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There is one and only one social responsibility of business to 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 free and open competition, without deception or fraud.
Milton Friedman
Nobel Prize-winning Economist
Chapter Roadmap
What Do We Mean by Business Ethics?
Behavior
Why Ethical Strategies Matter Approaches to Managing a Companys Ethical
Conduct
Social Responsibility and Corporate Citizenship
Strategies
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companys efforts to craft and execute a winning strategy and its duties to
Conduct activities in an ethical manner? Demonstrate socially responsible behavior by Being a committed corporate citizen? Attending to needs of non-owner stakeholders?
How Do Ethical Standards Impact the Tasks of Crafting and Executing Strategy?
Two sets of questions must be considered by
Ethical Universalism
Ethical Relativism
universalism . . .
Same standards of what is ethical and what is unethical resonate with peoples of most societies regardless of
Trustworthiness
Respecting rights of others Practicing the Golden Rule Treating people with dignity and respect Exercising due diligence in product safety
significantly according to local cultural beliefs, traditions, or religious convictions, a multinational company can
Apply a code of ethics more or less evenly across its worldwide operations
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relativism . . .
Different societies/cultures/countries
Have different standards of right and wrong Have different social mores
and behavioral norms
by multinational companies
Degree of cross-country variability in paying bribes as part of business transactions
their codes of ethics face a formidable challenge in countries where payments are entrenched as a local custom
Foreign Corrupt Practices Act prohibits U.S.
Local customs and traditions Local beliefs about what is fair Local standards of right and wrong Ethical problems in business cannot be fully resolved without appealing to the shared convictions of the parties in question
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From a global markets perspective, ethical relativism results in a maze of conflicting ethical standards for multinational companies wanting to address the issue of what ethical standards to enforce companywide 8-17
contracts theory, the ethical standards a company should try to uphold are governed by both
A limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations and The circumstances of local cultures, traditions, and shared values that further prescribe what constitutes
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space based on the collective view of multiple societies and cultures Commonly held views about morality and ethical principles combine to form a social contract with society It is appropriate for societies or companies to go beyond universal ethical principles and specify local or second-order ethical norms Where firms have developed ethical codes, the
standards they call for provide appropriate ethical guidance Social contracts theory maintains adherence to universal or first-order ethical norms should always take precedence over local or second-order norms!
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Moral manager
Immoral manager
Amoral manager
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behavior in
Own actions
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decisions
Views legal standards as barriers to overcome
upon
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own actions since business activity lies outside sphere of moral judgment Views ethics as inappropriate for tough, competitive business world Concept of right and wrong is lawyer-driven (what can we get by with without running afoul of the law)
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or personally ethical
Typical beliefs
Do what is necessary to comply with laws and regulations Government provides legal framework stating what society will put up withif it is not illegal, it is allowed
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Immoral
Results of recent issues of the Global
kickbacks
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whatever it takes to deliver good financial performance Actions often taken by managers
Cut costs wherever savings show up immediately Squeeze extra sales out of early deliveries Engage in short-term maneuvers to make the numbers Stretch rules to extreme, until limits of ethical conduct are overlooked
since their compensation depends heavily on company performance Fundamental problem with a make the numbers syndrome
Company does not create additional value for customers or improve its competitiveness
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Engage in most any behavior or employ most any strategy they think they can get away with
Pressures to conform to cultural norms
characteristics Strongly advocate a corporate code of ethics and strict ethics compliance Display genuine commitment to certain corporate values and business practices Walk the talk in
Displaying a companys stated values Living up to ethical business principles and
standards
paint the white lines for a companys business practices Consciously opt for strategic actions passing moral scrutiny
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Compliance Approach
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are immoral and unintentionally amoral Notions of right and wrong in business matters are defined by government via prevailing laws and regulations after that, anything goes If the law permits unethical behavior, why stand on ethical principles Companies are usually out to make greatest possible profit at most any cost Strategies used, while legal, may embrace elements that are ethically shady
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intentionally amoral but who fear scandal May adopt a code of ethics as windowdressing Adept at using spin to explain away the use of unethical strategy elements or discount the impact of shady actions Executives look the other way when shady behavior occurs Executives may condone questionable actions that help a company reach earnings targets or bolster its market standing
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clear signal that complying with ethical standards must be taken seriously Commitment to eradicate unethical behavior stems from a desire to
Avoid cost and damage associated with unethical conduct or Gain favor from stakeholders from having a highly regarded reputation for ethical behavior
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compliance
Install ethics hotlines to help detect and deter
violations
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actions to benefit shareholders against the duty to be a good corporate citizen Socially responsible behaviors go beyond
Complying with legal requirements and Corporate philanthropy activities
actions to earn trust and respect of stakeholders for efforts to improve the well-being of
Employees Local communities Environment Customers Society
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Figure 9.2: Demonstrating a Social Conscience: The Five Components of Socially Responsible Business Behavior
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A companys specific combination of socially beneficial and community citizenship activities it opts to support via contributions of
Time,
Money,
Other resources.
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Triple-P performance
People
Planet
Profit Convey beneficial outcomes via Press releases Special sustainability reports for stakeholders
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Redesigned packaging for many products to conserve natural resources and reduce volume of consumer waste
Addressed societal needs of consumers in developing countries
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strategies a company pursues impacts its ability to achieve a competitive advantage Management should match a companys social responsibility/sustainabilty strategy to its
Core values Business mission Overall strategy
Moral Case: Corporate Social Responsibility and Environmentally Sustainable Business Practices
Businesses should promote the betterment of
a business should
Act as a responsible citizen Do its fair share to promote the general welfare
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Business Case: Socially Responsible Behavior and Environmentally Sustainable Business Practices
Generates internal benefits Enhances recruitment of quality employees Increases retention of employees Improves employee productivity Lowers costs of recruitment and training Reduces risk of reputation-damaging