CH4 : Managing Ethics and Social Responsibility
The definition of Ethics :
→ The code of moral principles and values that govern the behaviors of a person
or group with respect to what is right or wrong.
→ Ethics is a set of moral rules and values that guide how people or groups decide
what is right or wrong. It helps us know if our actions are good or bad. Ethics
focuses on answering the question, "What should I do ?" by reflecting on values,
principles, and purpose.
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Ethics and law :
1. "Legal" and "ethical" are not the same. Laws are written rules enforced by
courts, while ethics are moral principles guiding behavior.
2. Laws set minimum standards, like environmental rules or minimum wage.
3. Ethical people ( companies ) often do more than what the law requires.
Sometimes, following the law might go against personal ethics.
❖ Human behavior is divided into three areas : codified law, free choice,
and ethics
1. Codified law: Actions with rules written into laws and enforced by courts.
2. Free choice: Actions where the law has no control, giving complete freedom.
3. Ethics: Falls between the two, with no specific laws but guided by shared values
and moral standards.
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Sources of Ethics:
→ Notions of right and wrong come from many sources, such as :
• Religious beliefs
• Family background
• Education
• Community/neighborhood
• Media influences
→ These sources help :
1. Shape a person's ethics, morality, and socially acceptable behavior.
2. Act as a moral guide when facing ethical dilemmas.
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Ethical relativism:
→ Ethical issues can be complicated because people have different views on what
is right or wrong :
• Ethics can change depending on the time, place, situation, and the people
involved.
• There are no universal ethical standards that everyone in the world agrees on
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Why a buisness should be ethical :
1. Improve company image and reputation : Society values ethical behavior, and
unethical companies may face boycotts.
2. Boost business performance : Ethical companies build strong partnerships,
improve employee engagement, and are more profitable long-term.
3. Comply with legal requirements: Laws guide businesses toward ethical
practices.
4. Prevent harm to general public and other stakeholders : Protect society from
harm (e.g., toxic waste) and safeguard the business from unethical employees
or competitors.
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Unethical organizational behaviors :
→ Examples of unethical practices :
• Bribery
• Discrimination and harassment
• Misusing company assets
• Employing child labor
• Using copyrighted materials illegally
• Doing unrelated work during office hours
• Unfair treatment of customers or employees
→ Consequences of unethical behavior :
• Fines
• Jail time
• Revocation of licenses
• Termination of employment
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Globalization and ethics :
→ Globalization makes ethical issues more complex because businesses operate
across different countries with varying cultural values, laws, and standards.
What is considered ethical in one country may not be in another. Companies
must navigate challenges such as :
• Cultural differences: Different beliefs about right and wrong.
• Legal variations : Laws vary by country, making compliance more complicated.
• Labor practices : Ethical concerns about wages, working conditions, and child
labor in different regions.
• Environmental impact : Companies must manage ethical responsibilities for
sustainability across borders.
Globalization forces businesses to balance profit-making with respect for diverse
ethical norms and global standards.
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Main sources of ethical problems in buisness :
→ Competitive pressure : Intense competition may push managers to take
unethical shortcuts.
→ Pressure to achieve results: The drive for promotions, closing deals, or
avoiding failure can lead to unethical actions.
→ Cross-cultural contradictions : Different cultures may have conflicting ethical
standards, making decisions more challenging.
→ Conflicts of interest: Personal interests, such as favoritism toward a friend or
supplier, can compromise professional judgment.
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Ethical dilemmas :
An ethical dilemma occurs when values conflict, making it unclear what is right or
wrong. These situations are often complex, with no clear solution.
Most dilemmas involve a conflict between individual and collective needs, such as :
• The individual versus the organization
• The organization versus society
For example, should a company export products that don't meet strict local standards
to countries with lower standards, benefiting the company but possibly harming global
citizens?
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Ethical standards :
→ Managers and employees are responsible for making ethical choices and need
clear guidelines to help them make informed decisions. Company leaders
should develop these ethical standards for their employees to follow. These
guidelines help individuals identify and understand ethical issues and determine
the best course of action to ensure ethical outcomes.
