Chapter Outline
· What it means to be socially responsible and what factors influence that decision?
· Explain Green Management and how organizations can go green?
· Discuss the factors that lead to unethical behavior.
· Describe management’s role in encouraging ethical behavior.
· Discuss current social responsibility and ethics issues.
To hire an employee on low age from third world or poor or developing country for high paid job, and saying that they are providing employment in the country, do such type of company is socially responsible.?
From Obligations to Responsiveness to Responsibility:
It is from “profit making only” to going beyond profit making” to any discretionary activity intended for social welfare” to improving social or environmental conditions”
Social Obligation:
When a company performs social action just because, it is necessary to meet certain economic and legal responsibilities.
This reflects the Classic view that says “managements only responsibility is to maximize profit”
Social Responsiveness and social responsibility reflects the Socioeconomic view, according to which managers’ responsibilities go beyond from profit making to protecting and improving society’ welfare.
Social responsiveness:
When company engages in social actions in response to some social need.
Example, Ford endorsed federal ban on text messages while driving.
Social Responsibility:
Business intentions beyond its legal and economic obligations, i-e social welfare, not for money.
Example: a company in US Abt. Electronics shut off lights and reducing air conditioning more frequently, not to reduce company cost but to support society, to maintain the flow of electricity.
Example: Walmart sponsored a program to eliminate “Hunger”, customers supported them in raising funds. They do it by saying H_NGER “the problem can’t be solved without you”
Should Organizations Be Socially Involved:
SRI (Socially responsible Investing) Funds:
It is another way for social involvement for individual investors.
These funds use some type of Social Screening, they apply social and environmental criteria to investing decisions.
For instance, SRI funds will not invest in companies that are involved in Liquor, gambling, tobacco, nuclear power, weapons etc.
Interestingly, performance of SRI funds and Non SRI funds is comparable, so we can conclude that, companies should fulfil social responsibility.
Examples are:
· Coca cola announced that 100% of its new vending machines and coolers would be hydrofluorocarbon free by 2015. This will have same effect equal to carbon emission of 11 million cars off the road for a single year.
· The Fairmont hotel chain has made a decision to set up rooftop beehives to strengthen the population of honeybees. The reason behind it is that one –third of the food we eat comes from plants that depends on bee pollination.
Managers considering the impact of their organization on the natural environment, which we call as Green Management.
How Organizations Go Green:
Legal (or Light Green) Approach:
In this approach managers do, what is required legal, i.e. Social Obligation.
These organizations show little environmental sensitivity.
They obey laws, rules and regulations.
Market approach:
When organization become more environmental sensitive it may adopt this approach.
Whatever customer demand in term of environmental friendly products will be provided by the organizations.
e.g., DuPont developed a new type of herbicide that enabled farmers to minimize the use of chemicals.
Stakeholder approach:
An organization works to meet environmental demands of its multiple stakeholders. E.g. product recycling for its customers and society or work operations for employees and community.
Activist (or dark green) Approach:
In this approach managers take steps to protect earth’s natural resources.
It shows the highest degree of environmental sensitivity. i.e. Social Responsibility.
e.g. Belgian company Ecover produces ecological cleaning products in a near-zero emissions factory. Factory has a huge grass roof that keeps things cool in the summer and warm in the winter. Water treatment system runs on wind and solar energy.
Company chose to build this facility because of its deep commitment to the environment.
Evaluating Green Management Actions:
o GRI:
Global reporting initiative,
More than 1300 companies report about their efforts to promote environmental sustainability, following the guidelines issued by GRI.
These reports can be found on GRI website i.e. www.globalreporting.org
o ISO 14000:
For a company to become ISO 14000 compliant, it must develop a management system for meeting environmental challenges.
That means it should reduce the effect of its activities on environment.
o Global 100:
This is the final way to evaluate company’ commitment to environmental sustainability.
To be enlisted in this Globe 100 list, companies should continue to work for environmental sustainability. And protecting its resources.
Some companies are, Siemens (Germany), Starbucks (U.S.)
Is it ethical to use office car for personal use.?
Is it ethical for a sales representative to bribe the purchase agent?
