Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 5-5- 1 Bateman Snell Management 5th Edition Competing in the New Era

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Bateman Snell

Management

5thEdition

Competingin theNew Era


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Part TwoChapter 5 - Ethics and Corporate Responsibility

Chapter OutlineEthicsCorporate Social ResponsibilityThe Political EnvironmentThe Natural Environment


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Learning ObjectivesLearning Objectives

After studying Chapter 5, you will know: how different ethical perspectives guide decision making how companies influence the ethics environment the options you have when confronting ethical issues the important issues surrounding corporate social

responsibility how the political and social environment affects your firm’s

competitive position and legitimacy the strategies corporations use to manage the political and

social environment the role of managers in our natural environment


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EthicsEthics

Ethics the system of rules governing the ordering of values

affects people’s behavior and the ‘goods’ that are worth seekingvalues - principles of conduct

ethics becomes more complicated when a situation dictates that one value overrules another

business ethics - the moral principles and standards that guide behavior in the world of business


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Ethics (cont.)Ethics (cont.)

Ethical systems moral philosophy - the principles, rules, and values people

use in deciding what is right and wrong universalism - individuals should uphold certain values,

regardless of the immediate resultimportant values are those that society needs to function

teleology - an act is morally right if it produces a desired result

egoism - acceptable behavior maximizes consequences for the individual

utilitarianism - seeks the greatest good for the greatest number of people, thereby maximizing total utility


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Ethical systems (cont.) deontology - focuses on the rights of individuals

ensures that equal respect is given to all personsconcentrates on means

relativism - ethical behavior defined by the opinions and behavior of relevant other people

acknowledges the existence of different theoretical viewpointsgroup consensus is sought

positive consensus signifies that an action is right, ethical, and acceptable


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Ethical systems (cont.) virtue ethics - morality defined by what a mature person with

‘good’ moral character would deem rightsociety’s rules provide a moral minimumindividual’s can transcend rules by applying personal standards

Kohlberg’s model of cognitive moral developmentpreconventional stage - decisions based on concrete rewards, punishments, and immediate self-interest

conventional stage - actions conform to societal expectationsprincipled stage - follow self-chosen ethical principle

see beyond authority, laws, and norms


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The ethics environment Ethical climate - processes by which decisions are evaluated

and made on the basis of right and wrongunethical corporate behavior may be the responsibility of an unethical individual

often reveals a company culture that is ethically lax

Corporate ethical standards- organizations must be explicit regarding their ethical standards and expectations

there are many different corporate ethical standards golden rule accepted business practice intuitive approach


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Climate Factors Conducive To Unethical Behavior

Climate Factors Conducive To Unethical Behavior

Financial concernstake precedence overethical considerations

Ethics consideredfrom legal or publicrelations viewpoint

Emphasis on short-term revenues

DangerSigns

No written codeof ethics

Shareholders concernstake precedence over other constituencies

Lack clear proceduresfor dealing with ethical

problemsDesire for “quick

fix” solutions


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The ethics environment (cont.) Ethics codes - most visible sign of corporate commitment to

ethical behaviormust be tailored to individual company’s philosophiesaddress subjects such as employee conduct, community and environment, shareholders, customers, political activity

Ethics programscompliance-based - designed by corporate counsel to prevent, detect, and punish legal violations

increases surveillance and controlsintegrity-based - guiding principles that instill personal responsibility for ethical behavior


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Define theissue clearly

Identify therelevant values

in the situation

Implement thedecision

EthicalDecisionMaking

Weigh conflictingvalues and choose

option thatbalances them

Ethical Decision MakingEthical Decision Making


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Corporate Social ResponsibilityCorporate Social Responsibility

Corporate social responsibility the obligation toward society assumed by business

maximizes it positive effects on society and minimizes it negative effects

economic responsibilities - produce goods and services that society wants at a price that perpetuates the business

legal responsibilities - obey local, state, federal and relevant international laws

ethical responsibilities - meeting other societal expectations, not written as law

voluntary responsibilities - additional behaviors that society finds desirable and that the values of the business support


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VoluntaryResponsibilities

Be a good corporatecitizen

EthicalResponsibilities

Be ethical

LegalResponsibilities

Obey the law

EconomicResponsibilities

Be profitable

Pyramid Of Corporate Social Responsibility

Pyramid Of Corporate Social Responsibility


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(cont.)Corporate Social Responsibility

(cont.)Contrasting views

profit maximization viewmanagers obligated to maximize the present value of the firmeconomic performance is an organization’s primary social responsibility

business judgment rule - allows management wide latitude in policy if the policy can be justified

duty to pursue profits is not absolute principled moral reasoning view

ethical actions are not optional, but mandatoryorganizations have a wider range of responsibilities that extend beyond the production of goods and services for a profit


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(cont.)Corproate Social Responsibility

