Chapter 3

SOCIAL RESPONSIBILITY
AND ETHICS IN STRATEGIC
MANAGEMENT
Outlines

Group 1

undiknas university
 Outlines :

Social Responsibilities of Strategic

Decision Makers
01
02 Sustainability

03 Stakeholder Analysis

04 Ethical Decision Making

05 Views on Ethical Behavior

Social Responsibilities of Strategic
Decision Makers
The concept of social responsibility proposes that a private
corporation has responsibilities to society that extend
beyond making a profit.

What are the responsibilities of a business firm and how many of them
must be fulfilled? Milton Friedman and Archie Carroll offer two
contrasting views of the responsibilities of business firms to society.
Responsibilities of a
Business Firm

Friedman’s Traditional View of

Business Responsibility 125

Milton Friedman believed that a business's

100
sole responsibility is to maximize profits
within fair competition rules. Spending on
75
social causes, according to him, can harm a
company's efficiency and shareholder wealth. 50
This perspective questions Caterpillar's
spending on recycling and whether it benefits 25
shareholders.
0
Item 1 Item 2 Item 3 Item 4 Item 5
Responsibilities of a Businesses must create valuable goods
Economic
Business Firm responsibilities
and services to repay debts and increase
shareholder wealth.

Carroll’s Four Responsibilities of Legal are defined by governments in laws that

Business responsibilities management is expected to obey

Archie Carroll proposed that the

managers of business organizations
organization’s management are to follow
have four responsibilities: Ethical the generally held beliefs about behavior
responsibilities in a society.

Discretionary the purely voluntary obligations a

responsibilities corpora?tion assumes.
 Sustainability
Sustainability includes much more than just ecological concerns and the natural environment.

The broader concept of sustainability has much in common with Carroll’s list of business responsibilities
presented earlier. In order for a business corporation to be sustainable—that is, to be successful over a long
period of time—it must satisfy all of its economic, legal, ethical, and discretionary responsibilities.
Sustainability thus involves many issues, concerns, and tradeoffs—leading us to an examination of corporate
stakeholders.
Corporate Stakeholders
The concept that business must be socially responsible sounds appealing until we ask,
“Responsible to whom?” A corporation’s task environment includes a large number of groups
with interest in a business organization’s activities.

These groups are referred to as stakeholders because they affect or are affected by the
achievement of the firm’s objectives

The corporation may need to craft an enterprise strategy —an overarching strategy that
explicitly articulates the firm’s ethical relation?ship with its stakeholders. This requires not only
that management clearly state the firm’s key ethical values, but also that it understands the
firm’s societal context, and undertakes stakeholder analysis to identify the concerns and abilities
of each stakehold
Stakeholder analysis

is the identification and evaluation of corporate stakeholders. This can be

done in a three-step process.

1. Identify primary stakeholders, those who have a direct connection with

the corporation and who have sufficient bargaining power to directly affect
corporate activities.

2. Identify the secondary stakeholders, those who have only an indirect

stake in the corporation but who are also affected by corporate activities.

3. To estimate the effect on each stakeholder group from any particular

strategic decision, Because the primary decision criteria used by
management is generally economic, this is the point where secondary
stakeholders may be ignored or discounted as unimportant.
 • Once stakeholder impacts have been identified, managers
should decide whether stakeholder input should be invited into
the discussion of the strategic alternatives
Stakeholder • A group is more likely to accept or even help implement a

Input
decision if it has some input into which alternative is chosen and
how it is to be implemented.
Ethical Decision Making
Some people joke that there is no such thing as “business ethics.”

Why are many business people perceived to be acting unethically?

Some Reasons for Unethical Behavior :

• Organizational performance required it—74%
• Rules were ambiguous or out of date—70%
• Pressure from others and everyone does it—47%

Some people justify their seemingly unethical positions by arguing that

there is no one absolute code of ethics and that morality is relative.
Simply put, moral relativism
Moral Naïve relativism
Based on the belief that all moral
decisions are deeply personal and that
individuals have the right to run their own
Relativism lives

At one time or another, most Role Based on the belief that social roles carry
managers have probably used one relativism with them certain obliga?tions to that role

of the four types of moral

relativism
Based on a belief that morality is simply a
Social group matter of follow?ing the norms of an
relativisms individual’s peer group

Cultural relativism Based on the belief that morality is

relative to a particular culture, society,
or community
Kohlberg’s Levels of Moral
Development
Three levels of moral development :

The preconventional The The principled

level conventional level level

This level is This level is This level is characterized

characterized by a characterized by by a person’s adherence
concern for self considerations of to an internal moral code.
society’s laws and norms.
Encouraging Ethical
Behavior
Codes of Ethics

A code of ethics specifies how an organization expects its

employees to behave while on the job.

A code of ethics (1) clarifies company expectations of

employee conduct in various situations and (2) makes clear
that the company expects its people to recognize the ethical
dimensions in decisions and actions
Views on Ethical Behavior

the three basic approaches to ethical

behavior :

Utilitarian approach Individual rights Justice

approach approach

proposes that proposes that human proposes that decision

actions and plans beings have certain makers be equitable, fair,
should be judged by fundamental rights that and impartial in the
their consequences. should be respected in all distribution of costs and
decisions benefits to individuals
and groups.
 Chapter 3

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