5-1

Ethics, Social
Responsibility,
and Diversity
 5-2

Ethics and Stakeholders

lStakeholders: people or groups that have an
interest in the organization.
n Stakeholders include employees, customers,
shareholders, suppliers, and others.
n Stakeholders often want different outcomes and
managers must work to satisfy as many as
possible.
lEthics:a set of beliefs about right and
wrong.
n Ethics guide people in dealings with stakeholders
and others, to determine appropriate actions.
n Managers often must choose between the conflicting
interest of stakeholders.
 5-3

Ethics
 It is difficult to know when a decision is
ethical. Here is a good test:
Managerial ethics: If a manager


makes a decision falling within usual

standards, is willing to personally
communicate the decision to
stakeholders, and believes friends
would approve, then it is likely an
ethical decision.
 5-4

Ethical Models
Figure 5.2
Social Ethics:
Legal rules, customs

Organization’s
Code of Ethics

Professional Ethics: Individual Ethics:

Values in workplace Family influence
 5-5

Ethical Origins
lSocietal Ethics: standards that members of
society use when dealing with each other.
n Based on values and standards found in society’s
legal rules, norm, and mores.
n Codified in the form of law and society customs.
n Norms dictate how people should behave.
lSocietal ethics vary based on a given
society.
n Strong beliefs in one country may differ elsewhere.
n Example: bribes are an accepted business practice
in some countries.
 5-6

Ethical Origins
lProfessionalethics: values and standards
used by groups of managers in the
workplace.
n Applied when decisions are not clear-cut ethically.
n Example: physicians and lawyers have professional
associations that enforce these.
lIndividual ethics: values of an individual
resulting from their family& upbringing.
n If behavior is not illegal, people will often disagree on
if it is ethical.
n Ethics of top managers set the tone for firms.
 5-7

Ethical Decisions
lA key ethical issue is how to disperse harm
and benefits among stakeholders.
n If a firm is very profitable for two years, who should
receive the profits? Employees, managers and
stockholders all want a share.
n Should we keep the cash for future slowdowns?
 What is the ethical decision?
lWhat about the reverse, when firms must
layoff workers.
lFinal point: stockholders are the legal owners
of the firm!
 5-8

Ethical Decisions
lSome other issues managers must consider.
n Should you hold payment to suppliers as long as
possible to benefit your firm?
u This will harm your supplier who is a
stakeholder.
n Should you pay severance pay to laid off workers?
u This may decrease the stockholder's return.

n Should you buy goods from overseas firms that hire

children?
u If you don’t the children might not earn enough
money to eat.
 5-9

Why Behave Ethically?

lManagers should behave ethically to avoid
harming others.
n Managers are responsible for protecting and
nurturing resources in their charge.
lUnethicalmanagers run the risk for loss of
reputation.
n This is a valuable asset to any manager!
n Reputation is critical to long term management
success.
n All stakeholders are judged by reputation.
 5-10

Social Responsibility
lSocial Responsibility: the manager’s duty to
nurture, protect and enhance the welfare of
stakeholders.
There are many ways managers respond to

this duty:
lObstructionist response: managers choose not
to be socially responsible.
n Managers behave illegally and unethically.
n They hide and cover-up problems.
 5-11

lDefensive response: managers stay within the

law but make no attempt to exercise
additional social responsibility.
n Put shareholder interest above all other stakeholders.
n Managers say society should make laws if change is
needed.
lAccommodative response: managers realize
the need for social responsibility.
n Try to balance the interests of all stakeholders.
lProactiveresponse: managers actively
embrace social responsibility.
n Go out of their way to learn about and help
stakeholders.
 5-12

Levels of Responsibility
Figure 5.3

Obstruction Defensive Accommodative Proactive

response response response response

Low Social responsibility High

 5-13

Why be Responsible?
lManagers accrue benefits by being
responsible.
n Workers and society benefit.
n Quality of life in society will improve.
n It is the right thing to do.
lWhistleblowers: a person reporting illegal or
unethical acts.
n Whistleblowers now protected by law in most cases.
lSocial audit: managers specifically take
ethics and business into account when
making decisions.
 5-14

The Social Audit

Figure 5.4
Profitability
Negative Low Medium High

Negative
Social Returns

Low

Medium
Favored
High
Strategies
 5-15

Promoting Ethics
lThere is evidence showing that ethical
managers benefit over the long run.
lEthical Control System: a formal system to
encourage ethical management.
n Firms appoint an ethics ombudsman to monitor
practices.
n Ombudsman communicates standards to all
employees.
lEthicalculture: firms increasingly seek to
make good ethics part of the norm and
organizational culture.
 5-16

Managing Diverse Workforces

lThe workforce has become much more
diverse during the last 30 years.
n Diversity refers to differences among people such as
age, gender, race, religion.
n Diversity is an ethical and social responsibility issue.
lManagers need to give all workers equal
opportunities.
n Not following this is against the law and unethical.
n When all have equal opportunity, the organization
benefits.
 5-17

Types of Diversity
Figure 5.5

Capabilities
Disabilities Age

Socioeconomic Gender
background

Sexual
orientation Race

Religion
Ethnicity
 5-18

Manage Diversity
lDistributive Justice: dictates members be
treated fairly concerning pay raises,
promotions, office space and similar issues.
n These rewards should be assigned based on merit and
performance.
n A legal requirement that is becoming more prevalent
in American business.
lProcedural Justice: Managers should use
fair practices to determine how to distribute
outcomes to members.
n This involves how managers appraise worker
performance or decide who to layoff.
 5-19

Diversity Makes Business Sense

lDiverse employees provide new, different
points of view.
n Customers are also diverse.
lStill,
some employees may be treated
unfairly.
n Biases: systematic tendencies to use information in
ways that result in inaccurate perceptions.
n People often view those like themselves positively and
have biases about others.
n Social status is a type of bias conferred to people of
differing social position.
n Stereotypes: inaccurate beliefs about a given group.
 5-20

How to Manage Diversity

lIncrease diversity awareness: managers need
to become aware of their own bias.
lUnderstand cultural differences and their
impact on working styles.
lPractice effective communication with
diverse groups.
lBe sure top management is committed to
diversity.
 5-21

Sexual Harassment
lDamages both the person being harassed and
the organization.
n Both men and women can be victims.
lQuid pro quo harassment: victim is requested
to perform sexual favors to keep a job or
win promotion.
lHostile work environment harassment: Some
members are faced with a hostile,
intimidating work environment.
n Lewd jokes, pornographic displays and remarks.
 5-22

Avoiding Harassment
lDevelopand communicate a sexual
harassment policy.
n Point out that these actions are unacceptable.
lSet up a fair complaint system to investigate
allegations.
n If there are problems, correct them at once.
lProvide
harassment training to employees
and managers.