Chapter 9 – Strategy, Ethics, and Social Responsibility

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In the course of trying to craft and execute a strategy that delivers value to both customers and shareholders, what ethical duties does a company also have?
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(1) act in an ethical manner (2) be a committed corporate citizen and allocate some of its financial and human resources to improving the well-being of employees, the communities in which it operates, and society as a whole (3) screen its strategic initiatives and operating practices for possible negative effects on the environment and future generations of the world’s population
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ethics vs business ethics?
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-Ethics concerns the principles and standards of right and wrong conduct -Business ethics concerns the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel **Ethical principles in business are not materially different from ethical principles in general
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Where Do Ethical Standards Come From, (the 3 schools of thought)
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1. Ethical universalism 2. Ethical Relativism 3. Ethics and Integrative Social Contracts Theory
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Ethical universalism concept
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common moral agreement about right and wrong actions and behaviors across multiple cultures and countries gives rise to universal ethical standards that apply to the members of all societies, all companies, and all business people.
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strength of Ethical universalism
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draws upon the collective views of multiple societies and cultures to put some clear boundaries on what constitutes ethical and unethical business behavior no matter what country or culture a company or its personnel are operating in
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Ethical Relativism
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differing religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms across countries and cultures give rise to multiple sets of standards concerning what is ethically right or wrong. These differing standards mean that whether certain business-related actions or behaviors are ethically right or wrong depends on the prevailing local ethical standards.Strict adherence to the principles of ethical relativism leads to the untenable conclusion that child labor is ethically impermissible in countries where it is contrary to local custom, but it is ethically permissible in countries where the use of child labor is common practice
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“When in Rome, do as the Romans do” relates to which school of thought?
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ethical relativism
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The Use of Underage Labor concept regarding ethical relativism
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Strict adherence to the principles of ethical relativism leads to the untenable conclusion that child labor is ethically impermissible in countries where it is contrary to local custom, but it is ethically permissible in countries where the use of child labor is common practice.
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Why is using the Principle of Ethical Relativism to Create Ethical Standards Is Problematic for Multinational Companies ? What can managers do?
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It is a slippery slope indeed to resolve conflicting ethical standards for operating in different countries. Managers in multinational enterprises have to figure out how to navigate the gray zone that arises when their company operates in two or more countries or cultures with differing customs and ethical standards. Having multiple standards that vary by locale is equivalent to having no standard
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The Foreign Corrupt Practices Act (FCPA)
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prohibits U.S. companies from paying bribes to government officials, political parties, political candidates, or others in all countries where they do business
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Which theory provides a middle position between the opposing views that the same set of ethical standards should apply everywhere and that ethical standards should be governed by local custom and practice
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Integrative social contracts theory
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Integrative social contracts theory
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universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a “social contract” that all individuals, groups, organizations, and businesses in all situations have a duty to observe. So long as the boundaries of this social contract are observed, there is legitimate room for local cultures or groups to prescribe what other actions may or may not be ethically permissible. However, according to integrated social contracts theory, adherence to universal or “first-order” ethical norms must always take precedence over local or “second-order” norms.
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The strength of integrated social contracts theory
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it accommodates the best parts of ethical universalism and ethical relativism. It is indisputable that cultural differences impact how business is conducted in various parts of the world and that these cultural differences sometimes give rise to different ethical norms. But it is just as indisputable that some ethical norms are more authentic or universally applicable than others, meaning that in many instances of cross-country differences one side may be more “ethically correct” or “more right” than another.
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ethical thoughts on bribery
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Virtually all of the world’s major religions (Buddhism, Christianity, Confucianism, Hinduism, Islam, Judaism, Sikhism, and Taoism) and all moral schools of thought condemn bribery and corruption
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Three categories of mgmt morality
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-The moral manager. -The immoral manager. -The amoral manager.
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The moral manager
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they are dedicated to high standards of ethical behavior, both in their own actions and in their expectations of how the company’s business is to be conducted. They typically regard complying with the law as an ethical minimum, and they operate well above what the law requires
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The immoral manager
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they have no regard for so-called ethical standards in business and pay no attention to ethical principles in making decisions and conducting the company’s business. They have few scruples, little or no integrity, and are willing to do most anything they believe they can get away with.
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The amoral manager
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believe businesses ought to be able to do whatever the prevailing laws and regulations allow them to do without being shackled by any ethical considerations. They think that what is permissible and what is not are governed entirely by prevailing laws and regulations, not by societal concepts of right and wrong
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top 5 countries in the Corruption Perceptions Index
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Denmark New Zealand Finland Sweden Norway
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3 main drivers of unethical strategies and business behavior
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1. Overzealous pursuit of wealth and other selfish interests 2. Heavy pressures on company managers to meet or beat performance targets. 3. A company culture that puts profitability and good business performance ahead of ethical behavior.
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why should compnay strategies be ethical?
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(1) because a strategy that is unethical in whole or in part is morally wrong and reflects badly on the character of the company personnel involved (2) because an ethical strategy is good business and in the self-interest of shareholders
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The moral case for ethical strategy making
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is predicated on the belief that crafting and pursuing a wholly ethical strategy is the only “right” or “morally correct” way to run a business; a strategy with unethical elements cannot withstand moral scrutiny and is therefore “wrong.”
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The Costs Companies Incur When Ethical Wrongdoing Is Exposed to Public View
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-Visible costs -(fines, penalties, costs to shareholders) -internal administrative costs-(legal & investigative costs, costs of corrective actions and remedial education) -intangible costs -(Customer defections, Loss of reputation, Lower employee morale and higher degrees of employee cynicism, Higher employee turnover)
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Executives committed to high standards make a point of considering three sets of questions whenever a new strategic initiative or policy or operating practice is under review:
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1. Is what we are proposing to do fully compliant with our code of ethics? 2. Is there any aspect of the strategy (or policy or operating practice) that gives the appearance of being ethically questionable? 3.Is there anything in the proposed action that customers, employees, suppliers, stockholders, competitors, community activists, regulators, or the media might consider as ethically objectionable?
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social responsibility
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concerns a company’s duty to operate honorably, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large
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social responsibility strategy
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The particular combination of socially responsible endeavors a company elects to pursue
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The Five Components of a Social Responsibility Strategy
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Actions to: 1. promote workforce diversity 2. ensure the company has an ethical strategy and operates honorably and ethically 3.supportcharitable causes,participate in communityservice activities, and contribute to the overall betterment of society 4. enhance employee well-being and make the company a great place to work 5. protectand sustainthe environment
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environmental sustainability strategy
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consists of its deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against ultimate endangerment of the planet
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good business reasons why companies should be public spirited and devote time and resources to social responsibility initiatives, environmental sustainability, and good corporate citizenship:
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– Such actions can lead to increased buyer patronage. – A strong commitment to socially responsible behavior reduces the risk of reputation-damaging incidents. – Socially responsible actions yield internal benefits (particularly concerning employee recruiting, workforce retention, and training costs) and can improve operational efficiency. – Well-conceived social responsibility strategies work to the advantage of shareholders

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