CHAPTER 9

1. CHAPTER 9 Ethical Business Strategies, Corporate Social Responsibility, and Environmental Sustainability

2. Linking Strategy to Ethicsand Social Responsibility Should there be a link between a company’s efforts to craft and execute a winning strategyand its dutiesto Conduct activities in an ethical manner? Demonstrate socially responsible behavior by being a committed corporate citizen? Limit its strategic initiatives to those meeting needs of consumers without depleting resources needed by future generations

3. What Is Business Ethics? • Business ethics involves applying general ethical principles and standards to business activities, behavior and decisions • Ethical principles in business are not different from ethical principles in general • Business actions are judged • By general ethical standards of society • Not by more permissive standards

4. Drivers of Unethical Strategies and Business Behavior • The view that “the business of business is business, not ethics” • Overzealous pursuit of personal gain, wealth, and other self-interests • Heavy pressures on company managersto meet or beat earnings targets • A company culture that places profits and good performance ahead of ethical behavior

5. The Business Case for an Ethical Strategy and Business Behavior

6. Ensuring a Strong Commitment to Business Ethics in Multinational Companies • Three schools of thought about the extent to which ethical standards apply across countries and cultures exist: • Ethical Universalism • Ethical Relativism • Integrative Social Contracts Theory

7. Concept of Ethical Universalism • According to the school of ethical universalism . . . • Same standards of what is right and what is wrong are universal and transcend most cultures, societies, and religions • Universal agreement on basic moral standards allows a multinational company to develop a code of ethics that is applied evenly across its worldwide operations

8. Examples of UniversalEthical Principles or Norms • Honesty • Trustworthiness • Respecting the rights of others • Practicing the Golden Rule • Avoiding unnecessary harm to • Workers • Users of a company’s product or service

9. Concept of Ethical Relativism • According to the school of ethical relativism . . . • What is ethical or unethical must be judged in light of local moral standards and can vary from one country to another • Companies a code of conduct based upon the principle of ethical relativism assume that local morality is an adequate guide for ethical behavior

10. Drawbacks of Ethical Relativism • The ethical relativism rule of “when in Rome, do as the Romans do” presents problems • It is ethically dangerous for company personnel to assume that local ethical standards are an adequate guide to ethical behavior • What if local standards condone kickbacks and bribery? • What if local standards blink at environmental degradation?

11. Integrative Social Contracts Theory • According to the integrative social contracts theory,the ethical standards a company should try to uphold are governed by both • A limited number of universal ethical principles that put ethical boundaries on actions and behavior in all situations and • The circumstances of local cultures, traditions, and values that further prescribe what constitutes ethically permissible behavior and what does not

12. Prioritizing Ethical Standards • Integrative social contracts theory provides that “first order” universal ethical norms always take precedence over “second order” local ethical norms when local norms are more permissive

13. Corporate Social Responsibility • Social responsibility calls for companies to strike a balance between • Its economic responsibility to shareholders • The legal responsibility to comply with the laws of the countries where it operates • The ethical responsibility to abide by society’s norms, and • The discretionary philanthropic responsibility to meet the unmet needs of society

14. Common Corporate Social Responsibility Initiatives • Actions to protect the environment • Actions to create a work environment that enhances employees’ quality of life • Actions to build a diverse workforce

15. Corporate Citizenship • Corporate citizenship involves a company’s discretionary philanthropic activities to address the unmet non-economic needs of society • Good corporate citizens contribute to society in areas where government has fallen short or chosen not to focus its efforts

16. Corporate Sustainability • Corporate sustainability involves meeting the needs of today’s stakeholders in a manner that protects the environment and resources needed for future generations • Directed at improving a company’s triple bottle line (TBL)—its performance on economic, environment, and social metrics

17. The Business Case for Socially Responsible Behavior • Generates internal benefits • Enhances recruitment of quality employees • Increases retention of employees • Reduces risk of reputation-damagingincidents • Avoids criticism from consumer groups and may lead to increased buyer patronage • Works in best interest of shareholders • Preempts costly legal and regulatory actions