Business Ethics LO Quiz 2
LO 5.1 Define the ethics of business
The rules, standards, codes, or principles that provide guidelines for morally right behavior and truthfulness in specific situations. LO 5.1
LO 5.3 Identify the influences on ethical behavior and define ethical relativism
The multitude of influences on ethical behavior range from educational and religious backgrounds to professional organizations and governments. These influences lead to ethical relativism, the belief that ethical answers depend on the situation and that no universal standards or rules guide or evaluate morality. Individual influencers, corporate influences, economic efficiency influences, government and the legal system influences, societal influences. LO 5.3
LO 4.5 Apply the stakeholder identification and salience typology
The salience stakeholder typology increases the complexity of analysis by using three attributes to assess stakeholder importance: power, legitimacy, and urgency. Stakeholder Salience: Priority given by managers to competing stakeholder claims.
LO 5.2 Understand the different approaches managers and businesspersons take to assessing the ethical implications of their decisions
The three levels of ethical assessment are 1) Awareness of moral or ethical implications 2) Ethical implications assessed upon individual, organization, economic efficiency, governmental, and societal influences, described as value judgments and moral standards 3) Implications assessed upon use of ethical principles LO 5.2
LO 3.1 Recognize business as one institution in society and understand that its activities are influenced by other institutions and individuals referred to as stakeholders.
A stakeholder is an individual, or group, that has some share, interest, or "stake" in the business system and the activities of corporations. Managers must seek out stakeholders and argues that if "you want to manage effectively, then you must take your stakeholders into account in a systematic fashion." The corporation must consider the ethical implications of its behavior toward stakeholders as must stakeholders toward the corporation. Corporations have responsibilities to stakeholders, depending on the situation and issue. Likewise, stakeholders must consider their responsibilities to the corporation depending on the circumstances of the relationship. It is important for managers to identify the complete array of stakeholders for two reasons: 1) to obtain resources, business has to recognize the groups that control scarce resources; and 2) to maintain the legitimacy of business as an institution in society, the support of other groups is required. LO 3.1
LO 3.3 Understand the dynamic nature of stakeholder influence and that stakeholders have different goals and influence.
Although some stakeholders - for example employees, shareholders, and customers - are important to all corporations, the dynamic nature of the relationships between business and stakeholders means that the importance of other stakeholders will vary by corporation and over time. Because of this variability, the list is not categorized in any way so the reader is less likely to predetermine the influence of particular stakeholders. The demands of unions, employees and shareholders are usually known, while the demands of others are emerging. LO 3.3
LO 4.2 Describe stakeholder management capability
Definition: The ability of managers to identify stakeholders and their influence, to develop the organizational practices to understand stakeholders, and to undertake direct contact with stakeholders. The process an organization uses to manage relationships with its stakeholder groups involves three levels 1) Identifying the organization's stakeholders and their perceived stakes according to the rational perspective 2) Determining the organizational processes used to manage relationships with stakeholders and fitting these processes with the stakeholder map of the organization 3) Understanding the set of transactions or bargains between the organization and its stakeholders and deciding whether these negotiations fit the map and the processes. The rational level, the first level, involves preparing a stakeholder map that identifies specific stakeholders. The second level, process, identifies the procedures used to assess stakeholders. Finally, the transactional level deals with the actual interaction with stakeholders. LO 4.2
LO 4.7 Identify the use of stakeholder collaboration approaches
FOSTERing stakeholder relationships, develop collaborative stakeholder relationships, involves 6 steps. (F)oundation: Relationship building by incorporating it into corporate missions, values, and ethics guidelines. (O)rganizational Alignment: Organization's internal systems and structures need to be aligned to support the development of collaborative relationships. (S)trategy development: A strategy is necessary to forge new stakeholder relationships. (T)rust building: Trust is essential for stable social relationships as it promotes cooperation and understanding. (E)valuation: The effectiveness of the relationship-building effort must be assessed and improvements identified. (R)epeat the process: The process is repeated to further improve social performance. LO 4.7
LO 3.1 Managers:
Managers are a special stakeholder. Managers in a unique position where they are responsible for: -Identifying the firm's stakeholders -understanding how they're viewed -Examining their potential influence -Assessing potential for opportunity/threat -Ranking stakeholders by influence -Preparing necessary programs/policies for dealing with stakeholders LO 3.1 Managers
LO 3.4 Recognize the role of managers in relation to stakeholders.
Managers perform a key role in the relationship between the corporation and stakeholders. Manager or CEO compensation is an issue and it proposed that executive compensation should be tied to ethical, social, and environment criteria. Managers are responsible for carefully indentifying and analyzing the stakeholders influencing the enterprise and the stakeholders influenced by the enterprise. They are also responsible for responding to stakeholders. This managerial responsibility might be outlined as follows: -Identify stakeholders influenced by, or having an influence on, the corporation -Understand how the corporation currently views the stakeholders -Examine how each stakeholder will or might influence the corporation -Assess opportunities or threats, and the magnitude of their influence on the stakeholder -Rank stakeholders by influence -Prepare programs or policies detailing how to deal or cope with stakeholders LO 3.4
LO 5.5 Outline a sequence of moral reasoning
Moral Reasoning: A systematic approach to thinking or reasoning through the implications of a moral problem or issue. EDM Process/Moral decision making process: -Define the moral issue or decision -Gather all relevant information -Identify the stakeholders involved -Develop possible alternative solutions -Consider the applicable value judgments, moral standards, and ethical principles -Identify the distribution of harms and benefits to the stakeholders by each alternative with each ethical principle used -Determine any practical constraints that might apply -Decide on the action or decision to be taken that can be supported, explained, and defended if necessary -Monitor Outcomes LO 5.5
LO 3.3 Categorizing Stakeholders
Primary interactions are with employees (unions), shareholders, creditors, suppliers, customers, competitors, and wholesalers or retailers. Secondary interactions are with local communities, governments, social activist groups, media, business support groups, and the general public. The difficulty with such a categorization is that stakeholders' involvement and influence shift over time and vary among corporations. It is difficult to ascertain who should be on each list; for example, government is listed as secondary, whereas in Canada it is primary in regulated or protected industries. Mintzberg's external influencers are owners, associates, employee associations, the public, and directs. Internal influencers are the chief executive officer, line managers, operators, analysts of the technostructure, support staff, and ideology. Philips identifies two types of stakeholders. Normative stakeholders are those to whom the organization has an obligation and stakeholders from whom the corporation has voluntarily accepted benefits, examples such as financiers, employees, consumers, suppliers, and the local community. Derivative stakeholders are those from whom the corporation has not accepted benefits, but they hold power over the corporation and may exert either a beneficial or harmful influence, like NGOs and competitors. LO 3.3 Categories
LO 5.4 Describe the seven common theoretical bases for ethical conduct
Self-interest, personal virtues, caring, utilitarian, universal rules, individual rights, and justice. Self-Interest Ethic: Individuals or corporations set their own standards for judging the ethical implications of their actions; only the individual's values and standards are the basis for actions. Personal Virtues Ethic: An individual's or corporation's behavior is based upon being a good person or corporate citizen with traits such as courage, honesty, wisdom, temperance, courage, fidelity, integrity, and generosity. Ethic of Caring: Gives attention to specific individuals or stakeholders harmed or disadvantaged and their particular circumstances. Utilitarian Ethic: Focuses on the distribution of benefits and harms to all stakeholders with the view to maximizing benefits. Universal Rules Ethic: Ensures that managers or corporations have the same moral obligations in morally similar situations. Individual Rights Ethic: Relies on a list of agreed upon rights for everyone that will be upheld by everyone and that becomes the basis for deciding what is right, just, or fair. Ethic of Justice: Considers that moral decisions are based on the primary of a single value: justice. LO 5.4
LO 4.1 Explain stakeholder analysis in an organization
The appropriate identification of stakeholders is very important to business corporations as one approach to understanding the environment in which they operate. Identification should be only the first step, as managers must analyze the nature of the relationships between the corporation and its stakeholders. The corporation should involve themselves in stakeholder management, even at a preliminary level. The corporation can increase its understanding of these stakeholders by answering the following questions, which will capture the essential information needed for effective stakeholder management. 1) Who are our stakeholders? 2) What are their stakes? 3) What opportunities and challenges are presented to our firm? 4) What responsibilities (economic, legal, ethical, and philanthropic) does our firm have to all its stakeholders? 5) What strategies or actions should our firm take to best deal with stakeholder challenges and opportunities? Stakeholder Analysis Worksheet Stakeholder Identification, How the organization influences the stakeholder, how the stakeholder influences the organization. LO 4.1
LO 5.6 Appreciate the challenges of ethics in business
The consideration of the ethical implications of the responsibilities of business is prevalent in what corporations do. The theoretical basis for ethics has been outlined and sets the stage for further examination of the ethics and responsibilities of business. But, there are several challenges to ethical behavior in corporations. LO 5.6
LO 4.4 Discuss the diagnostic typology of organizational stakeholders
The diagnostic typology of organizational stakeholders attempts to understand stakeholder influence by assessing the potential threat or potential for cooperation. Stakeholders can be classified into 4 types, and that different strategies exist for responding to each type. Type 1 - Supportive stakeholder: Friend. Involve and don't take for granted. Type 2 - The marginal stakeholder: Neither highly threatening nor especially cooperative. Monitor them while recognizing that their interests are narrow and issue-specific. Type 3 - The non-supportive stakeholder: High threat potential, but low cooperation potential, most difficult to manage. Strategy is to be defensive, and reduce the organization's dependence on the stakeholder. Type 4 - The mixed blessing stakeholder: Play a major role in the organization as their threat and cooperation potential are high. Strategy is to collaborate, like a joint-venture or alliances. LO 4.4