CHPT 3

Chapter 3:
ETHICAL BEHAVIOUR AND SOCIAL

RESPONSIBILITY
CHAPTER 3 STUDY QUESTIONS
In studying this chapter, students should consider the following questions:
What is ethical behaviour?

How do ethical dilemmas complicate the workplace?
How can high ethical standards be maintained?
What is corporate social responsibility?
How do organizations and governments work together in society?
CHAPTER 3 LEARNING OBJECTIVES

After completing this chapter, students should be able to:
Define ethics and ethical behaviour; and describe the relationships between law, values, and
ethical behaviour.
Identify and discuss four alternative views of ethical behaviour.
Discuss the influence of culture on ethical behaviour; compare and contrast cultural relativism
and cultural universalism; and explain how companies can respect universal values across
cultures.
Define the term ethical dilemma and describe ethical dilemmas typically faced by managers.
Identify four rationalizations for unethical behaviour.
Identify and discuss the key factors influencing ethical behaviour.
List and discuss the various ways in which high ethical standards can be maintained.
Explain the concept of corporate social responsibility; explain the role of stakeholders in
corporate social responsibility; identify the beliefs that guide socially responsible actions in
businesses; and discuss contrasting perspectives on social responsibility.
Define the term social responsibility audit; explain the roles of compliance and conviction in
social performance; and describe four criteria for evaluating corporate social performance and the
strategies that use them
Explain how governments influence businesses and how businesses influence governments.
Explain the nature of corporate governance and its importance to organizations.
40
41 Schermerhorn & Wright: Management Fundamentals
CHAPTER 3 OVERVIEW
Ethical behaviour and corporate social responsibility are critical issues for contemporary managers. This
chapter seeks to make students aware of various ethical dilemmas they may face in their careers while
encouraging them to adopt high ethical standards. It also examines the role of social responsibility in
contemporary business.
The chapter begins by defining key terms such as ethics and ethical behaviour before considering these
terms in a managerial context. The utilitarian, individualism, moral-rights, and justice views of ethical
behaviour are examined next. Opposing viewpoints on the relationship between culture and ethics are
identified, as is the notion of universal ethical values for guiding the operations of multinational
companies. Ethical dilemmas faced by managers are then described, along with four rationalizations for
unethical behaviour. The person, the organization, and the environment are discussed as factors
influencing ethical behaviour. Also considered are various approaches for maintaining high ethical
standards, including ethics training, whistleblower protection, managers as ethical role models, and codes
of ethics.
From here, the focus of the chapter shifts to the related topic of corporate social responsibility. The
stakeholder model is introduced as a useful way for viewing corporate social responsibility efforts. Also
provided is a summary of the beliefs that guide socially responsible business practices. The arguments
against and for social responsibility as well as four criteria for evaluating corporate social
performance are also discussed. A continuum reflecting different strategies of social responsibility is also
presented. Because government regulation influences and is, in turn, influenced by the level of social
responsibility exhibited by corporations, the reciprocal relationship between businesses and government
is described. Finally, consideration is given to the social responsibility and organizational performance
impacts of both boards of directors via corporate governance and the companys managers via daily
activities.
CHAPTER 3 LECTURE OUTLINE

Teaching Objective: To expose students to the issues of managerial ethics and organizational social
responsibility and to encourage them to adopt high ethical standards. In your discussion of these issues,
be sure to stress the long-term benefits of ethical behaviour and corporate social responsibility.
Suggested Time: Two hours of class time are typically required to present the material in this chapter.
I.
Introduction to the Chapter 3 lecture.

Study questions for Chapter 3
Organization of lecture material
Examples of ethical and unethical actions in various businesses
II.
Study Question 1: What is ethical behaviour?

Basic definitions
Law, values, and ethical behaviour
Alternative views of ethical behaviour
Cultural issues in ethical behaviour
III.
Study Question 2: How do ethical dilemmas complicate the workplace?

What is an ethical dilemma?
Rationalizations for unethical behaviour
Factors influencing ethical behaviour

IV.
Study Question 3: How can high ethical standards be maintained?

Progressive organizations and ethical standards
Ethics training
Whistleblower protection
Ethical role models
Codes of ethics
V.
Study Question 4: What is corporate social responsibility?

Background on organizational social responsibility
Stakeholder issues and analysis
Perspectives on social responsibility
Evaluating corporate social performance
Social responsibility strategies
VI.
Study Question 5: How do organizations and governments work together in society?

