Chapter 3 MGT 250
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This 7 page Class Notes was uploaded by Stephanie De Angelis on Friday February 5, 2016. The Class Notes belongs to MGT 250 at Pace University - New York taught by Professor Bhandari in Winter 2016. Since its upload, it has received 82 views. For similar materials see Managerial and Organizational Concepts in Business, management at Pace University - New York.
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Date Created: 02/05/16
Chapter 3: The Manager’s Changing Work Environment & Ethical Responsibilities Doing the Right Thing Vocabulary Clawbacks rescinding the tax breaks when firms don’t deliver promised jobs Climate Change major changes in temperature, precipitation, wind patterns, and similar matters occurring over several decades Code of Ethics a formal written set of ethical standards guiding an organization’s actions Competitors people or organizations that compete for customers or resources Corporate Governance the system of governing a company so that the interests of corporate owners and other stakeholders are protected Corporate Social Responsibility the notion that corporations are expected to go above and beyond following the law and making a profit Crowdfunding raising money for a project or venture by obtaining many small amounts of money from many people (“the crowd”) Customers those who pay to use an organization’s goods or services Demographic Forces influences on an organization arising from changes in the characteristics of a population, such as age, gender, or ethnic origin Distributor a person or an organization that helps another organization sell its goods and services to customers Economic Forces general economic conditions and trends – unemployment, inflation, interest rates, economic growth – that may affect an organization’s performance Ethical Behavior behavior that is accepted as “right” as opposed to “wrong” according to those standards Ethical Climate employees’ perceptions about the extent to which work environments support ethical behavior Ethical Dilemma a situation in which you have to decide whether to pursue a source of action that may benefit you or your organization but that is unethical or even illegal Ethics the standards of right and wrong that influence behavior External Stakeholders people or groups in the organization’s external environment that are affected by it General Environment six forces: economic, technological, sociocultural, demographic, political legal, and international Global Warming the rise in global average temperature near the Earth’s surface, caused mostly by increasing concentrations in the atmosphere of greenhouse gases, such as carbon emissions from fossil fuels Government Regulators regulatory agencies that establish ground rules under which organizations may operate Individual Approach what will result in the individual’s best longterm interests, which ultimately are in everyone’s selfinterest Insider Trading the illegal trading of a company’s stock by people using confidential company information Internal Stakeholders employees, owners, and the board of directors, if any Chapter 3: The Manager’s Changing Work Environment & Ethical Responsibilities Doing the Right Thing International Forces changes in the economic, political, legal, and technological global system that may affect an organization Justice Approach respect for impartial standards of fairness and equity Macroenvironment six forces: economic, technological, sociocultural, demographic, political legal, and international Moralrights Approach respect for the fundamental rights of human beings Natural Capital the value of natural resources, such as topsoil, air, water, and genetic diversity, which humans depend on Owners all those who can claim it as their legal property Philanthropy making charitable donations to benefit humankind Politicallegal Forces changes in the way politics shape laws and laws shape the opportunities for and threats to an organization Ponzi Scheme using cash from new investors to pay off older ones SarbanesOxley Act of 2002 requirements for proper financial record keeping for public companies and penalties of as much as 25 years in prison for noncompliance Social Audit a systematic assessment of a company’s performance in implementing socially responsible programs, often based on predefined goals Social Responsibility a manager’s duty to take actions that will benefit the interests of society as well as of the organizations Sociocultural Forces influences and trends originating in a country’s, a society’s, or a culture’s human relationships and values that may affect an organization Specialinterest Groups groups whose members try to influence specific issues Stakeholders the people whose interests are affected by an organization’s activities Strategic Allies the relationship of two organizations who join forces to achieve advantages neither can perform as well alone Supplier a person or organization that provides supplies – that is, raw materials, services equipment, labor, or energy – to other organizations Task Environment 11 groups that present you with daily tasks to handle: customers, competitors, suppliers, distributors, strategic allies, employee organizations, local communities, financial institutions, government regulators, specialinterest groups, and mass media Technological Forces new developments in methods for transforming resources into goods or services Triple Bottom Line representing People, Planet, and Profit (the 3 Ps) – measures an organization’s social, environmental, and financial performance Utilitarian Approach what will result in the greatest good for the greatest number of people Value System the pattern of values within an organization Values the relatively permanent and deeply held underlying beliefs and attitudes that help determine a person’s behavior Whistleblower an employee, or even an outside consultant, who reports organizational misconduct to the public Chapter 3: The Manager’s Changing Work Environment & Ethical Responsibilities Doing the Right Thing 3.1 The Triple Bottom Line: People, Planet & Profit o The major purpose of a business is to strive o An organization has a responsibility to is employees and to the wider community, is committed to sustainable environmental practices, and includes the costs of pollution, worker displacement, and other factors in its financial calculations (3 Ps) The Millennials’ Search for Meaning o “millennials appear to be more interested in living lives defined by meaning than by what some would call happiness” o Two factors in achieving a meaningful life include o Understanding the environment in which a manager operates – the community of stake holders inside and outside the organization o The ethical and social responsibilities of being a manger 3.2 The Community of Stakeholders Inside the Organization To Whom Should a Company Be Responsible? o Things to consider: o Is a company principally responsible only to its stockholders and executives? o Or are other groups equal in significance? Internal & External Stakeholders o Managers operate in two organizational environments, both made up of various stakeholders including o Internal stakeholders o External stakeholders o Observe Figure 3.1 for further understanding the organization’s environment Internal Stakeholders Employees o If you run your part of the organization with a conflict of interest with employees constantly, it could lower the performance of the organization and hurt everyone’s stake Owners o If the owner is just you, it is a sole proprietorship o If the owner is you and your brother, it is a partnership o If the owner is you and your family, you are investors in a privately owned company Chapter 3: The Manager’s Changing Work Environment & Ethical Responsibilities Doing the Right Thing o If you work for a company that is more than half owned by its employees, you are a joint owner o If you bought a few shares of stock in a company,, you are one of thousands of owners, aka a stockholder Board of Directions o Members who are elected by the stockholders to see that the company is being run according to their interest o Sometimes they are called the board of trustees or the board of regents o They set the organization’s overall strategic goals and approve major decisions and salaries of top management. 3.3 The Community of Stakeholders Outside the Organization o The environment inside the organization consists of o The task environment o The general environment The Task Environment Customers Competitors Suppliers Distributors Strategic allies Employee organizations Local communities Financial institutions Government regulators Specialinterest groups Mass media Local communities Financial institutions Government regulators Specialinterest groups Mass media The General Environment Economic forces Technological forces Sociocultural forces Demographic forces Politicallegal forces International forces Chapter 3: The Manager’s Changing Work Environment & Ethical Responsibilities Doing the Right Thing 3.4 The Ethical Responsibilities Required of You as a Manager o Economic performance and social performance is what most ethical conflicts are about Defining Ethics & Values o 73% of American employees working full time say they have observed ethical is conduct at work Ethics o Ethical standards may vary among countries and among cultures Values o Organizations may have two important value systems that can conflict The value system stressing financial performance versus The value system stressing cohesion and solidarity in employee relationships Four Approaches to Deciding Ethical Dilemmas The utilitarian Approach: For the Greatest Good The Individual Approach: For Your Greatest SelfInterest Long Term, Which Will Help Others The MoralRights Approach: Respecting Fundamental Rights Shared by Everyone The Justice Approach: Respecting Impartial Standards of Fairness WhiteCollar Crime, SarbOxst& Ethical Training o Beginning of the 21 century, US business erupted in an array of scandals represented in such names o There were cases of insider trading o Cases of Ponzi scheme’s The SarbanesOxley Reform Act o SarbOx, for short, requires a company’s CEO and CFO to personally certify the organization’s financial reports, prohibits them from taking personal loans or lines of credit, and makes them reimburse the organization for bonuses and stock options when required by restatement of corporate profits. It also requires the company to have established procedures and guidelines for audit committees How Do People Learn Ethics? Kohlberg’s Theories o There have been proposed three levels of personal moral development Level 1, preconventional follows rules Level 2, conventional follows expectations of others Level 3, postconventional guided by internal values How Organizations Can Promote Ethics o There are several ways an organization can promote high ethical standards on the job such as Chapter 3: The Manager’s Changing Work Environment & Ethical Responsibilities Doing the Right Thing o Creating a strong ethical climate o Screening prospective employees o Instituting ethics codes & training programs o Rewarding ethical behavioral: protecting whistleblowers 3.5 The Social Responsibilities Required of You as a Manager Corporate Social Responsibility: The Top of the Pyramid o Refer to Figure 3.2 o Archie B. Carroll believes the responsibilities of an organization in the global economy should take the following priorities, with profit being the most fundamental and corporate citizenship on top o Be a good global corporate citizen o Be ethical in its practices o Obey the law o Make a profit Is Social Responsibility Worthwhile? Opposing & Supporting Viewpoints o There are two viewpoints to social responsibility Against Social Responsibility For Social Responsibility One Type of Social Responsibility: Climate Change, Sustainability, & Natural Capital o Sustainability is economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs The Benefits of Being Green o Shows environmental benefits along with cost savings, revenue growth, and competitive advantages The Value of Earth’s Resources: Natural Capital o According to the natural capital view, we are approaching the planet’s limitations with human activity threatening to exceed the earth’s capacity to generate resources and absorb wastes Another Type of Social Responsibility: Philanthropy “Not Dying Rich” o Philanthropy is charitable donations to benefit humankind o Not only do wealthy individuals and companies practice philanthropy, so even do ordinary individuals How Does Being Good Pay Off? o Does ethical behavior and high social responsibility pay off financially? o Effect on customers Respondents of a survey said that they are more likely to buy from companies that are socially responsible o Effect of employees’ work effort Workers tend to be more efficient, loyal, ad creative when they feel a sense of purpose Chapter 3: The Manager’s Changing Work Environment & Ethical Responsibilities Doing the Right Thing o Effect on job applicants & employee retention Company’s record of business ethics are very important when deciding whether to accept a job offer o Effect on sales growth The announcement of a company’s convention for illegal activity has been shown to diminish sales growth for several years o Effect on company efficiency One study found that employees who saw honesty applied rarely or never in their organization had seen misconduct in the past year o Effect on company revenue Employee fraud is twice as common as consumer fraud o Effect on stock price People polled said their perception of a firm’s honestly directly affected their decision about whether to buy its stock o Effect on profits Studies suggest that profitability is enhanced by a reputation for honesty and corporate citizenship 3.6 Corporate Governance The Need for Independent Directors o The biggest complaint concerns can be the independence of the directors The Need for Trust o In the end, “We do not have a crisis of ethics in business today. We have a crisis of trust.” o Trust comes from asking how likely the people you are dealing with are to serve your interests, how much they have demonstrated concern for others, how well they deliver on their promises, how much they try to keep their word and how effectively they communicate these skills
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