Etc.
Ethics: It includes principles, values, and beliefs that define right and wrong decision and behavior.
Ø Factors that determine Ethical and Unethical Behavior:
There are certain factors that determine how someone will behave, ethically or unethically while facing certain situation.
o Stage of moral development:
There are 3 levels each having 2 stages, they are,
Pre-conventional stage:
Person’s choice between right and wrong depends upon external sources or consequences like physical punishment, reward or exchange of favors.
Conventional stage:
In this stage, people live as per the expectations of others.
Principled stage:
Here, people define moral values ignoring authority of the groups to which they belong.
o Individual characteristics:
Two individual characteristics are values and Personality.
Ø Values:
A personal belief about what is right and wrong, these believes develop from the younger age by seeing the actions of their parents or teachers or people around them.
Ø Personality:
Two variables that define personality are
Ego strength: people with high in ego strength do what they believe is right and are more consistent in their moral judgements and actions than those with low ego strength.
Locus of control: such type of people believe that they control their own fates.
People with internal locus of control believe that they control their own destinies, and take responsibility for consequences and rely on their own internal standards, which they have set for right and wrong.
People with external locus of control believe that what happens to them is due to luck or by chance. They take less responsibility of consequences of their behavior and rely of external forces.
o Structural variables:
An organizational design can influence employees whether to behave ethically or unethically.
A structural design that continuously remind employees of what is ethical and encourage ethical behavior.
Structural variables include goals, performance appraisal system and reward allocation systems.
Problems can be,
· Goal setting can cause unethical practices, e.g. shipping unfinished products just to meet sales targets.
· If appraisal system will focus on outcomes, then most probably employees can involve in any kind of unethical practice to look good in the end.
· Same thing goes with reward system. If Rewards are based on end results, then employees will have the pressure to achieve the target, in this course they will adopt procedure to reach their goal even if its unethical.
o Organization’ culture:
As we know organizational culture consist of the shared organizational values.
These shared values create an environment for employees to act ethically or unethically.
Many organizations are using Values Based Management in which organizational values guide employees in the way they do their jobs.
Example: Timberland using values-based management with simple statement “make it better”. Employees know what is expected from them, so they find ways to make it better.
So, managers in a company should create an environment for employees to work ethically. Or to set benchmarks.
o Issue Intensity:
Ethics is an International Context:
· Employee Selection:
Selection process should be taken as an opportunity to know candidate’ level of moral development, personal values, ego strength, and locus of control.
But even through tough and careful selection criteria, candidates with questionable ethics can be hired.
· Codes of Ethics and Decision Rules:
Companies should have written codes of ethics in order to avoid the ambiguity in the minds of employees if there is any.
Researches show that 97% of companies with more than 10,000 employees and among smaller companies nearly 93% have written code of ethics.
3 categories content for codes of ethics are
a) Be a dependable organizational citizen
Illegal drugs and alcohol at work are prohibited.
Manage personal finances well.
Do not use abusive language.
Follow instructions of supervisors.
Dress in business attire.
b) Do not do anything unlawful or improper that will harm the organizational.
Bribes are prohibited.
Maintain records confidentially.
Do not use company property for personal use.
Make decisions without regard of personal benefits.
Do not propagate false and misleading information.
c) Be good to customers.
Convey true claims in product advertisements.
Perform assign duties with the best of your abilities.
Provide products and services of the highest quality.
Suggestions for Managers:
Managers should reward those employees who act ethically.
All managers should continually reaffirm the importance of ethics codes.
Managers should communicate and reinforce the ethics code regularly.
· Leadership:
Doing business ethically requires commitment from top management, why.?
Because lower-level employees will follow the footsteps of top management.
For example, if they take company resources for personal use, or give favors to friends, they imply as this type of behavior is acceptable.
Top managers also set the rules by giving rewards to employees who acts ethically in front of other employees and punish the employee who acts unethically in front of whole staff, so that other employees get to know, what is the right practice, whether to act ethically or unethically.
· Job Goals and Performance Appraisal:
Job goals should be so realistic.
