Chapter 3

Social responsibility
and ethics in strategic
management
 01 Discuss the relationship between social
responsibility and corporate performance

02 Explain the concept of sustainability

TABLE OF
CONTENTS 03 Conduct a stakeholder analysis

Explain why people may act

04 unethically

Describe different views of ethics

05 according to the utilitarian, individual
rights, and justice approaches
 3-1
Discuss the relationship
between social responsibility
and corporate performance
 Social
responsibility
proposes that a private corporation has
responsibilities to society that extend
beyond making a profit.
 Milton Friedman and Archie Carroll offer
two contrasting views:

“ There is one and only one social

responsibility of business—to use its Friedman’s
resources and engage in activities Traditional View
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.”
Carroll’s Viewpoint
Maximization of profits cannot be the primary obligation of
business, Archie Carroll proposed that the managers of
business organizations have four responsibilities:

Economic Legal

Ethical Discretionary
Economic responsibilities
Legal responsibilities
produce goods and services of
value to society so that the defined by governments in
firm may repay its creditors laws that management is
and increase the wealth of its expected to obey
shareholders

Discretionary
Ethical responsibilities responsibilities
follow the generally held the purely voluntary
beliefs about behavior in a obligations a corporation
society. assumes
 Responsibilities of Business

● Like a tree profit is the nutrients for the tree

to grow.
● The relationship with social responsibility
helps corporates have a solid ground to
stand and grow
 BENEFITS RECEIVED FROM
BEING SOCIALLY RESPONSIBLE

Gain brand loyalty Trustworthiness

Attract outstanding
Goodwill
employees

Attract capital
infusions from
investors
 3-2
Explain the
concept of
sustainability
As you know in the chapter 1

Definition Involve

Sustainability refers to
(1) the management of
the use of business
traditional profit/loss;
practices to manage the
(2) the management of the
triple bottom line as was
company’s social responsibility
discussed earlier.
(3) the management of its
environmental responsibility.
.
Sustainability not only includes much more
than just ecological concerns and the
natural environment but also includes
economic and social as well as
environmental concerns

For example, even though environmentalists

may oppose road building programs because
of their effect on wildlife and conservation
efforts, others point to the benefits to local
communities of less traffic congestion and
more jobs.
Conclusion
Sustainability involves many issues,
concerns, and tradeoffs—leading us to
an examination of corporate
stakeholders.
 3-3
Conduct a stakeholder analysis
 Stakeholder analysis is the identification and evaluation
of corporate stakeholders in a three-step process.

1 2 3

Identify primary Estimate the effect on

Identify the secondary
stakeholders each stakeholder
stakeholders
group from any
particular strategic
decision.

MAIN IDEA
The first step in
stakeholder analysis is to
identify primary
stakeholders, those who
have a direct connection
with the corporation and
who have sufficient
bargaining power to
directly affect corporate
activities.
First Step SUMMARY
IDEA 2 IDEA 3
Primary stakeholders Although difficult at times, it is
include customers, nonetheless important for
employees, suppliers, businesses to determine who
shareholders, and
their stakeholders are and
creditors.
what they want. The
corporation systematically
monitors these stakeholders
because they are important to
a firm meeting its economic
and legal responsibilities.
 Second Step SUMMARY
IDEA 3
MAIN IDEA IDEA 2
The second step in These secondary stakeholders
These usually include
stakeholder analysis is are not usually monitored by
nongovernmental
to identify the organizations, the corporation in any
secondary activists, local systematic fashion &
stakeholders- those communities, trade relationships are usually based
who have only an associations, on a set of questionable
competitors, and
indirect stake in the assumptions . These actions
governments.
corporation but who are could impact a corporation's
also affected by reputation and thus its long-
corporate activities. term performance.
 Third Step SUMMARY
MAIN IDEA IDEA 2 IDEA 3

The third step in For a firm to fulfill its For example, how much
stakeholder analysis ethical or discretionary will specific stakeholder
is to estimate the responsibilities, it must groups lose or gain? What
effect on each seriously consider the other alternatives do they
stakeholder group needs and wants of its have to replace what may
from any particular secondary stakeholders be lost?
strategic decision. in any strategic decision.
.
 Stakeholder Input

Once stakeholder
impacts have been
identified, managers
should decide whether
stakeholder input should
be invited into the
discussion of the
strategic alternatives
A group is more likely
to accept or even help
implement a decision
if it has some input
into which alternative
is chosen and how it is
to be implemented
 Stakeholder Input
Given the wide range of interests and concerns present in any
organization's task environment, one or more groups, at any one
time, will probably be dissatisfied with an organization's
activities-even if management is trying to be socially
responsible.

A company may have some stakeholders of which it is only

marginally aware and in some cases does not seem interested
in appeasing.
Therefore, before making a strategic decision,
strategic managers should consider how each
alternative will affect various stakeholder
groups. What seems at first to be the best
decision because it appears to be the most
profitable may actually result in the worst set of
consequences to the corporation.
 3-4
Explain why people
may act unethically
 There are several reasons why
people may act unethically in
strategic management.
Some of the most common

Pressure to perform

The pressure to meet targets, increase

profits, and reach other business goals can
lead individuals to take shortcuts and
engage in unethical behavior.
 Conflicts of interest can arise when individuals
have personal or financial incentives that are not
aligned with the best interests of the organization.
Conflicts of interest

Without clear ethical guidelines and enforcement

mechanisms, individuals may feel that unethical
Lack of clear ethical
behavior is acceptable or even expected.
standards

Individuals in positions of power may use their

Power dynamics influence to make unethical decisions, such as
engaging in insider trading or manipulating
financial data.
 Cultural norms
The norms and values of a particular organization or industry
can also contribute to unethical behavior. For example, if a
culture values profits above all else, individuals may feel
justified in engaging in unethical behavior to achieve those
goals.

It's important to note that while these factors can contribute to

unethical behavior in strategic management, they are not excuses
for such behavior. Ethical behavior is essential for maintaining
trust and integrity in organizations, and companies should work
to create a culture that encourages and rewards ethical behavior.
 3-5
Describe different views of
ethics according to the
utilitarian, individual rights,
and justice approaches
 Ethics:
the consensually accepted standards of
behavior for an occupation, a trade, or a
profession

— Views on ethical behavior

 — Views on ethical behavior

Morality Laws

formal codes that

constitutes one’s rules
permit or forbid certain
of personal behavior
behaviors and may or
based on religious or
may not enforce ethics
philosophical grounds
or morality.
3 basics approaches to Ethical Behavior

Individual
Utilitarian rights
approach approach

Ethical

Justice
approach
 Utilitarian Individual rights
approach approach

● Actions and plans should be ● Human beings have certain

judged by their consequences fundamental rights that should be
(greatest benefit & least harm, respected in all decisions.
lowest cost)
● Problem:
● Problems:
- “fundamental rights” in Vietnam
hard to all benefits & costs may or may not be accepted
throughout the world.
- can encourage selfish behavior
 Justice approach:
● Decision makers be equitable, fair, and impartial in
the distribution of costs and benefits to individuals and groups

● Problems: conflicts between justice.

- distributive justice (people who are similar on relevant dimensions
such as job seniority should be treated in the same way)
- fairness (liberty should be equal for all persons).
- retributive justice (punishment should be proportional to the offense)
- compensatory justice (wrongs should be compensated in proportion to
the offense)
 Job’s Job’s Work Work Total Mean
Job quality volume ability finishment grade grade
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