Transcript Chapter 3: Ethics and Social Responsibility in Strategic Management

CHAPTER 3
Ethics & Social
Responsibility
STRATEGIC MANAGEMENT & BUSINESS POLICY
11TH EDITION
THOMAS L. WHEELEN
Prentice Hall, Inc. © 2008
J. DAVID HUNGER
3-1
Ethics & Social Responsibility
Prentice Hall, Inc. © 2008
3-2
Corporate Governance
Broader responsibility --
Private corporations have responsibility to
society that extend beyond making a profit
Do they?
Prentice Hall, Inc. © 2008
3-3
Social Responsibility
Milton Friedman
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 open and free competition
without deception or fraud.
Prentice Hall, Inc. © 2008
3-4
Corporate Governance
Carroll’s 4 Responsibilities
–Economic
–Legal
–Ethical
–Discretionary
Prentice Hall, Inc. © 2008
3-5
Mortensen’s View
The order and strength of the priorities for
the five stakeholders, as decided by the
executives, sets the tone for a company:
– Customers
– Employees
– Stockholders
– Executives
– Society
Prentice Hall, Inc. © 2008
3-6
Corporate Stakeholders
“Corporate Stakeholders”
Affect or are affected by the
achievement of the corporation’s
objectives
Prentice Hall, Inc. © 2008
3-7
Corporate Stakeholders
Stakeholder Analysis –
–Primary stakeholder
•Sufficient bargaining power to affect outcomes
–Secondary stakeholder
•Indirect stake but are affected by corporation’s actions
–Stakeholder Input
•Determine whether input is necessary
Prentice Hall, Inc. © 2008
3-8
Ethical Behavior
“business ethics”
–Argument that there is no such thing … it is an
oxymoron
Prentice Hall, Inc. © 2008
3-9
Ethical Decision Making
BAD Corporate practices -–Massive write-downs and restatements of profit
[after having gotten the bonuses for making their
numbers]
–Misclassification of expenses as capital
expenditures
–Pirating corporate assets for personal gain
Prentice Hall, Inc. © 2008
3-10
Ethical Decision Making
Recent Survey Results -–70% distrust business executives
–Enron
–WorldCom
Provocative Question --
–Why are businesspeople perceived to be
acting unethically?
Prentice Hall, Inc. © 2008
3-11
Reasons for Unethical Behavior
Perceptions caused by -–Not aware of impropriety
–Cultural norms and values vary
–Governance systems based on rule or
relationships
–Differences in values between
businesspeople and key stakeholders
Prentice Hall, Inc. © 2008
3-12
Reasons for Unethical Behavior
Allport-Vernon-Lindzey Study of Values -–Aesthetic
–Economic
–Political
–Religious
–Social
–Theoretical
Prentice Hall, Inc. © 2008
3-13
Reasons for Unethical Behavior
Most common reasons for bending rules -–Organizational performance required it
–Ambiguous or out of date rules
–Pressure from others – everyone else does it
–[Greedy #@%$(#s]
Prentice Hall, Inc. © 2008
3-14
Moral Relativism
“Moral Relativism” says that morality is
relative to some personal, social, or cultural
standard and there is no method for
deciding whether one decision is better than
another.
Prentice Hall, Inc. © 2008
3-15
Moral Relativism
“Moral Relativism” says that morality is
relative to some personal, social, or cultural
standard and there is no method for
deciding whether one decision is better than
another.
Prentice Hall, Inc. © 2008
3-16
Kohlberg’s Levels of Moral Development
1. Preconventional level
–Characterized by a concern for self
•Personal interest
•Avoidance of punishment
2. Conventional level
–Characterized consideration of society’s values
•External code of conduct
3. Principled level
–Characterized by adherence to internal moral
code
•Universal values or principles
Prentice Hall, Inc. © 2008
3-17
Encouraging Ethical Behavior
Guidelines for Ethical Behavior
Ethics
Morality
Law
Prentice Hall, Inc. © 2008
3-18
Encouraging Ethical Behavior
Codes of Ethics
–Specifies how an organization expects its
employees to behave on the job.
Prentice Hall, Inc. © 2008
3-19
Encouraging Ethical Behavior
Approaches to Ethical Behavior
–Utilitarian
•Judged by consequences
–Individual Rights
•Fundamental rights in all decisions
–Justice
•Distribution in equitable fashion
–Categorical imperative
•“golden rule”
•Means - Ends
Prentice Hall, Inc. © 2008
3-20
Strategy Bits
192 U.S. companies surveyed -–92% monitored employees use of e-mail/Internet
–26% monitored employees electronic activities all
the time
–Almost none had checks in place to protect
employees privacy
Prentice Hall, Inc. © 2008
3-21