Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights res 5 - 1 Bateman Snell Management 5t h Editio n 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
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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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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Ethics (cont.)Ethics (cont.)
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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Ethics (cont.)Ethics (cont.)
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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Ethics (cont.)Ethics (cont.)
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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Ethics (cont.)Ethics (cont.)
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 Responsibility
(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.)Corporate Social Responsibility
(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