GBA 490 Exam 3 Ch. 9

The moral case for why businesses should act in a manner that benefits all of the company's stakeholders—not just shareholders—boils down to what?

"It's the right thing to do." Ordinary decency, civic-mindedness, and contributions to society's well-being should be expected of any business

Pursuing unethical strategies and tolerating unethical conduct not only damages a company's reputation but

also may result in a wide-ranging set of other costly consequences

corporate responsibility programs commonly include the following elements:

- striving to employ an ethical strategy and observe ethical principles in operating the business - making charitable contributions, supporting community service endeavors, engaging in broader philanthropic initiatives, and reaching out to make a difference in the lives of the disadvantaged - taking actions to protect the environment and, in particular, to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities - creating a work environment that enhances the quality of life for employees - building a diverse workforce with respect to gender, race, national origin, and other aspects that different people to bring in the workplace

key points from Ch. 9: #7

Sustainability is a term that is used in various ways, but most often it concerns a firm's relationship to the environment and its use of natural resources. Sustainable business practices are those capable of meeting the needs of the present without compromising the world's ability to meet future needs. A company's environmental sustainability strategy consists of its deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against ultimate endangerment of the planet

key points from Ch. 9: #3

Apart from the "business of business is business, not ethics" kind of thinking, three other factors contribute to unethical business behavior: (1) faulty oversight that enables the unscrupulous pursuit of personal gain (2) heavy pressures on company managers to meet or beat short-term earnings targets (3) a company culture that puts profitability and good business performance ahead of ethical behavior. In contrast, culture can function as a powerful mechanism for promoting ethical business conduct when high ethical principles are deeply ingrained in the corporate culture of a company

In short, ethical behavior in business situations requires adhering to generally accepted norms about right or wrong conduct. what is the consequence?

As a consequence, company managers have an obligation—indeed, a duty—to observe ethical norms when crafting and executing strategy

key points from Ch. 9: #1

Ethics concerns standards of right and wrong. Business ethics concerns the application of ethical principles to the actions and decisions of business organizations and the conduct of their personnel. Ethical principles in business are not materially different from ethical principles in general

what is the integrative social contracts theory?

provides a middle position between the opposing views of ethical universalism and ethical relativism. According to this theory, the ethical standards a company should try to uphold are governed by both (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on behaviors in all situations (2) the circumstances of local cultures, traditions, and values that further prescribe what constitutes ethically permissible behavior

what is the concept of corporate social responsibility (CSR) ?

refers to a company's duty to operate in an honorable manner, provide good working conditions for employees, encourage workforce diversity, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large Balancing the shareholder's expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management. The shareholder must receive a good return but the legitimate concerns of other constituencies (customers, employees, communities, suppliers and society at large) also must have the appropriate attention. . . . [Leading managers] believe that by giving enlightened consideration to balancing the legitimate claims of all its constituents, a corporation will best serve the interest of its shareholders.

Many companies have acknowledged their ethical obligations in official codes of ethical conduct. In the United States, for example, the Sarbanes- Oxley Act, passed in 2002, requires

that companies whose stock is publicly traded have a code of ethics or else explain in writing to the SEC why they do not. But the senior executives of ethically principled companies understand that there's a big difference between having a code of ethics because it is mandated and having ethical standards that truly provide guidance for a company's strategy and business conduct. They know that the litmus test of whether a company's code of ethics is cosmetic is the extent to which it is embraced in crafting strategy and in operating the business day to day

what does the school of ethical relativism hold?

that differing religious beliefs, customs, and behavioral norms across countries and cultures give rise to differing of standards concerning what is ethically right or wrong. These differing standards mean that whether business-related actions are right or wrong depends on the prevailing local ethical standards

what are environmental sustainability strategies?

this entails deliberate and concerted actions to operate business in a manner that protects natural resources and ecological support systems, guards against outcomes that will ultimately endanger the planet, and therefore sustainable for centuries consists of its deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against ultimate endangerment of the planet

what are sustainable business practices?

those that meet the needs of the present without compromising the ability to meet the needs of the future most major companies have begun to change how they do business, emphasizing this practice Many have also begun to incorporate a consideration of environmental sustainability into their strategy-making activities

codes of conduct based on ethical relativism:

can be ethically problematic for multinational companies by creating a maze of conflicting ethical standards

what is the organization for economic cooperation and development (OECD)?

