How do managers become more socially responsible?

Ethics: A set of rules or principles that defines right and wrong conduct.

Ethics commonly refers to a set of rules or principles that defines right and wrong conduct. Right or wrong behavior, though may at times be difficult to determine. Most recognize that something illegal is also unethical. What about questionable “legal” areas? Recent literature is filled with management practices at companies such as Enron, Arthur Andersen and Madhavpura Mercantile Co-operative Bank (MMCB) in India. What executives at these companies did may be questionable, and some actions may have been illegal; the larger issue is what implications have such actions created? For many, the aftermaths of these corporate scandals resulted in a lack of trust in management. People are questioning how much unethical actions could have gone unnoticed if proper controls were in force in the organization. Moreover, the public is now examining the unethical cultures that were pervasive in these organizations.

Understanding ethics may be difficult, depending on the view that one holds of the topic.

Three Views of Ethics>>>

Utilitarian view of ethics:

Refers to a situation in which decisions are made solely on the basis of their outcomes or consequences. The goal of utilitarianism is to provide the greatest good for the greatest number. On one side, utilitarianism encourages efficiency and productivity and is consistent with the goal of profit maximization. On the other side, however, it can result in biased allocations of resources, especially when some of those affected lack representations or voice.

Right view of ethics:

Refers to a situation in which the individual is concerned with respecting and protecting individual liberties and privileges, including the rights to privacy, freedom of conscience, free speech, and due process. The positive side of the rights perspective is that it protects individuals’ freedom and privacy. But it has a negative side in organizations; It can present obstacles to high productivity and efficiency by creating an overly legalistic work climate.

Theory of justice view of ethics:

Refers to a situation in which an individual imposes and enforces rules fairly and impartially. A manager would be using a theory of justice perspective in deciding to pay a new entry level employer $ 1.50 an hour over the minimum wage because that manager believes that the minimum wage is inadequate to allow employees to meet their financial commitments. Imposing standards of justice also comes with pluses and minuses. It protects the interests of those stakeholders who may be underrepresented or lack power, but it can encourage a sense of entitlement that reduces risk taking, innovation, and productivity.

People who lack a strong moral sense, however, are much less likely to do the wrong things if they are constrained by rules, policies, job descriptions, or strong cultural norms that discourage such behaviors. For example, someone in your class has stolen the final exam and is selling a copy for $50. You need to do well on this exam or risk failing the course. You expect some classmates have bought copies, which could affect any results from the exam because your professor grades on a curve. Do you buy a copy because you fear that without it you’ll be disadvantaged do you refuse to buy a copy and try your best, or you report your knowledge to your instructor?

Code of ethics: A formal document that states an organization’s primary values and the ethical rules it expects managers and operatives to follow.

The example of the final exam illustrates how ambiguity about what is ethical can be a problem for managers. Codes of ethics are an increasingly popular tool for attempting to reduce that ambiguity. A code of ethics is a formal document that states an organization’s primary values and the ethical rules it expects managers and operative employees to follow. Ideally, these codes should be specific enough to guide organizational personnel in what they are supposed to do yet loose enough to allow for freedom of judgment. Nearly 90 percent of Fortune 1000 companies have a stated code of ethics and these codes extend into the global arena.

In isolation ethics codes are not likely to be much more than window dressing – Enron had a code of ethics statement. Their effectiveness depends heavily on whether management supports them and ingrains them into the corporate culture, and how individuals who break the codes are treated. If management considers them to be important, regularly reaffirms their content, follows the rules themselves, and publicly reprimands breakers, ethics codes can supply a strong foundation for an effective corporate ethics program.