Transcript Strategy, Ethics, and Social Responsibility

CHAPTER 9
Ethical Business
Strategies, Corporate
Social Responsibility,
and Environmental
Sustainability
McGraw-Hill/Irwin
Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved.
Linking Strategy to Ethics
and 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?
Limit its strategic initiatives to those
meeting needs of consumers without
depleting resources needed by future
generations
9-2
What Is Business Ethics?
 Business ethics involves applying
general ethical principles and standards
to business activities, behavior and
decisions
 Ethical principles in business are not
different from ethical principles in general
 Business actions are judged
 By general ethical standards of society
 Not by more permissive standards
9-3
Drivers of Unethical
Strategies and Business Behavior
 The view that “the business of business
is business, not ethics”
 Overzealous pursuit of personal gain,
wealth, and other self-interests
 Heavy pressures on company managers
to meet or beat earnings targets
 A company culture that places profits
and good performance ahead of ethical
behavior
9-4
The Business Case for an Ethical
Strategy and Business Behavior
9-5
Ensuring a Strong Commitment to
Business Ethics in Multinational
Companies
 Three schools of thought about
the extent to which ethical
standards apply across countries
and cultures exist:
Ethical Universalism
Ethical Relativism
Integrative Social
Contracts Theory
9-6
Concept of Ethical
Universalism
 According to the school of ethical
universalism . . .
Same standards of what is right and
what is wrong are universal and
transcend most cultures, societies,
and religions
 Universal agreement on basic moral
standards allows a multinational company to
develop a code of ethics that is applied
evenly across its worldwide operations
9-7
Examples of Universal
Ethical Principles or Norms
 Honesty
 Trustworthiness
 Respecting the rights of
others
 Practicing the Golden Rule
 Avoiding unnecessary
harm to
 Workers
 Users of a company’s
product or service
9-8
Concept of Ethical Relativism
 According to the school of ethical
relativism . . .
 What is ethical or unethical
must be judged in light of local
moral standards and can vary
from one country to another
 Companies a code of conduct based
upon the principle of ethical relativism
assume that local morality is an
adequate guide for ethical behavior
9-9
Drawbacks of Ethical
Relativism
 The ethical relativism rule of “when in
Rome, do as the Romans do” presents
problems
 It is ethically dangerous for company
personnel to assume that local ethical
standards are an adequate guide to ethical
behavior
» What if local standards condone
kickbacks and bribery?
» What if local standards blink at
environmental degradation?
9-10
Integrative Social Contracts Theory

According to the integrative social
contracts theory, the ethical
standards a company should try to
uphold are governed by both
1. A limited number of universal ethical
principles that put ethical boundaries on
actions and behavior in all situations
and
2. The circumstances of local cultures,
traditions, and values that further
prescribe what constitutes ethically
permissible behavior and what does not
9-11
Prioritizing Ethical Standards
 Integrative social contracts theory
provides that “first order” universal
ethical norms always take
precedence over “second order”
local ethical norms when local
norms are more permissive
9-12
Corporate Social Responsibility

Social responsibility calls for
companies to strike a balance between
1. Its economic responsibility to
shareholders
2. The legal responsibility to comply with the
laws of the countries where it operates
3. The ethical responsibility to abide by
society’s norms, and
4. The discretionary philanthropic
responsibility to meet the unmet needs of
society
9-13
Common Corporate Social
Responsibility Initiatives
 Actions to protect
the environment
 Actions to create a
work environment
that enhances
employees’ quality
of life
 Actions to build a
diverse workforce
9-14
Corporate Citizenship
 Corporate citizenship involves a
company’s discretionary philanthropic
activities to address the unmet noneconomic needs of society
 Good corporate citizens
contribute to society in
areas where government
has fallen short or chosen
not to focus its efforts
9-15
Corporate Sustainability
 Corporate sustainability
involves meeting the needs
of today’s stakeholders
in a manner that protects
the environment and resources
needed for future generations
 Directed at improving a company’s
triple bottle line (TBL)—its
performance on economic,
environment, and social metrics
9-16
The Business Case for Socially
Responsible Behavior
 Generates internal benefits
 Enhances recruitment of quality employees
 Increases retention of employees
 Reduces risk of reputation-damaging
incidents
 Avoids criticism from consumer groups and
may lead to increased buyer patronage
 Works in best interest of shareholders
 Preempts costly legal and regulatory actions
9-17