MGMT 1040 Notes
The Ethics of Management
Chapter 5- Why Should a Business Manager be Moral?
Amoral businesses that solely focus on the bottom line are expected to be more financially
healthy than businesses that are moral. This is because amoral businesses focus far more on
financials through their allocation of resources. However, in the long run, moral businesses that
spend time fulfilling their social responsibility are highly likely to improve their bottom line (more
so than amoral businesses even).
“Reciprocity is the most logical reason for morality” (Hosmer, 113).
Reciprocity is referred to as people treating others as how they would like to be treated.
(Thus, ethical treatment is reciprocated). *what goes around comes around*
According to Hosmer, more importantly than reciprocity is the quality of our lives in relevance to
how we balance our duties and responsibilities found in our profession, organizations,
communities and our personal lives.
Trust, Commitment, and Effort
• Is a very important focus of managers to create with stakeholders
• Stakeholders must be treated in an ethical way to build trust and confidence. It is in the
company’s own best interest to cater towards the needs of their stakeholders in a moral
way because the trust, commitment and effort it creates, will lead to critical and valuable
feedback of the company’s performance.
Trust requires recognition of moral responsibility, application of moral reasoning, and
possession of moral character or courage:
• Recognition of moral problems one must understand stakeholder’s benefit or harms
and their rights obeyed or denied.
• Managers should oversee the effects on or inflicted by stakeholders. This will avoid the
excuse of not being involved because they didn’t know.
• Process of examining and then resolving moral issues in a convincing way
• Resolution of these problems can be carried out by: logically presenting decisions or
plans in accordance to rationally integrating economic outcomes, legal requirements and
ethical duties in a fair manner.
• Possessing the courage to first recognize a problem and then propose a moral solution.
• Stakeholders may not always agree with the decisions of managers, thus calling on the
need of courage for outstanding management.
• Courage and integrity (willingness to act upon principle rather preference) is necessary
for building trust, commitment and effort of stakeholders in an extended organization.
Extended Organizations • An advancement of the stakeholder concept
• Many stakeholders of companies are becoming more influential in the operations of the
company. For example, suppliers and relied upon institutions are external stakeholders
but they are necessary for the company’s operations.
• Page 117 flow chart
• These external but influential stakeholders can alter the functions of company. For
example, suppliers and distributors, through their service fees, can influence the price of
a company’s products.
• Cooperation with such stakeholder groups must be obtained in order to succeed in
constantly changing global environment.
• Trade associations, public interest groups, political agencies, banks, investment
companies and educational institutions are more examples of external organizations
(cannot control or command hierarchy of company) that can affect a company’s
Cooperation, Innovation and Unification
• Moral management is necessary to achieve cooperation, innovation and unification to
achieve success in a competitive global economy
• The three basic steps (which each can be considered a thesis of the chapter ) that lie
in the progression between moral management and competitive success are:
1. Moral management builds individual attitudes of trust commitment and effort.
-treating people equitably leads to trust. Trust builds commitment and commitment ensures
-not all groups will agree with ideas, but as long as each of their stakes and rights are respected
in an equitable way, there should be an increase in trust, commitment and effort.
2. Individual attitudes of trust, commitment, and effort lead to organizational behaviours
of cooperation, innovation and unification.
-stakeholder trust and commitment spurs a willingness to “go the extra mile” which measures far
beyond a company’s financials (and contributes to cooperation, innovation and unification).
3. Organizational cooperation, innovation and unification is essential for competitive
success in a rapidly changing global economy.
-because of new global competition, the developed attitude of willingness to contribute more
than is expected is especially important.
-companies are more aggressive, technology has advanced, products are more complex, etc.
-to adapt and react to these changes affectively, companies must rely on cooperation,
innovation and unification.
Unification and Guide
• Control and command cannot be applied to innovation and cooperation, and thus
something extra is needed: unification and guide
• Unification: bringing all stakeholders together into an innovative and cooperative whole.