a) EMPHASIS ON FAIRNESS

b) HISTORICAL OVERVIEW
c) POLITICAL CONTINUUM:

stakeholder---------------------------------------------minimalist
[left] [right]
THE LAW IS NECESSARY BUT INSUFFICIENT
a) THE LAW IS REACTIVE

b) THE LAW IS SLOW

c) BUSINESS IS CHANGE-
ORIENTED & FASTER
Ethical Responsibilities

Social Responsibilities

Legal Responsibilities

Economic Responsibilities
•Community in a pre-modern, modern
and
postmodern world

•Why we expect more from business and

how
―the game is played‖
 TRADITIONAL ENTREPENEURIAL
 Power goes to those who succeed in ―the
jungle‖
 Authority resides in those with legitimacy–
size; wealth; longevity confers authority
 Ethics based on individual responsibility and
programs minimized
 COMMUNITY OF RATIONAL RULES
i) BUREAUCRATIC
ii) SCIENTIFIC MANAGEMENT
iii) RELIANCE ON "EXPERTS"
iv) COMPREHENSIVE RULES
Power goes to those who make the rules. Relies on
expertise
Authority goes to those who can enforce their rules
Reach for the top
Ethics are based on ―fairness’ and programs based
on rules
 COMMUNITY OF FLEETING EXCHANGES
i) NEED TO INTERPRET
ii) NEED TO BUILD CONSENSUS
iii) LOOSE CONNECTIONS
iv) SUSPICION OF AUTHORITY
Power goes to those who can ―make the deal‖
through networking and can handle uncertainty
Authority goes to those who see and can sell
coalitions and deals regardless of other levels of
authority
Ethics are situational; programs emerge to be
responsive
Position Responsible to therefore…
Minimalist Stockholders/ Maximizing profit
owners
Self interested Stockholders/ Do good when
owners/ cost furthers quest for
“controllers” growth and
profit
Social contract Those with social Goes beyond law
and legal contract to spirit of
commitment
Stakeholder Those who Develop
Management influence responsive
direction and strategies
fortunes
Stakeholder Society as whole / Solutions for
stewardship future social problems
 Traditional stockholders model,
fundamentalism, Libertarian
 Friedman

 PREMISES
-Shareholders are the st priority
-Obey the laws
-Private vs. Public [MINIMAL
STATE]
 THEY DISTRACT FROM PROFIT MOTIVE
 THEY ARE SOCIALISTIC
 "PUBLIC GOOD" IS SUSPECT
Defining ―Me‖
 PREMISES

 GOOD MOTIVES NOT

ENOUGH
 PROFITS & COMMUNITY
 CULTIVATING PHILANTHROPY
 REPUTATION
 MINIMALIST IS TOO RIGID
 ALL OTHERS IGNORE PROFIT
―we endeavor to become a leading contributor to a
more sustainable world‖…‖The Ford Motor
Company Fund supports many local and national
programs to affect change, provide for those in
need, and improve quality of life.‖

―Are consumers, especially in North America,

truly interested in and willing to pay for new
technology?‖
 http://www.ford.com/en/ourCompany/corporateCitizenship/ourLearningJourney/strategicIssuesUpdate/climateChange.htm
PREMISES
 CORPORATION AS "MORALPERSON"

IMPLICIT & EXPLICIT CONTRACT
WITH SOCIETY
 WITH POWER COMES RESPONSIBILITY
 1ST 2 MODELS FOCUS TOO MUCH ON PROFIT
 LEAKY" CONDO PLAYERS LACKED A
SENSE OF "IMPLICIT" CONTRACT WITH
SOCIETY
 … developers ―put a lot of money into
marble countertops and fancy kitchens
because that’s what sells the
product. And consequently they don’t
spend a lot of time thinking about how it
looks [and functions] from the
outside. It’s designing inside out.‖
 http://www.myleakycondo.com/com020601.htm
*PRIMARY [ECONOMIC]

*SECONDARY [SOCIO POLITICAL]

