Amazon Case study
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MGTChap004.pptEthics and Social Responsibility
chapter four
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
Explain the relationship between ethics and the law
Differentiate between the claims of the different stakeholder groups that are affected by managers and their companies actions
Describe four rules that can be used to help companies and their managers act in ethical ways
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Learning Objectives
Discuss why it is important for managers to behave ethically
Identify the four main sources of managerial ethics
Distinguish between the four main approaches toward social responsibility that a company can take
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The Nature of Ethics
Ethical Dilemma
quandary people find themselves in when they have to decide if they should act in a way that might help another person even though doing so might go against their own self-interest
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The Nature of Ethics
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
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Dealing with Ethical Issues
There are no absolute or indisputable rules or principles that can be developed to decide if an action is ethical or unethical
Neither laws nor ethics are fixed principles
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Managers must confront the need to decide what is appropriate and inappropriate as they use a company’s resources to produce goods and services
Ethical beliefs lead to the development of laws and regulations to prevent certain behaviors or encourage others
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Stakeholders and Ethics
Stakeholders
The people and groups that supply a company with its productive resources and so have a claim on and stake in the company.
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When the law does not specify how companies should behave, managers must decide what is the right or ethical way to behave toward the people and groups affected by their actions
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Types of Company Stakeholders
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Figure 4.1
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
Want to maximize their return on investment
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Managers
Responsible for using a company’s financial capital and human resources to increase its performance
Have the right to expect a good return or reward by investing their human capital to improve a company’s performance
Frequently juggle multiple interests
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Problem has been that in many companies corrupt managers focus not on building the company’s capital and stockholder’s wealth but on maximizing their own personal capital and wealth
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Managers
Problem has been that in many companies corrupt managers focus not on building the company’s capital and stockholder’s wealth but on maximizing their own personal capital and wealth
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Employees
Expect to receive rewards consistent with their performance
Companies can act ethically toward employees by creating an occupational structure that fairly and equitably rewards employees for their contributions
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Suppliers and Distributors
Suppliers expect to be paid fairly and promptly for their inputs
Distributors expect to receive quality products at agreed-upon prices
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Some Principles from the Gap’s Code of Vendor Conduct
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Table 4.1
Customers
Most critical stakeholder
Company must work to increase efficiency and
effectiveness in
order to create
loyal customers
and attract new
ones
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Whole Food’s Stakeholder Approach to Ethical Business
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Figure 4.2
Community, Society, and Nation
Community
Physical locations like towns or cities in which companies are located
A community provides a company with the physical and social infrastructure that allows it to operate
A company contributes to the economy of the town or region through salaries, wages, and taxes
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Example – Houston Non-Profits
Many Houston area non-profits were adversely affected by the demise of Enron
Many were dependent on donations from Enron
The arts community was especially hit hard
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http://www.nptimes.com/Apr06/news-040106_1.html
Ethical Decision Making
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Figure 4.3
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Utilitarian Rule
Decision that produces the greatest good for the greatest number
How do you measure the benefits and harms that will be done to each stakeholder group?
How do you evaluate the rights and importance of each group?
Moral Rights rule
Decision that best maintains and protects the fundamental or inalienable rights and privileges of the people affected by it
Justice rule
Decision that distributes benefits and harms among people and groups in a fair, equitable, or impartial way
Practical rule
- Decision that a manager has no hesitation about communicating to people outside the company because the typical person would think it is acceptable
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Practical Decision Model
Does my decision fall within the acceptable standards that apply in business today?
Am I willing to see the decision communicated to all people and groups affected by it?
Would the people with whom I have a significant personal relationship approve of the decision?
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Why should managers behave ethically?
