Ethics and Social Responsibility

 Stakeholders: people or groups that have an interest in the organization.
 Stakeholders include employees, customers, shareholders, suppliers, and others.
 Stakeholders often want different outcomes and managers must work to satisfy as many as possible.
 Ethics: a set of beliefs about right and wrong.
 Ethics guide people in dealings with stakeholders and others, to determine appropriate actions.
 Managers often must choose between the conflicting interest of stakeholders.
 Societal Ethics: standards that members of society use when dealing with each other.
 Based on values and standards found in society’s legal rules, norm, and mores.
 Codified in the form of law and society customs.
 Norms dictate how people should behave.
 Societal ethics vary based on a given society.
 Strong beliefs in one country may differ elsewhere.
 Example: bribes are an accepted business practice in some countries.
 Professional ethics: values and standards used by groups of managers in the workplace.
 Applied when decisions are not clear-cut ethically.
 Example: physicians and lawyers have professional associations that enforce these.
 Individual ethics: values of an individual resulting from their family& upbringing.
 If behavior is not illegal, people will often disagree on if it is ethical.
 Ethics of top managers set the tone for firms.
 Social Responsibility: the manager’s duty to nurture, protect and enhance the welfare of stakeholders.
There are many ways managers respond to this duty:
 Obstructionist response: managers choose not to be socially responsible.
 Managers behave illegally and unethically.
 They hide and cover-up problems.
 Defensive response: managers stay within the law but make no attempt to exercise additional social responsibility.
 Put shareholder interest above all other stakeholders.
 Managers say society should make laws if change is needed.
 Accommodative response: managers realize the need for social responsibility.
 Try to balance the interests of all stakeholders.
 Proactive response: managers actively embrace social responsibility.
 Go out of their way to learn about and help stakeholders.
 Managers accrue benefits by being responsible.
 Workers and society benefit.
 Quality of life in society will improve.
 It is the right thing to do.
 Whistleblowers: a person reporting illegal or unethical acts.
 Whistleblowers now protected by law in most cases.
 Social audit: managers specifically take ethics and business into account when making decisions.