Business firms are organizations that are engaged in
making a product or providing a service for a profit.
Society, in its broadest sense, refers to human beings and
to the social structures they collectively create.
Stakeholder refers to persons or groups that affect, or are
affected by, an organization’s decisions, policies, and
operations.
A stake is an interest in – or claim to – a business
enterprise
Market stakeholders are those that engage in economic
transactions with the company as it carries out its primary
purpose of providing society with goods and services.
Sometimes referred to as primary stakeholders.
Nonmarket stakeholders are people or groups who
although they do not engage in direct economic exchange
with the firm are affected by or can affect its actions.
Sometimes called secondary stakeholders.
Public Issue - An issue that is of mutual concern to an
organization and one or more of the organization’s
stakeholders.
Stakeholder’s Expectation -A mixture of people’s opinions,
attitudes, and beliefs about what constitutes reasonable
business behavior.
Public Affairs Management - Refers to the management of
a company’s external relations, especially its relations with
stakeholders such as government and regulatory agencies,
customers, investors, and communities
Issue Management - A structured and systematic process
to aid organizations in identifying, monitoring, and
selecting public issues that warrant organizational action
Environmental analysis - Provides managers with the
information about external issues and trends that enables
an organization to develop a strategy that minimizes
threats and takes advantage of new opportunities.
Environmental intelligence - The acquisition of
information gained from analyzing the multiple
environments affecting organizations. Depends on
scanning eight “radar” screens.
Issue Management Process
Composed of 5 Steps or Stages
1. Issue Identification-Anticipating emerging concerns, or
“horizon” issues
2. Issue Analysis- Evaluating the issue; coming to an
understanding of how it will evolve and how it will affect
the organization
3. Option Generation, Evaluation and Selection- Evaluating
action options, involves complex judgments that take in to
account “non-quantifiable” factors like the company’s
reputation
4. Program Implementation -Once option is chosen, must
design and implement it
5. Assessment of Results and Continuous Improvement -
Must assess results of the program and made adjustments
as needed.
CSR- A corporation should be held accountable for any of
its actions that affect people, their communities, and their
environment. Requires companies to balance the benefits
to be gained against the costs of achieving those benefits.
Charity Principle - Business should give voluntary aid to
society’s needypersons and groups.
Stewardship Principle
-Business acting as a public trustee, should consider the
interests of all who are affected by business decisions and
policies
There are three responsibilities of business:
1. Economic responsibilities
2. Social responsibilities
3. Legal responsibilities
Enlightened Self-Interest - Means firm leadership can see
it is in the company’s self interest in the long term to
provide true value to its customers, to help its employees
grow and behave
responsibility.
Corporate Citizenship - to businesses putting corporate
social responsibility into practice. Involves:
 Proactively building stakeholder partnerships.
 Discovering business opportunities in serving society.
 Transforming a concern for financial performance into a
vision of integrated financial and social performance.
Ethical Business Behavior
1. Engages in fair and honest business practices in its
relationship with stakeholders.
2. Sets high standards of behavior for all employees.
3. Exercises ethical oversight of the executive and board
levels.
Stakeholder Commitment
4. Strives to manage the company for the benefit of all
stakeholders.
5. Initiates and engages in genuine dialogue with
stakeholders.
6. Values and implements dialogue.
Community
7. Fosters a reciprocal relationship between the
corporation and community.
8. Invests in the communities in which corporation
operates.
Consumers
9. Respects the rights of consumers.
10. Offers quality products and services.
11. Provides information that is truthful and useful.
Employees
12. Provides a family-friendly work environment.
13. Engages in responsible human-resource management.
14. Provides an equitable reward and wage system for
employees.
15. Engages in open and flexible communication with
employees.
16. Invests in employee development.
Investors
17. Strives for a competitive return on investment.
Suppliers
18. Engages in fair trading practices with suppliers.
Environmental Commitment
19. Demonstrates a commitment to the environment.
20. Demonstrates a commitment to sustainable
development
Global Corporate Citizenship - Process of identifying,
analyzing, and responding to the company’s social,
political, and economic responsibilities as defined through
law and public policy, stakeholder expectations, and
voluntary acts flowing from corporate values and business
strategies. Involves actual results and the processes
through which they are achieved.
 Social Performance Auditing
Is a systematic evaluation of an organization’s social,
ethical, and environmental performance
Ethics - A conception of right and wrong conduct. Tells us
whether our behavior is moral or immoral. Deals with
fundamental human relationships - how we think and
behave toward others and want them to think and behave
toward us.
