Weekly Faculty Guide

Study Guide
MGT/521 Version 10 / 1

Week SixStudy Guide: Business Ethics

Readings and Key Terms

Content Overview

Social obligation– when an organizationperforms social actions because it mustmeet responsibilities such as economic and legal. This idea reflects the classical view of social responsibility, which states that the firm’s sole responsibilityis to make as much money as possible.
Social responsiveness – when a company performs in a socially responsible way due to the way social norms and needs are perceived.This reflects the socioeconomic view that managers’ responsibilities exceed just making money; this view is based on the belief that all organizations are tied into the larger mix of society and have obligations accordingly.
Social responsibility–occurs when an organization acts in manner consistent with doing what is best for society as a whole, beyond its legal and economic obligations. This also reflects the socioeconomic view.

Debate has occurred regarding whether firms should be socially responsible, and studies have concluded that firms can afford to do so, and they should.

When managers consider the impact of their organization on the natural environment
Companies range on the spectrum of social obligation to social responsibility in regard to their green management initiatives
The shades of green model describes the different environmental approaches organizations may take.

The light green or legal approach is doing what they areobligated to do by law.Firms using this method are demonstrating social obligation.
The market approach is when a firm responds to customers’environmental preferences. This is a demonstration of social responsiveness.
The stakeholder approach also demonstrates social responsiveness, and in this approach, an organization works to meet the environmental demands of multiple stakeholders, such as employees, suppliers, and the community.
The dark green or activist approach is a type of social responsibility, and it looks for ways to protect the earth’s natural resources.This is the highest degree of environmental sensitivity.
Organizations can show green management through pursuing standards developed by the International Organization for Standardization.

The “principles, values, and beliefs that define right and wrong decisions and behavior” (Robbins & Coulter, 2012, p. 130).
Factors that determine ethical and unethical behavior:

Stage of moral development – behavior develops, becoming increasingly moral as different stages are reached.As the stages progress, a person becomes increasingly independent from outside influences.
Individual characteristics – values—basic convictions about what is right and wrong— and personality play a role in determining whether a person behaves ethically.Personality variables that influence an individual’s actions include ego strengthand locus of control.
Structural variables – organizational structures that minimize ambiguity and uncertainty with formal rules and regulations and remind employees of these rules and regulations are more likely to encourage ethical behavior.How goals are set can also influence ethical or unethical behavior.
Organizational culture – an organizational culture that is high in risk tolerance, control, and conflict tolerance can promote ethical behavior. Values-basedmanagement is where the organization’s values guide employees in the way they do their jobs.
Issue intensity – the higher the intensity of the situation, the more likely it will be perceived as unethical. (Robbins & Coulter, 2012, p. 132)

While some common moral beliefs exist, social and cultural differences between countries and regions are important in determining what is considered ethical and unethical in each area.
Managers in a multinational organization must determine whether employees in a specific location adhere to their location’s ethical standards or the standards of the home office location.
The Global Compact was created by the United Nations to set common standards of ethical treatment “in the areas of human rights, labor, the environment, and anticorruption” (Robbins & Coulter, 2012, p. 132).

While managers can take steps to encourage ethical behavior, including creating comprehensive ethics programs, this does not always mean that employees will act ethically.
Steps taken during the employee selection process may allow managers hiring new employees to ascertain the values of candidates, in an attempt to find someone whosevalues align with those of the company.
Creating a code of ethics—a formal statement, created by an organization, stating the values it holds dear and to which it expects employees to adhere—can reduce ambiguity in ethical decisionmaking for employees. Codes of ethics should set guidelines for ethical decisions but be flexible enough to allow employees the freedom to adapt to the situation.
Top managers and leaders can encourage ethical behavior by acting ethically and serving as good examples to their employees. Managers should also reward employees acting ethically (and punish employees acting unethically), so this can serve as an example to other employees.
Managers can also establish ethics training programs to encourage ethical behavior.Although most values are learned in childhood, training can assist employees in polishing their ideas about ethics.

Managing ethical lapses and social irresponsibility—two managerial actions seem particularly important in encouraging ethical behavior among employees:

Serving as a good example by promoting and exhibiting ethical leadership
Protecting employees who raise ethical issues and bringing these issues to management

Social entrepreneursfind ways to effect society in a positive, sustainable, innovative way and they use creativity and ingenuity.

Corporate philanthropy – where organizations support social causes, through investing time, money, and other resources
Encouraging employees to volunteer their time and efforts for change