For example, in a law firm, employees were found flushing tax return documents, they straight away admit that they did this, when the reason was asked, employees said that they were overburdened, and were told to complete the maximum returns in less time. And on the basis of this their performance will be evaluated.
So, to meet the target, they decided to flush the returns and clan their desks.
So, the situation is very clear, as job goal was not realistic and ethical, in response employees act unethically.
· Ethics Training:
Many organizations arrange seminars, workshops and ethical training programs to encourage ethical behavior.
Through this type of events people at least learn what Is expected from them at workplace, they learn new ways of treating people.
Critics says, these types of training are useless, people don’t learn anything from such seminars or events. They say individuals develop ethics when they are young.
In my view, such trainings are helpful, these events provide people a chance to think differently.
· Independent Social Audits:
Independent social audits should be conducted in organizations.
They should have complete back from top management, and the team of auditors should present the exact finding before the top management.
· Protective Mechanisms:
Employees facing ethical dilemmas need protective mechanisms, so that they can do the right without fearing of reprimand.
If possible, organizations may assign ethical advisor to such employees, so that they can make better decisions.
Managers being socially responsible and ethical face following three main types of challenges.
a) Managing ethical lapses and social irresponsibility:
As per one survey among 5000 employees 45% employees admitted that thy fell asleep at work. 22% admitted the fact that they spread rumor about their coworkers.
18% said that they snooped after 2 hours.
And 2% said that they took credit of someone others work.
These are unethical practices at work.
In another survey 23% of students said that violence toward other person is acceptable to some extent.
Now the question is, how managers will handle such type of unethical behavior which is becoming acceptable.
Ethical leadership:
Example of new salesperson and manager.
How managers can provide ethical leadership, because what managers will do, lower employees will perceive and copy the same.
· Be a good role model by being ethical and honest
· Don’t hide and manipulate information.
· Be willing to admit your failures.
· Share your personal values by regularly communicating them with employees.
· Stress the organization’ or team’ important shared values.
· Use reward system to hold everyone accountable to the values.
Protection of employees who raise ethical issues:
Managers will have to make sure that, if someone raise the ethical concerns or issues or any wrong doing in the company will face no personal or career risk.
These type of employees or individual often called as Whistle Blowers
To provide protection to employees.
Companies can set up toll-free ethics hotlines, so that employees can call anonymously. Dell have it.
Developing a culture in the company where bad news can be heard before it’s too late.
Example; federal legislation Sarbanes-Oxley offers some legal protection to whistle blower. If any manager takes unethical action against the employee who raises an ethical concern will be sent to prison for 10 years.
But despite this law, employees have been fired from job for reporting wrong doings in the company.
b) Social entrepreneurship:
o World’ problems are many and their viable solutions are few. But many people and organizations are trying to do something differently.
o Example: Reed Paget, founder and CEO of bottle making British company, it is the first company to become carbon neutral. Its bottles are made from corn, so they can be composted in soil. And its profit goes in the projects of providing clean water where it is needed in different parts of the world.
o This type of people and business is the example of Social Entrepreneur.
o What business entrepreneur is to economy, social entrepreneurs are to society.
o Social entrepreneurs use creativity and ingenuity to solve problems.
o It may also involve nurturing individuals who passionately believe that they have an idea that could make the world a better place to live.
c) Businesses promoting positive social change:
It is also spending money or resources or time for betterment of society.
Corporate philanthropy:
Companies supporting different campaigns e.g. “pink” campaign regarding cancer and “Red” campaign for AIDS
Many organizations also fund for different causes
Some organizations fund their own foundations to support various social issues.
For example, Google’ foundation called DotOrg by its employees. Use their funds to support five areas.
o Developing systems to eradicate or prevent disease pandemics
o Empowering the poor with information about public services
o Creating jobs by investing in small businesses.
o Acceleration of plug-in cars.
o Making renewable energy cheaper than coal.
Employee volunteering efforts:
Employee volunteering is another way in promoting social change.
‘For example: pricewaterhouseCooper employees renovated an abandoned school in Newark, New Jersey
Wachovia employee given 6 paid day offs from work each year to volunteer in his or her society.
This thing not only benefit the society but enhance employee’s work efforts and motivation.