1. Utilitarian approach
2. Moral Rights Approach
3. Justice Approach
4. Virtues Approach
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1) Utilitarian approach :
▫ Ethical actions are those that result in the greatest benefits and the least harm.
▫ The ethical choice is one that brings the most good to the most people.
▫ This approach focuses on the consequences of actions, where the end justifies
the means. It is considered acceptable to cause some harm if it leads to
significant benefits for many people
2) the moral rights approach :
▫ This approach is based on the philosophy of Immanuel Kant.
▫ The ethical action is the one that best protects and respects the moral rights of
those involved. To determine if an action is ethical, we must ask, "Does it
respect the moral rights of everyone?"
▫ Humans have the right to make choices about their lives, including rights to
truth, privacy, life, and free consent.
▫ It doesn't matter how much good an action might generate if it violates even one
fundamental human right.
3) the virtues approach :
▫ The virtue approach to ethics encourages people to base their decisions on
universal virtues.
▫ Virtues are qualities and habits that help us act according to the best of our
character.
▫ Examples of virtues include honesty, courage, compassion, generosity,
tolerance, love, integrity, fairness, self-control, and prudence.
▫ Virtue ethics asks, "What kind of person will I become if I do this?" or "Is this
action aligned with me acting at my best ?"
4) the justice approach :
▫ The justice approach is based on the work of Aristotle. The main moral question
in this approach is: How fair is an action ? Does it treat everyone equally, or
does it show favoritism or discrimination ?
▫ People should be treated the same unless there are relevant differences
between them.
▫ In a company, all employees should be treated equally, regardless of their
position or influence. For example, men and women should receive the same
salary if they perform the same job. However, individuals with different job skills
or responsibilities can be treated differently, based on the differences in skills or
responsibilities.
Comparative table between the approaches to differenciate them :
approach Main focus Key question Guiding Example
principle
Utilitarian Maximizing "What action Focuses on the It’s okay to
Approach benefits, will result in consequences cause some
minimizing the greatest of actions. The harm if it
harm good for the ends justify the benefits many
greatest means. people.
number?"
Rights Respecting "Does the Actions should No matter how
approach moral rights action respect respect human much good
the moral rights, no your action will
rights of matter the bring, don't
everyone consequences violate a
involved?" human right.
Virtue Developing "What kind of Focuses on the Make
Approach good character person will I character and decisions
traits (virtues) become if I do virtues of the based on
this?" or "Is person making virtues like
this action the decision. honesty,
consistent with integrity, and
acting at my fairness.
best ?"
Justice Ensuring "How fair is Treat people Men and
Approach fairness and this action ? the same women
equality Does it treat unless there performing the
everyone are relevant same job
equally?" differences should be paid
between them. the same
salary.
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How can ethical behavior be improved in the workplace :
1) Code of Ethics: A written guide that explains what is expected from employees
and how to handle common ethical problems.
2) Ethics Training : Helps employees understand the company’s values and rules,
and how to deal with ethical dilemmas through real-life examples.
3) Zero-Tolerance Policy : Strict rules with consequences for employees who
break ethical standards.
4) Inquiry and Reporting Mechanisms
▫ Provide clear ways for employees to ask for ethics advice or information.
▫ Set up anonymous reporting channels for ethical misconduct, ensuring no fear
of retaliation (Whistle-blowing).
5) Performance Evaluation and Rewards: Performance reviews, compensation,
and promotions should recognize and reward ethical behavior.
6) Strong Ethical Leadership : Leaders should set a good example for ethics in the
workplace. Weak leadership can encourage employees to think, "If they can
break the rules, so can I."
Corporate social responsibility (CSR) :
➢ refers to companies taking action to address social and environmental concerns
in their business practices. This includes:
• Reducing carbon footprints and water pollution.
• Using renewable energy, sustainable resources, and recycled materials.
• Donating a portion of profits to charities or good causes.
→ To be socially responsible, a company must do more than just follow the law and
ethical guidelines. CSR is increasingly seen as an obligation, not just a choice.
→ Studies show that investors and consumers are more likely to support
companies involved in social causes, such as environmentally friendly activities.
