TOPIC 3

ETHICS AND CORPORATE

SOCIAL RESPONSIBILITY IN
STRATEGIC MANAGEMENT
 3.1 Strategic Decision Makers and Social
Responsibility
Firms have multiple stakeholders and must go beyond a focus
solely on financial results.
• Social responsibility is the expectation that businesses or
individuals will strive to improve the overall welfare of
society.
• Firms can measure a triple bottom line, assessing financial,
social, AND environmental performance.
• Sustainability projects can yield substantial benefits even
when they are difficult to quantify.
Carroll’s Four Responsibilities of Business
1. Economic responsibilities
• produce goods and services of value to society so that the firm may
repay its creditors and increase the wealth of its shareholders

2. Legal responsibilities
• defined by governments in laws that management is expected to obey

3. Ethical responsibilities
• follow the generally held beliefs about behavior in a society

4. Discretionary responsibilities
• purely voluntary obligations a corporation assumes
 3.2 Ethical Decision Making
• Ethical decision-making refers to the process of evaluating and choosing among
alternatives in a manner consistent with ethical principles.
• In making ethical decisions, it is necessary to perceive and eliminate unethical
options and select the best ethical alternative.
• Leaders have to develop ethical standards that employees in their company will
be required to adhere to.
• This can help move the conversation toward using a model to decide when
someone is in violation of ethics.
 3.3 Corporate Stakeholders
• Stakeholders
• have an interest in the business and affect or are affected by the achievement
of the firm’s objectives
• Stakeholder analysis
• the identification and evaluation of corporate stakeholders
• usually done in a three-step process
1. To identify primary stakeholders
• Primary stakeholders
• those who have a direct connection with the corporation and who have
sufficient bargaining power to directly affect corporate activities
• include customers, employees, suppliers, shareholders, and creditors
2. To identify the secondary stakeholders.
• Secondary stakeholders
• have an indirect stake in the corporation but are also affected by corporate
activities
• includes NGOs, activists, local communities, trade associations, competitors,
and governments
3. To estimate the effect on each stakeholder group from any particular strategic
decision.
An Organization’s Key Stakeholders & the Nature of Their Claims
 3.4 The Responsibility of a firm
• Social capital
1. the goodwill of key stakeholders, that can be used for
competitive advantage
2. opens doors in local communities
3. enhances reputation with consumers