Good Governance & Social Responsibility (Midterms)

Ethical Issues in Business

Abusive or Intimidating Behavior, Bullying, Lying, Conflict of Interest, Fraud, Discrimination, Sexual Harassment

Types of Fraud

Accounting Fraud, Marketing Fraud, Consumer Fraud

The managerial or political tasks

Any society or community requires institutions and systems to identify and implement policy for the group and related agencies to arbitrate systems and assess conflicting demands or expectations. The society is likely to interact with other communities; institutions are required to manage these relationships. Government, political parties, the law, and the military perform these tasks.

Distribution Function

As goods produced are meant for sale, distribution function is an important business activity. The process of making a product or service available for the consumer or business user who needs it. This can be done directly by the producer or service provider, or using indirect channels with distributors or intermediaries.

Be consistent

Be sure that everyone in your organization knows what your CSR strategy and goals are and that everyone can express them consistently to one another — and to the general public. Your CSR efforts are multiplied when everyone in your company has a clear understanding of his or her role and is completely aligned with the program.

Maximizing cash flows

Cash flow is not the same as profit and an organization needs cash to survive. In some circumstances this cash flow may be more important than profit because the lack of cash can threaten the survival of the organization.

Identify the ethical issues

Ethical issues exist, in a broad sense, whenever one's actions affect others. In the workplace, a manager's decisions might affect employees, customers, suppliers, creditors and shareholders.

Use ethical reasoning to decide on a course of action

Ethical reasoning skills are essential to making ethical decisions.

Identify alternative courses of action

Every dilemma affords more than just one opportunity. The cautious handling of workplace ethics issues can resolve personal and business dilemmas. By identifying the alternatives, the next step can take place.

Profit maximization

For organizations which exist to make a profit it seems reasonable that they should seek to make as large a profit as possible. It is not however always clear what course of action will lead to the greatest profit, and it is by no means clear whether profit maximization in the short term will be in the best interests of the business and will lead to the greatest profit in the longer term.

Dealing with Ethical Issues

Identify the ethical issues, Identify alternative courses of action, Use ethical reasoning to decide on a course of action

Simplify

In developing and implementing a CSR strategy, simpler is usually better

Investor Loyalty

Investors look at a corporation's bottom line for profits or the potential for increased stock price. To be successful, relationships with stockholders and other investors must rest on dependability, trust, and commitment.

Social responsibility applies to all types of business

It is important to recognize that all businesses−small and large, sole proprietorship and partnerships, as well as large corporations−implement social responsibility initiatives to improve their relationships with their customers, employees, and their community at large.

Development of an Effective CSR Strategy

Know thyself, Get a good fit, Be consistent, Simplify, Work from the inside out, Know your customer, Tell your story,

Social responsibility fulfills society's expectations

Many people believe that business should accept and abide by four types of responsibility: economic, legal, ethical, and philanthropic.

Purchasing Function

Materials required for production of commodities should be procured on economic terms and should be utilized in efficient manner to achieve maximum productivity. This function of the entity helps support other businesses, thereby improving economic activity in general.

Implied falsity

Means that the message of the advertisement has the tendency to mislead, confuse, or deceive the public. It doesn't necessarily have to be false but it's not completely true either. This is illegal.

Salience Level

Non-Stakeholders, Latent, Expectant, Definitive

Stakeholder Analysis

One mechanism for understanding stakeholders and their potential effect to a firm involves a tool called the salience model.

Coercive Power

Plainly stated, this is a physical power. It incorporates the use of violence, force, physical threat, damage of property, restraint, to name a few.

