Chapter 10: Strategy, Ethics, and Social Responsibility

Strategy, Ethics, andSocial Responsibility10ChapterScreen graphics created by:Jana F. Kuzmicki, Ph.D.Troy State University-Florida and Western Region Chapter RoadmapStrategy and EthicsWhat Do We Mean by Business Ethics?Three Categories of Management MoralityWhat Are the Drivers of Unethical Strategies and Business Behavior?Business Ethics in the Global CommunityApproaches to Managing a Company’s Ethical ConductWhy Should Company Strategies Be Ethical?Linking a Company’s Strategy to its Ethical Principles and Core ValuesStrategy and Social ResponsibilityWhat Do We Mean by Social Responsibility?Linking Strategy and Social ResponsibilityThe Moral Case for Corporate Social ResponsibilityThe Business Case for Socially Responsible BehaviorThe Controversy over Do-Good ExecutivesHow Much Attention to Social Responsibility Is Enough?Linking Social Performance Targets to Executive CompensationLinkage of 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 toConduct activities in an ethical manner?Demonstrate socially responsible behavior byBeing a committed corporate citizen andAttending to needs of non-owner stakeholders? Key IssuesWhat Are Ethical Principles?Involves concepts ofRight and wrong behaviorsFair and unfair actionsMoral and immoral behaviorsExamples of ethical behaviorsHonestyIntegrityKeeping one’s wordRespecting rights of othersPracticing the Golden RuleBeliefs about what is ethical serve as a moral compass to guide behaviors of individuals and companiesConcept of Business EthicsBusiness ethics involves applying general ethical principles and standards to business behaviorEthical principles in business are not different from ethical principles in generalBusiness actions are judged byGeneral ethical standards of societyNot by more permissive standardsMoral managerAmoral manager Immoral managerThree Categories of Management MoralityManagerial ethical and moral principlesCharacteristics ofa Moral ManagerDedicated to high standards of ethical behavior inOwn actionsHow the company’s business is to be conductedConsiders it important toBe a steward of ethical behaviorDemonstrate ethical leadershipPursues business successWithin confines of both letter and spirit of lawsWith a habit of operating well above what laws requireWhat Are the Drivers of Unethical Strategies and Business Behavior?The large numbers of immoral and amoral business peopleOverzealous pursuit of personal gain, wealth, and other selfish interestsHeavy pressures on company managersto meet or beat earnings targetsA company culture that places profits andgood performance ahead of ethical behaviorBusiness Ethicsin the Global CommunityNotions of right and wrong, fair and unfair, moral and immoral, ethical and unethical exist in all societiesTwo schools of thoughtEthical universalismHolds that human nature is the same everywhereand ethical rules are cross-culturalEthical relativismHolds that different societal cultures andcustoms give rise to divergent values andethical principles of right and wrongCross-Culture Variabilityin Ethical StandardsApart from certain universal basics –HonestyTrustworthinessFairnessAvoiding unnecessary harmRespecting the environment – variations exist in what societies generally agree to beright and wrong in the conduct of business activitiesFactors affecting cross-cultural variabilityReligious beliefsHistoric traditionsSocial customsPrevailing political and economic doctrinesCross-country variations also exist in the degree to which certain behaviors are considered unethical Ethical vs. Unethical ConductWhat constitutes ethical or unethicalconduct can vary according toTimeCircumstanceLocal cultural normsReligionThus, no objective way exists to prove that some cultures are correct and others wrong about proper business ethicsTherefore, there is merit in the ethical relativism view that proper business ethics has to be viewed in the context of each country’s societal norms Approaches to Managing a Company’s Ethical ConductUnconcerned or non-issue approachDamage control approachCompliance approachEthical culture approachWhy Should Company Strategies Be Ethical?An unethical strategyIs morally wrongReflects badly on the character of company personnelAn ethical strategy isGood businessIn the self-interest of shareholdersLinking Strategy With EthicsIf ethical standards are to have more than a cosmetic role, boards of directors and top executives must work diligently to see they are scrupulously observed in Crafting the company’s strategy andConducting every facet of the company’s businessTwo sets of questions must be considered by senior executives when a new strategic initiative is under reviewIs what we are proposing to do fully compliant with our code of ethical conduct? Is there anything here that could be considered ethically objectionable?Is it apparent this proposed action is in harmony with our core values? Are any conflicts or concerns evident?What Is CorporateSocial Responsibility?Notion that corporate executives should balance interests of all stakeholders began to blossom in the 1960sSocial responsibility as it applies to businesses concerns a company’s duty toOperate by means that avoid harm toStakeholdersEnvironmentConsider the overall bettermentof society in itsDecisions ActionsFig. 10.1: Categories of Socially Responsible Business BehaviorLinking Strategy andSocial ResponsibilityManagement should match a company’s social responsibility strategy to itsCore valuesBusiness missionOverall strategyThe combination of socially responsibleendeavors a company elects to pursuedefines its social responsibility strategySome companies are integrating social responsibility objectives into theirMissionsPerformance targetsStrategiesThe Moral Case forCorporate Social ResponsibilityBusinesses should promote the bettermentof society, acting in ways to benefit alltheir stakeholders becauseIt’s the right thing to do!Based on an implied social contract, societyGrants a business the right to conduct its business affairsAgrees not to unreasonably restrain a business’ pursuit of a fair profitIn return for a “license to operate,” a business shouldAct as a responsible citizenDo its fair share to promote the general welfareReasons to Behave in a Socially Responsible MannerGenerates internal benefitsEnhances recruitment of quality employeesIncreases retention of employeesImproves employee productivityLowers costs of recruitment and trainingsReduces risk of reputation-damagingincidents, leading to increased buyer patronageWorks in best interest of shareholdersMinimizes costly legal and regulatory actionsProvides for increased investments by socially conscious mutual funds and pension benefit managersFocusing on environment issues may enhance earningsDo We Really WantDo-Good Executives?At least 4 different views exist regarding use of company resources in pursuit of a better world and the efforts of “do-good” executivesAny money authorized for social responsibilityinitiatives is theft from a company’s shareholdersCaution should be exercised in pursuingvarious societal obligations since thisDiverts valuable resourcesWeakens a company’s competitivenessSocial responsibilities are best satisfied through conventional business activities (doing what businesses are supposed to do, which does not include social engineering)Spending money for social causes Muddies decision making by diluting focuson a company’s business missionThrusts executives into role of social engineersHow Much Attention to Social Responsibility Is Enough?What is the appropriate balance betweenCreating value for shareholders?Obligation to contribute to the larger social good?What fraction of a firm’s resources ought to be aimed atAddressing social concerns?Bettering the well-being of society and the environment?Approaches to fund a social responsibility strategy canAllocate a specified percentage of profitsAvoid committing a specified percentage of profitsNo widely accepted standard for judging if a companyhas fulfilled its citizenship responsibilities exits!