CHAPTER 3

Ethics & Social

Responsibility

STRATEGIC MANAGEMENT & BUSINESS POLICY

10TH EDITION
THOMAS L. WHEELEN

Prentice Hall, Inc. 2006

J. DAVID HUNGER

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Ethics & Social Responsibility

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Corporate Governance

Broader responsibility -Private corporations have responsibility to

society that extend beyond making a profit

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Social Responsibility

Milton Friedman
There is one and only one social
responsibility of businessto use its
resources and engage in activities designed
to increase its profits so long as it stays
within the rules of the game, which is to say,
engages in open and free competition
without deception or fraud.

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Corporate Governance

Carrolls 4 Responsibilities
Economic
Legal
Ethical
Discretionary

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Carrolls 4 Responsibilities

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Corporate Stakeholders

Affect or are affected by the

achievement of the corporations
objectives

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Corporate Stakeholders

Stakeholder Analysis
Primary stakeholder
Sufficient bargaining power to affect outcomes

Secondary stakeholder
Indirect stake but are affected by corporations actions

Stakeholder Input
Determine whether input is necessary

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Ethical Behavior

business ethics
Argument that there is no such thing it is an
oxymoron

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Ethical Decision Making

Corporate practices -Massive write-downs and restatements of profit

Misclassification of expenses as capital
expenditures
Pirating corporate assets for personal gain

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Ethical Decision Making

Recent Survey Results -70% distrust business executives

Enron
WorldCom

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Reasons for Unethical Behavior

Provocative Question -Why are businesspeople perceived to be

acting unethically?

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Reasons for Unethical Behavior

Perceptions caused by -Not aware of impropriety

Cultural norms and values vary
Governance systems based on rule or
relationships
Differences in values between
businesspeople and key stakeholders

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Reasons for Unethical Behavior

Allport-Vernon-Lindzey Study of Values -Aesthetic

Economic
Political
Religious
Social
Theoretical

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Reasons for Unethical Behavior

Most common reasons for bending rules -Organizational performance required it

Ambiguous or out of date rules
Pressure from others everyone else does it

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Moral Relativism

Morality is relative to some personal, social,

or cultural standard and there is no method
for deciding whether one decision is better
than another.

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Kohlbergs Levels of Moral Development

1. Preconventional level
Characterized by a concern for self
Personal interest
Avoidance of punishment

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Kohlbergs Levels of Moral Development

2. Conventional level
Characterized consideration of societys values
External code of conduct

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Kohlbergs Levels of Moral Development

3. Principled level
Characterized by adherence to internal moral
code
Universal values or principles

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Encouraging Ethical Behavior

Codes of Ethics
Specifies how an organization expects its
employees to behave on the job.

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Encouraging Ethical Behavior

Guidelines for Ethical Behavior

Ethics
Morality
Law

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Encouraging Ethical Behavior

Approaches to Ethical Behavior

Utilitarian
Judged by consequences

Individual Rights
Fundamental rights in all decisions

Justice
Distribution in equitable fashion

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Encouraging Ethical Behavior

Approaches to Ethical Behavior

Categorical imperative
golden rule
Means - Ends

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Strategy Bits

192 U.S. companies surveyed -92% monitored employees use of e-mail/Internet

26% monitored employees electronic activities all
the time
Almost none had checks in place to protect
employees privacy

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