Bài giảng Crafting and Executing Strategy - Chapter 9: Ethical Business Strategies, Social Responsibility, and Environmental Sustainability

Chapter 9: Ethical Business Strategies, Social Responsibility, and Environmental Sustainability Screen graphics created by:Jana F. Kuzmicki, Ph.D.Troy UniversityChapter Learning ObjectivesUnderstand why business conduct is judged according to the ethical standards of society at large rather than a special set of ethical standards for businesses only.Understand the principal drivers of unethical strategies and business behavior.Learn why unethical business conduct can be very costly for a company’s shareholders.Become familiar with the various approaches to managing a company’s ethical conduct.Gain an understanding of the concepts of corporate social responsibility, corporate citizenship, and environmental sustainability.Become familiar with both the moral case and the business case for ethical business conduct and socially responsible business behavior.Chapter RoadmapWhat Do We Mean by Business Ethics?Where Do Ethical Standards Come From – Are They Universal or Dependent on Local Norms and Situational Circumstances?The Three Categories of Management MoralityDrivers of Unethical Strategies and Business BehaviorWhy Ethical Strategies MatterApproaches to Managing a Company’s Ethical ConductSocial Responsibility and Corporate Citizenship StrategiesLinking Strategy to Ethicsand Social ResponsibilityShould there be a link between a company’s efforts to craft and execute a winning strategy and its duties toConduct activities in an ethical manner?Demonstrate socially responsible behavior byBeing a committed corporate citizen?Attending to needs ofnon-owner stakeholders?Limit its strategic initiatives to those meeting needs of consumers without depleting resources needed by future generations Key IssuesWhat Is Business Ethics?Business ethics involves applying general ethical principles and standards to behavior in business situations Ethical principles in business are not different from ethical principles in generalBusiness actions are judgedBy general ethical standards of societyNot by a set of rules businesspeopleapply to their own conduct How Do Ethical Standards Impact the Tasks of Crafting and Executing Strategy?Two sets of questions must be considered by senior executives when reviewing a new strategic initiativeIs what we are proposing to do fully compliant with our code of ethical conduct? Is there anything here that could be considered ethically objectionable?Is it apparent that this proposed action is in harmony with our core values? Are any conflicts or concerns evident? The litmus test of a company’s code of ethics isthe extent to which it is embraced in crafting strategy and in operating the business day to day!Are Ethical Standards Universal or Dependent on Local Norms?Three schools of thought regarding extentto which ethical standards can be applied . . . Ethical UniversalismEthical RelativismIntegrative Social Contracts TheoryConcept of Ethical UniversalismAccording to the school of ethical universalism . . . Same standards of what is ethical andwhat is unethical resonate with peoplesof most societies regardless ofLocal traditions andCultural normsThus, common ethical standards can be used to judge conduct of personnel at companies operating in a variety ofCountry markets andCultural circumstancesExamples of UniversalEthical Principles or NormsHonestyTrustworthinessRespecting rights of othersPracticing the Golden RuleTreating people with dignity and respectExercising due diligence in product safetyActing in a manner that does notHarm others orPillages the environmentWhat Is the Appealof Ethical Universalism?Draws on collective views of multiple societies and cultures to place clear boundaries on what constitutesEthical business behavior andUnethical business behaviorRegardless of what country acompany is operating inWhen basic moral standards do not vary significantly from country to country, a multinational company canApply a code of ethics more or less evenly across its worldwide operationsConcept of Ethical RelativismAccording to the school of ethical relativism . . . Different societies/cultures/countriesPut more/less emphasis on some values than others Have different standards of right and wrongHave different social moresand behavioral normsWhat is ethical or unethicalMust be judged in light of localcustoms and social mores andCan vary from one country to another In some countries the payment of bribes and kickbacks is normal and customary; in other countries such payments are illegal Companies forbidding payment of bribes in their codes of ethics face a formidable challenge in countries where such payments are entrenched as a local customForeign Corrupt Practices Act prohibits U.S. companies from paying bribes in all countries where they do business even if such payments are customary Payment of Bribes and KickbacksEthical Relativism =Multiple Sets of Ethical StandardsProponents of the ethical relativism school maintain there are Few ethical absolutes to judge a company’sconduct in various countriesPlenty of situations where ethicalnorms are contoured to fitLocal customs and traditionsLocal 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 questionDrawbacks of Ethical Relativism The ethical relativism rule of “when in Rome, do as the Romans do” presents problemsCannot assume that local ethical standards are an adequate guide to ethical behaviorWhat if local standards condonekickbacks and bribery?What if local standards don’t requiresafe working conditions?What if local custom is to permit companies to engage in egregious pollution of the environment?