Ethics and

Stakeholder
Social Responsibility

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 Learning Objectives

• State the importance of ethics for individual

employees and organizations.
• Describe four forces that influence the ethical
behavior of individuals and organizations.
• Describe three approaches that people use
when making ethical judgments.
• Explain stakeholder social responsibility and
how it influences managers’ ethical decisions.
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 Shaping Ethical Conduct
(adapted from Figure 6.1)

Cultural Forces

Fundamental American personal values include:

 honesty
 integrity
 trustworthiness
 respect for other people
 self-respect
 family
 achievement
 reliability
 fairness
 loyalty

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 Shaping Ethical Conduct
(adapted from Figure 6.1)

Cultural Forces

Legal and Regulatory Forces

Laws are society’s values and standards that

are enforceable in the courts.

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 Examples of Lawful and Unlawful Reasons
for Dismissing Employees
(adapted from Table 6.1)

Some Permissible Reasons Some Unacceptable Reasons

• Incompetence in performance that • Blowing the whistle about illegal
does not respond to training or to conduct by the employer
accommodation • Reporting OSHA violations
• Gross or repeated insubordination • Filing discrimination charges with
• Civil rights violations such as the EEOC or a state or municipal fair
engaging in harassment employment agency
• Illegal behavior such as theft or • Filing unfair labor practice charges
physical violence with the NLRB or a state agency
• Repeated lateness or unexcused • Engaging in union activities,
absences provided there is no violence or
• Drug activity or drunkenness on unlawful behavior
the job • Complaining or testifying about
violations of equal pay, wage, or
hour law

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 Shaping Ethical Conduct
(adapted from Figure 6.1)

Cultural Forces

Legal and Regulatory Forces

Organizational Forces
A code of ethics states the principles that
employees are expected to follow when
acting on behalf of the organization.
Some recommended actions include
 Create a formal ethics system
 Communicate ethical expectations
 Include ethical conduct as a measure of
performance evaluations
 Make it acceptable to talk about ethics

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 Shaping Ethical Conduct
(adapted from Figure 6.1)

Cultural Forces

Legal and Regulatory Forces

Organizational Forces
Individual Forces

 Moral Development
 Whistle Blowing

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 Whistle-Blowing

• Anyone considering whistle-blowing should

consider the following
– Is this the only way?
– Do I have the evidence?
– Why am I doing this?
– Am I ready?

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 Shaping Ethical Conduct
(adapted from Figure 6.1)

Cultural Forces

Legal and Regulatory Forces

Organizational Forces
Individual Forces
Ethical Conduct
• Individual
• Organization

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 Making Ethical Judgments

• The utilitarian approach focuses on behaviors

and their results, not on the motives for such
actions.
– Achieving organizational goals
– Efficiency
– Conflicts of interest

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 Making Ethical Judgments

• The moral rights approach holds that decisions

should be consistent with fundamental rights
and privileges.
– Life and safety
– Truthfulness
– Privacy
– Freedom of conscience and speech

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 Making Ethical Judgments

• The justice approach involves evaluating

decisions and behavior with regard to how
equitably they distribute the benefits and costs
among individuals and groups.
– Distributive Justice Principle
– Fairness Principle
– Natural Duty Principle

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 Stakeholder Social Responsibility

• Stakeholder social responsibility holds that

managers and other employees have
obligations to identifiable groups that are
affected by, or can affect the achievement of an
organizations goals.
• Stakeholders are individuals or groups that
have interests, rights, or ownership in an
organization and its activities.
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 Common Stakeholders of Organizations
(adapted from Figure 6.2)

Secondary Stakeholders
Governments
Media (Regulatory Agencies)

Primary Stakeholders
Customers
Political
Action Suppliers The Employees Unions
Groups/ Organization
Activists
Shareholders

Nongovernmental
Organizations

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Examples of Types of Pressures from Primary
Stakeholders
(adapted from Table 6.3)

• Employees
– Pay and benefits
– Safety and health
– Rights at work/global labor standards
– Fair/ethical treatment in hiring, reviews, promotion, and related
areas
• Shareholders
– Demands for efficiency/profitability
– Viability (sustainability)
– Growth of investment
– Ethical disclosure of financial information

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Examples of Types of Pressures from Primary
Stakeholders (cont.)
(adapted from Table 6.3)

• Customers
– Competitive prices
– Quality and safe products
– Respect for customers’ privacy
– Concern for environment
– Truthful/ethical advertising and sales practices
• Suppliers
– Meet commitments
– Repeat business
– Fair trade practices/ethical treatment

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 Evaluating Social Performance

• Proactive Responsibility
– Broad performance criteria
– Ethical norms
– Operation strategy
– Response to social pressures
– Legislative and political activities
• Social Audits

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