has anti bribery standards that criminalize the bribery of foreign public officials in international business transactions—all 35 OECD member countries and seven nonmember countries have adopted these standards

A strong, independent board is necessary to

have proper oversight of the company's financial practices and to hold top managers accountable for their actions

The fallout of a company's ethical misconduct goes well beyond the costs of making amends for the misdeeds. Customers shun companies caught up in

highly publicized ethical scandals

Company executives often feel pressured to hit financial performance targets because

their compensation depends heavily on the company's performance

under ethical relativism,

there can be no one-size-fits-all set of authentic ethical norm as against which to gauge the conduct of company personnel

calling a halt to actions usually hinges in:

(1) the effectiveness of activist social groups in publicizing the adverse consequences of a company's social irresponsibility and mar-shaling public opinion for something to be done, (2) the enactment of legislation or regulations to correct the inequity, and (3) decisions on the part of socially conscious buyers to take their business elsewhere."

Apart from the "business of business is business, not ethics" kind of thinking apparent in recent high-profile business scandals, three other main drivers of unethical business behavior also stand out:

- Faulty oversight, enabling the unscrupulous pursuit of personal gain and self-interest. - Heavy pressures on company managers to meet or beat short-term performance targets. - A company culture that puts profitability and business performance ahead of ethical behavior

Executives committed to high standards make a point of considering three sets of questions whenever a new strategic initiative or policy or operating practice is under review:

- Is what we are proposing to do fully compliant with our code of ethical conduct? Are there any areas of ambiguity that may be of concern? - Is there any aspect of the strategy (or policy or operating practice) that gives the appearance of being ethically questionable? -Is there anything in the proposed action that customers, employees, suppliers, stockholders, competitors, community activists, regulators, or the media might consider ethically objectionable?

aspects of sustainability concerns

- containing the adverse effects of greenhouse gases and other forms of air pollution to reduce their impact on undesirable climate and atmospheric changes - greater reliance on sustainable energy sources; greater use of recyclable materials; the use of sustainable methods of growing foods (to reduce topsoil depletion and the use of pesticides, herbicides, fertilizers, and other chemicals that may be harmful to human health or ecological systems); habitat protection; environmentally sound waste management practices; and increased attempts to decouple environmental degradation and economic growth (according to scientists, economic growth has historically been accompanied by declines in the well-being of the environment)

what do some companies use to characterize their CSR initiatives?

- corporate citizenship - corporate responsibility - sustainable responsible business

Whatever the moral arguments for socially responsible business behavior and environmentally sustainable business practices, there are definitely good business reasons why companies should be public-spirited and devote time and resources to social responsibility initiatives, environmental sustainability, and good corporate citizenship:

- such actions can lead to increased buyer patronage - a strong commitment to socially responsible behavior reduces the risk of reputation damaging incidents - socially responsible actions and sustainable business practices can lower costs and enhance employee recruiting and workforce retention - opportunities for revenue enhancement may also come from CSR and environmental sustainability strategies - well-conceived CSR strategies and sustainable business practices are in the best long-term interest of shareholders

Even if a company's managers are not personally committed to high ethical standards, they have good reason to operate within ethical bounds, if only to:

1. avoid the risk of embarrassment, scandal, disciplinary action, fines, and possible jail time for unethical conduct on their part 2. escape being held accountable for lax enforcement of ethical standards and unethical behavior by personnel under their supervision

There are two reasons why a company's strategy should be ethical:

1. because a strategy that is unethical is morally wrong and reflects badly on the character of the company and its personnel, 2. because an ethical strategy can be good business and serve the self-interest of shareholders

striving to employ an ethical strategy and observe ethical principles in operating the business

A sincere commitment to observing ethical principles is a necessary component of a CSR strategy simply because unethical conduct is incompatible with the concept of good corporate citizenship and socially responsible business behavior

such actions can lead to increased buyer patronage

A strong visible social responsibility or environmental sustainability strategy gives a company an edge in appealing to consumers who prefer to do business with companies that are good corporate citizens. Ben & Jerry's, Whole Foods Market, Stonyfield Farm, TOMS, Keurig Green Mountain, and Patagonia have definitely expanded their customer bases because of their visible and well-publicized activities as socially conscious companies. More and more companies are also recognizing the cash register payoff of social responsibility strategies that reach out to people of all cultures and demographics (women, retirees, and ethnic groups)

key points from Ch. 9: #4

Business ethics failures can result in three types of costs: (1) visible costs, such as fines, penalties, and lower stock prices (2) internal administrative costs, such as legal costs and costs of taking corrective action (3) intangible costs or less visible costs, such as customer defections and damage to the company's reputation

key points from Ch. 9: #8

CSR strategies and environmental sustainability strategies that both provide valuable social benefits and fulfill customer needs in a superior fashion can lead to competitive advantage

socially responsible actions and sustainable business practices can lower costs and enhance employee recruiting and workforce retention

Companies with deservedly good reputations for social responsibility and sustainable business practices are better able to attract and retain employees, compared to companies with tarnished reputations. Some employees just feel better about working for a company committed to improving society. This can contribute to lower turnover and better worker productivity. Other direct and indirect economic benefits include lower costs for staff recruitment and training. For example, Starbucks is said to enjoy much lower rates of employee turnover because of its full-benefits package for both full-time and part-time employees, management efforts to make Starbucks a great place to work, and the company's socially responsible practices. Sustainable business practices are often concomitant with greater operational efficiencies. For example, when a U.S. manufacturer of recycled paper, taking eco-efficiency to heart, discovered how to increase its fiber recovery rate, it saved the equivalent of 20,000 tons of waste paper—a factor that helped the company become the industry's lowest-cost producer. By helping two-thirds of its employees to stop smoking and by investing in a number of wellness programs for employees, Johnson & Johnson saved $250 million on its health care costs over a 10-year period

taking actions to protect the environment and, in particular, to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities

Corporate social responsibility as it applies to environmental protection entails actively striving to be a good steward of the environment. This means using the best available science and technology to reduce environmentally harmful aspects of the company's operations below the levels required by prevailing environmental regulations. It also means putting time and money into improving the environment in ways that extend beyond a company's own industry boundaries—such as participating in recycling projects, adopting energy conservation practices, and supporting efforts to clean up local water supplies. Häagen-Dazs, a maker of all-natural ice creams, started a social media campaign to raise awareness about the dangers associated with the decreasing honey-bee population; it donates a portion of its profits to research on this issue. The Walt Disney Company has created strict environmental targets for themselves and created the "Green Standard" to inspire employees to reduce their environmental impact

who is an example of a company that has worked hard to prevent any form of child labor by its suppliers. Its practices go well beyond standards and safeguards to include measures designed to address the underlying social problems of the communities in which their suppliers operate?

IKEA

building a diverse workforce with respect to gender, race, national origin, and other aspects that different people to bring in the workplace

Most large companies in the United States have established workforce diversity programs, and some go the extra mile to ensure that their workplaces are attractive to ethnic minorities and inclusive of all groups and perspectives. At some companies, the diversity initiative extends to suppliers—sourcing items from small businesses owned by women or members of ethnic minorities, for example. The pursuit of workforce diversity can also be good business. At Coca-Cola, where strategic success depends on getting people all over the world to become loyal consumers of the company's beverages, efforts to build a public persona of inclusiveness for people of all races, religions, nationalities, interests, and talents have considerable strategic value

creating a work environment that enhances the quality of life for employees

Numerous companies exert extra effort to enhance the quality of life for their employees at work and at home. This can include onsite day care, flexible work schedules, work-place exercise facilities, special leaves for employees to care for sick family members, work-at-home opportunities, career development programs and education opportunities, showcase plants and offices, special safety programs, and the like

making charitable contributions, supporting community service endeavors, engaging in broader philanthropic initiatives, and reaching out to make a difference in the lives of the disadvantaged

Some companies fulfill their philanthropic obligations by spreading their efforts over a multitude of charitable and community activities—for instance, Cisco, LinkedIn, IBM, and Google support a broad variety of community, art, and social welfare programs. Others prefer to focus their energies more narrowly. McDonald's concentrates on sponsoring the Ronald McDonald House program (which provides a home away from home for the families of seriously ill children receiving treatment at nearby hospitals). Genentech and many pharmaceutical companies run prescription assistance programs to provide expensive medications at little or no cost to needy patients. Companies frequently reinforce their philanthropic efforts by encouraging employees to support charitable causes and participate in community affairs, often through programs that match employee contributions

opportunities for revenue enhancement may also come from CSR and environmental sustainability strategies

