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Kardell Paper Who are Kardell’s stakeholders? Are their claims equally important? What factors would you suggest the Board consider in its decision? Did the Board make any mistakes? Why? Apply moral imagination for a better decision? Senior Salary Cases Eleanor Clitheroe – Hydro One Jack Welch – GE $2 million/$6 million golden parachute $300,000 nanny costs, $40,000 reno., 7 clubs NY Central Park condo, company jets $2 million payback per year Ken Lay – Enron $141 million, $10 cash, $131 stock options Stock options have “no cost” Betaseron (A) Case Three Problems Pricing Distribution Supply Stakeholder Identification & Interests POWER LEGITIMACY Dynamic Influence URGENCY Ranking Stakeholder Interests Most offensive to values: decision maker corporate local country consumer markets capital markets Most vulnerable Most concern to public/press Stakeholder Impact Analysis Should a proposed action be taken? Sniff tests…mom, paper… If it smells, then... 5 Questions: Is Is Is Is Is it it it it it profitable? legal? fair? right? sustainable? If not …Modify …Moral Imagination Stakeholder Impact Analysis CHALLENGES FOR PROPOSED ACTION: Profitable? Legal? Fair? Right? Sustainable? TYPICAL FLAWS ENCOUNTERED: Short run Only test? To all? Personal+ Optional No modification EDM: Moral Standards Approach Three Challenges: M. Velasquez Individual rights impact Justice (fairness) impact Utilitarian impact Maximize social benefits & minimize social injuries Net benefit to society as a whole Cost-benefit analysis (CBA) Cost-Benefit Analysis Maximize Net Present Value (NPV) NPV = P.V. of Benefits – P.V. of Costs for each option Example: JM Co in text JM Co. Ltd. Pollution Control Equipment Protecting Workers Benefits (PV at 10%) Reduction in worker health costs borne by society $500,000 Increase in worker productivity 200,000 Improve. earnings of scholarship recipients $700,000 Costs (PV at 10%) Pollution Equipment 350,000 Scholarships paid Net Benefits $350,000 Benefit/cost ratio 2/1 University Admission Scholarships $600,000 $600,000 400,000 $200,000 3/2 EDM: Mark Pastin’s Approach Ground rule ethics - organization’s values End-point ethics Risk-benefit analysis (CBA+) End-point ethics Rank stakeholders Identify ethical alternatives Intangible factors included Rule ethics Social contract ethics The Ford Pinto Case Benefits: Savings 180 Burn Deaths $200,000 each 180 Serious Burn Injuries 67,000 “ 2,100 Burned Vehicles $36,000,000 12,060,000 1,470,000 $49,530,000 Costs: 11 Million Cars 1.5 Million Light Trucks $11 each $11 “ $121,000,000 16,500,000 $137,500,000 Issues: looking forward, valuing intangibles, moral imagination Fundamental Challenges Well-offness Fairness More benefits than costs Of distribution of benefits & burdens Right No offence to stakeholders &/or decision maker All three must be satisfied Diagnostic Typology of Organizational Stakeholders Stakeholder’s Potential for Threat Low High Stakeholder’s High Potential For Cooperation With Organization Low Type 4 Type 1 Mixed Blessing Supportive Strategy Strategy Collaborate Involve Type3 Type 2 Nonsupportive Marginal Strategy Strategy Defend Monitor Source: G. Savage et al, “Strategies for assessing and managing organizational shareholders”, The Executive 5, no. 2 May), 1991, 65. Microsoft Antitrust Case Predator or Fierce competitor? Found guilty of antitrust violations, 11/5/98 Forcing OEM PC makers to take Windows/Explorer package. 95% of market for PC operating systems Significant barriers to entry Lack of viable alternatives Also guilty on appeal, 6/01 Government changed, refused to split Microsoft into 2 parts Stakeholder management analysis using the Savage model. Source: Business Ethics, 3e, by Joseph Weiss, South-Western, 2003, 31-32. High Stakeholder’s Potential for Threat Low High Low Stakeholder’s Potential For Cooperation Diagnostic Typology of Stakeholders for Microsoft Corporation Type 4 Type 1 Mixed Blessing Supportive Strategy: Collaborate Strategy: Involve Many Customers Employees Suppliers, Trade Associations Shareholders, Many Customers Type3 Type 2 Nonsupportive Marginal Strategy: Defend Federal & /State Gov., AOL Sun Microsystems, 18 states Netscape& Spyglass Strategy: Monitor OEMs, ISPs, OLS, ICPs Media, Apple(OS), IBM (OS/2)