Lecture 5 Oct.

Ethics and Social Responsibility
Definitions
 Ethical Dilemma
 a type of ethical issue that arises when the available choices
and obligations in a specific situation do not allow for an ethical
outcome
Ethics
The inner-guiding moral principles, values, and beliefs that
people use to analyze or interpret a situation and then decide
what is the “right” or appropriate way to behave .
Stakeholders and Ethics
 Stakeholders
 The people and groups that supply a company with its productive
resources and so have a claim on and a stake in the company.
 Stockholders
 A shareholder, also referred to as a stockholder, is a person,
company, or institution that owns at least one share of a
company’s stock, known as equity. Because shareholders essentially
own the company, they reap the benefits of a business's success.
 Stockholders : want to ensure that managers are behaving
ethically and not risking investors’ capital by engaging in actions
that could hurt the company’s reputation.
 Managers: must be motivated and given incentives to work

hard in the interests of stockholders. Their behavior must also be
scrutinized to ensure they do not behave illegally or unethically,
pursuing goals that threaten stockholders and the company’s
interests.
 Employees : One principal way that a company can act
ethically toward employees and meet their expectations is by
creating an occupational structure that fairly and equitably
rewards employees for their contributions.
 Suppliers : expect to be paid fairly and promptly for their

inputs;
 Distributors : expect to receive quality products at agreed-

upon prices.
 Customers : Thus managers and employees must work to
increase efficiency and effectiveness in order to create loyal
customers and attract new ones.
 Community, Society, and Nation: Business ethics are also

important because the failure of a company can have
catastrophic effects on a community; a general decline in
business activity affects a whole nation. The decision of a large
company to pull out of a community, for example, can threaten
the community’s future. Some companies may attempt to
improve their profits by engaging in actions that, although not
illegal, can hurt communities and nations.
Safety in the Garment Industry
 more than 150 international brands and retailers, including

Abercrombie & Fitch, American Eagle Outfitters, Fruit of the
Loom, and PVH, sign the Accord on Fire and Building Safety in
Bangladesh in 2013
 The accord is a five-year agreement stating that the signing

companies and organizations commit to meet the minimum safety
standards for the textile industry in Bangladesh.
UTILITARIAN RULE
 The utilitarian rule is that an ethical decision is a decision that

produces the greatest good for the greatest number of people.
 To decide which is the most ethical course of business action,
managers should first consider how different possible courses
of business action would benefit or harm different
stakeholders.
 They should then choose the course of action that provides the
most benefits, or, conversely, the one that does the least harm,
to stakeholders.
MORAL RIGHTS RULE
 Under the moral rights rule, an ethical decision is one that best
maintains and protects the fundamental or inalienable rights and
privileges of the people affected by it .
 For example, ethical decisions protect people’s rights to freedom,
life and safety, property, privacy, free speech, and freedom of
conscience.
 The adage “Do unto others as you would have them do unto you” is
a moral rights principle that managers should use to decide which
rights to uphold.
 Customers must also consider the rights of the companies and
people who create the products they wish to consume.
JUSTICE RULE
 The justice rule is that an ethical decision distributes benefits and
harms among people and groups in a fair, equitable, or impartial way.
 Managers should compare and contrast alternative courses of action
based on the degree to which they will fairly or equitably distribute
outcomes to stakeholders.
 For example, employees who are similar in their level of skill,
performance, or responsibility should receive similar pay;
PRACTICAL RULE
 The practical rule is that an ethical decision is one that a manager

has no hesitation or reluctance about communicating to people
outside the company because the typical person in a society would
think it is acceptable.
 Individual Ethics
personal standards and values that determine how
people view their responsibilities to other people and
groups and thus how they should act in situations when
their own self-interests are at stake. ( taxi case study )
 Organizational Ethics
 The guiding practices and beliefs through which a particular
company and its managers view their responsibility toward their
stakeholders . (TOMS )
 Societal Ethics
 Standards that govern how members
of a society should deal with one another in matters involving
issues such as fairness, justice, poverty, and the rights of the
individual.
 occupational ethics
 Standards that govern how members of a profession, trade, or
craft should conduct themselves when performing work-related
activities.
Act in an ethical or unethical way
 You are planning to leave your job to go work for a
competitor; your boss invites you to an important
meeting where you will learn about new products
your company will be bringing out next year. Do you
go to the meeting?
 You sign a contract to manage a young rock band,

and that group agrees to let you produce their next
seven records, for which they will receive royalties of
5 percent. Their first record is a smash hit and sells
millions. Do you increase their royalty rate on future
records?
 You’re the manager of sales in an expensive
sports car dealership. A young executive who
has just received a promotion comes in and
wants to buy a car that you know is out of
her price range. Do you encourage the
executive to buy it so you can receive a big
commission on the sale?
 why it is important for managers to behave

ethically ?
 Egypt-corruption-index
Social Responsibility
 The way a company’s managers and

employees view their duty or
obligation to make decisions that
protect, enhance, and promote the
welfare and well-being of
stakeholders and society as a whole.
Forms of Socially Responsible Behavior
 Provide severance payments to help laid-off workers make ends meet until they
can find another job.
 Give workers opportunities to enhance their skills and acquire additional

education so they can remain productive and do not become obsolete because of
changes in technology.
 Allow employees to take time off when they need to and provide health care and
pension benefits for employees.
 Contribute to charities or support various civic-minded activities in the cities
or towns in which they are located. (Target and Levi Strauss both contribute
5 percent of their profits to support schools, charities, the arts, and other
good works.)
 Decide to keep open a factory whose closure would devastate the local
community.
 Decide to spend money to improve a new factory so it will not pollute the
environment.
 Decline to invest in countries that have poor human rights records and
Choose to help poor countries develop an economic base to improve living
standards
Approaches to Social Responsibility
 obstructionist approach
 Companies and their managers

choose not to behave in a socially
responsible way and instead
behave unethically and illegally.
 defensive approach
 Companies and their managers behave
ethically to the degree that they stay
within the law and strictly abide by legal
requirements.
 accommodative approach
 Companies and their managers behave
legally and ethically and try to balance
the interests of different stakeholders as
the need arises.
 proactive approach
 Companies and their managers actively
embrace socially responsible behavior,
going out of their way to learn about the
needs of different stakeholder groups and
using organizational resources to
promote the interests of all stakeholders.
The Role of Organizational Culture
 Ethical organizational cultures encourage
organizational members to behave in a
socially responsible manner.
 Managers’ roles in developing ethical values

and standards in other employees are
important.
 A manager responsible for communicating

and teaching ethical standards to all
employees and monitoring their conformity to
those standards.
ADD TO your GROUP
PROJECT / final
 Creating an Ethical Code .

 Creating a CSR program .
 SWOT analysis .
 New strategy .

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Ethics and Social Responsibility

 Managers: must be motivated and given incentives to work

 Suppliers : expect to be paid fairly and promptly for their

 Distributors : expect to receive quality products at agreed-

 Community, Society, and Nation: Business ethics are also

 more than 150 international brands and retailers, including

 The accord is a five-year agreement stating that the signing

 The utilitarian rule is that an ethical decision is a decision that

 The practical rule is that an ethical decision is one that a manager

 You sign a contract to manage a young rock band,

 why it is important for managers to behave

 The way a company’s managers and

 Give workers opportunities to enhance their skills and acquire additional

 Companies and their managers

 Managers’ roles in developing ethical values

 A manager responsible for communicating

 Creating an Ethical Code .

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