Engineering Management

ENM151X
ENM150S

Industrial Leadership

Chapter 3:
Ethical Behaviour and Social
Responsibility
©2013 John Wiley & Sons, Inc. All rights reserved. 1-1
Planning Ahead — Chapter 3 Study Questions

1. What is ethical behaviour?

2. How do ethical dilemmas complicate the
workplace?
3. How can high ethical standards be maintained?
4. What is social responsibility and governance?
Planning Ahead — Chapter 3 Study Questions
Group Discussion: Check

Picture the situation: A 12-year-old boy is

working in a garment factory in Bangladesh.
He is the sole income earner for his family.
He often works 12-hour days and was once
burned quite badly by a hot iron. One day he
is fired. His employer had been given an
ultimatum by a major American customer:
“No child workers if you want to keep our
contracts.” The boy says: “I don't
understand. I could do my job very well. I
need the money.”
Should the boy be allowed to work?
 Takeaway 1: What Is Ethical Behavior?

• Ethics is defined as the moral code of

principles that sets standards of good or bad,
or right or wrong, in one’s conduct
• Moral code is influenced by family, friends,
local culture, religion, educational institution
and individual experiences
• Ethical behaviour
– What is accepted as good and right in the context
of the governing moral code
 Takeaway 1: What Is Ethical Behaviour?

• Values, and ethical behaviour:

– Values underlying beliefs and attitudes that help determine
individual behaviour
– Terminal values are preferences about desired end states.
– E.g. Values considered important by the managers include self
respect, family, security, freedom and happiness.
– Instrumental values are preferences regarding the means for
accomplishing these ends.
– Among the instrumental values held important by managers
are honesty, ambition, imagination, and self-discipline.
Figure 3.1: Four views of ethical behavior
 Takeaway 1: What Is Ethical Behavior?
• Four alternative ethical views
1. In the utilitarian view ethical behavior delivers the
greatest good to the most people.
– E.g. In a recession or when a firm is suffering through hard times,
an executive may decide to cut 30% of the workforce in order to
keep the company profitable and save the jobs of remaining
workers.
2. In the individualism view ethical behavior advances long-
term self-interests.
– Promotes honesty and integrity
– People are supposedly self-regulating as they seek long-term
individual advantage.
 Takeaway 1: What Is Ethical Behaviour?
3. In the moral rights view ethical behaviour respects and
protects fundamental rights.
– In organisations, the moral rights concept extends to ensure
that employee privacy rights are protected, due process, free
speech, free consent, health and safety and freedom of
conscience.
 Takeaway 1: What Is Ethical Behaviour?

4. In the justice view ethical behaviour treats people

impartially and fairly.
– Evaluates the ethical aspects of any decision on the basis of
whether it is ‘equitable’ for everyone affected
– Justice issues in organisations are addressed in four
dimensions:
Procedural justice – Policies and rules fairly applied to all
individuals
Distributive justice – Equal treatment for all people
regardless of ethnicity, race, gender, age
Interactional justice – The degree to which people treat one
another with dignity and respect
Commutative justice – Fairness of exchanges or transactions
 Takeaway 1: What Is Ethical Behaviour?

• Cultural issues in ethical behaviour:

– Cultural relativism
• The belief that there is no one right way to behave
• Ethical behaviour is always determined by cultural
context.
– Moral absolutism
• Behaviour unacceptable in one’s home
environment should not be acceptable anywhere
else.
– Ethical imperialism
• Imposing one’s ethical standards on others.
11
Source: Developed from Thomas Donaldson, “Values in Tension: Ethics Away from
Home,” Harvard Business Review, vol. 74 (September–October 1996), pp. 48–62.
 LEARNING CHECK 1

• Be sure you can • define ethics • explain why

obeying the law is not always the same as
behaving ethically • explain the difference
between terminal and instrumental values •
identify the four alternative views of ethics •
contrast cultural relativism with moral
relativism?

13
 Takeaway 2: Ethics in the Workplace

• An ethical dilemma is a situation that offers

potential benefit or gain and that may also be
considered unethical.
• A situation in which action must be taken but for
which there is no clear consensus on what is “right”
and “wrong.”
 Takeaway 2: Ethics in the Workplace

• A college student gets a job offer and accepts it, only to

get a better offer two weeks later. Is it right for her to
reject the first job to accept the second?
• A student knows that his roommate submitted a term
paper purchased on the Internet. Is it right for him not
to tell the instructor?
• One student confides to another that a faculty member
promised her a high final grade in return for sexual
favours. Is it right for him to inform the instructor's
department head?
 Takeaway 2: Ethics in the Workplace

• Examples of situations that present managers

with ethical dilemmas:

Discrimination

Sexual harassment

Conflicts of interest

Product Safety

Organisational resources
 Checklist for ethical dilemmas

Step 1: Recognise the ethical dilemma.

