strategy, ethics, and social responsibility mcgraw-hill/irwincopyright © 2008 by the mcgraw-hill...
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Strategy,
Ethics, and
Social
Responsibility
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
“There is one and only one social
responsibility of business – to use its
resources and engage in activities
designed to increase its profits so long
as it stays within the rules of the game,
which is to say engages in free and
open competition, without deception or
fraud.”
Milton Friedman, Nobel Prize-winning economist
Business Hall of Shame
(New York Daily News, 9/12/2002)
A Test of Your Business Ethics
Comparison of Business Ethics and Social Responsibility
Business Ethics Refers to the principles and standards that define acceptable conduct in the world of business.
Social Refers to a business’s obligation Responsibility to maximize its positive impact
and minimize its negative impact on society.
Linking Strategy to Ethicsand Social Responsibility
• Should there be a link between a company’s efforts to craft and execute a winning strategy and its duties to
– Conduct activities in an ethical manner?
– Demonstrate socially responsible behavior by
• Being a committed corporate citizen?
• Attending to needs of non-owner stakeholders?
Key IssuesKey Issues
Are Ethical Standards Universal or Dependent on Local Norms?
Three schools of thought regarding extentto which ethical standards can be applied . . .
Ethical UniversalismEthical Universalism
Ethical RelativismEthical Relativism
Integrative Social Contracts TheoryIntegrative Social Contracts Theory
Ethics
The study of moral obligation: determining right versus wrong; the basic rules of behavior.
Ethics are defined by:
the individual
societal traditions
periods of time in history
special circumstances
Examples of UniversalEthical Principles or Norms
• Honesty• Trustworthiness• Treating people with dignity and respect• Respecting rights of others• Practicing the Golden Rule• Avoiding unnecessary harm to
– Workers– Users of a company’s product or service
• Respecting the environment
Your OpinionPaying bribes and kickbacks to grease business transactions
A. violates ethical principles of right and wrong in all countries.
B. is ethically acceptable according to the principle of ethical universalism.
C. is acceptable to immoral managers but not to amoral managers.
D. should be considered ethically appropriate by a company so long as such payments are normal and customary in the countries where such payments are made.
E. may be ethically acceptable according to the principle of ethical relativism if paying bribes and kickbacks is normal and customary practice in a country.
Approaches to Managing a Company’s Ethical Conduct
Unconcerned or non-issue approachUnconcerned or non-issue approach
Damage control approachDamage control approach
Compliance approachCompliance approach
Ethical culture approachEthical culture approach
Reactions to Unethical Employers
What happened when surveyed employees found out their employers were doing something that was against the employee’s ethical standards…
tried to resolve the situation without losing job 40%
talked to boss 38%
did nothing 9%
quit 5%
other 1%
not sure 7%
Source: Yankelovich Partners Survey,PRNewswire, October 6, 1998.
Reasons for Not Reporting Observed Misconduct
1. Fear of not being considered a team player2. Didn’t believe corrective action would be taken3. Feared retribution or retaliation form supervisor or
management4. No one else cares about business ethics so why
should I5. Didn’t trust organization to keep report confidential
Source: 1997 Society for Human Resource Management/EthicsResource Center Business Ethics Survey Report, p. 21.
Ethical Issue Categories
• Conflict of interest• Fairness and honesty• Communications• Business associations
Three Factors that Influence Business Ethics
IndividualStandardsandValues
IndividualStandardsandValues
Managers’andCoworkers’Influence
Managers’andCoworkers’Influence
Opportunity:Codes andComplianceRequirements
Opportunity:Codes andComplianceRequirements
Ethical/UnethicalChoicesin Business
Ethical/UnethicalChoicesin Business
Organizational Response to Ethics
• Institute a structure• Institute a confidential disclosure system• State the code of ethics• Institute training programs
What Is Socially ResponsibleBusiness Behavior?
• A company should strive to balance strategic actions – To benefit shareholders against any possible adverse
impacts on other stakeholders– To be a good corporate citizen
• Socially responsible behaviors include– Corporate philanthropy– Actions to earn trust and respect of stakeholders for
a firm’s efforts to improve the general well-being of• Customers• Employees• Local communities• Society• Environment
Arguments for Social Responsibility
Ethical Responsibilitiesbeing ethical; doing what is right, just,
and fair; avoiding harm
VoluntaryResponsibilities
being a “good corporate citizen”;
contributing to thecommunity and quality of life
Source: Adapted from Archie B. Carroll, “The Pyramid of CorporateSocial Responsibility: Toward the Moral Management of Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.
Legal Responsibilitiesobeying the law (society’s codification of rightand wrong); playing by the rules of the game
Economic Responsibilitiesbeing profitable