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 companywideConcept of IntegrativeSocial Contracts TheoryAccording to the integrative social contracts theory, the ethical standards a company should try to uphold are governed by bothA limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situationsandThe circumstances of local cultures,traditions, and shared values that further prescribe what constitutesEthically permissible behavior andWhat does notAppeal of IntegrativeSocial Contracts TheoryUniversal ethical principles establish “moral free space” based on the collective view of multiple societies and culturesCommonly held views about morality and ethical principles combine to form a “social contract” with societyIt is appropriate for societies or companies to go beyond universal ethical principles and specify local or second-order ethical normsWhere firms have developed ethical codes, the standards they call for provide appropriate ethical guidanceSocial contracts theory maintains adherence touniversal or first-order ethical norms should alwaystake precedence over local or second-order norms!Three Categories of Management MoralityManagers that are moralManagers that are amoral Managers that are immoralThe three types of managers as concerns ethical and moral principles9-17Dedicated to high standards of ethical behavior inOwn actionsHow the company’s business is to be conductedConsiders it important toBe a steward of ethical behaviorDemonstrate ethical leadershipPursues business successWithin confines of both letter and spirit of lawsWith a habit of operating well above what laws requireCharacteristics of a Moral ManagerCharacteristics of an Immoral ManagerActively opposes ethical behavior in businessWillfully ignores ethical principles in making decisionsViews legal standards as barriers to overcomePursues own self-interestsIs an example of self-serving greedIgnores interests of othersFocuses only on bottom line –making one’s numbersWill trample on others to avoid being trampled uponBelieves business and ethics should not be mixed since different rules apply toBusiness activitiesOther realms of lifeBelieves if a business-related action is legal then it is OK; ethical considerations in business activity don’t matter and lie outside sphere of moral judgmentViews ethical considerations as inappropriate for tough, competitive business worldConcept of right and wrong islawyer-driven (what can we get bywith without running afoul of the law)Characteristics of anIntentionally Amoral ManagerIs blind to or casual about ethics ofdecision-making and business actionsDisplays lack of concern regardingwhether ethics applies to company actionsSees self as well-intentionedor personally ethicalTypical beliefsDo what is necessary to comply with laws and regulationsGovernment provides legal framework stating what society will put up with—if it is not illegal, it is allowedCharacteristics of an Unintentionally Amoral ManagerMany Managers in the Global Business Community Are UnethicalEvidence indicates a sizable majority of managers are eitherAmoral orImmoralResults of recent issues of the Global Corruption Report indicate corruption is widespread across the worldCorruption extends beyond bribes and kickbacksTable 9.1: Corruption Perceptions Index (CPI), Selected Countries, 20079-23What Are the Drivers of Unethical Strategies and Business Behavior?Large numbers of immoraland amoral business peopleOverzealous pursuit of personal gain, wealth, and other selfish interestsHeavy pressures on company managersto meet or beat earnings targetsCompany cultures that place profits andgood performance ahead of ethical behavior9-24People obsessed with wealth accumulation, greed, power, status, and other self-interests oftenPush ethical principles aside in theirquest for self gainExhibit few qualms in Skirting the rules orDoing whatever is necessaryto achieve their goalsEngage in all kinds of unethicalstrategic maneuvers and behaviors Overzealous Pursuit of Personal Gain, Wealth, and Selfish InterestsManagers often feel enormous pressure to do whatever it takes to deliver good financial performanceActions often taken by managersCut costs wherever savings show up immediatelySqueeze extra sales out of early deliveriesEngage in short-term maneuvers to make the numbersStretch rules to extreme, until limits of ethical conduct are overlookedExecutives feel pressure to hit performance targets since their compensation depends heavily on company performanceFundamental problem with a “make the numbers” syndromeCompany does not create additional value for customers or improve its