Step 2: Get the facts and identify your options.

Step 3: Test each option: Is it legal? Is it right? Is it beneficial?

Step 4: Decide which option to follow.

Step 5: Ask the Spotlight Questions: To double check your decision.

• “How would I feel if my family found out about my decision?”
• “How would I feel if my decision was printed in the local paper or posted online?”
• “What would the person I admire most for their character and ethical judgement say
about my decision?”

Step 6: Take action

 Takeaway 2: Ethics in the Workplace

Influences on Ethical Decision Making

 Takeaway 2: Ethics in the Workplace

• Influences on Ethical Decision Making

– And ethical framework provides personal rules or
strategies for ethical decision making
– Personal Influence on ethics
• Values, family, religion and personal needs all help
determine a person’s ethics
• Managers with a lack of strong and clear set of ethics will
find that their decisions vary from situation to situation
• Managers with solid ethical frameworks provide personal
rules or strategies for ethical decision making, will act more
consistently and confidently
Kohlberg’s stages of individual moral development
 Kohlberg’s stages of individual moral development
• Preconventional: Self Centred Behaviour
– The individual is self centered
– Moral thinking limited to issues of punishment, obedience and
personal interest
– Decisions directed towards achieving personal gain or avoiding
punishment
• Conventional Level: Social Centered Behaviour
– Social centered
– Decisions based on following social norms, meeting the expectations
of group membership and living up to agreed upon role obligations
• Postconventional Level: Principle Centered Behaviour
– Strongly Principle centered
– Strong ethics framework is evident
 Takeaway 2: Ethics in the Workplace

• Situational Context and Ethics Intensity

– Ethic intensity or issue intensity refers to the degree to
which a situation is perceived to pose important ethics
challenges
– The greater the ethical intensity of the situation, the
more aware the decision maker is about ethics issues, the
more likely the behaviour will be ethical
– Conditions that raise the ethics intensity
• Magnitude of the situation
• Risk of immediate harm
• Proximity and concentration of harm
• Social consensus
 Takeaway 2: Ethics in the Workplace

• Organisational Culture
– The culture and values of an organisation are
important influences on ethics in the workplace
– Formal policy may be issued to set ethics culture
– What is considered ethical behaviour within the
organisational context?
• What are the expectations of management?
• What are the expectations of co-workers?
• Is there a code of ethics?
 Takeaway 2: Ethics in the Workplace

• External Environment, Government

Regulation, and Industry Norms
– Government laws and regulations are important
influences on ethical behaviour.
– Laws interpret social values to define appropriate
behaviours for organisations and their members.
– Regulations help governments monitor these
behaviours and keep them within acceptable
standards.
 Takeaway 2: Ethics in the Workplace

• Ethical behaviour can be rationalised by

convincing yourself that:

Behaviour is not really illegal.

Behaviour is really in everyone’s best interests.

Nobody will ever find out.

The organisation will “protect” you.

 Takeaway 2: Ethics in the Workplace

Your Social Media History Might Be a Job Hurdle

• What rights do employers have

when it comes to their employees'
use of social media—both on and
off the job?
• Just how far should a recruiter or
employer be able to go in using
social media postings in job-related
decisions?
• Where does individual privacy
begin and end in employment?
• Is it ethical for a recruiter to
conduct Internet searches without
first informing the job candidate
that this will be done?
 LEARNING CHECK 2

• Be sure you can • define ethical dilemma and

give workplace examples • identify
Kohlberg's stages of moral development •
explain how ethics intensity influences ethical
decision making • explain how ethics
decisions are influenced by an organisation's
culture and the external environment • list
four common rationalisations for unethical
behaviour

27
Takeaway 3: Maintaining High Ethical Standards
 Takeaway 3: Maintaining High Ethical Standards

• Ethics training:
– Structured programmes that help participants to
understand ethical aspects of decision making
– Helps people incorporate high ethical standards
into daily life
– Helps people deal with ethical issues under
pressure.
– Might include ways to deal with issues such as
bullying, harassment, conflicts of interests, gifts
and bribery
 Takeaway 3: Maintaining High Ethical Standards

