Business Ethics Quiz 2

Ethical issues with community stakeholders

"quality of life" issues are often principles of focus; health, safety, and environment are heavily valued; transparency of information and communications are key

people follow group norms

- Rationalizing unethical behavior - Pressure to go along - Practical advice for managers - Be aware of group norms - Consider whether the reward system implicitly rewards misconduct

underlying assumptions

-managers want to be ethical -managers want their subordinates to be ethical -based on their experience managers will have insight into the unique ethical requirements of the job

The Stakeholder Analysis Tool

1) Identify specifics of action / project and key goals and milestones. 2) Identify key stakeholder groups that could affect success of the outcome. 3) Identify interests and expectations of stakeholders as positive and negative. 4) Identify the level of importance of each stakeholder. 5) Identify actions needed to meet interests and expectations of stakeholders.

7 Habits of Moral Managers

1) have a passion to do right 2) morally proactive 3) consider all stakeholders 4) have a strong ethical character 5) have an obsession with fairness 6) undertake principled decision making 7) integrate ethics wisdom with management wisdom

Two leadership styles

1) transactional leaders 2) transformational leaders

Three Models of Corporate Social Responsibility

Business Case Model; Social Values-Let Model; Syncretic Stewardship Model

strategic CSR

CSR is integrated into decision-making processes; sees social needs as opportunities for better business; innovative and entrepreneurial in its focus

transformational CSR

CSR is viewed as a transformative opportunity for a company; deeply oriented toward stakeholders and long-term sustainability; aligns activities with transformations of stakeholders; e.g. virtual universities

Business Case Model

Corporate social responsibility is a means to generate financial results; enhancement of competitive advantage; broader appeal of products or services; address potentially hostile stakeholder threats

Ethical issues with Customer Stakeholders

Manufacturing process: are products safe? is the quality reasonable? Sales and quotes: are prices and quotes accurate? is the information provided misleading? Distribution: are the same items that are ordered received? is there a difference quality from samples/models? Customer service: are guarantees and promises honored? are complaints dealt with in a timely and transparent manner?

Triple Bottom Line Reporting

Measuring the social, environmental, and economic performance of a company; "People, Planet, Profits"

Two Pillars of Ethical Leadership

Moral Person possesses certain traits Moral Manager role models through visible action, rewards and disciplines, and communicates about ethics and values

Hosmer's Model of Trust, Commitment and Effort

Recognition of Moral Problem: What is our duty? Application of Moral Reasoning: What is right? Possession of Moral Courage: What is integrity?

people do what they're told

Research: the "shocking" Milgram experiment; Practical advice for managers - stop and think hard when an authority figure asks you to do something that could harm another or seems wrong in another way—think for yourself; recognize the power managers hold as legitimate authority figures; use this power to set high ethical standards; encourage employees to question manager if they think something is wrong

Premise of the Shareholder Model

Shareholders invest money into the corporation, and elect a Board of Directors who then appoint corporate officers. Shareholders have voting rights. The Board oversees officers. Corporate officers are obligated to maximize profit on behalf of owners (in "legal and non-deceptive ways.") The primary emphasis is on meeting fiduciary obligations. Social benefit: Adam Smith's "invisible Hand" argument

Justification for Milton Friedman's "The Social Responsibility of Business is to Increase its Profits"

Social responsibilities are the shared values of individuals. Social responsibility may imply acting agains interests of the owners by spending money in ways that do not see their interests - this is a type of taxation. Executives are experts in running businesses, not making social decisions. Businesses should use resources and earn profits within the boundaries of the rules for conducting business and promote open and free competition. Social responsibility is ultimately the domain of government and individuals.

Types of stakeholders and Courses of Action

Supportive Marginal Non-supportive Mixed-blessing

a right

a legal claim or a moral right such as fairness, justice, or equity

ethical aspect of corporate social responsibility

a part of society, we have the responsibility to behave ethically and to contribute to the greater good

secondary stakeholders

also sometimes divided into social and nonsocial categories; are characterized by indirect interests but often exert great influence

Stake

an interest or share in a undertaking

an interest

anyone affected by a decision has an interest in it

Companies which act only to maximize profits

are likely to engage in unethical behavior

Milton Friedman's "The Social Responsibility of Business is to Increase its Profits"

argues that individuals have social responsibilities, but not businesses

Leapfrogging

as certain CEOs are offered excessively high levels of compensation, other companies adjust their compensation packages to accommodate these increases

strategic aspect of corporate social responsibility

being socially responsible creates shared value and can differentiate one from competitors; when society prospers, business prospers

inclusiveness and stakeholder culture

build a stakeholder through inclusiveness; cooperate with stakeholder interests; include stakeholders in decision-making processes; be transparent in giving relevant information to stakeholders

transformational leadership

causes authentic change in followers, ultimately turning followers into leaders The Four I's

contingent rewards

certain tasks lead to certain rewards

primary stakeholders

characterized by frequent interaction

secondary stakeholders

characterized by public perceptions

Stakeholder Model

companies are viewed as members of the moral community

Syncretic Stewardship Model

comprehensive stakeholder perspective; encourage feedback and information flow between stakeholders; actions and philosophy are intertwined; integral to vision, mission, goals and processes of company

Stakeholder Perspective

considering the interests and opinions of all people, groups, organizations, or systems that affect or could be affected by the organizations actions

punishment

critical part of a manager's job; must be administered fairly; recognize punishment's indirect effects

examples of primary stakeholders

customers, employees, investors, suppliers, local communities, government agencies

Urgency

degree to which the claim of the stakeholder demands an immediate attention or response; e.g. an impending employee strike

