Transcript Session 5 & 6

Kardell Paper
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Who are Kardell’s stakeholders?
Are their claims equally important?
What factors would you suggest
the Board consider in its decision?
Did the Board make any mistakes?
Why?
Apply moral imagination for a
better decision?
Senior Salary Cases
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Eleanor Clitheroe – Hydro One
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Jack Welch – GE
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$2 million/$6 million golden parachute
$300,000 nanny costs, $40,000 reno., 7 clubs
NY Central Park condo, company jets
$2 million payback per year
Ken Lay – Enron
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$141 million, $10 cash, $131 stock options
Stock options have “no cost”
Betaseron (A) Case
Three Problems
 Pricing
 Distribution
 Supply
Stakeholder Identification & Interests
POWER
LEGITIMACY
Dynamic
Influence
URGENCY
Ranking Stakeholder Interests
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Most offensive to values:
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decision maker
corporate
local country
consumer markets
capital markets
Most vulnerable
Most concern to public/press
Stakeholder Impact Analysis
Should a proposed action be taken?
Sniff tests…mom, paper…
If it smells, then...
5 Questions:
Is
Is
Is
Is
Is
it
it
it
it
it
profitable?
legal?
fair?
right?
sustainable?
If not …Modify …Moral Imagination
Stakeholder Impact Analysis
CHALLENGES FOR
PROPOSED ACTION:
 Profitable?
 Legal?
 Fair?
 Right?
 Sustainable?
TYPICAL FLAWS
ENCOUNTERED:
 Short run
 Only test?
 To all?
 Personal+
 Optional
 No modification
EDM: Moral Standards Approach
Three Challenges:
M. Velasquez
 Individual rights impact
 Justice (fairness) impact
 Utilitarian impact
 Maximize social benefits & minimize
social injuries
 Net benefit to society as a whole
 Cost-benefit analysis (CBA)
Cost-Benefit Analysis
Maximize Net Present Value (NPV)
NPV = P.V. of Benefits – P.V. of Costs
for each option
Example: JM Co in text
JM Co. Ltd.
Pollution Control
Equipment
Protecting Workers
Benefits (PV at 10%)
Reduction in worker health costs
borne by society
$500,000
Increase in worker productivity
200,000
Improve. earnings of scholarship recipients
$700,000
Costs (PV at 10%)
Pollution Equipment
350,000
Scholarships paid
Net Benefits
$350,000
Benefit/cost ratio
2/1
University
Admission
Scholarships
$600,000
$600,000
400,000
$200,000
3/2
EDM: Mark Pastin’s Approach
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Ground rule ethics - organization’s values
End-point ethics
 Risk-benefit analysis (CBA+)
 End-point ethics
 Rank
stakeholders
 Identify ethical alternatives
 Intangible factors included
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Rule ethics
Social contract ethics
The Ford Pinto Case
Benefits: Savings
180 Burn Deaths
$200,000 each
180 Serious Burn Injuries 67,000 “
2,100 Burned Vehicles
$36,000,000
12,060,000
1,470,000
$49,530,000
Costs:
11 Million Cars
1.5 Million Light Trucks
$11 each
$11 “
$121,000,000
16,500,000
$137,500,000
Issues: looking forward, valuing intangibles,
moral imagination
Fundamental Challenges
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Well-offness
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Fairness
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More benefits than costs
Of distribution of benefits & burdens
Right
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No offence to stakeholders &/or
decision maker
All three must be satisfied
Diagnostic Typology of
Organizational Stakeholders
Stakeholder’s Potential for Threat
Low
High
Stakeholder’s
High
Potential
For
Cooperation
With
Organization Low
Type 4
Type 1
Mixed Blessing
Supportive
Strategy
Strategy
Collaborate
Involve
Type3
Type 2
Nonsupportive
Marginal
Strategy
Strategy
Defend
Monitor
Source: G. Savage et al, “Strategies for assessing and managing organizational shareholders”, The Executive 5, no. 2 May), 1991, 65.
Microsoft Antitrust Case
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Predator or Fierce competitor?
Found guilty of antitrust violations, 11/5/98
 Forcing OEM PC makers to take
Windows/Explorer package.
 95% of market for PC operating systems
 Significant barriers to entry
 Lack of viable alternatives
Also guilty on appeal, 6/01
Government changed, refused to split Microsoft
into 2 parts
Stakeholder management analysis using the
Savage model.
Source: Business Ethics, 3e, by Joseph Weiss, South-Western, 2003, 31-32.
High
Stakeholder’s Potential for Threat
Low
High
Low
Stakeholder’s Potential For Cooperation
Diagnostic Typology of Stakeholders
for Microsoft Corporation
Type 4
Type 1
Mixed Blessing
Supportive
Strategy: Collaborate
Strategy: Involve
Many Customers
Employees
Suppliers, Trade Associations
Shareholders, Many Customers
Type3
Type 2
Nonsupportive
Marginal
Strategy: Defend
Federal & /State Gov., AOL
Sun Microsystems, 18 states
Netscape& Spyglass
Strategy: Monitor
OEMs, ISPs, OLS, ICPs
Media, Apple(OS), IBM (OS/2)