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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
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 open and free competition
without deception or fraud.
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Corporate Governance
Carroll’s 4 Responsibilities
–Economic
–Legal
–Ethical
–Discretionary
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Carroll’s 4 Responsibilities
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Corporate Stakeholders
Affect or are affected by the
achievement of the corporation’s
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 corporation’s 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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Kohlberg’s Levels of Moral Development
1. Preconventional level
–Characterized by a concern for self
•Personal interest
•Avoidance of punishment
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Kohlberg’s Levels of Moral Development
2. Conventional level
–Characterized consideration of society’s values
•External code of conduct
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Kohlberg’s 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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