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The External Environment, Social Responsibility and Ethics


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Chapter Objectives
 Describe the nature of the pluralistic society and selected environments

 Explain the social responsibility of managers and the arguments for and against
the social involvement of business

 Understand the nature and importance of ethics in managing and ways to


institutionalize ethics and raise ethical standards

 Recognize that some ethical standards vary in different societies

 Realize that trust is the basis for human interaction


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The Organization and its External Environment


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Operating in a Pluralistic Society

Pluralistic Society: A society where many organized groups


represents various interests

Each group has an impact on other groups, but no one group exerts
an inordinate amount of power. Many groups exert some power
over business
THE TECHNOLOGICAL ENVIRONMENT

One of the most pervasive factors in the external environment is


technology.

The term technology refers to the sum total of the knowledge we have of
ways to do things.

The main influence of technology is on ways of doing things, on how we


design, produce, distribute, and sell goods and services.
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THE ECOLOGICAL ENVIRONMENT

Ecology means the relationship of people and other living things and their environment
such as soil, water, and air.

• Land may be polluted by industrial waste such as packing materials.


• Water pollution may be caused, for example, by hazardous waste and sewer systems
• Air pollution can be caused by acid rain, auto exhaust fumes, carcinogens from
manufacturing processes, and other causes
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THE SOCIAL RESPONSIBILITY OF MANAGERS

 Corporate social responsibility is “seriously considering the impact of


the company's actions on society”

 Social responsiveness is "the ability of a corporation to relate its


operations and policies to the social environment in ways that are
mutually beneficial to the company and to society”
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ETHICS IN MANAGING

 Ethics is the discipline dealing with what is good and bad, with
moral duty and obligation

 Business ethics is concerned with truth and justice

Scandals and Corporate Governance


Corporate scandals such as those of PnB and Kingfisher have shaken the confidence of
investors.
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ETHICAL THEORIES

 The utilitarian theory suggests that plans and actions should be evaluated by
their consequences

 The theory based on rights holds that all people have basic rights

 The theory of justice demands that decision makers be guided by fairness and
equity, as well as impartiality
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INSTITUTIONALIZING ETHICS

Managers have a responsibility to create an organizational environment


that fosters ethical decision-making by institutionalizing ethics.
APPLYING AND INTEGRATING ETHICAL CONCEPTS WITH DAILY ACTIONS.

Theodore and James suggest this can be accomplished in three ways:


1. By establishing company policy & code of ethics.
2. By using a formally appointed ethics committee
3. By teaching ethics in management development programs

A code is a statement of policies, principles, or rules that guide behavior.


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FACTORS THAT MAY RAISE ETHICAL STANDARDS (A STUDY)

 Public disclosure and publicity


 The increased concern of a well-informed public

Achieved Thru’
 Government regulations
 Education to raise the professionalism of business managers
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WHISTLE-BLOWING

An employee who refuses to engage in and/or report illegal or


wrongful activities of his employer or fellow employees to the
outside agencies.
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DIFFERING ETHICAL STANDARDS BETWEEN SOCIETIES

Ethical as well as legal standards differ, particularly among nations and


societies.
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TRUST AS THE BASIS FOR CHANGE MANAGEMENT

 Traditionally, the concept of trust is equated with integrity,


loyalty, caring, and keeping promises in the relationships
between and among individuals

 Belardo points out that trust should go beyond individual


relationships and extend to the organization by creating a culture
of trust that transcends individual leadership

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