Ethical Reasoning MANA 4347 Ethics CSR Spring 2019

Ethical Reasoning MANA 4347 Ethics & CSR Spring 2019 Dr. Shih-chi Sana Chiu

Emphasizing Ethical Practices • Effectiveness of processes used to implement the firm’s strategies increases when based on ethical practices. • Ethical practices create social capital and goodwill for the firm. • Ethics address questions regarding what is “right”, “just” or “fair”. • Managers’ decisions can have powerful impacts on various stakeholders including shareholders, employees, customers, suppliers, the public, and so on.

Emphasizing Ethical Practices (cont’d) • Actions that develop an ethical organizational culture include: • Developing and implementing methods and procedures to use in achieving the firm’s ethical standards. • Creating and using explicit reward systems that recognize acts of courage. • Creating a work environment in which all people are treated with dignity.

What is Ethical Reasoning? Ethical reasoning is the process of consciously reasoning about what is right or wrong and, thus, helps a manager to decide how to act in a given situation. Ethical reasoning involves at least the following steps of deliberation: Ø Recognize the ethical issue. Ethical principles are moral standards that are used to analyze whether the action(s) is ethical to the relevant stakeholders. Assess the impact of the action(s) on the stakeholders. Ø Identify the relevant stakeholders affected by the ethical issue (or the action(s) that it entails). Ø Make a decision after analyzing trade-offs among stakeholders.

Recognize Ethical Issue • An ethical issue is a situation, problem or opportunity that requires a choice among actions that must be evaluated as right or wrong, ethical or unethical (Ferrell, Fraedrich & Ferrell, 2008). • Examples of Ethical Issues • Is it ethical to close down a plant and move it overseas? • Is it ethical to offer something of value to a potential customer so as to increase the probability of the customer selecting the firm as its provider? Ferrell, O. C. , Fraedrich, J. & Ferrell, L. (2008). Business Ethics: Ethical decision making and cases. Mason, OH: South. Western Cengage Learning.

Ethical principles to analyze whether the action is ethical, and impact on stakeholders (I) Self-interests Never take any action that is not in the long-term self-interests of yourself and/or of the organization to which you belong Personal Virtues Never take any action which is not honest, open and truthful, and which you would not be proud to see reported widely in national newspapers and on network news programs Religious Injunctions Never take any action that is not kind and compassionate, and that does not build a sense of community, a sense of all of us working together for a commonly accepted goal Government Requirements Never take any action that violates the law, for the law represents the minimal moral standards of our society Utilitarian Benefits Never take any action that does not result in greater good than harm for the society of which you are a part. C. f. Hosmer, L. T. (1994). Strategic planning as if ethics matter. Strategic Management Journal, 15, 17 -34. A PDF version of this article is available at the Blackboard.

Ethical principles to analyze whether the action is ethical, and impact on stakeholders (II) Universal Rules Never take any action that you would not be willing to see others, faced with the same or a closely similar situation, also be free or even encouraged to take Individual Rights Never take any action that abridges the agreed-upon and accepted rights of others Economic Efficiency Always act to maximize profits subject to legal and market constraints, for maximum profits are evidence of the most efficient production Distributive Justice Never take any action in which the least among us are harmed in some way Contributive Liberty Never take any action that will interfere with the right of all of us for our self-development and self-fulfillment to the limit of our abilities C. f. Hosmer, L. T. (1994). Strategic planning as if ethics matter. Strategic Management Journal, 15, 17 -34. A PDF version of this article is available at the Blackboard.

Stakeholders Can affect development of the firm’s vision and mission Primary stakeholders (individuals, groups, and organizations) Are affected by the strategic outcomes achieved by the firm Can have enforceable claims on the firm’s performance Are influential when in control of critical or valued resources

Identify Relevant Stakeholders • Organizational Stakeholders • People working within the boundaries of the firm (include high-level and lower-level employees). • Product-market stakeholders • Parties with whom the firm shares its industries such as customers, suppliers and distributors. • Capital-market stakeholders • Groups which provide capital resources (and will affect cost of capital to the firm) such as shareholders, banks and other financial intermediaries. • Social stakeholders • External parties that may be affected by or can influence the firm’s strategy and performance such as governments, unions and social activists.

Make a Decision after analyzing Tradeoffs • Application of different ethical principles to the action(s) involved in the ethical issue may not lead to a consistent conclusion. • When this happens, one has to analyze the trade -offs and then make a judgment.