Lecture 10:

Contemporary Management Issues

 Outline
I. Business ethics
• Defining ethics and ethical philosophies
• Ethical temptations and violations
• Some real-life examples and guidelines
II. Corporate Social Responsibility
• Defining the concept
• Stockholder vs. stakeholder viewpoint
• CSR initiatives
III. Environmental Sustainability
• Defining the concept of Going Green
• Seven initiatives to Go Green
• Benefits of being ethical and CSR
IV. CSR with stakeholders
• Defining and classifying stakeholders
• Stakeholders’ expectations and conflicts
 I. Business ethics

1. Defining ethics and business ethics

• Ethics is the discipline of dealing with what is good and
bad, with moral duty and obligation. It is a set of moral
principles or values.
• Business ethics is the study of business situations,
activities and decisions where issues of right and wrong are
addressed.
(Webster’s 9th New Collegiate Dictionary)
2. Key ethical philosophies
• Consequentialism / Teleology
– Focusing on consequences
– The decision-maker is concerned with the utility of the decision.
• Deontology
– Examining the rights of individuals in making a decision.
– It is based on universal principles such as honesty and fairness.
• Virtue ethics
– If the decision maker has good character and genuine motivation and
intentions, he or she is behaving ethically.
3. How values relates to ethics?
• Ethics become the vehicle for
converting values into action
and doing the right thing.
• A firm’s moral standards and
values influence which kind of
Source: Bigstock website, 2016
behaviors managers believe are ethical.
• According to ethically centered management, the high quality of an
end product takes precedence over meeting a delivery schedule.
• Catastrophes can result when management is not ethically centered.
4. Ethical temptations and violations
• Stealing from employees and customers
• Illegally copying soft wares
• Treating people unfairly
• Sexual harassment
• Conflicts of interests
• Accepting kickbacks and bribes for doing business with another company
• Divulging confidential information
• Misuse of corporate resources
• Extracting extraordinary compensation from organization
• Corporate espionage
• Poor cyber ethics (i.e. ethics relating to cyber technology, online
environment)
5. Some real-life examples of unethical corporate
scandals:
Watch the Youtube links below:
• Long version with description
https://www.youtube.com/watch?v=_QepKsfmfSo
• Short version as headlines
https://www.youtube.com/watch?v=u-yForoAZ3U
6. A guide to ethical decision-making
When faced with ethical dilemma, ask yourself:
• Is it right?
• Is it fair?
• Who gets hurt?
• How does it “smell”?
• Would you be comfortable
with the deed exposed?
• Would you tell your child to do it?
 II. Corporate Social
Responsibility (CSR)
1. Defining CSR
• CSR is the idea that firms have obligations to society beyond their economic
obligations to owners or stockholders and also beyond those prescribed by
law or contract. (DuBrin, 2012)
• Business ethics and CSR?
– Business ethics is a narrower concept that applies to the morality of an
individual’s decisions and behaviors.
– CSR is a broader concept that relates to an organization’s impact on
society, beyond doing what is ethical.
🡪 To behave in a socially responsible way, managers must be aware of how
their actions influence the stakeholders and the environment.
2. Stockholder vs. Stakeholder viewpoints
• Stockholder/shareholder:
Stock holder is an individual or company that legally owns one or
more shares of stock in a joint stock company. The shareholders
are the owners of the company.
• Stakeholder:
Stakeholders are those people who stand to gain or lose by the
policies and activities of an organization. E.g. employees,
customers, suppliers, bankers, governments, etc.
Stockholder vs. Stakeholder viewpoints (cont)

Source: Gavin, 2012

Two different viewpoints
• Stockholder viewpoint of CSR
✔ The traditional perspective on social responsibility that a business organization is
responsible only to its owners and stockholders.
✔ The manager’s job therefore is to satisfy the financial interests of the stockholders.
By doing so, the interests of society will be served in the long run.
✔ CSR is a by-product of profit seeking.
• Stakeholder viewpoint of CSR:
✔ The viewpoint contends that firms must hold themselves responsible for the quality
of life of the many groups affected by the firm’s actions.
✔ This reflects the modern viewpoint of the corporation. The organization and its
stakeholders work together for their mutual success.
3. CSR Initiatives
• Creating opportunities for a diverse workforce is a major social
responsibility initiative.
• Other important social issues that corporate can take positive
initiatives are:
✔ Philanthropy (e.g. donating money to charities)
✔ Work/life programs helping employees to balance the demands of work and
personal life
✔ Community redevelopment project to help rebuild distressed communities
✔ Acceptance of whistle-blower (i.e. an employee who discloses organizational
wrong-doing to parties who can take action)
✔ Compassionate downsizing
 III. Environmental sustainability

1. Defining the concept:

• A major corporate thrust towards ethical and socially responsible behavior
is to GO GREEN, i.e. to make a deliberate attempt to create a sustainable
environment.

