Business Ethics Lec 4,5

Chapter 2Stakeholder Relationships,

Social Responsibility & Corporate Governance

“Degree to which a firm understands & addresses

stakeholders demands & concerns”

Three set of activities are involved;

I. Generating data about stakeholders & impacts on

them

II. Disseminating information throughout the organization

III. Organization’s responsiveness towards stakeholders’

concerns

Stakeholder Orientation

Identifying stakeholders that are relevant

Characterizing their relevant concerns Online Forums

Representatives

Concerned Managers

Evaluating impact

Step I: Generating data about Stakeholders & Measuring Impacts

Facilitating communication of information

Distributing information about;

Nature of relevant stakeholders

Stakeholder issues

Current impact on firm

Distribution of information should be

formally

Step II: Disseminating information throughout the organization

Consists of initiatives that a firm adopts to

ensure that it abides by or exceeds

stakeholder expectations & has a positive

impact on stakeholders’ concerns

Involving concerned stakeholders on

Priority basis

Step III: Organization’s Responsiveness Towards Stakeholders’ Concerns

meeting overly aggressive financial or

business objectives

meeting schedule pressures

helping the organization survive

rationalizing that others do it

resisting competitive threats

saving jobs

Key Causes of Unethical Behavior

personal values

supervisor influence

senior management influence

internal drive to succeed

performance pressures

lack of punishment

friends/coworker influence

Key Influences On Ethical Behavior

I. Conflict of Interest

II. Honesty and Fairness

III. Communications

IV. Organizational Relationships

Classification of Ethical Issues

exists when an individual must choose

whether to advance his/her own interests,

the organization’s, or others’

Examples include bribes or personal

payments, gifts, or special favors intended

to influence decision making

I. Conflict of Interest

following applicable laws a regulations &

not knowingly harming stakeholders

Is advertising prescription drugs on TV and

in magazines fair?

II. Honesty & Fairness

refers to the transmission of information

and the sharing of meaning

Examples: deceptive advertising, product

safety information, & product composition

III.Communications

behavior of organizational members toward

stakeholders

Includes confidentiality, meeting

obligations & deadlines, not pressuring

others to behave unethically

IV. Organizational Relationships

Accounting

Finance

Management

Marketing

Human Resource

Ethical Issues can relate to all Functional Areas

CSR can improve profits?

 CSR can promote respect for their company

in the marketplace which can result in

higher sales, enhance employee loyalty and

attract better personnel to the firm

CSR activities focusing on sustainability

issues may lower costs and improve

efficiencies as well

Social Responsibility & Profitability

Stages in Social Responsibility

Economic: maximizing stakeholder wealth and/or value

Legal: abiding by all laws & government regulations

Ethical: following standards of acceptable behavior as judged by

stakeholders

Philanthropic: “giving back” to society

Formal systems developed by organizations for

Accountability, Oversight & Control

Accountability- How closely workplace decisions

are aligned with firm’s strategic goals & objectives

Oversight- A system of checks and balances that

limit employees’ opportunities to deviate from firm’s

goals

Control- Process of auditing and improving

organizational decisions & actions

Corporate Governance

Organizations should develop some processes for managing

ethical concerns of stakeholders

The most effective process consists of following steps;

I. Assessing the Corporate Culture

II. Identifying Stakeholder Groups

III. Identifying Stakeholder Issues

IV. Assessing Organizational Commitment to Social

Responsibility

V. Identifying Resources & Determining Urgency

VI. Gaining Stakeholder Feedback

Implementing Stakeholder Perspective

Must align with organization’s goals & objectives

First step is to identify organizational mission, norms &

values

Sources -

Mission Statement

Annual Reports

Sales brochures

Websites

“Example”

Stage I: Assessing the Corporate Culture

Goal is to recognize stakeholder needs,

wants & desires

Level of power may vary, depending upon

the nature of involvement of stakeholders

Some Power vs. Most Power

Example

Stage II: Identifying Stakeholder Groups

Understanding the nature of the main issues

of concern to the stakeholders

Can be settled down through;

Collaboration

Negotiation

“Example”

Stage III: Identifying Stakeholder Issues

How much the organization is inclined towards being

socially responsible?

Brings first three stages together to arrive at a

common understanding of social responsibility

Evaluating current practices

Selecting concrete social responsibility initiatives

Sources - Annual Reports, Webpages & Company

Brochures

Stage IV: Assessing Organizational Commitment

to Social Responsibility

Cost-Time ratio

Two main criteria to be considered;

- Level of Financial & Organizational

resources

- Level of urgency when prioritizing

If an issue requires significant resources, it is

to be considered “Urgently”

Stage V: Identifying Resources & Determining

Urgency

What is stakeholder’s level of satisfaction?

Can be through various ways;

- Satisfaction & reputation Surveys

- Blogs, Websites & Newsletters

- Formal Research via focus groups,

observation &

surveys

Stage VI: Gaining Stakeholder Feedback