Corporate Social ResponsibilityEfficiency PerspectiveSocial Responsibility PerspectiveCorporate ResponsesCorporate Responses (cont.)Strategic Corporate Social Responsibility PerspectiveEthicsThe Development of Individual EthicsBasic Approaches to EthicsUtilitarian ApproachMoral Rights ApproachUniversal ApproachJustice ApproachMoral Intensity in Ethical Decision MakingHow Managers Make Better Ethical DecisionsHow Firms Make Better Ethical DecisionsSuccessfully Implementing Codes of EthicsThe Government: Foreign Corrupt Practices Act1Corporate Social ResponsibilityObligation corporations have to constituencies and the nature and extent of those obligationsFocus on the “oughts” of conducting businessConstituencies include: shareholders, customers, employees, specific communities, society at large, governmentsIssue: constituencies may not share same expectationsTwo Fundamental Perspectives Efficiency vs. Social Responsibility2Efficiency PerspectiveMaximize profits for the owners of the businessMANAGERS AS OWNERSSelf-interests of the manager-owner are best achieved by serving the needs of societyMANAGERS AS AGENTSManagers have no obligation to act on behalf of society if it does not maximize value for the shareholders3Social Responsibility PerspectiveFirms have responsibilities and obligations to society as a whole, not just shareholdersShareholdersSocietyFinanciersCommunitiesSuppliersEmployeesFIRMKey Stakeholders4Corporate ResponsesWe will change when legally compelled to do so.We will change when legally compelled to do so.Maximize profits. Abide by the letter of the law. Change when legally compelled to do so.Maximize profits. Abide by the letter of the law. Change when legally compelled to do so.We must fight against efforts to restrict or regulate our activities and profit-making potential.We must fight against efforts to restrict or regulate our activities and profit-making potential.Maximize profits. Find legal loopholes. Fight new restrictions and regulations.Maximize profits. Find legal loopholes. Fight new restrictions and regulations.BeliefBeliefFocusFocusDefendersDefendersAccommodatorsAccommodatorsAdapted from Exhibit 2.25Corporate Responses (cont.)We owe it to society to anticipate and avoid actions with harmful consequences, even if we are not pressured or legally required to do so.We owe it to society to anticipate and avoid actions with harmful consequences, even if we are not pressured or legally required to do so.Obtain profits, Abide by the law. Anticipate harmful consequences independent of pressures and laws.Obtain profits, Abide by the law. Anticipate harmful consequences independent of pressures and laws.We should respond to significant pressure even if we are not legally required to.We should respond to significant pressure even if we are not legally required to.Protect profits. Abide by the law. React to pressure that could affect business results.Protect profits. Abide by the law. React to pressure that could affect business results.BeliefBeliefFocusFocusReactorsReactorsAnticipatorsAnticipatorsAdapted from Exhibit 2.26Strategic Corporate Social Responsibility Perspective Three fundamental criteria guide managers:Inside-OutInside-OutApproachApproachOutside-InOutside-InApproachApproachOutside-OutOutside-OutApproachApproachLook insidecompany at issuesthat are importantto the companyLook outsidecompany at issues that company has an impact upon Look at social issues in general in terms of the extent to which they are problematic7EthicsWhat are ethics?A set of principles governing right and wrong behavior by individuals and groupsWhat is managerial ethics?Concerned with morality and standards of business behaviorWhy is it important to consider business ethics?Good ethical behavior can result in positive consequences for the organizationUnethical behavior results in negative consequences8The Development of Individual EthicsLifeExperiencesLifeExperiencesJobExperiencesJobExperiencesReligionReligionTeachersTeachersPeersPeersFriendsFriendsFamilyFamilyIndividualEthicsIndividualEthics9Basic Approaches to EthicsEthical DilemmasThe choice between two competing but arguably valid optionsEthical LapsesDecisions that are contrary to an individual’s stated beliefs and policies of the company Frameworks for ethical decision making:Utilitarian approachMoral rights approachUniversalism approachJustice approach10Utilitarian ApproachWhich will result in the “greatest good?” Focused on the consequences of an actionCost/benefit analysis – choose decision in which benefits most outweigh costsDifferent people may see the outcome differently in terms of good or bad11Moral Rights ApproachFocused on moral standing of actions, independent of their consequencesSome things are simply “right” or “wrong”When two actions have moral standing, then the positive or negative consequences of each will determine the more ethical one12Universal Approach“Do unto others as you would have them do unto everyone, including yourself.”The “Golden Rule”Choose a course of action you believe can apply to all people under all situationsDecisions or actions that limit rights like freedom and autonomy generally lack moral justification and are unethical13Justice ApproachFocuses on the how equitable the process and outcomes areDistributive justiceCosts and benefits should be equitably distributedEquitable distribution is based on performanceProcedural justiceRules should be impartially appliedEnsure that people consent to the decision-making process Ensure that the process is administered impartiallyCompensatory justiceThose damaged should be compensatedIf distributive and procedural justice fail, those hurt by inequitable distribution of rewards are compensated14Moral Intensity in Ethical Decision MakingMoral intensityThe degree to which people see an issue as an ethical one6 componentsMoralIntensityMagnitude of theConsequencesConcentration of EffectSocialConsequencesProximityTemporalImmediacyProbabilityof Effect15How Managers Make Better Ethical DecisionsBy improving the ethical climate through improving their own facility with ethical reasoning.By becoming more aware of the factors of moral intensity and the basic ethical reasoning systemsBy developing their skill at ethical decision making and making more ethically consistent