Management’s Social and Ethical

Responsibilities

Chapter Five

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Chapter ObjectivesDefine the term corporate social responsibility (CSR) and

specify the four levels in Carroll’s global CSR pyramid.Contrast the classical economic and socioeconomic models of

business and summarize the arguments for and against CSR.Identify and describe the four social responsibility strategies

and explain the concept of enlightened self-interest.Summarize the four practical lessons from business ethics

research.Distinguish between instrumental and terminal values and

explain their relationship to business ethics.Identify and describe at least four of the ten general ethical

principles.Discuss what management can do to improve business ethics.

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Social Responsibility: Definition and Perspectives

Corporate Social Responsibility (CSR) The idea that business has:

Social obligations above and beyond making a profit Social obligations to constituent groups in society

other than stockholders and beyond that prescribed by law

Organizations include financial, environmental, and social responsibility in their core business strategies.

Triple bottom line: People, planet, profits

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.3

Social Responsibility: Definition and Perspectives (cont’d)

CSR for global and transnational corporations

Working from the bottom up, the global corporation should: Make a profit Obey the law Be ethical in its practices Be a good corporate citizen

CSR requires voluntary action

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.4

What Is the Role of Business in Society?The Classical Economic Model (Adam Smith)

An “invisible hand” promoted the public welfare.

The public interest was served by individuals pursuing their own economic self-interests.

According to the classical economic model of business, profitability and social responsibility are the same thing. The Socioeconomic Model

Business has an obligation to meet the needs of the many groups in society besides stockholders in its pursuit of profit.© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Arguments For and Against Corporate Social Responsibility

Arguments For Business is unavoidably involved in social

issues. Business has the resources to tackle today’s

complex societal problems. A better society means a better environment

for doing business. Corporate social action will prevent

government intervention.

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Arguments For and Against Corporate Social Responsibility (cont’d)

Arguments Against Profit maximization ensures the efficient use

of society’s resources. As an economic institution, business lacks the

ability to pursue social goals. Business already has enough power. Because business managers are not elected,

they are not directly accountable to society.

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Social Responsibility StrategiesReactive Strategy

Denying responsibility while striving to maintain the status quo by resisting change

Defensive Strategy Resisting additional social responsibilities

with legal and public relations tactics

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Social Responsibility Strategies (cont’d)

Accommodation Strategy Assuming social responsibility only in

response to pressure from interest groups or the government

Proactive Strategy Taking the initiative in formulating and

putting in place new programs that serve as role models for the industry

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The Ethical Dimension of ManagementEthics

The study of moral obligation involving the distinction between right and wrong

Business Ethics Narrows the frame of reference to productive

organizations Also referred to as management ethics or

organizational ethics

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Practical Lessons from Business Ethics Research

Ethical Hot Spots Balancing work and

family Poor internal

communications Poor leadership Work hours, work

load Lack of

management support

Need to meet sales, budget, or profit goals

Little or no recognition of achievements

Company politics Personal financial

worries Insufficient

resources© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.11

Practical Lessons from Business Ethics Research (cont’d)

Pressure from Above The problem of superiors pressuring

subordinates to achieve results is widespread. Managers’ responses to pressure from above

Consciously avoid putting undue pressure on subordinates (who may act unethically to relieve the pressure).

Prepare to deal with excessive organizational pressure.

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Practical Lessons from Business Ethics Research (cont’d)

Ambiguous Situations Situations where there are no clear-cut ethical

guidelines or ethical codesRationalization: How Good People End Up

Doing Bad Things Perceiving an objectively questionable action

as normal and acceptableA Call to Action

The deliberate and conscious action of a manager to do the right thing is an ethical and personal matter

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Personal Values as Ethical AnchorsValues

Abstract ideals that shape one’s thinking and behavior Instrumental value: Enduring belief that a certain

way (mode) of behaving is appropriate in all situations

Terminal value: Enduring belief that a certain end-state of existence (being admired) is worth striving for

Identifying and Acting Upon Your Own Values Basic personal values are taken for granted. They are not arranged consciously in order of

priority.© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.14

Managerial Ranking of ValuesTerminal Values

Self-respect Family security Freedom A sense of

accomplishment Happiness

Instrumental Values Honesty Responsibility Capability Ambition Independence

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Summary Corporate responsibility is the idea that management has broader

responsibilities than just making a profit. The debate over the basic purpose of the corporation is long-

standing. Management scholars who advocate greater corporate social

responsibility cite the iron law of responsibility. Ethics research indicates that many employees have acted

unethically, have been pressured to act unethically, desire ethical standards, and engage in rationalization to defend their behaviors.

Managers must pay attention to the instrumental and terminal values that comprise employee’s personal value systems.

There are at least ten general ethical principles that guide behavior are self-interests, personal virtues, religious injunctions, government requirements, utilitarian benefits, universal rules, individual rights, economic efficiency, distributive justice, and contributive liberty. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Terms to UnderstandCorporate social

responsibilityStakeholder auditIron law of responsibilityReactive social

responsibility strategyDefensive social

responsibility strategyAccommodative social

responsibility strategyProactive social

responsibility strategy

AltruismEnlightened self-

interestCorporate philanthropyEthicsValuesInstrumental valueTerminal valueAmoral managersEthical advocateWhistle-blowing

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.17