* TERTIARY [POWERLESS]
 1ST 2 MODELS TOO PROFIT-FOCUSED
 -S-C MODEL IS TOO VAGUE
 CITIZENSBANK
 SHELL
PREMISES
 -CARING FOR TERTIARY
 -HELP NON-BENEFICIAL PARTIES
 -HOLD IN TRUST
 -ASPIRE TO HIGH IDEALS

*ALL OF THIS PRESUPPOSES TIME & MONEY

 -1ST 2 MODELS TOO PROFIT-FOCUSED
 -S-C MODEL TOO VAGUE
 STAKEHOLDER MODEL NOT
AMBITIOUS ENOUGH
 Ben and Jerrys
 ―Ben & Jerry’s Head of Social Mission has
returned from a two-week mission in Cote
d’Ivoire and Mali on the subject of
alleged child trafficking in West Africa‖
 http://www.benjerry.com
Participants Change Issues Trust
 Investors/  Hyper Trust grows
stockholders competition when
 Owners /  globalizatio performance
n meets
managers expectation;
Distrust if fails
to meet
expectation
Participants Change Issues Trust
 Program  Competition Trust grows
advocates  Reputation when program
 Owners / enhancement advocates
deliver
managers enhanced
corporate
reputation;
Distrust if do not
Participants Change Issues Trust
 Those with  Need for Trust grows
contracts when keeps
with firm flexibility legal and
 Owners /  internationaliz social
ation contracts
managers over time;
Distrust if do
willing to
violate them
Participants Change Issues Trust
 Primary and  Information Trust grows
secondary access to firm when
 Owners / increases stakeholders
 Systems feel
managers open to included in
scrutiny decision
making
Distrust if feel
excluded
Participants Change Issues Trust
Spokespersons  Pressure to Trust grows when
for tertiary include firm willing to
Owners / tertiary negotiate with
managers  Worry about spokespersons
for tertiary
environment Distrust if feel
excluded
 Pre modern
 Minimalist
 Self Interested
 Modern
 The social contract
 Postmodern
 Stakeholder (management and stewardship)
Ethical Responsibilities

Social Responsibilities

Legal Responsibilities

Economic Responsibilities
CORPORATE SOCIAL
RESPONSIBILITY
(CSR) AND ETHICS
 Corporate social responsibility (CSR) is the
process by which businesses negotiate
their role in society
 In the business world, ethics is the study
of morally appropriate behaviors and
decisions, examining what "should be
done‖
 Although the two are linked in most firms,
CSR activities are no guarantee of ethical
behavior
 Companies can engage in CSR activities even
while they are acting in unethical ways.
For example, Enron was a champion of
community involvement, but used off-
balance-sheet partnerships to bilk investors
and eventually ruin the company.

 Companies can say one thing and do another.

 CSR activities are important to and even
expected by the public
 And they are easily monitored worldwide
 CSR activities help organizations hire and
retain the people they want
 CSR activities contribute to business
performance
 Corporate Social Responsibility Continuum
Do more than
required; Integrate
e.g. engage social
in objectives
Fight social philanthropic and business
responsibility giving goals
initiatives
Maximize
Balance profits
firm’s profits
and social
to the
objectives
exclusion of all
else

Do what it
takes to Lead the
make a Comply;
do industry
profit; Articulate and other
skirt the what is
social value businesses
law; fly legally
required objectives with best
below practices
social
radar
 Do what it takes to make a profit; skirt the law; fly
below social radar
 Fight CSR initiatives
 Comply with legal requirements
 Do more than legally required, e.g., philanthropy
 Articulate social (CSR) objectives
 Integrate social objectives and business goals
 Lead the industry on social objectives
 Philanthropy
 give money or time or in kind to charity
 Integrative philanthropy—select beneficiaries aligned with company
interests
 Philanthropy will not enhance corporate reputation if a
company
 fails to live up to its philanthropic image or
 if consumers perceive philanthropy to be manipulative
 These may be activities you’ll see in your firms.