Types of Stakeholders

Primary and Secondary Stakeholders

Possible Objectives of an Organization

Profit maximization, Maximizing cash flows, Maximizing return on capital employed, Maximizing service provision, Maximizing shareholder value, Growth, Long term stability, Satisficing

Three Categories of Misleading advertisements

Puffery, Implied falsity, Literal falsity

Business Functions

Purchasing Function, Production Function, Distribution Function, Accounting Function, Personnel Function, Research and Development Function, Economic Function,

Economic Function

Small and large businesses drive economic stability and growth by providing valuable services, products and tax money that directly contribute to the health of the community. Taxes are used, among other things, to maintain the infrastructure of a city, state or country - roads, bridges, tunnels, public transportation, libraries and other public buildings and services, including police officers and firefighters, all benefit from tax money collected from individuals and businesses.

Benefits of Social Responsibility

Some of the specific rewards of adopting social responsibility include increased efficiency in daily operations, greater employee commitment, higher product quality, improved decision making, increased customer loyalty, and improved financial performance

Urgency

Stakeholders exercise greater pressures on managers and organizations. This is based on two characteristics: time sensitivity and the importance of the claim to the stakeholder.

Basic Principles of Corporate Social Responsibility

Sustainability, Accountability and Transparency

Abusive or Intimidating Behavior

The concepts can mean anything from physical threats, false accusations, annoying a coworker, profanity, insults, yelling, harshness, and ignoring someone to being unreasonable; and the meaning of these words can differ by person

Societal Functions

The economic and production tasks, The maintenance tasks, The adaptive functions, The managerial or political tasks

Social responsibility requires a shareholder orientation

The final element of our definition involves those to whom an organization is responsible, including customers, employees, investors and shareholders, suppliers, governments, communities, and many others.

Get a good fit

The goals you select for your CSR strategy must fit your company and its products and services. For example,if your business is a boutique selling women's clothing, then actively supporting breast cancer research is a good fit.

Customer Satisfaction

The prevailing business philosophy about customer relationships is that a company should strive to market products that satisfy customers' needs through a coordinated effort that also allows the company to achieve its own objectives

Accounting Function

The purpose of this is to provide financial information to the stakeholders of the business: management, investors, creditors and/or the general public.

Long term stability

The survival of a business is of great concern to both owners and managers and this can lead to different behavior and a reluctance to accept risk

Lying

There are three major types of lies. The first includes joking without malice, and the so called white lie that is told in order to avoid hurting someone's feelings. The second type of lie is lying by commission, or creating a perception of belief by words that intentionally deceive the receiver of the message. The third type of lie, lying by omission, involves intentionally not informing the receiver of material facts. When lying damages others, it can be the focus of a lawsuit.

Primary Stakeholders

These are stakeholders whose continuous association is absolutely necessary for the firm's survival; these include employees, customers, investors, suppliers, and shareholders, as well as the governments and communities that provide necessary infrastructure.

Maximizing shareholder value

These assets can comprise partly of tangible assets such as plant and machinery or land and buildings and partly of intangible assets such as brand names

Latent

These entities possess only one of the three potential attributes. As such, they will be unlikely to affect any impact and likely to be uninterested in project. Similar to non- stakeholders, a latent stakeholder need not occupy much of your time. Nonetheless, they should be at least kept in mind as they do have a relationship to the organization.

Non-Stakeholders

These entities really aren't stakeholders as they possess none of the attributes of power, legitimacy, or urgency. It is a good idea to be aware of them as at some point, during the identification process, they were thought important enough to have been at least mentioned.

The maintenance tasks

These exist to hold the society together, maintain its stability and ensure its continuation. Most activities which are involves with transmitting and shaping knowledge and culture fall into this category. Education, religion, health and welfare service and some aspects of the media provide the clearest examples of the institutions which undertake these roles.

The economic and production tasks

These include land maintenance and food production, manufacture and distribution of goods and services and all tasks associated with the creation and maintenance of wealth. Farms, mines, manufacturers, distributors, retailers and the myriad of enterprises which make up the business and commercial world perform these and the related economic roles.

The adaptive functions

These provide the means by which the society responds to change. Research, the creative activities, even the means for shaping and managing debate or conflict undertake this. Universities (their research activities), research organizations and the arts are the clearest examples of this form of venture.