Source: Kirchner, 2016

 2. Three aspects of GOING GREEN
• In more technical detail, going green is an approach to define and create
processes that are:
✔ Environmentally friendly – reducing the generation of pollution at its source
and minimizing life risks to humans, animals, plants and the planet.
✔ Economically viable – financial benefits as attaining reduced costs from
energy savings, gaining governmental subsidies and avoiding penalties.
✔ Pragmatic in the long run – an approach to sustainability that affects the
global or local environment, community, society, or economy by means of a
practical and realistic approach, rather than seeking an impossible ideal.
3. Seven initiatives to GO GREEN
1. Commit to lowering carbon dioxide and other hazardous emissions
2. Develop a green supply chain
3. Make sustainability and eco-friendly policies part of your business plan
4. Implement a four-day workweek
5. Manufacture and sell products made with recycled materials
6. Invest heavily in recycling
7. Plant a rooftop garden on your office building or factory
 4. Creating an ethical and socially responsible
workplace
Initiatives for creating an ethical socially responsible workplace include:
🡪 Formal mechanism to monitoring ethics
🡪 Written organizational codes of conduct
🡪 Widespread communication about ethics and CSR
🡪 Leadership by example and ethical role models
🡪 Encouragement of confrontation about ethical deviations
🡪 Training programs in ethics and CSR
5. Benefits of ethics and CSR for business
Highly ethical behavior and socially responsible acts are not always free but
businesses can greatly benefit from them:
🡪 Profits and CSR sometimes have a reciprocal influence on each other:
more profitable firms can better afford to invest in CSR initiatives and they in
turn lead to more profits.
🡪 Enhanced organizational efficiency: green practices such as recycling,
reusing, and reducing waste can reduce costs (e.g. the Subaru plant in
Indiana)
🡪 Being ethical also helps to avoid huge fines for unethical behaviors
🡪 Finally, an organization with a strong reputation for CSR will attract more
people to work for them and increase sales especially from the customers
with high ethical awareness.
 IV. CSR with organizational
stakeholders
1. Definition of stakeholders:
• Stakeholders are people or organizations with a special interest in
a business.
• This is normally because they are directly or indirectly affected by
the business and how it operates – both now and in the future.
2. Different stakeholder groups
Organizational stakeholders can be divided into 2 main
groups: internal and external

Source: Boundless, 2016

a. Internal stakeholders:
• Internal stakeholders are those within an organization with an
interest in its success and failure, since they may be
rewarded or punished accordingly.
• Internal stakeholders include:
– Shareholders: the owners of the company
– Managers: the employees who are responsible for coordinating
organizational resources and ensuring that an organization’s goals
are successfully met
– The work-force: all non-managerial employees
b. External stakeholders:
• Internal stakeholders are individuals, groups and entities
from outside that are affected by the consequences and
outcomes of an organization’s decisions.
• External stakeholders can exercise different types of
power over organization and try to influence its decisions
through applying economic or political pressure.
• External stakeholders includes:
– Customers: an organization’s largest outside stakeholder
group
– Suppliers: provide reliable raw materials and component
parts to organizations.
– The government:
• Wants companies to obey the rules of fair competition
• Wants companies to obey rules and laws concerning the
treatment of employees and other social and economic issues
• External stakeholders includes (cont):
– Trade union: relationships with companies can be one of
conflict or cooperation
– Local communities: their general economic well-being is
strongly affected by the success or failure of local
businesses
– The general public:
• Wants local businesses to do well against overseas competition
• Wants corporations to act in socially responsible way
3. Stakeholders’ expectations and influence
Stakeholders’ expectations and influence (cont)
4. Organizational effectiveness: satisfying
stakeholders’ interests and expectations
• An organization is used simultaneously by various stakeholders
to achieve their goals.
• Each stakeholder group is motivated to contribute to the
organization.
• Each group evaluates the effectiveness of the organization by
judging how well it meets the groups’ interests and expectations.
• For an organization to be viable, the dominant coalition of
stakeholders has to control sufficient inducements to obtain
contributions required of other stakeholder groups.
5. Conflicts of stakeholders
Stakeholders with different interests maybe in conflict, for
instance:
• Local community against expansion of business, employees
want job security
• Shareholders want high dividends, managers want to use profits
for investment
• Suppliers want high prices for goods they supply, customers
want low selling prices
• Customers want high product/service quality with low prices,
shareholders want high profit margin
Source: Chapman, 2015