Strategy and Ethics

1. Strategy and Ethics • Ethics involves notions of • Right and wrong • Fair and unfair • Moral and immoral • Business Ethics is the application of general ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel • Ethical principles in business are not materially different from ethical principles in general • Business actions are judged by the general ethical standards of society • Legal versus Ethical Behavior

2. Business Ethics in the Global Community • Some notions of right and wrong are universal while others are not (universalism vs. relativism) • Cross-culture variability in ethical standards • Determining what is ethical when local standards vary • Managers have to figure out how to navigate the gray zone when cross-culture ethics differ • Should adhere to higher standard(s) • 3 Schools of Thought • Ethical Universalism • Ethical Relativism • Integrative Social Contracts Theory

3. Ethical Universalism • Ethical Universalism • The most important concepts of what is right and wrong are universal and transcend culture, society, and religion • Results in a set of universal ethical standards that apply to members of all societies, all companies, and all businesspeople • Sets limits and puts boundaries on ethical behavior

4. Ethical Relativism • Ethical Relativism • Differing religious beliefs, customs and behavioral norms across countries and cultures give rise to multiple sets of standards concerning what is ethically right or wrong • What is ethical or unethical depends on the prevailing local ethical standards and can vary from one nation to another • There can be multiple sets of ethical standards • There is no one-size-fits-all set of ethical norms

5. Integrative Social Contracts Theory • Integrative Social Contracts Theory • Provides a middle position • The ethical standards a company should try to uphold are governed by both: • A common or universal set of ethical standards that apply everywhere • Ethical standards that vary according to local custom (i.e., cultures, traditions, and shared values) • The more stringent standards should always take precedence

6. Three Categories of Management Morality • Moral Managers • Are dedicated to high standards of ethical behavior both personally and on the part of their organizations • Immoral Managers • Are actively opposed to or have no regard for ethical standards in business behavior • Amoral Managers • Do not pay attention or are blind to business ethics or believe that business and ethics don’t mix

7. Drivers of Unethical Strategies and Business Behavior • Apparent pervasiveness of immoral and amoral business people • Confusion over conflicting ethical standards • Faulty oversight that allows for the overzealous pursuit of personal gain, wealth, and self interest • Heavy pressures to beat earnings targets • Unethical company cultures

8. Approaches to Managing a Company’s Ethical Conduct • Unconcerned or nonissue approach • Do what is legal; do what we can get away with • Damage control approach • Prevent adverse publicity; use window dressing • Compliance approach • Put a compliance system in place to control ethical behavior • Ethical culture approach • Use culture and peer pressure to control ethical behavior

9. Why Should Company Strategies Be Ethical? • An unethical strategy is morally wrong and reflects badly on the company • Puts reputation at risk and can have costly consequences • Time consuming and costly to rehab reputation • May be shunned by customers • Makes it difficult to recruit and retain employees • An ethical strategy is good business and is in the self-interest of shareholders

10. Strategy and Corporate Social Responsibility • Companies should balance strategic actions to benefit shareholders against the duty to be a good corporate citizen • Should consider the effect that company actions will have on: • Employees • Local communities • The environment • Society at large • Companies must demonstrate a social consciousness

11. What is Meant by Corporate Social Responsibility? • 5 Components of Socially Responsible Business Behavior

12. Linking Strategy and Social Responsibility • There is no generic approach linking strategy and social responsibility • Social Responsibility Strategy - the particular combination of socially responsible endeavors a company elects to pursue • Social responsibility must be rooted in the company and it’s values • Each company’s version of being socially responsible is unique

13. The Moral and Business Case for CSR • It’s the right thing to do • Corporations have a duty to be good corporate citizens • A business is obligated to act as a responsible citizen and do its fair share to promote the general welfare • Should act in the overall best interests of society as well as shareholders • It generates internal benefits • It reduces the risk of reputation-damaging incidents and can lead to increased buyer patronage

14. Linking a Company’s Strategy to Its Ethical Principles and Core Values • Vision/Mission • Code of ethics • Core values and a values statement • Culture - perspective • Should not be window dressing • Communication • Leading by example • Should influence and be part of strategy