Secondary Stakeholders

These stakeholders do not typically engage in transactions with a company and thus re not essential for its survival; these include the media, trade associations, and special interest groups.

Puffery

This can be defined as the exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely. When it's obvious that the statement is meant to be not taken seriously. This isn't illegal.

Utilitarian Power

This involves monetary or material items of value and the use thereof for control purposes such as boycotts that affects a company's performance.

Ethical Formalism

This is a class of moral philosophy that focuses on the rights of individuals and on the intentions associated with the particular behavior rather than on its consequences. Ethical formalists regards certain behaviors as inherently right, and their determination of rightness focuses on the individual actor, not on society.

Maximizing return on capital employed

This is a measure of performance of a business in terms of its operating efficiency and therefore provides a measure of how a business is performing over time.

Accountability

This is concerned with an organization recognizing that its actions affect the external environment, and therefore assuming responsibilities for the effects of its actions. When an individual or department experiences consequences for their performance or actions

Utilitarianism

This is concerned with seeking the greatest good for the greatest number of people. Using a cost benefit analysis, a utilitarian decision maker calculates the utility of the consequences of all possible alternatives and then chooses the one that achieves the greatest utility through a calculus/weighting approach.

Sustainability

This is concerned with the effect of certain actions taken in the present has upon the options available in the future.

Accounting Fraud

This is the intentional manipulation of financial statements to create a false appearance of corporate financial health.

Marketing Fraud

This is the intentional misrepresentation or deceit during the process of creating, distributing, promoting and pricing products. False or misleading marketing communications can destroy customers' trust in a company

Maximizing service provision

This is the not-for-profit sector equivalent of maximizing the return on capital employed and thus provides a similar means of evaluating decisions.

Consumer Fraud

This occurs when consumers attempt to deceive businesses for their own gain. Involves intentional deception to derive an unfair economic advantage by an individual or group over an organization. Examples of fraudulent activities include shoplifting, collusion or duplicity, and guile.

Social responsibility adopts a strategic focus

This refers to the extent to which a firm embraces the philosophy of social responsibility by incorporating it into their company strategies, including mission and vision statements, core values, etc. and implementing it to produce actions and results. Social responsibility must be given the same planning time, priority, and management attention that is given to any other company initiative.

Personnel Function

This refers to the planning, coordinating, and controlling of a network of organization and facilitating work pertaining to recruitment, selection, utilization, development of human resources. This is the business function that provides job opportunities to the community.

Symbolic or Normative Power

This relies on the use of symbols that connote social acceptance, prestige or some other attributes

Growth

Through expansion of the business, in terms of both assets and earnings, and the increase in market share which the business holds is one objective which appeals to both owners and managers.

Expectant

When a stakeholder possesses two of the three attributes they are said to be expectant as they will anticipate influencing the project. Unlike the latent level, an expectant stakeholder becomes active and the quantity of effort applied to manage the expectations of such entities must be increased accordingly. Additionally, there is a possibility that an expectant entity will be looking for ways to achieve the missing third salience attribute. Specific understanding and planning are recommended for this level of stakeholder.

Definitive

When an entity possesses all three of the attributes they are then a definitive stakeholder and therefore highly salient and influential to the organization. In preparing your social responsibility plans the needs of definitive stakeholders must be explicitly mentioned.

Fraud

When an individual engages in deceptive practices to advance his or her own interests over those of the organization or some other group, charges of illegal fraud may result. In general,this is any false communication that deceives, manipulates, or conceals facts to create a false impression to damage others. It is considered a crime, and convictions may result in fines, imprisonment, or both.

Know your customer

When developing a CSR strategy, it's better to address the immediate needs of your customers before you try to solve all the problems of the world. These customer needs often boil down to the most basic of human needs: safety, love and belonging, self‐esteem, and self‐actualization. If you can address these customer needs, you'll have a customer for life.

Literal falsity

When the advertisement is stating that the product is something that's not. A product may state that's completely organic when it has artificial components or state that it can do something that it can't. This is obviously illegal.