The drive for sustainability and social responsibility can spur innovative efforts that in turn lead to new products and opportunities for revenue enhancement. Electric cars such as the Chevy Bolt and the Nissan Leaf are one example. In many cases, the revenue opportunities are tied to a company's core products. PepsiCo and Coca-Cola, for example, have expanded into the juice business to offer a healthier alternative to their carbonated beverages. General Electric has created a profitable new business in wind turbines. In other cases, revenue enhancement opportunities come from innovative ways to reduce waste and use the by-products of a company's production. Tyson Foods now produces jet fuel for B-52 bombers from the vast amount of animal waste resulting from its meat product business. Staples has become one of the largest non utility corporate producers of renewable energy in the United States due to its installation of solar power panels in all of its outlets (and the sale of what it does not consume in renewable energy credit markets)

key points from Ch. 9: #9

The moral case for corporate social responsibility and environmental sustain-ability boils down to a simple concept: It's the right thing to do. There are also solid reasons why CSR and environmental sustainability strategies may be good business—they can be conducive to greater buyer patronage, reduce the risk of reputation-damaging incidents, provide opportunities for revenue enhancement, and lower costs. Well-crafted CSR and environmental sustainability strategies are in the best long-term interest of shareholders, for the reasons just mentioned and because they can avoid or preempt costly legal or regulatory actions

key points from Ch. 9: #5

The term corporate social responsibility concerns a company's duty to operate in an honorable manner, provide good working conditions for employees, encourage workforce diversity, be a good steward of the environment, and support philanthropic endeavors in local communities where it operates and in society at large. The particular combination of socially responsible endeavors a company elects to pursue defines its corporate social responsibility (CSR) strategy

key points from Ch. 9: #6

The triple bottom line refers to company performance in three realms: economic, social, and environmental, often referred to as profit, people, and planet. Increasingly, companies are reporting their performance with respect to all three performance dimensions

key points from Ch. 9: #2

There are three schools of thought about ethical standards for companies with international operations: -According to the school of ethical universalism, common understandings across multiple cultures and countries about what constitutes right and wrong behaviors give rise to universal ethical standards that apply to members of all societies, all companies, and all businesspeople. -According to the school of ethical relativism, different societal cultures and customs have divergent values and standards of right and wrong. Thus, what is ethical or unethical must be judged in the light of local customs and social mores and can vary from one culture or nation to another. - According to the integrated social contracts theory, universal ethical principles based on the collective views of multiple cultures and societies combine to form a "social contract" that all individuals in all situations have a duty to observe. Within the boundaries of this social contract, local cultures or groups can specify what additional actions are not ethically permissible. However, universal norms always take precedence over local ethical norms

What does the Foreign Corrupt Practices Act (FCPA) prohibit?

U.S. companies from paying bribes to government officials, political parties, political candidates, or others in all countries where they do business

well-conceived CSR strategies and sustainable business practices are in the best long-term interest of shareholders

When CSR and sustainability strategies increase buyer patronage, offer revenue-enhancing opportunities, lower costs, increase productivity, and reduce the risk of reputation-damaging incidents, they contribute to the economic value created by a company and improve its profitability. A two-year study of leading companies found that improving environmental compliance and developing environmentally friendly products can enhance earnings per share, profitability, and the likelihood of winning contracts. The stock prices of companies that rate high on social and environmental performance criteria have been found to perform 35 to 45 percent better than the average of the 2,500 companies that constitute the Dow Jones Global Index. A review of 135 studies indicated there is a positive, but small, correlation between good corporate behavior and good financial performance; only two percent of the studies showed that dedicating corporate resources to social responsibility harmed the interests of shareholders. Furthermore, socially responsible business behavior helps avoid or preempt legal and regulatory actions that could prove costly and other-wise burdensome. In some cases, it is possible to craft corporate social responsibility strategies that contribute to competitive advantage and, at the same time, deliver greater value to society. For instance, Walmart, by working with its sup-pliers to reduce the use of packaging materials and revamping the routes of its delivery trucks to cut out 100 million miles of travel, saved $200 million in costs (which enhanced its cost-competitiveness vis-à-vis rivals) and lowered carbon emissions. Thus, a social responsibility strategy that packs some punch and is more than rhetorical flourish can produce outcomes that are in the best interest of shareholders.

what does the term profit refer to?

