Chapter 05 – Ethics, Corporate Responsibility, and Sustainability
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chapter
Ethics, Corporate Respon-
sibility, and Sustainability
Learning Objectives 2
Key Student Questions 3
Class Roadmap 4
Bottom Line 11
Social Enterprise 12
CHAPTER CONTENTS
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1 Describe how different ethical perspectives guide decision mak-
ing.
2 Explain how companies influence their ethics environment.
3 Outline a process for making ethical decisions.
LEARNING OBJECTIVES
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Students see ethics from both an “insider” and an “outsider” perspective. As “insiders”, students are
faced with ethical dilemmas at work, and they want to know how to resolve their ethical dilemmas. As
“outsiders”, students see the unethical actions taken by business leaders today, and they want to know
how to prevent such things from occurring. They also want to know what impact ethical/unethical actions
can have on corporations.
1. “What are the options you have when confronting ethical issues?”
1a. “What should you do when your manager/CEO is behaving
unethically?”
All of these questions are answered in the text, but you will want to reinforce the pragmatic, practical side
to textbook answers in your lecture. Some suggested responses are given below.
Question 1. When discussing the options people have when confronting ethical issues, let students know
that the more they understand their own values, the clearer the appropriate course of action will be. A
Question 1a. The reality of this dilemma is a power differential, and a possible lack of information.
Again, one thing to stress is that the situation might look different from different perspectives, and before
any action is taken, it is important to get complete information. So the first thing you have to do in this
KEY STUDENT QUESTIONS
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Management in Action
How Can Ginni Rometty Ensure that IBM Does Well while Doing Good?
As chief executive of IBM, Ginni Rometty works in the shadow of her widely admired predeces-
sor, Sam Palmisano. Palmisano refreshed IBM culture with a “values jam,” during which em-
Introduction
A. It’s a big issue
• Ethics – the system of rules that governs the ordering of values.
B. It’s a personal issue
• Ethical Issue– situation, problem or opportunity in which an individual must choose
E.G.
Use Example 5.1 – Business ethics here
Multiple Generations at Work
I. ETHICS
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LO 1: Describe how different ethical perspectives guide decision making
a. Ethical systems
i. Moral philosophy refers to the principles, rules, and values people use in deciding
what is right or wrong.
ii. Universalism is the ethical system upholding certain values regardless of immediate
result.
E.G.
Use Example 5.2 – Egoism here
LO 2: Explain how companies influence the ethics environment
b. Business Ethics
i. Questions of ethics in business have been prominent in the news in recent years.
Insider trading, illegal campaign contributions, bribery, famous court cases and
c. The Ethics Environment
i. Sarbanes-Oxley Act.
1. Passed by Congress in 2002, this act establishes an array of strict ac-
counting and reporting rules in order to make senior managers more ac-
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ii. Ethical climate refers to the processes by which decisions are evaluated and
made on the basis of right and wrong.
iii. Danger signs that a company is morally lax (Exhibit 5.5):
1. excessive emphasis on short-term revenues over long term considerations
2. failure to establish a written code of ethics
cies
iv. Corporate ethical standards – organizations must be explicit regarding their standards
and expectations.
v. Ethical leaders are both moral people and moral managers, who influence others to
behave ethically.
vii. Effective ethics codes: (Example, Exhibit 5.6)
1. involve those who have to live with it in writing the statement
Teaching Tip:
To help students understand the difficulty of putting an ethical program into place, break them up into small groups,
and have each group develop a training outline for a school-related ethics program. For example, one group might
develop a program for writing papers, another for taking tests, another for classroom behavior, another for on-
campus behavior, etc. Make sure that student programs address all of the components of ethics programs described
above.
viii. Ethics programs
1. Compliance based vs. integrity based
• Compliance-based ethics programs-company mechanisms
2. Effective ethics programs include:
a. formal ethics codes
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E.G.
Use Example 5.3 – Ethics programs here
LO 3: Outline a process for making ethical decisions
d. Ethical decision making
1. Ethical decision making requires:
a. moral awareness (realizing the issue has ethical implications)
2. Understand all moral standards
3. Recognize all moral impacts
a. benefits to some
4. Define complete moral problem
8. Propose convincing moral solution
E.G.
Use Example 5.4 – Ethical decision-making here
e. Courage
a. Courage plays a role in the moral awareness needed to identify some-
Management in Action
– Progress Report
In meeting its standards for trust, IBM has one advantage: the public sees the technology industry as the
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• Besides the measures described, how else can IBM promote ethical conduct by its employees?
IBM can establish global standards for behavior and consider those standards as they monitor the external
• In a company operating where bribing government officials is expected, how can employees find the
moral courage to forgo bribery, at the risk of losing a big sale?
Answers will vary; answering this question is a way for students to begin thinking about the personal
LO 4: Summarize the important issues surrounding corporate social responsibility
a. Corporate social responsibility is the obligation toward society assumed by
business.
d. Types of corporate social responsibility include (Figure 5.8)
1. Economic responsibilities involve producing goods and services that soci-
ety wants at a price that perpetuates the business and satisfies its obliga-
tions to investors.
E.G.
Use Example 5.5 – Philanthropic responsibilities here
e. A transcendent education has five higher goals that balance self-interest with
responsibility to others
1. empathy
II. CORPORATE SOCIAL RESPONSIBILITY
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Contrasting views
a. It holds that manager’s act as agents for shareholders and, as such, are obli-
Reconciliation
a. Early attention to corporate social responsibility focused on alleged wrongdo-
ing and how to control it.
LO 5: Discuss reasons for businesses’ growing interest in the natural environment.
1) A risk society is one in which the creation and distribution of wealth gen-
LO 6: Identify actions managers can take to manage with the environment in mind.
2) Ecocentric management has as its goals the creation of sustainable eco-
nomic development and improvement of quality of life worldwide for all
organizational stakeholders.
3) Environmental Agendas for the Future
(i) In the past, companies were oblivious to their negative environmental impact.
III. THE NATURAL ENVIRONMENT
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E.G.
Use Example 5.6 – Environmental actions here
Management in Action –
Onward
IBM builds trust with the public by publishing its values and policies online, as well as an annual Corpo-
rate Responsibility Report. IBM describes itself as socially responsible in that it applies its expertise to
social problems and empowers employees and others to serve their communities. In addition, the compa-
ny says, “We integrate corporate citizenship and social responsibility into every aspect of our company.”
• Is IBM’s commitment to corporate social responsibility good for IBM as a business? Explain.
Students may disagree (giving reasons), but the text makes the case that being responsible can be good for
•Improving energy-efficiency saves IBM millions of dollars, but recycling its used electronics requires
hiring hundreds of people. Is the recycling program justified? Why or why not?
Answers will vary. There is a moral argument for recycling as a way of taking responsibility for the com-
Teaching Tip:
Most companies’ corportate social responsibility efforts are made highly visible on their websites. During a break or
before the discussion of CSR, ask students to look up examples of what their favorite company is doing to be social-
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p. 165: What are some costs of treating employees unethically?
Possible costs include retaliation (poor work, absences, lawsuits) by employees who feel hurt and angry,
p. 174: Think of a product you recently purchased. How could its packaging have been more environmen-
tally friendly?
BOTTOM LINE
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Can a Former Yoga Instructor Clean Up the Trucking Business?
1. Do you think Welby can help change the trucking industry for the better? Why or
why not?
Welby does not have much experience in the trucking industry. She will first need to edu-
2. If you were Welby, how would you go about making RFX into a more environmen-
tally and socially responsible company?
Welby would need to look at the heart of the organization and see what changes can be
SOCIAL ENTERPRISE
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LECTURETTE 5.1: The Ethics Imperative
THE NATURE OF ETHICS
1. Today, it seems that there is a higher ethical standard by which all behaviors must be judged. More
than ever before, society appears to apply the “ethics test” to all manners of human behavior. Ethical
behavior is seen as an essential ingredient in the effort to improve the quality of life.
