approaches
– Requirement: Firm only does what is required by law
– Recognition: Firm has obligations to pursue both profit
and social goals
– Believing: Firm has both profit and social goals

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Social Audit Challenge
• Process of measuring social responsibility activities to
assess organizational performance
• Social Audit Steps
– Monitoring
– Measuring
– Appraising

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Philanthropy Challenge
• Promote welfare of others through general monetary
donations to social causes
• Aim to increase the well-being of people
• Focuses on supporting the arts, education, world peace,
and disaster relief
• Managers should donate to causes that in some way
benefit both the organization and the society

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

The Sustainable Organization Challenge
• Includes conserving national resources, reducing waste,
recycling, and protecting threatened species
• Sustainability
– The degree to which a person or entity can meet its
present needs without compromising the ability of
others to meet their needs

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Defining a Sustainable Organization
Challenge
• Sustainable Organization
– An organization that can meet their present needs
without compromising future generations ability to meet
theirs
• The Triple Bottom-Line
– Management should work toward making their
organizations sustainable in three areas: economy,
environment, and society

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Why Sustainability?
Three reasons why managers should build sustainable
organizations
• Increased profits
• Increased productivity
• Increased innovation

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Steps to Sustainability
• Set sustainability goals
• Hire organization members who can help organization
become more sustainable
• Reward employees who contribute to organization’s
sustainability goals
• Track progress in reaching sustainability goals

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Managers and Ethics
• Ethics
– The capacity to reflect on values in the corporate
decision-making process, to determine how these
values and decisions affect various stakeholder groups,
and to establish how managers can use these
observations in day-to-day company management
• Ethical managers strive for management practices that are
fair and just.

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Benefits of Ethics in Management Practices
Ethical business practices can lead to these benefits
• Increased Productivity
• Improved Stakeholder Relations
• Minimizing Government Regulation

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Code of Ethics (1 of 2)
• A formal statement that acts as guide for how employees
should act and make decisions
• Ninety percent of Fortune 500 firms have a code of ethics
• Cannot be expected to cover all behavior and should be
evaluated and refined periodically

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Code of Ethics (2 of 2)
Figure 3.2 Highlights of the Code of Ethics for financial managers at
Publix Super Markets

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Creating an Ethical Workplace (1 of 2)
• Create, distribute, and improve a Code of Ethics
• Appoint a Chief Ethics Officer
• Provide Training
– Do not focus on teaching morals
– Give employees criteria for helping determine if an
action is ethical

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Creating an Ethical Workplace (2 of 2)
Ethical Standards
• Utilitarian: Ethical behavior provides the most good or
least harm for the greatest number of people
• Rights: Ethical behavior promotes the respect and rights
of others
• Virtue: Behaviors are ethical if they reflect high moral
values such as honesty, fairness, and compassion

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved

Following the Law: Sarbanes-Oxley Reform
Standards
• Mainly the result of unethical practices of at Enron
Corporation
• Passed to prevent accounting deception of publicly owned
companies
• Holds managers accountable and can result in significant
jail time
• Supports whistle-blowing—employee reporting of
suspected misconduct or corruption

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved