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
2. Explain green management and how organizations can go green.
4. Describe management’s role in encouraging ethical behavior.
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?
When an ethical dilemma occurs at work—the place where you spend the vast majority
of your week and the source of your income that pays your bills and provides benefits—
it can be challenging to decide what to do. In addition to the chapter suggestions (see
Exhibit 6-8), here are some ideas that might help nudge you to be ethical when no one
else seems to be:
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
INTRODUCTION
This chapter discusses issues involving social responsibility and managerial
ethics and their effect on managerial decision-making. Both social responsibility
and ethics are responses to a changing environment and are influenced by
organizational culture.
6.1 WHAT IS SOCIAL RESPONSIBILITY?
Managers regularly face decisions that have dimensions of social responsibility.
Examples include employee relations, philanthropy, pricing, resource
conservation, product quality and safety, and doing business in countries that
violate human rights. There are two opposing views of social responsibility. The
classical view is the view that management’s only social responsibility is to
maximize profits. Economist and Nobel laureate Milton Friedman is the most
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
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
A number of companies have announced plans to move to more environmentally
sustainable products and service, including Coca-Cola’s new HFC-free vending
machines, Fairmont Hotel’s use of rooftop beehives to help dwindling honeybee
populations, and GE’s program of Ecomagination to reduce greenhouse gases at
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
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
and wrong behavior. This section examines the ethical dimensions of managerial
decision-making.
A. Factors That Affect Employee Ethics. Exhibit 6-3 shows the complex
interactions that influence whether a person acts ethically or unethically
when faced with an ethical dilemma.
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
d. Research on the stages of moral development indicates
that people proceed sequentially through the six stages of
these three levels, with no guarantee of continued
development at any stage. The majority of adults are at
2. Individual Characteristics. A person joins an organization with a
relatively entrenched set of values.
a. Values are basic convictions about what is right and
3. A third factor influencing managerial ethics is structural variables.
The existence of structural variables such as formal rules and
4. The content and strength of an organization’s culture influences
ethical behavior.
a. An organizational culture most likely to encourage high
5. Finally, issue intensity influences ethical behavior. Not all issues
are strongly held by everyone. Exhibit 6-5 shows six
FUTURE VISION 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
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:
Talk About It 1: Why do you think organizations with weak ethical cultures have
four times as many workers witnessing misconduct?
Talk About It 2: “Society expects it (ethical practices). Customers demand it.”
Discuss why you agree or disagree with this.
Student answers to these questions will vary.
C. Ethics in an International Context
Are ethical standards universal? Hardly! Social and cultural differences
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. The selection process for bringing new employees into organizations
should be viewed as an opportunity to learn about an individual’s level of
moral development, personal values, ego strength, and locus of control.
B. 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,
C. Top management’s leadership and commitment to ethical behavior is
extremely important since the cultural tone for an organization is
established by its top managers.
D. Employees’ job goals should be tangible and realistic, because clear and
realistic goals reduce ambiguity and motivate rather than punish. Job
goals are usually a key issue in the performance appraisal process.
E. If an organization wants employees to uphold high ethical standards, this
6.5 SOCIAL RESPONSIBILITY AND ETHICS ISSUES IN TODAY’S WORLD
A. Managing ethical lapses and social responsibilities. Ethical lapses
are not just confined to the CEOs of large companies, like Enron.
Employees at all levels of the organization have admitted to lapses, such
as falling asleep at work or spreading rumors about a co-worker. And
such behavior is not limited to work; studies also show that business
schools have their share of bad behavior, including cheating. One survey
showed that only 19 percent of students would report a classmate who
cheated.
1. Ethical Leadership. Above all, managers must set an ethical
2. Protecting Employees Who Raise Ethical Issues. Managers must
B. Social Entrepreneurship. A social entrepreneur is an individual or
organization who seeks out opportunities to improve society by using
practical, innovative, and sustainable approaches.
C. Businesses promoting positive 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
are encouraged to volunteer their time to promote social change.
ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
Student answers to these questions will vary.
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. What factors influence whether a person behaves ethically or unethically? Explain
6-4. Do you think values-based management is just a “do–gooder” ploy? Explain your
answer.
If viewed as an actual approach to managing and not just a series of guidelines, values-
6-5. Internet file sharing programs are popular among college students. These programs
work by allowing non-organizational users to access any local network where desired
files are located. Because these types of file sharing programs tend to clog bandwidth,
local users’ ability to access and use a local network is reduced. What ethical and social
responsibilities does a university have in this situation? To whom do they have a
responsibility? What guidelines might you suggest for university decision-makers?
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. Explain the ethical and social responsibility issues facing managers today.
These issues fall within three categories: managing ethical lapses, social
entrepreneurship, and promoting positive change. Ethical lapses can occur at all levels
of the organization; however, we certainly hear more about the unethical behavior of top
management and leaders than individuals with less power. Included with the issue of
ethical lapses are the people who raise ethical issues of organizations in the press (i.e.
whistleblowers). Social entrepreneurs are individuals who seek opportunities to improve
PERSONAL INVENTORY ASSESSMENTS
Student answers to these questions will vary.
ETHICS DILEMMA
Student answers to these questions will vary.
70 percent of adults say that most students cheat. This is nothing new. However,
cheating has become more sophisticated. With advances in technology, students can
wirelessly transmit questions outside the room during tests or install a key-logger on a
teacher’s computer. Technology has enabled those who cheat additional ways to cheat.
6-11. Cheating scandals uncovered at Harvard, the Air Force Academy, New York City’s
Stuyvesant High School, Corona del Mar, and many others are often described as
having a “culture of cheating.” Explain what you think this means. Could such a
culture be changed? If so, how? If not, why not?
6-12. Do you think that those who use technology to cheat know that what they’re doing
is wrong and that it’s damaging their education? Explain.
6-13. What might work best for controlling high-tech cheating—changing people’s
attitudes towards cheating or developing high-tech deterrents to make sure cheating
can’t take place? Explain.
(LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Ethical
understanding and reasoning)
SKILLS EXERCISE: Developing Your
Developing Trust Skill
In this exercise, students are asked to work on their trust skills as it relates to ethical
employee behavior. Students are given eight steps in practicing trust and then
presented with a scenario and asked to write a paper on how they would handle the
situation. Students should be encouraged to review section 6.3 on the factors that lead
to ethical behaviors and section 5.4 on how organizations can encourage ethical
behavior. In the case, students should focus on what the organization can do to
promote a more positive culture in light of the change. (LO: 4, Discuss the challenges
managers face in managing diversity, AACSB: Ethical understanding and reasoning)
WORKING TOGETHER: TEAM EXERCISE
Students are presented with scenario in which employees are pressured into giving to a
charitable cause supported by the company. Students are asked to address this
situation as a manager of employees who are not financially able to make a donation.
The following questions are to be considered:
• How would they handle the situation?
• What ethical guidelines might you suggest for individual and organizational
contributions in such a situation?
• Create a company policy statement that expresses your ethical guidelines.
MY TURN TO BE A MANAGER
• Find five different examples of organizational codes of ethics. Using Exhibit 6–9,
describe what each contains. Compare and contrast the examples. (LO: 3,
Discuss the factors that lead to ethical and unethical 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
• Take advantage of volunteer opportunities and be sure to include them on your
résumé. If possible, try to do things in volunteer positions that will improve your
managerial skills in planning, organizing, leading, or controlling. (LO: 4, Describe
management’s role in encouraging ethical behavior, AACSB: Ethical
understanding and reasoning)
• Go to the Global Reporting Initiative Web site, www.globalreporting.org, and
choose three businesses from the list of organizations that have filed reports.
Look at those reports and describe/evaluate what’s in them. In addition, identify
the stakeholders that might be affected and how they might be affected by the
• Find out what green management activities your school or employer is doing and
write up a list of them. Do some research on being green. Are there additional
things your school or employer could be doing? Write a report to your school or
employer, describing any suggestions. (Also look for ways that you can be green
• Over the course of two weeks, see what ethical “dilemmas” you observe. These
could be ones that you personally face, or they could be ones that others
(friends, colleagues, other students talking in the hallway or before class starts,
and so forth) face. List these dilemmas and think about what you might do if
• Interview two different managers about how they encourage their employees to
be ethical. Write down their comments and discuss how these ideas might help
• Steve’s and Mary’s suggested readings: Bethany McLean and Peter Elkind, The
Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
(Portfolio, 2003); Barbara Ley Toffler, Final Accounting: Ambition, Greed, and the
Fall of Arthur Andersen (Broadway Books, 2003); Joseph L. Badaracco, Jr.,
Leading Quietly: An Unorthodox Guide to Doing the Right Thing (Harvard
Business School Press, 2002); and Kenneth Blanchard and Norman Vincent
Peale, The Power of Ethical Management (Morrow, 1988). (LO: 1, Discuss what
it means to be socially responsible and what factors influence that decision,
AACSB: Ethical understanding and reasoning) (LO: 2, Explain green
management and how organizations can go green, AACSB: Ethical
• If you have the opportunity, take a class on ethics (business or management) or
on social responsibility—often called business and society—or both. Not only will
this look good on your résumé, it could help you personally grapple with some of
• In your own words, write down three things you learned in this chapter about
• Self-knowledge can be a powerful learning tool. Go to mymanagementlab and
complete these self-assessment exercises: What Do I Value? How Do My Ethics
Rate? Do I Trust Others? and Do Others See Me as Trusting? Using the results
of your assessments, identify personal strengths and weaknesses. What will you
ANSWERS TO CASE APPLICATION 1
QUESTIONS
Student answers to these questions will vary.
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
6-15. Would you describe TOMS’ approach as social obligation, social responsiveness,
or social responsibility? Explain.
It should be obvious that TOMS’ donation efforts go beyond social obligation. What may
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
or why not?
Students should see that not all consumers will be drawn to a company like TOMS.
ANSWERS TO CASE APPLICATION 2
QUESTIONS
Student answers to these questions will vary.
Lessons from Lehman Brothers: Will We Ever Learn?
6-18. Describe the situation at Lehman Brothers from an ethics perspective. What’s your
opinion of what happened here?
6-19. What was the culture at Lehman Brothers like? How did this culture contribute to
the company’s downfall?
6-20. What role did Lehman’s executives play in the company’s collapse? Were they
being responsible and ethical? Discuss.
6-21. Could anything have been done differently at Lehman Brothers to prevent what
happened? Explain.
Students should refer to the text and the following suggestions for encouraging ethical
6-22. After all the public uproar over Enron and then the passage of the Sarbanes-Oxley
Act to protect shareholders, why do you think we still continue to see these types of
situations? Is it unreasonable to expect that businesses can and should act ethically?
ADDITIONAL CHAPTER INFORMATION
The following Internet sites address business ethics: