WEEK 7

ETHICS & SOCIAL RESPONSIBILITY

Özge Can – 07.11.2012

Article on Ethics:

In China, Human Costs Are Built Into an iPad

http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?pagewanted=all

Stakeholders

Stakeholders The people and groups affected by how a

company and its managers behave. They supply a company with its productive

resources and so have a claim on and stake in the company

Stakeholders

Stockholders

They have a claim on company as they buy its stock or shares and become its owners. They;

Want to maximize their return on investment

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

Responsible for using a company’s financial, capital and human resources to increase its performance

Bear the responsibility to decide which goals an organization should pursue

Frequently try to balance multiple interests These interest may be in conflict; some

decisions that benefit certain stakeholder groups can harm others

Employees

They expect to receive rewards consistent with their performance

Fair treatment expected from managers:Recruitment and trainingPerformance appraisalReward system

Suppliers and Distributors

Suppliers expect to be paid fairly and promptly for their inputs

Distributors expect to receive quality products at agreed-upon prices

How companies contract and interact with them? How and when payments are made Product quality and safety specifications

Customers

Most critical stakeholder

Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones

Community and Society

Community: Refers to locations like towns or cities

or to social milieus in which companies are located

Provides a company with the physical and social infrastructure that allows it to operate

Ethics

Ethics Inner guiding moral principles, values that

people use to analyze and interpret a situation and then decide what is the right or appropriate way to behave

Ethical dilemma

Business Ethics The moral principles and standards that

guide behavior in the world of business

Rules of Ethical Decision Making

Why Should Managers Behave Ethically?

The relentless pursuit of self-interest can lead to a collective “disaster” when a few people start to profit from being unethical because this encourages other people to act in the same way

Pursuing of self interest with no consideration of societal interests harm both the individual and the society

=> Scarce resources are destroyed

Some Effects of Ethical/ Unethical Behavior:

The Business Costs of Ethical Failure

Sources of Business Ethics:

Business Ethics

Societal Ethics

Individual Ethics

Organizational Ethics

Occupational Ethics

Sources of Business Ethics:

Societal Ethics Standards that govern how members of a

society should deal with each other on issues such as fairness, justice, poverty, and the rights of the individual

Occupational (Professional) Ethics Standards that govern how members of a

profession, trade or craft should conduct themselves when performing work-related activities

Sources of Business Ethics:

Individual Ethics Personal standards and values that

determine how people view their responsibilities to others and how they should act in ethical situations

Organizational Ethics Guiding practices and beliefs through which

a particular company and its managers view their responsibility towards their stakeholders

Major Issues of Business Ethics Unfair wages and violation of employee rights Safety and health violations and poor working

conditions Discriminatory practices Failure of providing safe products Dishonest commonication, lack of transparency Damaging community, society and the

environment Financial frauds, bribery

Organizational Ethics

Code of Ethics: A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow.

Organizational characteristics, mechanisms and culture guide and influence ethics: Organiational structural design

Organization culture

Ethics programs and training

Becoming an Ethical Leader

1. Hire individuals with high ethical standards

2. Establish codes of ethics, decision rules and shared values in the organization

3. Lead by example: Be a good role model by being ethical and honest yourself

4. Include ethics in performance appraisals and the reward system

5. Provide ethics training

6. Conduct independent social audits

7. Provide support for individuals facing ethical dilemmas

Workforce Diversity & Ethics Workforce Diversity

The ways in which people in an organization are different from and similar to one another.

Unethical treatment (discrimination) towards diverse employees: Prejudice (false schemas, perceptions) Stereotyping Biases Overt discrimination, glass ceiling

Social Responsibility

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 society as a whole

Corporate Social Responsibility (CSR): The idea that businesses have obligations to society beyond the pursuit of profits

I. The Classical View

Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).

Expending the firm’s resources on doing “social good” is not preferable

II. The Socioeconomic View

Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.

Corporations are not independent entities responsible only to stockholders. Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.

Why Be Socially Responsible?

Building good image and reputation Responsibility for bearing the costs of

protecting stakeholders, providing health care and income, paying taxes and etc

Promoting a climate of caring in general Better environment and better society Superiority of prevention over cures

Practice: Take The Test

Assessing your ethical decision-making skills: http://www.mhhe.com/business/managemen

t/buildyourmanagementskills/updated_flash/topic2a/quiz.html

Corporate social responsibility: http://www.mhhe.com/business/managemen

t/buildyourmanagementskills/updatedexercises/quiz_1b.html

Next Week:

Read from your textbook: Chapter 6 – Managing the Global

Environment

Submit your written assignment (2) 2-pages at most Individual or up to 3 persons

Assignment -2 (Due 14.11.2012):

You are an entrepreneuer who has decided to go into business and open an Egean cuisine restaurant. Your business plan requires that you hire people as chefs, waiters and so on.

As the manager, you are drawing up a list of ethical principles that all of you must agree to. These principles outline your view of what is right or acceptable behavior in your business and will be expected both from you and your employees.

Assignment -2:

1. Create a list of the five main ethical rules or principles you will use to govern how the business operates (Please identify them in relation with your restaurant business)

2. Give three specific examples how these principles might relate to your stakeholders. How will you follow them in dealing with particular stakeholders? What will be the benefits for following these rules?

3. Give an example of one ethical dilemma that you might face with while running your business.