Social Responsibility and Ethics in Strategic Management Chapter

Social Responsibility and Ethics in Strategic Management Chapter 3

Learning Objectives ªCompare and contrast Friedman’s traditional view with Carroll’s contemporary view of social responsibility ªUnderstand the relationship between social responsibility and corporate performance ªExplain the concept of sustainability Copyright © 2015 Pearson Education, Inc. 3 -2

Learning Objectives ªConduct a stakeholder analysis ªExplain why people may act unethically ªDescribe different views of ethics according to the utilitarian, individual rights and justice approaches Copyright © 2015 Pearson Education, Inc. 3 -3

Social Responsibilities of Strategic Decision Makers ªSocial Responsibility 9 proposes that a private corporation has responsibilities to society that extend beyond making a profit Copyright © 2015 Pearson Education, Inc. 3 -4

Friedman’s Traditional View of Business Responsibility ªArgues against the concept of social responsibility ªPrimary goal of business is profit maximization not spending shareholder money for the general social interest Copyright © 2015 Pearson Education, Inc. 3 -5

Carroll’s Four Responsibilities of Business 1. Economic responsibilities 9 produce goods and services of value to society so that the firm may repay its creditors and increase the wealth of its shareholders 2. Legal responsibilities 9 defined by governments in laws that management is expected to obey Copyright © 2015 Pearson Education, Inc. 3 -6

Carroll’s Four Responsibilities of Business 3. Ethical responsibilities 9 follow the generally held beliefs about behavior in a society 4. Discretionary responsibilities 9 purely voluntary obligations a corporation assumes Copyright © 2015 Pearson Education, Inc. 3 -7

Responsibilities of Business Figure 3 -1 Copyright © 2015 Pearson Education, Inc. 3 -8

Responsibilities of a Business Firm ªSocial capital 9 the goodwill of key stakeholders, that can be used for competitive advantage 9 opens doors in local communities 9 enhances reputation with consumers Copyright © 2015 Pearson Education, Inc. 3 -9

Benefits of Being Socially Responsible ªMay enable firm to charge premium prices and gain brand loyalty ªMay help generate enduring relationships with suppliers and distributors ªCan attract outstanding employees ªCan utilize the goodwill of public officials for support in difficult times Copyright © 2015 Pearson Education, Inc. 3 -10

Characteristics of Sustainability Environmental Social Economic Copyright © 2015 Pearson Education, Inc. 3 -11

Corporate Stakeholders ªStakeholders 9 have an interest in the business and affect or are affected by the achievement of the firm’s objectives ªEnterprise strategy 9 an overarching strategy that explicitly articulates the firm’s ethical relationship with its stakeholders Copyright © 2015 Pearson Education, Inc. 3 -12

Stakeholder Analysis ªStakeholder analysis 9 the identification and evaluation of corporate stakeholders 9 usually

Stakeholder Analysis ªThe first step in stakeholder analysis is to identify primary stakeholders. ªPrimary stakeholders 9 have a direct connection with the corporation and who have sufficient bargaining power to directly affect corporate activities 9 include customers, employees, suppliers, shareholders and creditors Copyright © 2015 Pearson Education, Inc. 3 -14

Stakeholder Analysis ªThe second step in stakeholder analysis is to identify the secondary stakeholders. ªSecondary stakeholders 9 have an indirect stake in the corporation but are also affected by corporate activities 9 include NGOs, activists, local communities, trade associations, competitors and governments Copyright © 2015 Pearson Education, Inc. 3 -15

Stakeholder Analysis ªThe third step in stakeholder analysis is to estimate the effect on

Stakeholder Input ª Once stakeholder impacts have been identified, managers should decide whether stakeholder input should be invited into the discussion of the strategic alternatives. ª A group is more likely to accept or even help implement a decision if it has some input into which alternative is chosen and how it is to be implemented. Copyright © 2015 Pearson Education, Inc. 17

Reasons for Unethical Behavior ªUnaware that behavior is questionable ªLack of standards of conduct ªDifferent cultural norms and values ªBehavior-based or relationship-based governance systems ªDifferent values between business people and stakeholders Copyright © 2015 Pearson Education, Inc. 3 -18

Moral Relativism ªMoral relativism 9 claims that morality is relative to some personal, social or cultural standard and that there is no method for deciding whether one decision is better than another Copyright © 2015 Pearson Education, Inc. 3 -19

Moral Relativism ªNaïve relativism 9 based on the belief that all moral decisions are deeply personal and that individuals have the right to run their own lives ªRole relativism 9 based on the belief that social roles carry with them certain obligations to that role Copyright © 2015 Pearson Education, Inc. 3 -20

Moral Relativism ªSocial group relativism 9 based on a belief that morality is simply a matter of following the norms of an individual’s peer group ªCultural relativism 9 based on the belief that morality is relative to a particular culture, society or community Copyright © 2015 Pearson Education, Inc. 3 -21

Kohlberg’s Levels of Moral Development ªPreconventional level 9 concern for one’s self ªConventional level 9 considerations for society’s laws and norms ªPrincipled level 9 guided by an internal code of ethics Copyright © 2015 Pearson Education, Inc. 3 -22

Encouraging Ethical Behavior ªCode of Ethics 9 specifies how an organization expects its employees

Encouraging Ethical Behavior A code of ethics: 1. clarifies company expectations of employee conduct in various situations 2. makes clear that the company expects its people to recognize the ethical dimensions in decisions and action Copyright © 2015 Pearson Education, Inc. 3 -24

Encouraging Ethical Behavior ªWhistleblowers 9 employees who report illegal or unethical behavior on the

Guidelines for Ethical Behavior ª Ethics 9 the consensually accepted standards of behavior for an occupation, trade or profession ª Morality 9 one’s rules of personal behavior based on religious or philosophical grounds ª Law 9 the formal codes that permit or forbid certain behaviors and may or may not enforce ethics or morality Copyright © 2015 Pearson Education, Inc. 3 -26

Guidelines for Ethical Behavior ªUtilitarian approach 9 proposes that actions and plans should be judged by their consequences ªIndividual rights approach 9 proposes that human beings have certain fundamental rights that should be respected in all decisions Copyright © 2015 Pearson Education, Inc. 3 -27

Guidelines for Ethical Behavior ªJustice approach 9 decisions must be equitable, fair and impartial in the distribution of costs and benefits to individuals or groups Copyright © 2015 Pearson Education, Inc. 3 -28

Guidelines for Ethical Behavior Cavanagh’s questions to solve ethical problems: 1. Utility: Does it optimize the satisfactions of the stakeholders? 2. Rights: Does it respect the rights of the individuals involved 3. Justice: Is it consistent with the canons of justice? Copyright © 2015 Pearson Education, Inc. 3 -29

Guidelines for Ethical Behavior Kant’s categorical imperatives 1. Actions are ethical only if the person is willing 2. for the same action to be taken by everyone who is in a similar situation. Never treat another person simply as a means but always as an end. Copyright © 2015 Pearson Education, Inc. 3 -30