Where are we today? What current management concepts and practices are shaping “tomorrow’s history”? This session establishes first a framework for understanding social responsibility and managerial ethics. Then, in this session, we’ll attempt to answer those above stated questions by introducing several trends and issues that we believe are changing the way managers do their jobs: globalization, entrepreneurship, managing in an e-business world.
Organizational Social Responsibility
What is Social Responsibility?
Before the 1960s, few people questioned the role of business organizations insocial responsibility. However, times have changed. Now it’s important to get an understanding of whatsocial responsibility is.
There are two opposing views of what social responsibility is.
1. The classical view is the view that management’s only social responsibility is to maximize profits.
a. Milton Friedman is the most outspoken advocate of this view.
b. He argues that managers’ primary responsibility is to operate the business in the best interests of the stockholders—the true owners of the organization.
2. The socioeconomic view is the view that management’s social responsibility goes well beyond the making of profits to include protecting and improving society’s welfare.
a. The argument behind this view is that corporations are not independent entities responsible only to stockholders.
b. Also, modern organizations are no longer just economic institutions.
There are 10 major arguments for social responsibility, and they include the following:
a. Public expectations
b. Long-run profits
c. Ethical obligation
d. Public image
e. Better environment
f. Discouragement of further government regulation
g. Balance of responsibility and power
h. Stockholder interests
i. Possession of resources
j. Superiority of prevention over cures
There are six major arguments against social responsibility. These include:
a. Violation of profit maximization
b. Dilution of purpose
c. Costs
d. Too much power
e. Lack of skills
f. Lack of accountability
Social responsibility is an obligation, beyond that required by the law and economics, for a firm to pursue
long-term goals that are good for society.
Social obligation is the obligation of a business to meet its economic and legal responsibilities.
Social responsiveness the capacity of a firm to adapt to changing societal conditions.
Social Responsibility and Economic Performance
The question of whether socially responsible activities lower a company’s economic performance has been addressed in numerous studies. The majority of studies found a positive relationship between corporate social involvement and economic performance, but some caution is necessary because of methodological questions associated with trying to measure social responsibility and economic performance.
Managerial Ethics
Ethics refers to the rules and principles that define right and wrong conduct. There are ethical dimensions to managerial decisions and actions.
Four Views of Ethics:
1. The utilitarian view of ethics states that ethical decisions are made solely on the basis of their outcomes or consequences.
2. The rights view of ethics says that ethical decisions are concerned with respecting and protecting individual liberties and privileges such as the rights of privacy, freedom of conscience, free speech, life and safety, and due process.
3. The theory of justice view of ethics states that decision makers seek to impose and enforce rules fairly and impartially.
4. Finally, the integrative social contracts theory proposes that ethical decisions should be based on empirical (what is) and normative (what should be) factors. This view is based on the integration of two “contracts”—the general social contract and a more specific contract among members of a specific community that might be affected by a decision.
Toward Improving Ethical Behavior
What can be done to improve ethical behavior? There are a number of things organizations can do to cultivate ethical behavior among members. Eight suggestions will be explored.
1. The selection process for bringing new employees into organizations should be viewed as an opportunity to learn about an individual’s level of moral development, personal values, ego strength, and locus of control.
2. A code of ethicsis a formal statement of an organization’s primary values and the ethical rules it expects employees to follow. Also, decision rules can be developed to guide managers in handling ethical dilemmas in decision making. Top management’s leadership and commitment to ethical behavior is extremely important because it’s the top managers who set the cultural tone.
3. Employees’ job goals should be tangible and realistic, because when goals are clear and realistic, they reduce ambiguity and motivate rather than punish. Job goals are usually a key issue in performance appraisal.
4. If an organization wants it employees to uphold high ethical standards, it must include this dimension in its appraisal process. Performance appraisals should be comprehensive and not just focus on economic outcomes.
5. Ethics training should be used to help teach ethical problem solving and to present simulations of ethical situations that might arise. If it does nothing else, ethics training should increase awareness of ethical issues
6. Independent social audits evaluate decisions and management practices in terms of the organization’s code of ethics and can be used to deter unethical behavior.
7. Finally, organizations can provide formal protective mechanisms so that employees with ethical dilemmas can do something about them without fear of reprisal.
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