competitivenessHeavy Pressures on Company Managersto Meet or Beat Earnings TargetsCompany Cultures that Put BottomLine Ahead of Ethical BehaviorIn an ethically corrupt or amoral work climate, people have a company-approved license toIgnore “what’s right”Engage in most any behavior or employ mostany strategy they think they can get away withPressures to conform to cultural norms can prompt otherwise honorable people toMake ethical mistakesSuccumb to the many opportunitiesto engage in unethical practicesWhy Ethical Strategies MatterAn unethical strategyIs morally wrongReflects badly on the character of company personnelAn ethical strategy isGood businessIn the best interest of shareholdersCharacteristics of Managers Committedto Ethical Approaches to Strategy-Making Possess strong moral character and deeply-ingrained ethical convictionsAre genuinely committed to certain core values and business practicesPush for and support adoption of values statements/ethics codes that truly paint the white lines for a company’s business practicesInsist on strict ethics compliance Expect company personnel to practice/display corporate valuesAre a role model and walk the talk inDisplaying a company’s stated core valuesLiving up to high ethical standardsConsciously opt for strategic actions passing moral scrutinyFigure 9.1: The Business Costs of Ethical Failures9-30Test Your KnowledgeWhich one of the following is false when it comes to making a case for why a company’s strategy should be ethical? A. An unethical strategy can put a company’s reputation at risk and do lasting damage, especially when the misdeeds get into the public spotlight and make media headlines. B. An ethical strategy is in the best interest of shareholders. C. An unethical strategy reflects badly on the character of the company personnel involved. D. Shareholders profits are not greatly reduced by using ethical strategies.E. A strategy that is unethical in whole or in part is morally wrong.Unconcerned or Nonissue ApproachDamage Control ApproachCompliance ApproachEthical Culture ApproachApproaches to Managing a Company’s Ethical Conduct9-32Table 9.2: Four Approaches to Managing Business Ethics9-33What Is Corporate Social Responsibility?The thesis underlying the concept of corporate social responsibility is that a company has a duty to Be a good corporate citizenMake a positive contribution to society, and Actively work to improve the well-being of all stakeholdersEmployeesLocal communitiesEnvironmentCustomers and suppliersSociety at largeWhat Does Acting in a Socially Responsible Manner Entail?The consensus view is that acting in a socially responsible manner means that a company shouldOperate in an ethical and honorable mannerProvide good working conditions for employeesBe a good steward of the environmentActively work to better quality of life inLocal communities where it operates andSociety at largeFigure 9.2: Demonstrating a Social Conscience: The FiveComponents of Socially Responsible Business Behavior9-36What Is a Social Responsibility Strategy?A company’s social responsibility strategy consists of its actions to improve the well-being of all its stakeholder and to be a good corporate citizen its contributions ofTimeMoneyOther resources 9-37What Is an Environmental Sustainability Strategy?A company’s environmental sustainability strategy consists of its actions toProtect the environment,Provide for the longevityof natural resources,Maintain ecological supportsystems for future generations, andGuard against ultimate endangermentof the planet.9-38Businesses should promote the betterment of society, acting in ways to benefit all their stakeholders because“It’s the right thing to do!”Based on an implied social contract, societyGrants a business the right toconduct its business affairsAgrees not to unreasonably restraina firm’s pursuit of a fair profitIn return for a “license to operate,”a business shouldAct as a responsible citizenDo its fair share to promote the general welfareMoral Case: Corporate Social Responsibility and Environmentally Sustainable Business PracticesBusiness Case: Socially Responsible Behavior and Environmentally Sustainable Business PracticesGenerates internal benefitsEnhances recruitment of quality employeesIncreases retention of employeesImproves employee productivity Lowers costs of recruitment and trainingReduces risk of reputation-damagingincidents, leading to increased buyer patronageWorks in best interest of shareholdersMinimizes costly legal and regulatory actionsProvides for increased investmentsby socially conscious mutual fundsand pension benefit managersFocusing on environment issuesmay enhance earningsConsiderations in Crafting Social Responsibility and Sustainability StrategiesMatch social responsibility/sustainability strategy toCore valuesBusiness missionOverall strategyMake social responsibility and/or environmentally sustainability a part of the company’s mission and cultureHave explicit social responsibility and/or environmentally sustainability objectivesStrive to craft socially responsible and sustainability strategies that will help the company achieve a competitive advantage