Chapter 6
Managing Social Responsibility and Ethics
How important is it for organizations and managers to be socially responsible and
ethical? In this chapter, we’re going to look at what it means to be socially responsible
and ethical and what role managers play in both. Focus on the following learning
objectives as you read and study this chapter.
LEARNING OBJECTIVES
1. Discuss what it means to be socially responsible and what factors influence that
2. Explain green management and how organizations can go green.
4. Describe management’s role in encouraging ethical behavior.
• Know how to make good decisions about ethical dilemmas.
5. Discuss current social responsibility and ethics issues.
It’s Your Career
How to Be Ethical When No One Else Seems to Be
You make choices every day: Your boss asks you to do something questionable; you
see a colleague doing something that violates a company rule or policy; you think about
calling in sick because it’s a beautiful day, and boy oh boy do you need a day off; you
need to make copies of some personal documents and the company copier isn’t
monitored by anyone; you need to get some bills paid online and your boss is in
meetings all day. Choices, choices, choices. What do you do?
1. Make sure you have all the information you need to make a decision.
2. Recognize that we don’t always act the way we think we’re going to act
3. TEST yourself. When faced with an ethical dilemma, ask yourself many
questions, including Would I want people to do this to me?
CHAPTER OUTLINE
6.1 WHAT IS SOCIAL RESPONSIBILITY?
A. From Obligations to Responsiveness to Responsibility. Social
obligation occurs when a firm engages in social actions because of its
obligation to meet certain economic and legal responsibilities. Social
responsiveness is seen when a firm engages in social actions in
response to some popular social need. Social responsibility is a
business’s intention, beyond its legal and economic obligations, to do the
right things and act in ways that are good for society.
B. Should Organizations be Socially Involved? How do socially
responsible activities affect a company’s economic performance? Exhibit
6-1 details the arguments for and against social responsibility. A majority
of studies have found a positive relationship between social involvement
and economic performance, but some caution in this regard is necessary
6.2 GREEN MANAGEMENT AND SUSTAINABILITY
Many managers are considering the impact of their organization on the natural
environment. Nike Inc. has launched an app called Making, which allows its
design engineers to see the environmental effects of their material choices on
water, energy and waste, and chemistry. Fairmont Hotel’s use of rooftop
beehives to help dwindling honeybee populations is also generating a lot of buzz.
These companies are practicing green management, which considers the
company’s impact on the natural environment.
A. How Organizations Go Green. Approaches include the legal (or light
green) approach, the market approach, the stakeholder approach, and
the activist approach. See Exhibit 6-2 for a continuum of green
approaches.
LEADER making a DIFFERENCE
Recent events have cast a bad light on the ethical behavior of today’s CEOs. A
contradiction to this view is Yvon Chouinard, founder and president of Patagonia.
Chouinard realized early that everything his company did had a negative effect on the
environment. In response, he redefined his company’s mission to be proactive terms of
the environment. Since 1985, Patagonia has donated 1 percent of its annual sales to
grassroots environmental groups and has gotten more than 1,200 companies to follow
its lead as part of its “1% for the Planet” group.
What can you learn from this leader making a difference?
6.3 MANAGERS AND ETHICAL BEHAVIOR
The term ethics refers to principles, values, and beliefs that define what is right
1. Stages of Moral Development. Research confirms three levels of
moral development (see Exhibit 6-4). Each level has two stages.
a. The first level is called preconventional. At this level, the
individual’s choice between right and wrong is based on
2. Individual Characteristics. A person joins an organization with a
relatively entrenched set of values.
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a. Values are basic convictions about what is right and
wrong. Values are broad and cover a wide variety of
3. Structural Variables. A third factor influencing managerial ethics is
structural variables. The existence of structural variables such as
4. The content and strength of an organization’s culture influences
ethical behavior.
a. An organizational culture most likely to encourage high
5. Issue Intensity. Finally, issue intensity influences ethical behavior.
Not all issues are strongly held by everyone. Exhibit 6-5 shows
six characteristics that determine issue intensity. When an ethical
issue is important, employees are more likely to behave ethically.
FUTURE VISION Building an Ethical Culture That Lasts
Some mixed news on ethics in the U.S. workplace:
• 60% of misdeeds reported by workers involved someone with managerial
authority
• 24% of those misdeeds involved senior management
• In organizations with weak ethical cultures, 88% of workers witnessed
misconduct
• In organizations with strong ethical cultures, only 20% report witnessing
misconduct
• The most ethical companies had 20% greater profits and 6% better shareholder
returns than other companies
Ethics is a part of an organization’s culture. And it’s becoming ever more critical for
businesses to act ethically. So what are the critical aspects of an ethical culture? In part,
it’s whether managers at all levels talk about ethics and model appropriate behavior. Is
ethical behavior reinforced? In ethical cultures, organizational colleagues support one
another in making ethical decisions and in doing ethical work. It can be an infectious
type of atmosphere in which good people do good and the organization where they work
prospers by achieving those greater profits and better shareholder returns. A win-win in
anyone’s book!
The following discussion questions are posed:
Student answers to these questions will vary.
B. Ethics in an International Context. Are ethical standards universal?
6.4 ENCOURAGING ETHICAL BEHAVIOR
Organizations can take a number of actions to cultivate ethical behavior among
members. In this section of the text, eight suggestions are explored:
A. Employee Selection. The selection process for bringing new employees
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B. Research shows that the behavior of managers is the single most
important influence on an individual’s decision to act ethically or
unethically.
C. Because shared values can be powerful influences, many organizations
are using values-based management, in which the organization’s values
guide employees in the way they do their jobs.