a broader meaning with respect to the triple bottom line than it does otherwise. It encompasses not only the profit a firm earns for its shareholders but also the economic impact that the company has on society more generally, in terms of the overall value that it creates and the overall costs that it imposes on society

According to the implied social contract, society grants what?

a business the right to conduct its business affairs and agrees not to unreasonably restrain its pursuit of a fair profit for the goods or services it sells. In return for this "license to operate," a business is obligated to act as a responsible citizen, do its fair share to promote the general welfare, and avoid doing any harm. Such a view clearly puts a moral burden on a company to operate honorably, provide good working conditions to employees, be a good environmental steward, and display good corporate citizenship

The essence of socially responsible business behavior is that

a company should balance strategic actions to benefit shareholders against the duty to be a good corporate citizen. The underlying thesis is that company managers should display a social conscience in operating the business and specifically take into account how management decisions and company actions affect the well-being of employees, local communities, the environment, and society at large

shareholders suffer major damage when

a company's unethical behavior is discovered. Making amends for unethical business conduct is costly, and it takes years to rehabilitate a tarnished company reputation lost revenues, higher costs, lower profits, lower stock prices, and a diminished business reputation

what does the term planet refer to?

a firm's ecological impact and environmental practices

sustainability take on what?

a more focused meaning, concerned with the relationship of a company to its environment and its use of natural resources, including land, water, air, plants, animals, minerals, fossil fuels, and biodiversity. It is widely recognized that the world's natural resources are finite and are being consumed and degraded at rates that threaten their capacity for renewal. Since corporations are the biggest users of natural resources, managing and maintaining these resources is critical for the long-term economic interests of corporations

Companies that forbid the payment of bribes and kickbacks in their codes of ethical conduct and that are serious about enforcing this prohibition face what?

a particularly vexing problem in countries where bribery and kickback payments are an entrenched local custom. Complying with the company's code of ethical conduct in these countries is very often tantamount to losing business to competitors that have no such scruples—an outcome that penalizes ethical companies and ethical company personnel (who may suffer lost sales commissions or bonuses). On the other hand, the payment of bribes or kickbacks not only undercuts the company's code of ethics but also risks breaking the law

Every action a company takes can be interpreted as what?

a statement of what it stands for

Shareholders are likely to view the business case for social responsibility as what?

a strong one, particularly when it results in the creation of more customer value, greater productivity, lower operating costs, and lower business risk—all of which should increase firm profitability and enhance shareholder value even as the company's actions address broader stakeholder interests

a strong commitment to socially responsible behavior reduces the risk of reputation damaging incidents

companies that place little importance on operating in a socially responsible manner are more prone to scandal and embarrassment. Consumer, environmental, and human rights activist groups are quick to criticize businesses whose behavior they consider to be out of line, and they are adept at getting their message into the media and onto the Internet. Pressure groups can generate widespread adverse publicity, promote boycotts, and influence like-minded or sympathetic buyers to avoid an offender's products

triple-bottom-line reporting is emerging as an increasingly important way for

companies to make the results of their CSR strategies apparent to stakeholders and for stakeholders to hold companies accountable for their impact on society

CSR strategies and environmental sustainability strategies are more likely to

contribute to a company's competitive advantage if they are linked to a company's competitively important resources and capabilities or value chain activities. Thus, it is common for companies engaged in natural resource extraction, electric power production, forestry and paper products manufacture, motor vehicles production, and chemical production to place more emphasis on addressing environmental concerns than, say, software and electronics firms or apparel manufacturers

The particular combination of socially responsible endeavors a company elects to pursue defines its

corporate social responsibility (CSR) strategy

The term sustainability is used in a variety of ways. In many firms, it is synonymous with what?

corporate social responsibility; it is seen by some as a term that is gradually replacing CSR in the business lexicon

when high ethical principles are deeply ingrained in the corporate culture of a company,

culture can function as a powerful mechanism for communicating ethical behavioral norms and gaining employee buy-in to the company's moral standards, business principles, and corporate values. In such cases, the ethical principles embraced in the company's code of ethics and/or in its statement of corporate values are seen as integral to the company's identity, self-image, and ways of operating. The message that ethics matters—and matters a lot—resounds loudly and clearly throughout the organization and in its strategy and decisions

The use of standard reporting frameworks and metrics, such as those developed by the Global Reporting Initiative, promotes what?

greater transparency and facilitates benchmarking CSR efforts across firms and industries

there's little hard evidence indicating shareholders are what?