(cont.)Reconciliation

based on the idea that ethical behavior is both right and more profitable

competitive advantages of socially responsible actions, especially over the long-term

avoid unnecessary and costly regulationpay dividends to the reputation of the companyprofits can be made from attempts to solve society’s problems


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(cont.)Corporate social responsiveness

the process companies follow and the actions they take in the domain of corporate social responsibility

CSR1 (corporate social responsibility) - principles, philosophies, and beliefs

CSR2 (corporate social responsiveness) - processes companies follow and the actions they take

both CSR1 and CSR2 have their critics in academia and business

stakeholder management - managers do not manage relationships with society but with stakeholders


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Performance

Do less than required

Do the least that is required

Do all that is required

Do more than is required

Approach

1. Reactive

2. Defensive

3. Accommodative

4. Proactive

Posture or Strategy

Deny responsibility

Admit responsibilitybut fight it

Accept responsibility

Anticipate responsibility

Approaches To Corporate Social Responsiveness

Approaches To Corporate Social Responsiveness


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(cont.)Strategic voluntarism

corporate philanthropy has become more strategicstrive to do things that matterget recognition for their contributionssupport causes that both capitalize on and serve their businesses

community service is increasingly an employee benefit


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The Political EnvironmentThe Political Environment

Competitive advantage progressive organizations realize that government may be the

source of competitive advantages for an individual company or an entire industry

numerous examples of public policy that assists businessCorporate legitimacy

motive for business involvement in the public policy process organizations are legitimate to the extent that their goals and

methods are consistent with those of society domain defense - activities intended to counter challenges to

the organization’s legitimacy


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The Political Environment (cont.)The Political Environment (cont.)Strategies for influencing the political environment

public affairs department - monitors key events and trends, analyzes their effects on the organization, recommends organizational responses, and implements political strategies

Lobbying - traditional form of influenceinvolves political professionals or company executives who establish communication channels with regulatory bodies

Political action committees (PACs) - make donations to candidates for political office

companies may ask employees or shareholders for contributions to political candidates, subject to certain limitations

“protection money” - donated money intended to ensure that company is not disadvantaged in the legislative process


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Internationalrelations

Investor andstockholder

relations

Activitiesof

PublicAffairs

Issuesmanagement

Governmentrelations

Institutionaladvertising

Corporatecontributions

Publicrelations

Public Affairs DepartmentPublic Affairs Department


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The Political Environment (cont.)The Political Environment (cont.)

Strategies for influencing the political environment (cont.)

Corporate constituency programs - organizational effort to identify, educate, and motivate individuals to take political action that could benefit the organization

encourage interested stakeholders to take grassroots actionprobably requires the greatest commitment of organizational resources

Coalition building - finding other organizations or voter groups that share political interests on a particular legislative issue

combine efforts and power to influence the environment


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The Political Environment (cont.)The Political Environment (cont.)

Strategies for influencing the political environment (cont.)

Stonewalling - use of public relations, legal action, and administrative processes to prevent or delay the introduction of legislation and regulation that may have an adverse impact on the organization

rarely changes the conditions that led to the adverse regulationconsumes considerable time and money, and may boomerang

Strategic retreat - response to adverse regulatory change efforts to adapt products and processes to changes in the political and social environments while minimizing the negative effects of those changes


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The Natural EnvironmentThe Natural Environment

Environmental issues range of issues is broad, and the impact huge

must consider a mix of technical, ethical, social, and competitive issues

e.g., many technological developments used by business are contributing to the destruction of ecological ecosystems

A risk society sources of risk include:

excessive production of hazards ecologically unsustainable consumption of natural resources

risk has proliferated due to population explosion, industrial pollution, and environmental degradation


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The Natural Environment (cont.)The Natural Environment (cont.)

Ecocentric management has as its goal the creation of sustainable economic

development and improvement of quality of life worldwide for all organizational stakeholders

seeks to minimize negative environmental impact design for environment (DFE) - tool for creating products

that are easy to recover, reuse, or recycleall environmental effects of a product are examined during the design phase

assessments of inputs analysis of how consumers will use and dispose of the product


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Environmentallyappropriate production

technologies

Products withecofriendlypackaging

Use smallerresource quantities

Products withrecyclablematerials Ecocentric

Management

Encourage lowenergy loss

Ecocentric ManagementEcocentric Management


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The Natural Environment (cont.)The Natural Environment (cont.)

Environmental agenda for the future corporations are the only organizations with the resources,

technology, and global power to help create a sustainable world

webs of companies with a common ecological vision can combine their efforts into high-leverage, impactful action

companies beginning to acquire the motivation to solve environmental problems

may represent the biggest opportunity in the history of commerce

Documents

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 5-5- 1 Bateman Snell Management 5th Edition Competing in the New Era