Lecture 2 Business Ethics, Corporate Governance & CSR

8/18/2019 Lecture 2 Business Ethics, Corporate Governance & CSR

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Business Ethics, CorporateGovernance and CSR


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An ‘oxymoron’! – bringing together of twocontradictory concepts (Collins 1994)

‘Principles of conduct within organizations that guidedecision a!ing and beha"ior# ($a"id %&&')

Good business ethics is a prereuisite for goodstrategic anageent

‘he study of business situations* acti"ities* anddecisions where issues of right and wrong areaddressed# (Crane + ,atten %&&4)

Business Ethics


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Ethical values- shared beliefs about right and wrong*good and bad .o"ern the beha"iour of a person or a group

Ethical issues- probles or dileas which present acon/ict of "alues Pay a ‘li"ing wage# or personal 0nancial gain

Ethical choices- decisions about which option to ta!ein response to a dilea $icult decisions* because each option has its own

drawbac!s

Ethical Values, ssues andChoices


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isleadin" advertisin" isleadin" labelin" #oor product or service sa$ety

%armin" the environment nsider tradin" #addin" expense accounts &umpin" 'a(ed products on $orei"n mar)ets

But in many other cases, the la( is unclear andall choices have elements o$ both ‘ri"ht’ and‘(ron"’

Some business practices al(aysconsidered unethical and o$ten

ille"al


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Business Ethics ***

2ree

Choice3aw Ethics

A personal responsibility

3egal 5tandard 5ocial 5tandard Personal 5tandard


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6ou are a strategic analyst at a successful hotel enterprise thathas been generating substantial e7cess cash /ow8

6our C: instructed you to analyse the copetiti"e structure ofclosely related industries to 0nd one the copany could enter*using its cash reser"e to build up a substantial position8

6our analysis suggests that the highest pro0t opportunities areto be found in the gabling industry8 6ou realise that it ight

be possible to add casinos to se"eral of your e7isting hotels*lowering entry costs into this industry8

;owe"er* you personally ha"e strong oral ob


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Criteria $or Ethical &ecisiona)in"

.tilitarian approach – oral beha"ior producesthe greatest good for the greatest nuber

ndividualism approach – acts are oral whenthey proote the indi"idual#s best long=ter

interests oral ri"hts approach – oral decisions are

those that best aintain the rights of thosea>ected* including free consent* life and safety

/ustice approach – decisions ust be based onstandards of euity* fairness* and ipartiality?(esp8 iportant in ;@ anagent)


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Copanies e7perience ‘social blowbac!# when

sta!eholders percei"e that they ha"e breachedtheir deal with society

.ood business ethics is a prereuisite for good

strategic anageent

-hy is Business Ethicsmportant


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0he Emer"ence o$ Corporate Social Responsibility

Copanies ha"e responded to increasinge7pectations by ad"ocating what is now a coon

ter in business- Corporate 5ocial @esponsibility(C5@)

,ost large copanies now feature C5@ reports*

anagers* departents* and the sub


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Who determines a good business ethics

or CSR Agenda?

Government- the law a!ers Business ethics begins where the law ends

0he ‘strate"ists’1 C:* C5:* C2:* anagers Core "alues* beliefs ‘ebedded# in organization usiness ‘code of ethics# (an!ing* ,edia* 2ood Bndustry)

Board o$ &irectors Corporate .o"ernance $uties + @esponsibilities

Sta)eholders Consuerspressure groupslocal counity,edia


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Dho is @esponsible for thics C5@

2eadership 3 ana"ement

ssuesCE+ 4 Strate"ists

Code o$ business ethics1 Pro"ides basis on which policies can be de"ised to

guide daily beha"ior and decisions in the wor!place

C: + ,anageent responsible for ipleentation


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Who else is responsible for Ethics / CSR?

Governance Issues

Board of Directors Roles & Responsibilities

Control & oversight over management

Adherence to legal prescriptionsConsideration of stakeholder interests

Advancement of stockholder rights

Is being ethical! good for business? Is it possible to be both profitable and responsible?


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Corporate Governance

Defnitions…

0he (ay in (hich or"ani5ations aredirected and controlled

Cadbury67889:

0he process by (hich corporations are

made responsive to the ri"hts and (isheso$ sta)eholders

&emb and ;eubauer

67889:


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Corporate Governance

0he Gro(th o$ odern Corporations0he ‘


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Corporate Governance6/ensen 3 ec)lin" 78=>:

0he ‘


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&irectors Roles 3 ResponsibilitiesBusinessWeek ’s ‘#rinciples o$ Good Governance’

;o more than 9 directors are current or $ormercompany executives

;o directors do business (ith the company

Each director o(ns a lar"e e?uity sta)e in thecompany


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Corporate Governance 3CSR

0he #urpose o$ CorporationsTo maximise shareholder value

‘Bn a free enterprise* pri"ate property syste* acorporate e7ecuti"e is an eployee of the owners of thebusiness8 ;e has direct responsibility to his eployers8 hat responsibility is to conduct the business inaccordance with their desires* which generally will be toa!e as uch oney as possibleE#

,ilton 2riedan (19F&)


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Corporate Governance 3 CSRThe Debate…

0he #urpose o$ CorporationsTo meet the needs o stakeholders

5ta!eholders are indi"iduals or groups that a>ect or area>ected by the achie"eent of an organization#sob


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Socially obstructivePrioritising short=ter shareholder interests

A"oids highly regulated business locations* lobby to change laws

Socially obligativePrioritising longer=ter shareholder interests

Coply with laws

Socially responsivealancing ultiple sta!eholder obligations

Pay attention to pressure groups* use C5@ to build copetiti"e

ad"antageSocially contributive5ee!ing to shape society

Prooting sustainability and locally led econoic de"elopent

Ethical Stances o$ +r"ani5ations


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he Pyraid of C5@


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ey ?uestion5hould a business prioritise shareholder value or sta)eholder needs

5hareholders own the business

Priarily for 0nancial gain

5ta!eholders are a>ected by the decisions and operational

acti"ities of the business 2inancial* non=0nancial and personal bene0ts

+r"anisations and EthicalChoice

"he social contract bet#een business and societ$

is constantl$ evolving%%% (Waddock 2!"


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0he CSR &ebate moveson… he early essage ‘doing well by doing good# C5@ iposes political functions of go"t on corporate

e7ecuti"es C5@ has failed to create the good society – e7pecting too

uch fro business Close adherence to C5@ agenda leads to falling pro0ts $iculty in allocating rights responsibilities and enforcing

the – who decides 5ta!eholder theory the way forward – CA through building

superior relationships8 .ood C5@ anages the parado7 of pro0tability +

responsibility

ury is still out ! you decide"


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Lecture 2 Business Ethics, Corporate Governance & CSR

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