disadvantaged in any meaningful way by a company's actions to be socially responsible

when key personnel find themselves scrambling to meet the quarterly and annual sales and profit expectations of investors and financial analysts, they often

feel enormous pressure to do whatever it takes to protect their reputation for delivering good results

To a significant degree, therefore, ethical strategies and ethical conduct are

good business

In instances involving universally applicable ethical norms (like paying bribes),

there can be no compromise on what is ethically permissible and what is not.

what is a corporate social responsibility (CSR) strategy?

is defined by the specific combination of socially beneficial activities the company opts to support with its contributions of time, money, and other resources

The strength of integrated social contracts theory is that

it accommodates the best parts of ethical universalism and ethical relativism. Moreover, integrative social contracts theory offers managers in multinational companies clear guidance in resolving cross-country ethical differences: Those parts of the company's code of ethics that involve universal ethical norms must be enforced worldwide, but within these boundaries there is room for ethical diversity and the opportunity for host-country cultures to exert some influence over the moral and ethical standards of business units operating in that country

what is the strength of ethical universalism?

it draws on the collective views of multiple societies and cultures to put some clear boundaries on what constitutes ethical and unethical business behavior, regardless of the country or culture in which a company's personnel are conducting activities. This means that with respect to basic moral standards that do not vary significantly according to local cultural beliefs, traditions, or religious convictions, a multinational company can develop a code of ethics that it applies more or less evenly across its worldwide operations. It can avoid the slippery slope that comes from having different ethical standards for different company personnel depending on where in the world they are working

While most company managers are careful to ensure that a company's strategy is within the bounds of what is ________, evidence indicates they are not always so careful to ensure that all elements of their strategies and operating activities are within the bounds of what is considered _________

legal ethical

Business leaders who rely on the principle of ethical relativism to justify conflicting ethical standards for operating in different countries have what?

little moral basis for establishing or enforcing ethical standards companywide. rather, when a company's ethical standards vary from country to country, the clear message being sent to employees is that the company has no ethical standards or convictions of its own and prefers to let its standards of ethical right and wrong be governed by the customs and practices of the countries in which it operates. Applying multiple sets of ethical standards without some kind of higher-order moral compass is scarcely a basis for holding company personnel to high standards of ethical behavior. And it can lead to prosecutions of both companies and individuals alike when there are conflicting sets of laws

The ethical inconsistency of a ______________________ that, in the name of ethical relativism, declares it impermissible to engage in kickbacks unless such payments are customary and generally overlooked by legal authorities. It is likewise problematic for a multinational company to declare it ethically acceptable to use underage labor at its plants in those countries where child labor is allowed but ethically inappropriate to employ underage labor at its plants elsewhere

multinational company

ethical principles in business are _________________________________________

not materially different from ethical principles in general

when a company's culture spawns an ethically corrupt or amoral work climate,

people have a company-approved license to ignore "what's right" and engage in any behavior or strategy they think they can get away with. Such cultural norms as "Everyone else does it" and "It is okay to bend the rules to get the job done" permeate the work environment. At such companies, ethically immoral people are certain to play down observance of ethical strategic actions and business conduct. Moreover, cultural pressures to utilize unethical means if circumstances become challenging can prompt otherwise honorable people to behave unethically

The three dimensions of performance are often referred to in terms of the "three pillars" of

people, planet, and profit

According to integrated social contracts theory, adherence to universal or "first-order" ethical norms should always take

precedence over local or "second-order" norms

Ethical strategy making is generally the

product of managers who are of strong moral character (i.e., who are trustworthy, have integrity, and truly care about conducting the company's business honorably). Managers with high ethical principles are usually advocates of a corporate code of ethics and strong ethics compliance, and they are genuinely committed to upholding corporate values and ethical business principles. They demonstrate their commitment by displaying the company's stated values and living up to its business principles and ethical standards. They understand the difference between merely adopting value statements and codes of ethics and ensuring that they are followed strictly in a company's actual strategy and business conduct. As a consequence, ethically strong managers consciously opt for strategic actions that can pass the strictest moral scrutiny—they display no tolerance for strategies with ethically controversial components

The pressure to "never miss a quarter"—to not upset the expectations of analysts, investors, and creditors but

prompts nearsighted managers to engage in short-term maneuvers to make the numbers, regardless of whether these moves are really in the best long-term interests of the company.