 Integrative philanthropy—Avon Products Inc. ―The company

for
women" donates funds to breast cancer research.
 In Seattle, FareStart partners with Consolidated Restaurants;
Pharma companies align with Operation Smile, AIDs
donations.
 Incorporate values to make it part of an
articulated belief system
 Act worldwide on those values
 Cause-relatedmarketing
 Cause-based cross sector partnerships
 Engage with stakeholders
 Primarystakeholders
 Secondary stakeholders
 Incorporate values in belief statements: McDonald's: ―We believe
that being a good corporate citizen means treating people with
fairness and integrity, sharing our success with the communities in
which we do business, and being a leader on issues that affect
customers” (McDonald's Corporation, 1992).

 Act on values: Starbucks put resources into integrating values.

 Primary stakeholders are internal to the company such as owners,
employees, labor unions, customers and suppliers (Clarkson, 1995).
Secondary stakeholders operate external to the firm; they could
be nongovernmental organizations, social activists, community
groups, and governmental organizations.

 REI definition of social responsibility: “Achieving commercial

success in ways that honor ethical values and respect people,
communities, and the natural environment” includes ethics,
community investments, corporate governance, environmental
health and safety practices, sustainability, sourcing practices.
Matt Hyde, Sr VP of Merchandizing and Logistics at REI said the
only way we can be CSR is if we pursue commercial success—it’s a
given that you have to make money (November 1, 2004).
 The cultural context influences organizational
ethics
 Top managers also influence ethics
 The combined influence of culture and top
management influence organizational ethics
and ethical behaviors
 If national practice is bribery, then most companies in that
nation will use bribery.
 If a top manager is unethical, then he/she sets a lead that
others follow.
 When managers behave unethically, employees can be
demoralized, lose faith in the organization, and even
leave their jobs. Others might follow-the-leader
themselves and engage in unethical behaviors.
 High demands for performance and profitability led Enron
employees first to cut ethical corners and finally to
break laws as well. According to one Enron
controller, the logic was as follows:
"If your boss was [fudging] and you have never worked
anywhere else, you just assume that everybody fudges
earnings. Once you get there and you realized how it
was, do you stand up and lose your job?
It was scary. It was easy to get into 'Well, everybody
else is doing it, so maybe it isn't so bad.'"

 From domestic where ethics are shared
 To international where ethics are not shared
when companies:
 Make assumptions that ethics are the same
 Ethical absolutism—they adapt to us
 Ethical relativism—we adapt to them
 To global which requires an integrative
approach to ethics
 Most firms are developed within a
nation, borrowing their ethical practices
them. from
 When they go international, they face new ethical
challenges.
 NIKE Inc. was "founded on a handshake" with
implicit belief that "business with all of our
partners [would be] based on trust, teamwork,
honesty and mutual respect. We expect all of our
business partners to operate on the same
principles."
 Nike discovered that their overseas subcontractors
were not treating workers with respect, and this
suggests that Nike's view of these principles and
what they meant did not result in desired
subcontractor behavior.
 Growing sense that responsibility for righting
social wrongs belongs to all organizations
 Growing business need for integrative
mechanisms such as ethics
 Ethics reduce operating uncertainties
 Voluntary guidelines avoid government
impositions
 Ethical conduct is needed in an increasingly
interdependent world—everyone in the same
game
 Companies wish to avoid problems and/or be
good public citizens
 Create a cohesive ethical program that meets
multiple and sometimes conflicting
demands.
 Top management commitment in word and deed
 Company codes of ethics
 Supply chain codes
 Develop, monitor, enforce ethical behavior
 Seek external assistance
 Fundamental honesty and adherence to the law.
 Product safety and quality, workplace health and safety
precautions
 Conflicts of interest
 Employment practices
 Fair practices in selling and marketing products or
services
 Financial reporting
 Supplier relationships
 Pricing, billing, and contracting
 Trading in securities and/or use of insider information
 Payments to obtain business
 Acquiring and using information about others
 Security and political activities
 Environmental protection
 Intellectual property or use of proprietary information
(Business Roundtable, 1988).
 Industry or professional codes
 Certification programs, e.g., ISO 9000
 Adopt/follow global codes
 Caux Round Table Principles