Notions of right and wrong come from many sources
Religious beliefs Family background
Education Community / Neighborhood
Media influences
Ethical Relativism
Concept that holds that ethical behavior should be defined
by various periods in time in history, a society’s traditions,
the special circumstances of the moment, or personal
opinion.
Examples of unethical behavior at work are the
following: Abusive or intimidating behavior toward
employees. Lying to employees, customers, vendors, or
the public.
 A situation that places employee interests over
organizational interests.
 Violations of safety regulations.
 Misreporting of actual time worked.
 Discrimination on the basis of race, color, gender,
age or similar categories.
 Stealing or theft
 Sexual harassment
Five Key Reasons Why Business Should be Ethical
1. To meet demands of business stakeholders
10 country polls show 90% of general public placed
business ethics standards above traditional corporate
goals.
>Meeting demands of stakeholders is good business.
2. To enhance business performance
>Research shows linkage between ethically responsible
behavior and favorable corporate financial performance.
>Imparts trust, promoting positive alliances among
business partners.
3. To comply with legal requirements
>U.S. Corporate Sentencing Guidelines provides that if an
employee of a firm is found guilty of wrong-doing, the
sentence may be reduced if preventive measures were in
place in the company.
>Measures judges look for in assessing this culpability
(degree of blame).
>2002 Sarbanes-Oley legislation was approved as result of
corporate accounting scandals like Enron, and WorldCom.
4. To prevent or minimize harm
Overriding principle that business should “do no harm”.
Examples include not harming society with toxic waste,
protecting business from unethical employees and
unethical competitors.
5. To promote personal morality
Knowing one works in a supportive ethical climate
contributes to sense of psychological security.
People want to work for companies that do the right
thing.
Core Elements of Ethical Character
1. Manager’s Values
 Managers’ values set the ethical tone for the company.
 Corporate scandals have led to a crisis of confidence in
business leadership.
 Differences in ethical stances of U.S. versus European
managers and employees.
 Survey of new U.S. CEO’s shows concern for short-term
profits.
 One in four managers emphasizes moral values.
 Younger generation of managers more concerned
about ethics/social responsibility.
2. Virtue Ethics
 Part of business ethics theory derived from Philosoph
(Aristotle).
 Posits that a person with good character traits will use
these values to show good behavior.
 Virtue ethics holds that ethics is not rule determined but
based on a way of being and valuable characteristics.
 Stated differently – moral virtues are habits that enable
a person to live according to reason and avoid extremes.
3.Personal Spirituality
 Personal belief in a supreme being,religious organization
,power of nature or some other life-guiding force.
 In past 10 years has been a rise in spirituality at work.
 McKinsey survey of Australian companies showed
increase in productivity and reduced turnover for
companies that provided spirituality outlets for
employees.
 Is controversial, given separation of church and state
and common view that business is secular.
 Issues include which religion should be promoted, and
need for recognizing diversity of religious beliefs.
4. Stages of Moral Development
 Well researched model by Dr. Lawrence Kohlberg of how
individuals grow and mature in relation to moral
reasoning and decision-making.
 From childhood to mature adulthood people move up in
their moral reasoning.
 Earliest stages of reasoning are ego-centered.
 Most developed stages are principle-centered
 Most managers make decisions based on criteria in
levels 3 and 4.
 Company executives’ reasoning has wide implications
both inside and outside the organization.
Analyzing Ethical Problems in Business
The three approaches to ethical reasoning are powerful
tools for reasoning through ethical problems that occur in
business. It presents guidelines to: Identify and analyze the
nature of an ethical problem. Decide which course of
action is likely to produce an ethical result.
Three Approaches to Ethical Reasoning
Utilitarian - Compares benefits and costs of a decision,
policy or action. Costs and benefits can be economic,
social or human.
Rights - Person or group is entitled to something or to be
treated in a certain way. Examples of basic human rights
are right to life, safety, and due process.
Justice - Means benefits and burdens are distributed
equally, according to some accepted rule.
Applying Ethical Reasoning to Business Activities
Can use the Utility, Rights and Justice framework as a tool
to analyze real business ethics dilemmas.
For each possible action or decision, ask the three critical
questions. If all the answers are “Yes”, the proposed action
is ethical.
If all the answers are “No”, the action is not ethical and
needs to be reconsidered.
If “Yes” and “No” answers are mixed, you must decide
which takes priority.