Common moral agreement about right and wrong actions and behaviors across multiple cultures and countries gives what?

rise to universal ethical standards that apply to members of all societies, all companies, and all businesspeople. These universal ethical principles set forth the traits and behaviors that are considered virtuous and that a good person is supposed to believe in and to display

Cutting ethical corners in the name of profits carries an exceptionally high risk for shareholders—the steep stock price decline and tarnished brand image that accompanies the discovery of

scurrilous behavior leave shareholders with a company worth much less than before—and the rebuilding task can be arduous, taking both considerable time and resources

The notion that corporate executives should balance the interests of all stakeholders:

shareholders, employees, customers, suppliers, the communities in which they operate, and society at large-- began to blossom in the 1960s

Executives at high-performing companies know that investors will see the

slightest sign of a slowdown in earnings growth as a red flag and drive down the company's stock price. In addition, slowing growth or declining profits could lead to a downgrade of the company's credit rating if it has used lots of debt to finance its growth

Sometimes the pressure induces company personnel to continue to

stretch the rules until the limits of ethical conduct are overlooked

adherents of the school of ethical universalism maintains what?

that it is entirely appropriate to expect all members of society (including all personnel of all companies worldwide) to conform to these universal ethical standards For example, people in most societies would concur that it is unethical for companies to knowingly expose workers to toxic chemicals and hazardous materials or to sell products known to be unsafe or harmful to the users

In today's social and political climate, most business leaders can be expected to acknowledge what?

that socially responsible actions are important and that businesses have a duty to be good corporate citizens. But there is a complementary school of thought that business operates on the basis of an implied social contract with the members of society

what is business ethics?

the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel

particularly thorny area facing multinational companies is:

the degree of cross-country variability in paying bribes. In many countries in eastern Europe, Africa, Latin America, and Asia, it is customary to pay bribes to government officials in order to win a government contract, obtain a license or permit, or facilitate an administrative ruling. In some developing nations, it is difficult for any company, foreign or domestic, to move goods through customs without paying off low-level officials

what does the school of ethical universalism hold?

the most fundamental conceptions of right and wrong are universal and apply to members of all societies, all companies, and all businesspeople

A good example of the application of integrative social contracts theory to business involves

the payment of bribes and kickbacks. Yes, bribes and kickbacks are common in some countries. But the fact that bribery flourishes in a country does not mean it is an authentic or legitimate ethical norm.

despite laws forbidding bribery to secure sales and contracts,

the practice persists

relying on ___________________________ to determine what is right or wrong poses major problems for multinational companies trying to decide which ethical standards to enforce companywide

the principle of ethical relativism

what is short-termism?

the tendency for managers to focus excessive attention on short-term performance objectives at the expense of longer-term strategic objectives. it has negative implications for the likelihood of ethical lapses as well as company performance in the longer run

Once ethical boundaries are crossed in efforts to "meet or beat their numbers,"

the threshold for making more extreme ethical compromises becomes lower

what does the term people refer to?

the various social initiatives that make up CSR strategies, such as corporate giving, community involvement, and company efforts to improve the lives of its internal and external stakeholders

If a company's executives believe strongly in living up to the company's ethical standards, they will

unhesitatingly reject strategic initiatives and operating approaches that don't measure up. However, in companies with a cosmetic approach to ethics, any linkage of the professed standards to its strategy and operating practices stems mainly from a desire to avoid the risk of embarrassment and possible disciplinary action for approving actions that are later deemed unethical and perhaps illegal

according to integrated social contracts theory,

universal ethical principles based on the collective views of multiple societies form a "social contract" that all individuals and organizations have a duty to observe in all situations. Within the boundaries of this social contract, local cultures or groups can specify what additional actions may or may not be ethically permissible

CSR strategies and environmental sustainability strategies both provide what?

valuable social benefits and fulfill customer needs in a superior fashion can lead to competitive advantage. Corporate social agendas that address only social issues may help boost a company's reputation for corporate citizenship but are unlikely to improve its competitive strength in the marketplace

socially responsible strategies create what?

value for customers and lower costs can improve company profits and shareholder value at the same time that they address other stakeholder interests

Managers do not dispassionately assess,

what strategic course to steer—how strongly committed they are to observing ethical principles and standards definitely comes into play in making strategic choices

when does self-dealing occur?

when managers take advantage of their position to further their own private interests rather than those of the firm