3. The media seems focused on unethical behavior in government, business, and daily living. The re-
sults from a Harris Poll released in 2000 state two-thirds of Americans give Corporate America credit
4. One can make a good case in support of the latter proposition, noting that unethical behavior in all
walks of life has always been with us, but we simply expect more from today’s leaders.
5. When defining ethical business behavior, corporate executives usually turn to codes of ethics that de-
scribe corporate commitment to constituency groups, or shareholders, rather than prescribed ethical
conduct for specific situations.
6. In an effort to make business ethics more useful, critics suggest that the following dimensions and
boundaries of ethical should be applied.
7. Managers need more than a code of ethics—they need a value system that continuously strives to
clarify ethical behavior.
A FRAMEWORK OF CRITICAL ETHICAL ISSUES
1. Business codes of ethics need some sort of framework within which they can be developed and im-
plemented. Such an ethical framework must be consistent with and emerging from a base of ethical
propositions for the manager of the future.
➢ Thus, the ethical manager or the ethical organization must first develop an acceptable body of
ethical propositions. For example, the study could begin with the 14 ethical propositions offered,
such as the following:
LECTURETTES
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In the conduct of day-to-day business ethical conflicts and choices are inherent in business deci-
sion-making.
➢ Ethical behavior must exist on a plane above the law, which merely specifies the lowest common
denominator of acceptable behavior.
The preceding ethical propositions are recommended for contemporary managers to improve
their decision-making abilities and long run organization performance.1
LECTURETTE 5.2: The Social Responsibility Debate
INTRODUCTION
Should a business firm use its resources to engage in programs to promote what that business firm per-
ARGUMENTS IN SUPPORT OF COMPANY SOCIAL RESPONSIBILITY PROGRAMS
➢ Business is unavoidably involved in social issues in its daily operations.
➢ Social responsible actions are the ethical things to do.
1 Adapted from Harris Poll, Business Week, August 2000, A.D. Amar, “Ethics: No Duality,” The Mid-Atlantic Journal of Business,
March 1991, Michael Hyman, Robert Skinner, and Richard Tansey, “Ethical Codes Are Not Enough,” Business Horizons, March-
April 1990.
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➢ Since business has resources available, it stands to reason that business should try to solve social
problems.
➢ Business possesses a great deal of social power, so business needs to balance that power with re-
sponsible behavior.
➢ Societal expectations demand social responsibility on the part of business.
➢ Socially responsible behavior will improve the public image of the business enterprise.
ARGUMENTS IN OPPOSITION TO COMPANY SOCIAL RESPONSIBILITY PROGRAMS
➢ If businesses are allowed to engage in social programs, the public will lose control of society.
➢ In general, business involvement in social programs does not have broad public support.
➢ There is no acceptable way to measure the success of social programs.
➢ Businesses lack the skills for dealing effectively with social programs.
2 Adapted from Gene Burton, Dev Pathak, and David Burton, “To Be or Not To Be: The Dilemma of Social Responsibility.” Proceed-
ings: 1977 Southern Management Conference, Atlanta1977: Keith Davis and William Frederik, Business and Society: Management,
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1. Consider the various ethical systems described early in the chapter. Identify concrete examples
from your own past decisions or the decisions of others you have seen or read about.
2. Choose one or more topics from Exhibit 5.3 and discuss the ethical issues surrounding them.
The discussion of ethical issues may include: Artistic control, brands, CEO pay, commercialism in
• Brands: In-your-face marketing campaigns have sparked anti-brand attitudes among students.
• CEO pay: Nearly three-fourths of Americans see executive pay packages as excessive.
• Commercialism in schools: Parent groups have mounted battles in hundreds of communities against
advertising in the public schools.
DISCUSSION QUESTIONS