The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way
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Some Effects of
Ethical/Unethical Behavior
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Figure 4.4
Trust and Reputation
Trust
willingness of one person or group to have faith or confidence in the goodwill of another person
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Trust and Reputation
Reputation
esteem or high repute that individuals or organizations gain when they behave ethically
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Sources of Ethics
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Figure 4.5
Societal Ethics
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
People behave ethically because they have internalized certain values, beliefs, and norms
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Occupational Ethics
Occupational Ethics
Standards that govern how members of a profession, trade, or craft should conduct themselves when performing work-related activities
Medical & legal ethics
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Individual Ethics
Individual Ethics
Personal standards and values that determine how people view their responsibilities to other people and groups
How they should act in situations when their own self-interests are at stake
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Organizational Ethics
Organizational Ethics
Guiding practices and beliefs through which a particular company and its managers view their responsibility toward their stakeholders
Top managers play
a crucial role in
determining a
company’s ethics
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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 stakeholders and society as a whole
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Approaches to Social Responsibility
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Figure 4.6
Approaches to Social Responsibility
Obstructionist approach
Companies choose not to behave in a social responsible way and behave unethically and illegality
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Approaches to Social Responsibility
Defensive approach
companies and managers stay within the law and abide strictly with legal requirements but make no attempt to exercise social responsibility
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Approaches to Social Responsibility
Accommodative approach
Companies behave legally and ethically and try to balance the interests of different stakeholders against one another so that the claims of stockholders are seen in relation to the claims of other stakeholders
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Approaches to Social Responsibility
Proactive approach
Companies actively embrace socially responsible behavior, going out of their way to learn about the needs of different stakeholder groups and utilizing organizational resources to promote the interests of all stakeholders
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Why Be Socially Responsible?
Demonstrating its social responsibility helps a company build a good reputation
If all companies in a society act socially, the quality of life as a whole increases
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Role of Organizational Culture
Ethical values and norms help organizational members:
Resist self-interested action
Realize they are part of something bigger than themselves
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Johnson & Johnson Credo
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Figure 4.7
Ethics Ombudsman
Responsible for communicating ethical standards to all employees
Designing systems to monitor employees conformity to those standards
Teaching managers and employees at all levels of the organization how to appropriately respond to ethical dilemmas
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Video Case: Whose Life is It Anyway?
Do you think it is ethical for Scott’s or other companies to fire employees who smoke, even if they only smoke outside of work?
In implementing Scott’s health initiatives, does Hagedorn put the interests of one group of stakeholders above those of another?
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Chapter 4 Video Case Teaching Note
Whose Life Is It Anyway?
Teaching Objective: To examine one company’s employee health policies in terms of ethical issues
Summary: Scott’s Miracle-Gro is concerned about the health of its employees and its health care costs. The company promotes good health by providing a medical clinic and a gym. Its strict anti-smoking policy--no smoking, on the job or away from the workplace, or be fired—is seen by some as beneficial and by others as a violation of employee rights.
Questions:
Do you think it is ethical for Scott’s or other companies to fire employees who smoke, even if they only smoke outside of work?
Some students are likely to support each side. Amid growing anti-smoking sentiments, many organizations and cities have banned smoking inside facilities or in other locations. Since smoking is legal, smokers believe they have the right to smoke in other places and always in their own vehicles and homes. Many states have smokers’ rights laws that prohibit firing employees who smoke, but many don’t. When the law does not specify how companies should behave, managers must decide what is the right or ethical way to behave toward the people and groups affected by their actions.
In implementing Scott’s health initiatives, does Hagedorn put the interests of one group of stakeholders above those of another?
With the anti-smoking policy, Hagedorn had to juggle the interests of stockholders, employees, and management, while deciding the most efficient use of company resources. As manager, he strives to maximize the return on stockholders’ investment. One way is to keep down the fast-rising cost of employee health care. He also considered employees’ welfare. The health initiatives, including the strict smoking ban, are designed to help employees maintain or improve health and increase their longevity and quality of life. The smoking ban and penalty of firing smokers does put the welfare of stockholders, management, and the majority of employees above the preference of employees who smoke.
3. Which ethical rule does the strict smoking policy reflect?
The policy reflects the utilitarian rule, which bases an ethical decision on what produces the greatest good for the greatest number of people.
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