When government is called to act
How governments influence organizations
How organizations influence governments
Role of corporate governance
VII.
Study summary for Chapter 3.
CHAPTER 3 SUPPORTING MATERIALS

Textbook Inserts
Get Connected!
Aldo Shoes Creating a Better World
Figures
Figure 3.1: Four Views of Ethical Behaviour
Figure 3.2: The extremes of Cultural Relativism and Ethical Imperialism in International Business
Ethics
Figure 3.3: Factors Influencing Ethical Managerial Behaviour the Person, Organization, and
Environment
Figure 3.4: Multiple Stakeholders in the Environment of the Organization
Figure 3.5: Criteria for Evaluating Corporate Social Responsibility
Figure 3.6: Four Strategies of Corporate Social Responsibility From Obstructionist to
Proactive Behaviour
Figure 3.7: Centrality of Ethics and Social Responsibility in Leadership and the Managerial Role
Managers Notepad
Managers Notepad 3.1: How International Businesses Can Respect Universal Values
Managers Notepad 3.2: Checklist for Dealing with Ethical Dilemmas
Thematic Boxes
Canadian Company in the News: Mountain Equipment Co-op
Canadian Managers: Volunteer Now!
Around the World: Nonprofit Supports Social Accountability Worldwide
Personal Management
Personal Character
Chapter 3: Ethical Behaviour and Social Responsibility 43
Take It to the Case

Toms of Maine Where Doing Business Means Doing Good
Integrated Learning Activities
Cases/Projects
Toms of Maine Case
Project 2 Corporate Social Responsibility
Self-Assessments
Terminal Values (#5)
Instrumental Values (#6)
Diversity Awareness (#7)
Internal/External Control (#26)
Exercises in Teamwork
Confronting Ethical Dilemmas (#6)
What Do You Value in Work (#7)
Case of the Contingency Workforce (#22)

Self-Test 3 (Textbook)
CHAPTER 3 LECTURE NOTES

I.
Introduction to the Chapter 3 lecture.

A.
B.
Study questions for Chapter 3 (see PowerPoint Slide 2 for Chapter 3).
1.
What is ethical behaviour?
2.
How do ethical dilemmas complicate the workplace?
3.
How can high ethical standards be maintained?
4.
What is corporate social responsibility?
5.
How do organizations and governments work together in society?
The lecture material for Chapter 3 is organized around the study questions.
1.
C.
Point out to the students that the texts Chapter 3 Learning Preview identifies
the key topics contained in the chapter and links them to the appropriate study
questions.
The chapter opens with a description of Ben & Jerrys efforts to operate a successful
business that shares prosperity and addresses social concerns. Contrasting examples of
businesses being destroyed by unethical decisions and actions are then provided.
ENHANCEMENT
You can start out the discussion of this chapter by asking students to identify examples of ethical and
unethical business practices that they have read about, heard about, or personally witnessed or
experienced. Ask the students how these practices seem to have been viewed by the public at large. Also
have the students discuss how these practices seem to have affected the organization and relevant
stakeholders in both the short term and the long term.
To bring ethical and unethical behaviour closer to home, discuss students behaviour within the
college/university context. Topics may include cheating, adherence to campus regulations, maintenance
of the physical environment, or unauthorized use of materials or equipment.
II.
Study Question 1: What is Ethical Behaviour?

A.
B.
C.
Basic definitions.
1.
Ethics can be defined as the code of moral principles that sets standards of good
or bad, or right or wrong, in ones conduct and thereby guides the behaviour of a
person or group. (See PowerPoint Slide 3 for Chapter 3.)
2.
Ethical behaviour is behaviour that is accepted as good and right as

opposed to bad or wrong in the context of the governing moral code. (See
PowerPoint Slide 3 for Chapter 3.)
Law, values, and ethical behaviour (see PowerPoint Slide 4 for Chapter 3).
1.
Legal behaviour is not necessarily ethical behaviour. Behaviour might be legal

but that does not ensure that it is ethical.
2.
What one considers to be ethical varies according to personal values the

underlying beliefs and attitudes that help determine individual behaviour.
3.
Types of values that influence ethical judgments:

a.
Terminal values are preferences about desired end states.
b.
Instrumental values are preferences regarding the means for

accomplishing desired ends.
Alternative views of ethical behaviour.

1.
Figure 3.1 from the text shows four views of ethical behaviour (also see
PowerPoint Slide 5 for Chapter 3). These views are as follows:
a.
Utilitarian view ethical behaviour is that which delivers the greatest

good to greatest number of people.
b.
Individualism view ethical behaviour is that which best serves longterm self-interests.
c.
Moral-rights view ethical behaviour is that which respects and

protects the fundamental rights of all people.
d.
Justice view ethical behaviour is that which is impartial and fair in

treating people according to legal rules and standards.
(1)
Procedural justice the degree to which policies and rules are

fairly administered.
(2)
Distributive justice the degree to which people are treated

the same regardless of individual characteristics based on
ethnicity, race, gender, age, or other particularistic criteria.
(3)
Interactional justice the degree to which others are treated

with dignity and respect.
ENHANCEMENT
Ask students for examples of each of the above views of ethical behaviour. These can be either
hypothetical examples or situations they have encountered in their own lives. Ask them to indicate which
view they think is the most useful in business, and why. Also ask them to indicate which view they think
is the most useful in their personal lives, and why. Compare and contrast the two sets of answers,
exploring he nature and reasons for any differences in the two sets.
D.
Cultural issues in ethical behaviour (see PowerPoint Slide 7 for Chapter 3).
1.
Ethical management in a global environment is challenged by the complexities of

different cultures and value systems throughout the world.
2.
Cultural relativism is the notion that there is no one right way to behave and
that ethical behaviour is always determined by the cultural context.
3.
Figure 3.2 from the textbook contrasts cultural relativism with the alternative
position universalism that suggests if a behaviour is not acceptable in
ones home environment, it shouldnt be acceptable practice anywhere else.
Critics claim universalism is a form of ethical imperialism, or the attempt to
externally impose ones ethical standards on others.
4.
Business ethicist Thomas Donaldson argues instead that certain fundamental

rights and ethical standards, or hyper-norms should transcend cultural
boundaries. Even with a commitment to the core values underlying a transcultural ethical umbrella, international business behaviours can be tailored to
local and regional cultural contexts.
5.
Managers Notepad 3.1 from the text summarizes how international businesses
can show respect for core or universal values (also see PowerPoint Slide 7 for
Chapter 3). Specifically, international companies should:

a.
Respect human dignity by creating a corporate culture that values

employees, customers, and suppliers; keeping a safe workplace; and
producing safe products and services.
b.
Respect basic rights by protecting rights of employees, customers, and

communities; and avoiding anything that threatens safety, health,
education, and living standards.
c.
Be good citizens by supporting social institutions, including economic

and educational systems; and working with local government and
institutions to protect the environment.
ENHANCEMENT
Using the criteria contained in Managers Notepad 3.1, ask students to provide examples of how different
international businesses have responded to these core or universal values. This can be used as a short outof-class assignment, either individually or in groups.
III.
Study Question 2: How do ethical dilemmas complicate the workplace?

A.
What is an ethical dilemma?

1.
An ethical dilemma occurs when someone must choose whether or not to pursue
a course of action that, although offering the potential of personal or
organizational benefit or both, may be considered unethical. (See PowerPoint
Slide 10 for Chapter 3.)
2.
Ethical problems faced by managers.

a.
Potential sources of ethical dilemmas include discrimination, sexual

harassment, conflicts of interest, customer confidence, and organizational
resources. (See PowerPoint Slide 10 for Chapter 3.)
b.
According to a Harvard Business Review survey, many ethical dilemmas

involve conflicts with superiors, customers, and subordinates.
ENHANCEMENT
A good way to get students thinking about ethical dilemmas and to generate a lively discussion is to ask
students how they would respond to the following three dilemmas. The range of student responses is
likely to be quite broad. Next, you can present the results of the Harvard Business Review survey from
which they were taken.
Case 1: foreign payment. A governmental official of a foreign nation asks you to pay a $200,000
consulting fee. In return for the money, the official promises special assistance in obtaining a $100
million contract that would produce at least a $5 million profit for your company. The contract will
probably go to a foreign competitor if not won by you. Survey results: 42% of the responding managers
would refuse to pay; 22% would pay, but consider it unethical; 36% would pay and consider it ethical in a
foreign context.
Case 2: competitors employee. You learn that a competitor has made an important scientific discovery.
It will substantially reduce, but not eliminate, your profit for about a year. There is a possibility of hiring
one of the competitors employees who knows the details of the discovery. Survey results: 50% would
probably hire the person; 50% would not.
Case 3: expense account. You learn that a manager in your company who earns $50,000 a year has been
padding his expense account by about $1,500 a year. Survey results: 89% feel padding is okay if
superiors know about it; 9% feel it is unacceptable regardless of the circumstances.
(Source: Brenner, S.N., and Mollander, E.A. Is the Ethics of Business Changing? Harvard Business
Review, January-February 1977, Volume 55, p. 60.)
B.
Rationalizations for unethical behaviour (see PowerPoint Slide 11 for Chapter 3).
1.
Convincing yourself that the behaviour is not really illegal. This rationalization is
particularly common in ambiguous situations. A good rule of thumb is When in
doubt, dont do it.
2.
Convincing yourself that the behaviour is in everyones best interest. This

rationalization involves the mistaken belief that because someone may benefit,
the behaviour is also in the interest of the individual or the organization. When
asking How far can I push matters to obtain this performance goal? the best
answer is Dont try to find out.
3.
Convincing yourself that nobody will ever find out what youve done. This
argument assumes no crime is committed unless it is discovered. To deter this
view, make sure that sanctions for wrongdoing are public.
4.
Convincing yourself that the organization will protect you. This implies the
organization will condone the practice, but organizational norms should not be
put above the law or social morality.
ENHANCEMENT
Ask students for examples of rationalizations for unethical behaviour that they have used themselves or
have observed others using. Discuss the individual and organizational effects of these rationalizations.
C.
Factors influencing ethical behaviour.

1.
Figure 3.3 from the text summarizes three factors the person, the
organization, and the environment that influence ethical behaviour. (Also see
PowerPoint Slide 10 for Chapter 3.)
2.
The person in developing ethical frameworks as personal strategies for ethical

decision making, managers are influenced by the following factors:
3.
4.
IV.
a.
Family influences.
b.
Religious values.
c.
Personal standards
d.
Personal needs.
The organization the organization also plays a key role in shaping managerial
ethics through:
a.
Behaviour of supervisors.
b.
Expectations and reinforcement of peers, and peer group norms.
b.
Policy statements and written rules.
The environment managerial ethics are also shaped by the following

components of the external environment:
a.
Government laws and regulations.
b.
Norms and values of society.
c.
Climate of competition in an industry.

A.
Progressive organizations employ a variety of methods for maintaining high ethical

standards. These include ethics training, whistleblower protection, ethical role models,
and codes of ethics.

B.
Ethics training (see PowerPoint Slide 15 for Chapter 3).

1.
Ethics training refers to structured programs that help participants understand

the ethical aspects of decision making, and help people incorporate high ethical
standards into their daily behaviours. Ethics training helps people deal with
ethical issues while under pressure.
2.
Managers Notepad 3.2 from the text provides a checklist for dealing with
ethical dilemmas.
a.
Recognize the ethical dilemma.
b.
Get the facts.
c.
Identify your options.
d.
Test each option: Is it legal? Is it right? Is it beneficial?
e.
Decide which option to follow.
f.
Double-check your decision by asking: How would I feel if my family

finds out about my decision? How would I feel if my decision is
printed in the local newspaper?
g.
Take action.
ENHANCEMENT
Ask small groups of students to identify an ethical dilemma that commonly occurs for students as they
pursue their educations. Each group should focus on a different dilemma. Then have each group discuss
how their dilemma should be handled, given the checklist contained in Managers Notepad 3.2.
C.
Whistleblower protection.
1.
A whistleblower is a person who exposes the misdeeds of others in organizations

to preserve ethical standards and protect against wasteful, harmful, or illegal acts.
(See PowerPoint Slide 16 for Chapter 3.)
2.
Federal and state laws increasingly offer whistleblowers some protection from
retaliatory discharge. Still, legal protection can be inadequate (see PowerPoint
Slide 16 for Chapter 3).
3.
Organizational barriers to whistleblowing include (see PowerPoint Slide 17 for

Chapter 3):
a.
A strict chain of command that makes it difficult to report unethical

practices to higher-level managers.
b.
Strong work group identities that encourage loyalty and self-censorship.

c.
4.
Ambiguous priorities that make it difficult to distinguish right from

wrong.
Two ways in which organizations have attempted to overcome these

whistleblowing barriers and to encourage high ethical standards are (see
PowerPoint Slide 17 for Chapter 3):
a.
The use of formally appointed ethics staff members to serve as ethics

advocates.
b.
Moral quality circles.
ENHANCEMENT
Ask students to describe what they would do if they happened to be in a situation where they could
become whistleblowers. Then share the following practical tips for whistleblowers:
1.
2.
3.
4.
5.
6.
Do make sure you really understand what is happening and that your allegation is absolutely correct.
Dont assume the law automatically protects you.
Do talk to an attorney to ensure that your rights will be protected and proper procedures are followed.
Dont talk first to the media.
Do keep accurate records to document your case; keep copies outside of your office.
Dont act in anticipation of a big financial windfall if you end up being fired.
D.
E.
Ethical role models (see PowerPoint Slide 18 for Chapter 3).

1.
Because top managers serve as role models, their behaviour can either encourage
or discourage unethical behaviour.
2.
Although top managers have a special responsibility for setting the ethical tone of
an organization, all managers are in a position to influence the ethical behaviour
of the people who work for and with them.
3.
Too much pressure to accomplish goals that are too difficult can also encourage
unethical behaviour.
4.
Part of any managers ethical responsibility is to be realistic in setting

performance goals for others.
Codes of ethics (see PowerPoint Slide 19 for Chapter 3).

1.
A code of ethics is a formal statement of an organizations values and ethical

principles that provide guidelines on how to behave in situations susceptible to
ethical dilemmas.
2.
Most codes of ethical conduct identify expected behaviour in terms of general

organizational citizenship, the avoidance of illegal or improper acts in ones
work, and good relationships with customers.
3.
Areas often covered in written codes of ethics include the following:
4.
V.
a.
Bribes and kickbacks.
b.
Political contributions.
c.
Honesty of books or records.
d.
Customer-supplier relationships.
e.
Confidentiality of corporate information.
Ethical codes cannot cover all situations; nor are they automatic insurance for
universal ethical conduct.

A.
B.
Background on corporate social responsibility (see PowerPoint Slide 20 for Chapter 3).
1.
Corporate social responsibility looks at ethical behaviour from the organizational

level rather than the individual level.
2.
Corporate social responsibility is an obligation of the organization to act in

ways that serve both its own interests and the interests of society at large.
Stakeholder issues and analysis.

1.
Organizational stakeholders are those persons, groups, and other organizations

directly affected by the behaviour of the organization and holding a stake in its
performance. (See Power Point Slide 21 for Chapter 3.)
2.
Figure 3.4 from the text describes the environment of a typical business firm as a
network of organizational stakeholders.
3.
Commonly-cited stakeholders are employees, customers, suppliers, owners,

competitors, regulators, and interest groups. (See PowerPoint Slide 21 for
Chapter 3.)
4.
Unethical business practices have an adverse impact on stakeholders, whereas

ethical business practices have a positive impact on stakeholders.
5.
Leaders exert a critical influence on organizations. The following beliefs guide

socially responsible business practices (see PowerPoint Slide 21 for Chapter 3):
a.
The belief that people do their best in healthy work environments with a
balance of work and family life.
b.
The belief that organizations perform best when located in healthy

communities.
c.
The belief that organizations gain by treating the natural environment

with respect.

d.
The belief that organizations must be managed and led for long-term
success.
e.
The belief that the organizations reputation must be protected to ensure

consumer and stakeholder support.
ENHANCEMENT
Ask students to identify leaders with whom they are sufficiently familiar to make a reasonable statement
about the leaders beliefs. Have the students analyze these leaders beliefs relative to the above listing of
socially responsible leadership beliefs. To what extent does each example of a leaders beliefs mirror the
aforementioned socially responsible beliefs? What impact has each leaders beliefs apparently had on that
leaders organization and its stakeholders?
C.
Perspectives on social responsibility (see PowerPoint Slide 23 for Chapter 3).

1.
The classical view of corporate social responsibility holds that managements

only responsibility in running a business is to maximize profits.
2.
The socioeconomic view of corporate social responsibility holds that

management of any organization must be concerned with the broader social
welfare and not just with corporate profits.
3.
The arguments of the classical view against social responsibility and the
arguments of the socioeconomic view in favour of social responsibility are
summarized below. (See PowerPoint Slide 24 for Chapter 3.)
AGAINST
IN FAVOUR OF
Reduced business profits.
Will add long-run profits for businesses.
Higher business costs.
Improve public image of businesses.
Dilution of business purpose.
Help businesses to avoid more

governmental regulation.
Too much social power for businesses.
Businesses have the resources and ethical

obligation to act responsibly.
Lack of business accountability to the

public.
4.
In todays world, the public at large expects businesses and other organizations to
act with genuine social responsibility.

5.
D.
E.
Increasing empirical evidence exists indicating that high performance in social

responsibility can be associated with strong financial performance and, at worst,
has no adverse financial impact. Indeed, evidence suggests there is a virtuous
circle regarding the relationship between improved financial performance and
additional emphasis on corporate social responsibility.
Evaluating corporate social performance.

