《Contemporary Management》chpt 5 Ethics, Social Responsibility, and Diversity

5 Ethics Social S Responsibility,O C A and Diversity OThe McGraw-Hill Companies. Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-1 Ethics, Social Responsibility, and Diversity 5

5-2 Ethics and stakeholders 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 a bout 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 " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-2 Ethics and Stakeholders ⚫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

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。 " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 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 " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-4 Ethical Models Social Ethics: Legal rules, customs Professional Ethics: Values in workplace Individual Ethics: Family influence Organization’s Code of Ethics Figure 5.2

5-5 Ethical Origins o 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 oflaw 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 " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-5 Ethical Origins ⚫Societal Ethics: standards that members of society use when dealing with each other. ◼ Based on values and standardsfound 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

5-6 Ethical Origins o 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 " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-6 Ethical Origins ⚫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

5-7 Ethical decisions oa key ethical issue is how to disperse harm and benefits among stakeholders. receive the profits? Employees, managers and hould If a firm is very profitable for two years, who stockholders all want a share Should we keep the cash for future slowdowns? What is the ethical decision? o What about the reverse. when firms must layoff workers. o Final point: stockholders are the legal owners of the firm! Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-7 Ethical Decisions ⚫A key ethical issue is how to disperse harm and benefits among stakeholders. ◼ If a firm is very profitable for two years, who should receive the profits? Employees, managers and stockholders all want a share. ◼ Should we keep the cash for future slowdowns? What is the ethical decision? ⚫What about the reverse, when firms must layoff workers. ⚫Final point: stockholders are the legal owners of the firm!

5-8 Ethical decisions Some other issues managers must consider Should you hold payment to suppliers as long as possible to benefit your firm? This will harm your supplier who is a stakeholder Should you pay severance pay to laid off workers? o This may decrease the stockholder's return Should you buy goods from overseas firms that hire children? o If you don t the children might not earn enough money to eat " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-8 Ethical Decisions ⚫Some other issues managers must consider. ◼ Should you hold payment to suppliers as long as possible to benefit your firm? ◆ This will harm your supplier who is a stakeholder. ◼ Should you pay severance pay to laid off workers? ◆ This may decrease the stockholder's return. ◼ Should you buy goods from overseas firms that hire children? ◆ If you don’t the children might not earn enough money to eat

5-9 Why behave ethically? o Managers should behave ethically to avoid harming others. Managers are responsible for protecting and nurturing resources in their charge uNethical managers run the risk for loss of reputation This is a valuable asset to any manager Reputation is critical to long term management success All stakeholders are judged by reputation " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-9 Why Behave Ethically? ⚫Managers should behave ethically to avoid harming others. ◼ Managers are responsible for protecting and nurturing resources in their charge. ⚫Unethical managers run the risk for loss of reputation. ◼ This is a valuable asset to any manager! ◼ Reputation is critical to long term management success. ◼ All stakeholders are judged by reputation

5-10 Social Responsibility o Social responsibility. the managers duty to nurture protect and enhance the welfare of stakeholders There are many ways managers respond to this duty o Obstructionist response: managers choose not to be socially responsible. Managers behave illegally and unethically They hide and cover-up problems win/MeGraw-Hill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 5-10 Social Responsibility ⚫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