Tell your story

When you have your CSR strategy in place, don't be afraid to publicize your efforts to be socially responsible along with your successes

Work from the inside out

Your CSR strategy isn't worth the paper it's written on if you haven't engaged your employees in the process of developing and implementing it. Instead of forcing a CSR strategy on your employees, invite their active participation in creating it and then rolling it out.

Know thyself

Your CSR strategy must be authentic and must ring true for your organization. The best way to ensure that this is the case is to closely match it to your company's mission, vision, and values. Employees, customers, and others will know when it's not authentic, and your CSR strategy won't have the desired effect.

Principles

are specific and pervasive boundaries for behavior that are universal and absolute. Often become the basis for rules.

Values

are used to develop norms that are socially enforced. Integrity, accountability, and trust are examples.

Transparency

as a principle, means that the external impact of the actions of the organization can be ascertained from that organization's reporting and pertinent facts are not disguised within that reporting

Stakeholders

as those people and groups to whom an organization is responsible−including customers, investors and shareholders, employees, suppliers, governments, communities, and many others−because they have a "stake" or claim in some aspect of a company's products, operations, markets, industry, or outcomes. Not only are these groups influenced by business, but they also have the ability to affect businesses.

Business ethics

comprises the principles and standards that guide the behavior of individuals and groups in the world of business. Most definitions of this relate to rules, standards, and moral principles regarding what is right or wrong in specific situations.

Conflict of Interest

exists when an individual must choose whether to advance his or her own interests, those of his or her organization, or those of some other group. To avoid, employees must be able to separate their private interests from their business dealings

Research and Development Function

includes activities that companies undertake to innovate and introduce new products and services. It is often the first stage in the development process. The goal is typically to take new products and services that will improve the company's performance as well as satisfy the demands of consumers.

Satisficing

is a decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution. a way of reducing risk and taking multiple objectives into account by making decisions which are acceptable from several viewpoints without necessarily being the best to meet any particular objective.

Sexual harassment

is a form of discrimination and is defined as any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another. It may be verbal, visual, written, or physical and can occur between people of different genders or those of the same sex

Legitimacy

is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions.

Bullying

is associated with a hostile workplace when someone (or a group) considered as a target is threatened, harassed, belittled, verbally abused, or overly criticized

Guile

is associated with a person who is crafty or understands right/wrong behavior but uses tricks to obtain an unfair advantage. The advantage is unfair because the person has the intent to go against the right behavior or end.

The Mission Statement

is essential for effectively establishing objectives and formulating strategies. The "what" and the "how"

Discrimination

is the act of making distinctions between human beings based on the groups, classes, or other categories to which they are perceived to belong

Trust

is the glue that holds organizations together and allows them to focus on efficiency, productivity and profits

Egoism

looks at each decision by considering the effects of a decision only as it relates to the individual decision-maker. It is a philosophy that defines right or acceptable conduct in terms of consequences for an individual. Most ethicists dismiss this method because it fails to consider the consequences on the stakeholders.

Duplicity

may involve a consumer staging an accident and then seeking damages against the company for its lack of attention to safety.

Production Function

occupies the dominant position in business activities and it is a continuous process. Generally, production is the transformation of raw material into the finished goods. These raw materials are classified as land, labor, capital or natural resources.

Power

refers to the extent that a stakeholder can gain access to impose or communicate its views to an organization in a coercive, utilitarian or symbolic manner.

The Vision Statement

should answer the basic question, "What do we want to become?". Provides the foundation for developing a comprehensive mission statement.

Employee commitment

stems from employees who believe their future is tied to that of the organization and are willing to make personal sacrifices for the organization

Social responsibility

the "adoption by a business of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic responsibilities expected of it by its stakeholders."

Collusion

typically involves an employee who assists the consumer in fraud.

The Salience Model

was first introduced in 1997 based on a study of existing literature of stakeholder management. The proponents defined a way of evaluating stakeholders that used three variable: power, legitimacy, and urgency.