Session16: Business Ethics and Social Responsibility

Dr. Mark H. Mortensen66.490.211 and 212Tues &Thurs 2:00 to 3:15

3:30 to 4:45

Manning School of Business

Mortensen Consulting Group

Today

1. Attendance

2. Business Ethics

3. Assignment for next class

No assignment due

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3-3

Corporate Governance

Broader responsibility --

Private corporations have responsibility to society that extend beyond making a profit

Do they?

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3-4

Social Responsibility

There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

Milton Friedman

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3-5

Corporate Governance

Carroll’s 4 Responsibilities

–Economic–Legal–Ethical–Discretionary

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Prentice Hall, Inc. © 2008 3-6

Mortensen’s View

The order and strength of the priorities for the five stakeholders, as decided by the executives, sets the tone for a company:CustomersEmployeesStockholdersExecutivesSociety

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3-7Prentice Hall, Inc. © 2008

Corporate Stakeholders

“Corporate Stakeholders”Affect or are affected by the achievement of the corporation’s objectives

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3-8Prentice Hall, Inc. © 2008

Corporate Stakeholders

Stakeholder Analysis –

–Primary stakeholder• Sufficient bargaining power to affect outcomes

–Secondary stakeholder• Indirect stake but are affected by corporation’s actions

–Stakeholder Input• Determine whether input is necessary

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3-9Prentice Hall, Inc. © 2008

Ethical Behavior

“business ethics”

–Argument that there is no such thing … it is an oxymoron

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3-10

Ethical Decision Making

BAD Corporate practices --

–Massive write-downs and restatements of profit[after having gotten the bonuses for making their numbers]

–Misclassification of expenses as capital expenditures

–Pirating corporate assets for personal gain

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3-11

Ethical Decision Making

Recent Survey Results --

–70% distrust business executives–Enron–WorldCom–Banks

Provocative Question --

–Why are businesspeople perceived to be acting unethically?

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3-12

Reasons for Unethical Behavior

Perceptions caused by --

–Not aware of impropriety–Cultural norms and values vary–Governance systems based on rule or

relationships–Differences in values between businesspeople

and key stakeholders

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3-13

Reasons for Unethical Behavior

Allport-Vernon-Lindzey Study of Values --

–Aesthetic–Economic–Political–Religious–Social–Theoretical

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3-14

Reasons for Unethical Behavior

Most common reasons for bending rules --

– Organizational performance required it– Ambiguous or out of date rules– Peer pressure – everyone else does it

– [Greedy #@%$(#s]

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3-15

Moral Relativism

“Moral Relativism” says that morality is relative to some personal, social, or cultural standard and there is no method for deciding whether one decision is better than another.

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3-16

Kohlberg’s Levels of Moral Development

1. Preconventional level–Characterized by a concern for self

• Personal interest• Avoidance of punishment

2. Conventional level–Characterized consideration of society’s values

• External code of conduct

3. Principled level–Characterized by adherence to internal moral code

• Universal values or principles

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3-17

Encouraging Ethical Behavior

Guidelines for Ethical Behavior

Ethics

Morality

Law

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3-18

Encouraging Ethical Behavior

Codes of Ethics

–Specifies how an organization expects its employees to behave on the job.

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3-19

Encouraging Ethical Behavior

Approaches to Ethical Behavior

–Utilitarian• Judged by consequences

– Individual Rights• Fundamental rights in all decisions

–Justice• Distribution in equitable fashion

–Categorical imperative• “golden rule”• Means - Ends

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You will be faced with ethical issues in your career Doing your taxes Getting that contract:

Your boss says “Do whatever it takes!” Your customer requires you to use an agency

Making your numbers at the end of a quarter: “Borrowing revenue” Stuffing the channel Irrevocable contracts

Your colleague engages in unethical behavior.

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3-21

Strategy Bits

192 U.S. companies surveyed --

–92% monitored employees use of e-mail/Internet

–26% monitored employees electronic activities all the time

–Almost none had checks in place to protect employees privacy

So be careful with unethical behavior, anyway.

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Strategic Management – Spring 2014