Non-supportive Stakeholder

e.g. competitors, unions, governments, activists; high threat / low cooperation; negotiate, defend

Mixed-blessing Stakeholder

e.g. employees, clients, customers; high threat / high cooperation; collaborate, partner, keep informed

Marginal Stakeholder

e.g. professional associations, interest groups; low threat / low cooperation; monitor

Supportive Stakeholder

e.g. some employees, Board of Directors; low threat / high cooperation; involved, accommodating, keep satisfied

role model effect

employees will copy the substance and style of top management; "trickle-down effect" of ethical behavior on an entire organization

immoral manager

focuses on maximizing profits and meeting business goals; may be viewed positively and rewarded by superiors; legal standards are viewed as a barrier to success; exploit opportunities for personal or corporate gain; exhibit little or no concern for stakeholders;

examples of secondary stakeholders

government and regulators, civic institutions, social pressure / activist groups, media and academics, trade bodies, competitors, environmental interest groups, animal welfare organizations

Ethical issues with Government Stakeholders

government will establish rules and regulations of laws and expect compliance; non compliance can result in fines or imprisonment; unethical actions often create the demand for additional laws and regulations, and result in additional compliance issues

CEO Compensation

heavily tied to stock price -CEO has moderate control over stock price but not absolutely * higher stock-based compensation leads to higher volatility in earnings and higher risk

Stakeholder Attributes

help managers identify which stakeholders have a valid claim and need for their attention; include power, legitimacy, & urgency

the four I's

idealized influence, inspirational motivation, intellectual stimulation, individualized consideration

Effects of ethical leadership

influences leader's character and decision-making strategies; positively impact perception of effectiveness of top management; positively impacts employees sense of contribution to organization; results in higher levels of commitment and satisfaction of employees; role model effect

transactional leadership

interaction is based on mutually beneficial transaction between parties; focus on "maintenance activities;" directed towards achieving firm's goals and objectives characterized by manager-ship and control rather than leadership; negative effect on followers' self-esteem; contingent rewards; management by exception; pragmatic and teleological in focus (end justifies the means); inherently unethical style of leadership (dehumanizes followers through treating them as machines/robots); employs "control systems" rather than "positive influence" to enforce behavior

types of stakes

interest, right, or ownership

why corporate social responsibility?

it is pragmatic, ethical, and strategic

ownership

legal title to an asset or property

pragmatic aspect of corporate social responsibility

maintaining legitimacy, protecting reputation, and viability

management by exception

manager becomes involved in issues only in exceptional circumstances

amoral manager

may lack ethical awareness; may have good intentions, but are unaware of their impact on others; approach the law from a compliance perspective; minimal number of stakeholders are considered

examples of secondary stakeholders

media, special interests/NGOs

Ethical issues with Supply Chain Stakeholders

outsourcing has created many major ethical issues and concerns (e.g. child labor, forced labor, freedom of association, gender inequality, health and safety, working hours and wages); many companies establish codes of conduct: statements of expectations that suppliers will abide by legal and moral standards in their conduct; most approaches of doing so are weak because they do not ensure compliance

stakeholder view of the firm

owners (plus private citizens, institutional groups, & board members); employees (minorities, women, older workers, & unions); suppliers (these firms will also have stakeholders); community (the public, environmental groups, activities, & civic groups); government (federal, state and local); media (tv, print, internet mediums; local and national interests)

managerial view of the firm

owners, employees, suppliers, consumers

types of corporate social responsibility

philanthropic responsibilities; ethical responsibilities; legal responsibilities; economic responsibilities

Three Views of the Firm

production, managerial, stakeholder

quality-oriented CSR

quality control systems; environmental or social needs are addressed; e.g. day care center for children of employees, or reducing "carbon footprint"

corporate social responsibility

responsibility beyond economic and legal obligations to act ethically and to contribute in a positive way to society

examples of primary stakeholders

shareholders/investors, employees and managers, customers, local communities, suppliers and other business partners, environment, future generations, nonhuman species

primary stakeholders

sometimes divided into social and non-social categories; have a direct stake or interest in the organization

Project-oriented CSR

specific need of internal or external stakeholder is addressed; e.g. volunteering activity

moral manager

standards of behavior meet both compliance and ethical standards; high awareness of stakeholder groups

production view of the firm

suppliers -- the firm -- consumers

Ethical Leadership

the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships; and the promotion of such conduct through two-way communication, reinforcement, and decision-making

deindividuation

the loss of self-awareness and self-restraint occurring in group situations that foster arousal and anonymity; people fulfill assigned roles; Zimbardo/ Stanford Prison experiment

Legitimacy

the real or perceived validity or appropriateness of the stakeholder's claim; employees, customers, and owners have a greater amount (because of formal and direct relationships) with the business than NGOs, activist groups, media, etc.

Power

the stakeholder could affect the business and produce an effect; e.g. PETA and their success in influencing fast-food chains regarding their suppliers' ethical treatment of animals

Role of the manager in the Stakeholder Model

to balance the interests and needs of all stakeholders, and to ensure that no stakeholder's ethical rights are violated, even if it reduces profitability

Shareholder Model

traditional model of corporations; also called Stockholder Theory

Ethical issues with NGOS and Special Interest Stakeholders

use customer and government pressure often by mobilizing media to advance agendas; three factors for business: transaction costs, brand impact, & competitive position

Social Values-Led Model

used to address a specific CSR issue; may be led by a social policy entrepreneur; triple bottom line reporting is common; success is viewed as reaching social goal

reward systems

what gets rewarded gets done; achieving goals with ethical behavior must be reinforced

Diffused Responsibility

workers are encouraged to turn over responsibility to those in higher levels; bystander research; dividing responsibility; creating psychological distance