STRATEGIC MANAGEMENTCG, SR, AND ETHICS
Corporate GovernanceCG involves the interaction of 3 groups…
Phantom>Rubber Stamp>Minimal Review>Nominal Participation>Active Participation>Catalyst
30% (Active/Catalyst)
30% (Minimal/Nominal)
40% (Phantom/Rubber Stamp)
Boards of Directors‘Inside’ and ‘Outside’ directors
Board composition: former CEOs and COOs, academicians, lawyers, government officials, and bankers.
Financial institutions and investment companies as Board Members: Germany, Denmark, Sweden, Belgium, and Italy
Agency theory
Holding Boards/Board Members accountable
Ethics and Management
Stakeholders – anyone who has a financial interest, stake, or claim in an organization and/or what it does
Shareholders, customers, employees, interest groups, government, etc.
StakeholdersWhat are a company’s responsibilities to its owners/investors?
What are the company’s responsibilities to customers?
What are a company’s responsibilities to its employees?
Prioritize the three stakeholders above from most important to least.
Group Task
Q: In order, list the most important stakeholder to the least important e.g. 1,2,3,4 : Government, employees, owners (shareholders), customers
Be ready to support your ranking with sound reasoning.
Ethics
Ethics – a code, usually belonging to a profession or occupation, indicating what is right and wrong; acceptable practices and behavior
Ethical behavior has to do with adhering to a code of ethics
Social Responsibility ?
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. –Milton Friedman
Carroll4 Responsibilities
Economic (Must Do)
Legal (Have to Do)
Ethical (Should Do)
Discretionary (Might Do)
MoralityMorality has to do with adhering to principles of good versus bad behavior; usually on the basis of philosophy or religious belief
Kohlberg’s Levels of Moral Development:
Pre-conventional
Conventional
Principled
Ethical Decision Making“When in Rome…” (Moral Relativism)
The “American Express” Approach
Utilitarian
Individual Rights
Is there such a thing as universal truth?
Ethical Decision MakingJustice Approach
Distributive Justice
Retributive Justice
Compensatory Justice
Kant and CavanaughKant: A person’s action is ethical, only if he is willing to have that same action
taken by everybody else, who is in a similar situation.
A person should never treat another human being simply as a means, but always as an end.
Cavanaugh:
Utility
Individual
Justice
Application: Adding false expenses to a company expense account.