1.
A social responsibility audit is a systematic assessment and reporting of an

organizations accomplishments in various areas of corporate social
responsibility.
2.
Social performance is driven by either compliance (i.e., acting to avoid adverse

consequences) or conviction (i.e., acting to create positive impact).
3.
Figure 3.5 from the text links compliance and conviction with four criteria for
evaluating corporate social performance. These criteria are (see PowerPoint
Slide 26 for Chapter 3):
a.
Is the organizations economic responsibility met? Its economic

responsibility is met when it earns a profit through the provision of
goods and services desired by customers.
b.
Is the organizations legal responsibility met? Its legal responsibility is

fulfilled when it operates within the law and according to the
requirements of various external regulations.
c.
Is the organizations ethical responsibility met? Its ethical responsibility

is met when its actions voluntarily conform to both legal expectations
and the broader values and moral expectations of society.
d.
Is the organizations discretionary responsibility met? Its discretionary

responsibility involves the organizations voluntary movement beyond
basic economic, legal, and ethical expectations to provide leadership in
advancing the well-being of individuals, communities, and society as a
whole.
Figure 3.6 from the text describes four strategies of social responsibility in terms of level
of commitment to social responsibility. These strategies are (see PowerPoint Slide 28 for
Chapter 3):
1.
The obstructionist strategy (fight the social demands) meets the

organizations economic responsibility.
2.
The defensive strategy (do the minimum legally required) meets the
organizations economic and legal responsibilities.
3.
The accommodative strategy (do the minimum ethically required) meets the
organizations economic, legal, and ethical responsibilities.
4.
The proactive strategy (take leadership in social initiatives) meets all the
criteria of social performance economic, legal, ethical, and discretionary
responsibilities.
ENHANCEMENT
Discuss ways in which businesses can protect the environment and save money at the same time, such as
grocery stores selling low-priced canvas bags to replace paper or plastic ones; coffee shops encouraging
patrons to bring in their own cups; and fast food restaurants providing recycling bins so customers can
sort their trash. Ask students for other examples.
VI.

A.
When organizations do not act in a socially responsible manner, government is called

upon to act in the publics behalf.
B.
How governments influence organizations.

1.
Governments influence organizations by passing laws and establishing regulating

agencies to control and direct firms behaviour.
2.
Government agencies such as the Transportation Safety Board of Canada,

provincial ministries of the environment and health, and the Canadian Food
Inspection Agency, among others, are charged with monitoring and ensuring
compliance with legislative mandates.
3.
Business executives particularly, small business owners often complain

that many laws and regulations are overly burdensome.
4.
While the legal environment is complex and often frustrating for businesses,
provincial and federal laws have had some positive effects in regulating business
affairs, such as the following (see PowerPoint Slide 23 for Chapter 3):
a.
Occupational safety and health are regulated by the Occupational Health

and Safety Act of 1973, which is intended to protect worker health and
safety on the job.
b.
Fair labour practices are governed by laws such as the Employment

Equity Act, originally passed in 1985 and adapted in 1995, is designed to
reduce employment barriers for visible minorities, women, Aboriginals,
and persons with disabilities. Unfortunately, the act applies only to
federal government employees or employees of companies that have
contracts with the federal government.
c.
Consumer protection is provided by The Hazardous Product Act, which

gives government the authority to examine and force a business to
withdraw from sale any product that it feels is hazardous to the
consumer. Childrens toys and flammable fabrics are within the great
range of products affected by such regulation.
d.
Environmental protection is provided by several anti-pollution acts,

including the Canadian Environmental Protection Act of 1999, which are
designed to eliminate careless pollution of the air, water, and land.
ENHANCEMENT
Have students identify other laws that affect the activities of businesses in each of the above areas.
Alternatively, have students discuss how laws in the above areas have affected (b) them or their
employment situations, or (b) people they know and their employment situations.
C.
How organizations influence governments.

1.
Businesses seek to influence governments to adopt and pursue policies that are
favourable to them.
2.
Approaches that businesses take in influencing governments include the

following (see PowerPoint Slide 31 for Chapter 3):
a.
Personal contacts and networks enable executives to get to know

important people in government and to try to gain governments support
for special interests.
b.
Public relations campaigns allow executives to communicate positive

images of their organizations to the public at large.
c.
Lobbying enables executives to have their positions and preferences

communicated directly to government officials.
d.
Political action committees (PACs) enable executives to seek influence

through financial support for favoured political candidates.
e.
Illegal acts, such as bribes or illegal financial contributions to campaigns,

are sometimes used in an attempt to influence public officials.
ENHANCEMENT
Have students bring in examples of companies that have used any of the above approaches for influencing
governments. Discuss the impact that these specific efforts have had on the organization and its various
stakeholders.
D.
Role of corporate governance.