 Accountantshave a professional code of ethics that

companies rely on.
 Create the same opportunity for all
businesses if there are common rules
 Level the playing field
 They are needed in an
interconnected world
 They reduce operating uncertainties
 If businesses don’t collaborate, they may not
like what others develop
 A. Maintaining or creating the opportunity for
business activities.

b. All firms should be operating according to
the same principles; this produces the "level
playing field" upon which many organizational
leaders prefer to play.
 c. Ethical codes are needed and are possible
in a world that is interdependent on many
other dimensions of business activities.
 d. They reduce operating uncertainties and,
 e. Growing public interest in a global code of
ethics suggests that if businesses don't develop
such codes, they will be developed by other
bodies that may be unfavorable to business
interests.
 Global rules emerge from negotiations and will reflect values of
the strong
 Global rules may be viewed as an end rather than a beginning
 Rules can depress innovation and creativity
 Rules are static but globalization is dynamic

 Global rules are likely to emerge from a negotiation process;

they are unlikely to reflect values and habits consistent for all
cultures. To the extent that these rules are developed by firms
from the Westernized countries, they may not incorporate
concerns for much of the world. Second, global ethics may be
viewed as an end point rather than a beginning point for
developing global ethics. Organizations may hide behind global
codes, claiming that the absence of rules means that all behaviors
are acceptable as conditions change. Organizations may/will find
loopholes then use the rules in defense.

 A global code of ethics also may serve to depress innovation, since

some will hesitate to act in the absence of clear guidelines.
However, a static set of guidelines is unlikely to keep pace with
globalization.
 Ethics
 An individual’s personal beliefs regarding what
is right or wrong or good or bad.
 Ethical Behavior
 Behavior that is acceptable in the eye of the
beholder. However, it also refers to behavior
that conforms to generally accepted social
norms.
 Examples of Unethical Behavior
 ―Borrowing‖ office supplies for personal use.
 ―Surfing the Net‖ on company time.
 Family Situational Values and Peer
Experiences
Influences Factors Morals Influences

Individual Ethics
 Organizational Ethics
 moralvalues, beliefs, and rules that establish
the appropriate way for an organization and its
members to deal with each other and people
outside the organization
 Managing Ethical Behavior
 Begins with top management which establishes
the organization’s culture and defines what will
and will not be acceptable behavior.
 Includes training on how to handle different
ethical dilemmas.
 Developing a code of ethics.
 A written statement
of the values and
ethical standards that
guide the firm’s
actions.
 Social Responsibility
 The set of obligations (to behave responsibly)
that an organization has to protect and enhance
the social context in which it functions.
 Areas of Social Responsibility
 Stakeholders: customers, employees, and
investors.
 The natural environment:
environmentally
sensitive products, recycling, and public
safety.
 The general social welfare: charitable
contributions, and support for social issues such
 Highest Degree of
Social Responsibility
Proactive Stance

Accommodative Stance

Defensive Stance

Source: Barney, Jay B. and

Ricky W. Griffin, The
Management of
Obstructionist Stance
Organizations. Copyright ©
1992 by Houghton Mifflin Lowest Degree of
Company. Used with Social Responsibility
permission.
 Legal Compliance
 Extent to which the organization conforms to local,
state, federal, and international laws.
 Ethical Compliance
 Extent to which members of the organization follow
basic ethical/legal standards of behavior.
 Philanthropic Giving
 Awarding of funds or gifts to charities or other
social
programs.
 Organizational Leadership and Culture
 Leadershippractices and the culture of the organization
can help define the social responsibility stance an
organization and its members will adopt.
 Whistle Blowing
 Theorganizational response to the disclosure by an
employee of illegal or unethical conduct on the part of
others within the organization is indicative of the
organization’s stance on social responsibility.