D. Codes of Ethics and Decision Rules. A code of ethics is a formal
statement of an organization’s primary values and the ethical rules it
expects employees to follow. In addition, decision rules can be developed
to guide managers in handling ethical dilemmas in decision-making.
Exhibit 6-7 lists the variables included in the three content categories
found common to various corporate codes of ethics. Exhibit 6-8 shows a
appraisals should include this dimension, rather than focusing solely on
economic outcomes.
H. Ethics Training. Ethics training should be used to help teach ethical
problem solving and to present simulations of ethical situations that could
arise. At the least, ethics training should increase awareness of ethical
6.5 SOCIAL RESPONSIBILITY AND ETHICS ISSUES IN TODAY’S WORLD
A. Managing ethical lapses and social responsibilities. Ethical lapses
1. Ethical Leadership. Above all, managers must set an ethical
2. Protection of Employees Who Raise Ethical Issues. Managers
must assure employees who raise ethical concerns that they will
not encounter personal or career risks. These individuals are
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C. Businesses Promoting Positive Social Change. Managers are
increasingly expected to act responsibly in the way they conduct
business. Managers using a social impact management approach
examine the social impacts of their decisions and actions.
1. Corporate Philanthropy. Giving to charitable foundations and
causes is not limited to individuals. Organizations, through their
2. Employee Volunteering Efforts. Employees in many organizations
ANSWERS TO REVIEW AND DISCUSSION QUESTIONS
6-1. Differentiate between social obligation, social responsiveness, and social
responsibility.
These terms differ by the degree to which the organization is willing to go past what is
6-2. What does social responsibility mean to you personally? Do you think business
organizations should be socially responsible? Explain.
6-3. Compare the stakeholder and the activist approach to green management. Why
6-4. What factors influence whether a person behaves ethically or unethically? Explain
6-5. What is the Foreign Corrupt Practices Act?
6-6. What are some problems that could be associated with employee whistle-blowing
for (a) the whistle-blower and (b) the organization?
6-7. Describe the characteristics and behaviors of someone you consider to be an
ethical person. How could the types of decisions and actions this person engages in be
encouraged in a workplace?
6-8. Do you think values-based management is just a “do–gooder” ploy? Explain your
PERSONAL INVENTORY ASSESSMENTS
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Student answers to these questions will vary.
ETHICS DILEMMA
Student answers to these questions will vary.
6-11. What are some of the possible reasons for others taking credit for your work? Are
any of the reasons justifiable? Why or why not?
6-12. Do you think that those who take credit for your work know that what they’re doing
is wrong?
6-13. How would you respond to your coworker or boss? Explain.
(LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical
understanding and reasoning)
SKILLS EXERCISE: Developing Your Developing Trust Skill
WORKING TOGETHER: TEAM EXERCISE
Students are asked to identify a company they are familiar with and reflect on the
socially responsible behavior of the company.
Then, after dividing into groups of three or four, students are asked to share their
reflections with each other and compare and discuss the socially responsible actions of
their companies. Students are asked to address how the actions benefit the company
and whether there are steps each company could take to become more socially
responsible.
(LO: 1, Discuss what it means to be socially responsible and what factors influence that
decision, AACSB: Ethical understanding and reasoning)
MY TURN TO BE A MANAGER
• Identify three companies that are known for being socially responsible. List and
compare the types of socially responsible behavior that each company engages
in. (LO: 5, Discuss current social responsibility and ethics issues, AACSB:
Ethical understanding and reasoning)
• Find five different examples of organizational codes of ethics. Using Exhibit 6-7,
describe what each contains. Compare and contrast the examples. (LO: 4,
Describe management’s role in encouraging ethical behavior, AACSB: Ethical
understanding and reasoning)
• Using the examples of codes of ethics you found, create what you feel would be
an appropriate and effective organizational code of ethics. In addition, create
your own personal code of ethics that you can use as a guide to ethical dilemmas
found in each chapter. Write a response to each of the dilemmas and include
these responses in your portfolio. (LO: 4, Describe management’s role in
encouraging ethical behavior, AACSB: Ethical understanding and reasoning)
• Interview two different managers about how they encourage their employees to
be ethical. Write down their comments and discuss how these ideas might help
you be a better manager. (LO: 4, Describe management’s role in encouraging
ethical behavior, AACSB: Ethical understanding and reasoning)
ANSWERS TO CASE APPLICATION 1
QUESTIONS
A Better Tomorrow
6-14. How can TOMS balance being socially responsible and being focused on profits?
For Blake Mycoskle, the ability for TOMS to produce a profit is just as important as his
commitment to social responsibility is. Encourage students to think about the value that
TOMS gives to its customers and underprivileged children. Can companies afford to be
both for profit and at the same time heavily promote a charity at the expense of
corporate profits? Another way to ask this question is can companies afford NOT to be
6-15. Would you describe TOMS’ approach as social obligation, social responsiveness,
or social responsibility? Explain.
6-16. It’s time to think like a manager. TOMS’ one–for–one approach is a wonderful idea,
but what would be involved with making it work?
6-17. Do you think consumers are drawn to products with a charitable connection? Why
ANSWERS TO CASE APPLICATION 2
QUESTIONS
Defeating the System: Ethics at Volkswagen
6-18. Are you surprised that an organization as large as Volkswagen was caught
engaging in such unethical behavior? Do you agree that the organization’s culture could
have encouraged this behavior?
6-19. Are there structural variables that may have influenced the unethical behavior at
Volkswagen?
6-20. Evaluate Volkswagen’s actions based on the factors in Exhibit 6-5. How would you
describe the issue intensity of Volkswagen’s actions?
6-21. Moving forward, what do you think Volkswagen needs to do to avoid such an