1.
Corporate governance is the oversight of the top management of an

organization by a board of directors. (See PowerPoint Slide 33 for Chapter 3.)
2.
Governance typically involves hiring, firing, and compensating the CEO;

assessing strategy; and verifying financial records. (See PowerPoint Slide 33 for
Chapter 3.)
3.
Considerable pressure exists for corporate governance to be the key guarantor

that businesses and other organizations are run properly.
2.
VII.
All managers in contemporary organizations must accept personal responsibility

for doing the right things.
a.
Managers play a crucial role in responding to public demands that

organizations be held accountable for ethical and social performance as
well as economic performance.
b.
Figure 3.7 from the text emphasizes the central role that ethics and social
responsibility can and should play in managers decisions and activities.
Study summary for Chapter 3.

A.
Point out to the students that the texts Chapter 3 Study Questions Summary
recaps the key theories, concepts, and ideas in the chapter in relation to the
appropriate study questions.
CHAPTER 3 STUDY QUESTIONS SUMMARY

Study Question 1: What is ethical behaviour?
Ethical behaviour is that which is accepted as good or right as opposed to bad or wrong.
Simply because an action is not illegal does not necessarily make it ethical in a given situation.
Because values vary, the question of What is ethical behaviour? may be answered differently
by different people.
Four ways of thinking about ethical behaviour are the utilitarian, individualism, moral-rights, and
justice views.
Cultural relativism argues that no culture is ethically superior to any other.
Study Question 2:How do ethical dilemmas complicate the workplace?
When managers act ethically they have a positive impact on other people in the workplace and on
the social good performed by organizations.
An ethical dilemma occurs when someone must decide whether to pursue a course of action that,
although offering the potential of personal or organizational benefit or both, may be considered
potentially unethical.
Managers report that their ethical dilemmas often involve conflicts with superiors, customers, and
subordinates over such matters as dishonesty in advertising and communications as well as
pressure from their bosses to do unethical things.
Common rationalizations for unethical behaviour include believing the behaviour is not illegal, is
in everyones best interests, will never be noticed, or will be supported by the organization.
Ethics training in the form of courses and training programs helps people better deal with ethical
dilemmas in the workplace.
Whistleblowers expose the unethical acts of others in organizations, even while facing career
risks for doing so.
Top management sets an ethical tone for the organization as a whole, and all managers are
responsible for acting as positive models of appropriate ethical behaviour.
Written codes of ethical conduct formally state what an organization expects of its employees
regarding ethical conduct at work.
Corporate social responsibility is an obligation of the organization to act in ways that serve both
its own interests and the interests of its many external publics, often called stakeholders.
Criteria for evaluating corporate social performance include economic, legal, ethical, and
discretionary responsibilities.
Corporate strategies in response to social demands include obstruction, defence, accommodation,
and pro-action, with more progressive organizations taking proactive stances.
Government agencies are charged with monitoring and ensuring compliance with the mandates of
law.
Managers must be well informed about existing and pending legislation in a variety of social
responsibility areas, including environmental protection and other quality-of-life concerns.
Organizations exert their influence on government in many ways, including interpersonal
contacts of executives, use of lobbyists, and financial contributions to PACs.
All managerial decisions and actions in every workplace should fulfill performance
accountability with commitments to high ethical standards and socially responsible means.
CHAPTER 3 KEY TERMS

Accommodative strategy
Codes of ethics
Corporate governance
Corporate social
responsibility
Cultural relativism
Defensive strategy
Distributive justice
Ethical behaviour
Ethical dilemma
Ethical imperialism
Ethics
Ethics training
Individualism view
Instrumental values
Interactional justice
Justice view
Lobbying
Moral-rights view
Obstructionist strategy
Organizational
stakeholders
Political action
committees
Proactive strategy
A social responsibility strategy that meets the organizations

economic, legal, and ethical responsibilities by doing the minimum
that is ethically required.
A formal statement of an organizations values and ethical
principles that provide guidelines on how to behave in situations
susceptible to ethical dilemmas.
The oversight of the top management of an organization by a
board of directors
An obligation of an organization to act in ways that serve both its
own interests and the interests of society at large.
The notion that there is no one right way to behave and that ethical
behaviour is always determined by the cultural context.
economic and legal responsibilities by doing the minimum that is
legally required.
The degree to which people are treated the same regardless of
individual characteristics such as ethnicity, race, gender, age, or
other particularistic criteria.
Behaviour that is accepted as good and right as opposed to
bad or wrong in the context of the governing moral code.
A situation wherein someone must choose whether or not to pursue
a course of action that, although offering the potential of personal
or organizational benefit or both, may be considered unethical.
The attempt to externally impose ones ethical standards on others.
The code of moral principles that sets standards as to what is good
or bad, or right or wrong, in ones conduct and thereby guides the
behaviour of a person or group.
Structured programs that help people to understand the ethical
aspects of decision making and to incorporate high ethical
standards into their daily behaviour.
Ethical behaviour is that which best serves long-term self-interests.
Preferences regarding the means for accomplishing desired ends.
The degree to which others are treated with dignity and respect.
Ethical behaviour is that which is impartial and fair in treating people
according to legal rules and standards.
An approach for businesses to influence government that enables
executives to have their positions and preferences communicated
directly to government officials.
Ethical behaviour is that which respects and protects the
fundamental rights of people.
economic responsibility by fighting social demands.
Those persons, groups, and other organizations directly affected by
the behaviour of the organization and holding a stake in its
performance.
An approach for businesses to influence government that enables
executives to seek influence through financial support for favoured
political candidates.
Procedural justice
Social responsibility audit
Terminal values
Universalism
Utilitarian view
Values
Whistleblowers
economic, legal, ethical, and discretionary responsibilities by taking

