Download Strategy and Ethics

Strategy and Ethics
 Ethics involves notions of
 Right and wrong
 Fair and unfair
 Moral and immoral
 Business Ethics is the application of general
ethical principles and standards to the actions and
decisions of business organizations and the
conduct of their personnel
 Ethical principles in business are not materially
different from ethical principles in general
 Business actions are judged by the general
ethical standards of society
 Legal versus Ethical Behavior
Business Ethics in the Global Community
 Some notions of right and wrong are universal while others
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are not (universalism vs. relativism)
Cross-culture variability in ethical standards
Determining what is ethical when local standards vary
Managers have to figure out how to navigate the gray zone
when cross-culture ethics differ
Should adhere to higher standard(s)
3 Schools of Thought
 Ethical Universalism
 Ethical Relativism
 Integrative Social Contracts Theory
Ethical Universalism
 Ethical Universalism
 The most important concepts of what is right
and wrong are universal and transcend culture,
society, and religion
 Results in a set of universal ethical standards
that apply to members of all societies, all
companies, and all businesspeople
 Sets limits and puts boundaries on ethical
behavior
Ethical Relativism
 Ethical Relativism
 Differing religious beliefs, customs and
behavioral norms across countries and cultures
give rise to multiple sets of standards
concerning what is ethically right or wrong
 What is ethical or unethical depends on the
prevailing local ethical standards and can vary
from one nation to another
 There can be multiple sets of ethical standards
 There is no one-size-fits-all set of ethical norms
Integrative Social Contracts Theory
 Integrative Social Contracts Theory
 Provides a middle position
 The ethical standards a company should try to
uphold are governed by both:
 A common or universal set of ethical
standards that apply everywhere
 Ethical standards that vary according to
local custom (i.e., cultures, traditions, and
shared values)
 The more stringent standards should always
take precedence
Three Categories of Management Morality
 Moral Managers
 Are dedicated to high standards of
ethical behavior both personally and on
the part of their organizations
 Immoral Managers
 Are actively opposed to or have no
regard for ethical standards in business
behavior
 Amoral Managers
 Do not pay attention or are blind to
business ethics or believe that business
and ethics don’t mix
Drivers of Unethical Strategies and Business
Behavior
 Apparent pervasiveness of immoral and
amoral business people
 Confusion over conflicting ethical standards
 Faulty oversight that allows for the
overzealous pursuit of personal gain, wealth,
and self interest
 Heavy pressures to beat earnings targets
 Unethical company cultures
Approaches to Managing a Company’s
Ethical Conduct
 Unconcerned or nonissue approach
 Do what is legal; do what we can get away with
 Damage control approach
 Prevent adverse publicity; use window dressing
 Compliance approach
 Put a compliance system in place to control ethical
behavior
 Ethical culture approach
 Use culture and peer pressure to control ethical
behavior
Why Should Company Strategies Be Ethical?
 An unethical strategy is morally wrong and reflects
badly on the company
 Puts reputation at risk and can have costly
consequences
 Time consuming and costly to rehab reputation
 May be shunned by customers
 Makes it difficult to recruit and retain employees
 An ethical strategy is good business and is in the
self-interest of shareholders
Strategy and Corporate Social Responsibility
 Companies should balance strategic actions to benefit
shareholders against the duty to be a good corporate
citizen
 Should consider the effect that company actions will have
on:
 Employees
 Local communities
 The environment
 Society at large
 Companies must demonstrate a social consciousness
What is Meant by Corporate Social
Responsibility?
 5 Components of Socially Responsible Business Behavior
Linking Strategy and Social Responsibility
 There is no generic approach linking strategy
and social responsibility
 Social Responsibility Strategy - the
particular combination of socially responsible
endeavors a company elects to pursue
 Social responsibility must be rooted in the
company and it’s values
 Each company’s version of being socially
responsible is unique
The Moral and Business Case for CSR
 It’s the right thing to do
 Corporations have a duty to be good corporate
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citizens
A business is obligated to act as a responsible
citizen and do its fair share to promote the general
welfare
Should act in the overall best interests of society as
well as shareholders
It generates internal benefits
It reduces the risk of reputation-damaging incidents
and can lead to increased buyer patronage
Linking a Company’s Strategy to Its Ethical
Principles and Core Values
 Vision/Mission
 Code of ethics
 Core values and a values statement
 Culture - perspective
 Should not be window dressing
 Communication
 Leading by example
 Should influence and be part of strategy