Codes of Ethical Conduct

– Formal statement of an organisation’s values and ethical
principles regarding how to behave in situations
susceptible to the creation of ethical dilemmas

Bribes and kickbacks

Political contributions

Honesty of books or records

Customer/supplier relationships

Confidentiality of corporate information

 Takeaway 3: Maintaining High Ethical Standards

Whistleblowers
– Expose misdeeds of others to:
• Preserve ethical standards
• Protect against wasteful, harmful, or illegal acts
– Top reasons why workers fail to report wrong
doings:
• The belief that no corrective action would be taken
• The fear that reports would not be kept
confidential
 Takeaway 3: Maintaining High Ethical Standards

Whistleblowers – Examples
• Agnes Connolly pressed her employer to report two
toxic chemical accidents.
• Dave Jones reported his company used unqualified
suppliers in the construction of a nuclear power plant.
• Margaret Newsham revealed that her firm allowed
workers to do personal business while on government
contracts.
• http://www.cput.ac.za/whistle-blowing
 LEARNING CHECK 3

• Be sure you can • compare and contrast

ethics training and codes of ethical conduct
as methods for encouraging ethical behaviour
in organizations • differentiate between
amoral, immoral, and moral management •
define whistle-blower

33
 Takeaway 4: Social Responsibility

• Sustainability in management means acting in ways

that support a high quality of life for present and
future generations.
• Examples - Alternative energy, Recycling, Waste
avoidance etc.
• Corporate social responsibility is the obligation of
an organisation to serve the interests of society in
addition to its own interests.
 Takeaway 4: Social Responsibility

• Stewardship in management means taking

personal responsibility to always respect and
protect the interests of society at large.
• The triple bottom line evaluates organisational
performance on economic, social, and
environmental criteria.
• The 3 P's of organisational performance are
profit, people, and planet.
 Takeaway 4: Social Responsibility

• Stakeholder Management
– Stakeholders are the persons, groups, and other
organizations that are directly affected by the behaviour of
the organisation and that hold a stake in its performance.
– One way for managers to deal with conflicting stakeholder
demands is to evaluate them using three criteria:
1. Stakeholder power refers to the capacity of the stakeholder
to positively or negatively affect the operations of the
organisation.
2. Demand legitimacy indicates the validity and legitimacy of a
stakeholder's interest in the organisation.
3. Issue urgency indicates the extent to which a stakeholder's
concerns need immediate attention.
Figure 3.4: The Many Stakeholders of Organizations
 Takeaway 4: Social Responsibility
• Perspectives on social responsibility:
– Classical view
• Management’s only responsibility is to maximise profits.
• The principal obligation of management should be to
owners and shareholders
• Society’s interests are best served in the long run by
executives who focus on maximising firm’s profits
– Socio-economic view
• Management must be concerned for the broader social
welfare, not just profits
• Focus is on the triple bottom line and not only on financial
performance
 Takeaway 4: Social Responsibility

• Perspectives on social responsibility:

– Shared value view
• Approaches business decisions with the understanding
that economic and social progress are interconnected
• Business decisions should be made so that economic value
is created by pursuing social value
• Shared value approach is to seek business advantage by
following practices and aligning strategies with social
issues like illiteracy, nutrition, poverty
• Virtuous circle -Socially responsible behaviour improves
financial performance which leads to more responsible
behaviour
Takeaway 4: Social Responsibility
Four strategies of corporate social responsibility—from
obstructionist to proactive behaviour.
 Takeaway 4: Social Responsibility

• Corporate governance:
– The active oversight of the top management decisions
and company actions by a board of directors.
– Expectation is that board members will hold
management accountable for ethical and socially
responsible leadership
• Corporate governance involves:
– Hiring, firing, and compensating the CEO.
– Assessing strategy.
– Verifying financial records.
 Figure 3.6: Ethics Self-governance in Leadership and
the Managerial Role

Ethics self governance is making sure the day to day performance is achieved
ethically and in socially responsible ways.
 Learning: Check
• Define ethics
• Explain why obeying the law is not always the same as
behaving ethically
• Difference between terminal and instrumental values
• Identify alternative views of ethics
• Define corporate social responsibility
• Summarize the arguments against corporate and social
responsibility
• Name and briefly explain four possible social
responsibility strategies
Thank you

46