leadership in social initiatives.
The degree to which policies and rules are fairly administered.
A systematic assessment and reporting of an organizations resource
commitments and action accomplishments in various areas of
corporate social responsibility.
Preferences about desired end states.
The ethical position that suggests if a behaviour is not acceptable in
ones home environment, it shouldnt be acceptable practice
anywhere else
Ethical behaviour is that which delivers the greatest good to the
greatest number of people.
The underlying beliefs and attitudes that help determine individual
behaviour.
Individuals who expose the misdeeds of others in organizations to
preserve ethical standards and protect against wasteful, harmful, or
illegal acts.

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Chapter 3:

ETHICAL BEHAVIOUR AND SOCIAL

What is ethical behaviour?

CHAPTER 3 LEARNING OBJECTIVES

41 Schermerhorn & Wright: Management Fundamentals

CHAPTER 3 LECTURE OUTLINE

Introduction to the Chapter 3 lecture.

Study Question 1: What is ethical behaviour?

Study Question 2: How do ethical dilemmas complicate the workplace?

42 Schermerhorn & Wright: Management Fundamentals

Study Question 3: How can high ethical standards be maintained?

Study Question 4: What is corporate social responsibility?

Study Question 5: How do organizations and governments work together in society?

Study summary for Chapter 3.

CHAPTER 3 SUPPORTING MATERIALS

Chapter 3: Ethical Behaviour and Social Responsibility 43

Take It to the Case

Confronting Ethical Dilemmas (#6)

What Do You Value in Work (#7)

Case of the Contingency Workforce (#22)

CHAPTER 3 LECTURE NOTES

Introduction to the Chapter 3 lecture.

What is ethical behaviour?

How do ethical dilemmas complicate the workplace?

How can high ethical standards be maintained?

What is corporate social responsibility?

How do organizations and governments work together in society?

44 Schermerhorn & Wright: Management Fundamentals

Study Question 1: What is Ethical Behaviour?

Ethical behaviour is behaviour that is accepted as good and right as

Legal behaviour is not necessarily ethical behaviour. Behaviour might be legal

What one considers to be ethical varies according to personal values the

Types of values that influence ethical judgments:

Terminal values are preferences about desired end states.

Instrumental values are preferences regarding the means for

Alternative views of ethical behaviour.

Utilitarian view ethical behaviour is that which delivers the greatest

Chapter 3: Ethical Behaviour and Social Responsibility 45

Moral-rights view ethical behaviour is that which respects and

Justice view ethical behaviour is that which is impartial and fair in

Procedural justice the degree to which policies and rules are

Distributive justice the degree to which people are treated

Interactional justice the degree to which others are treated

Ethical management in a global environment is challenged by the complexities of

Business ethicist Thomas Donaldson argues instead that certain fundamental

46 Schermerhorn & Wright: Management Fundamentals

Respect human dignity by creating a corporate culture that values

Respect basic rights by protecting rights of employees, customers, and

Be good citizens by supporting social institutions, including economic

Study Question 2: How do ethical dilemmas complicate the workplace?

What is an ethical dilemma?

Ethical problems faced by managers.

Potential sources of ethical dilemmas include discrimination, sexual

According to a Harvard Business Review survey, many ethical dilemmas

Chapter 3: Ethical Behaviour and Social Responsibility 47

Convincing yourself that the behaviour is in everyones best interest. This

48 Schermerhorn & Wright: Management Fundamentals

Factors influencing ethical behaviour.

The person in developing ethical frameworks as personal strategies for ethical

Expectations and reinforcement of peers, and peer group norms.

Policy statements and written rules.

The environment managerial ethics are also shaped by the following

Government laws and regulations.