ETHICS PROBLEMS IN ORGANIZATIONS Focus on Stakeholders

1. ETHICS PROBLEMS IN ORGANIZATIONS Focus on Stakeholders referencing Chapter 8 Trevino & Nelson, Managing Business Ethics. NY: Wiley, 1999.

2. Understand the “stakeholder approach” to classifying ethical performance of firms. Identify categories of ethical problems at the organizational-level based on internal and external stakeholders. 3. Appreciate the concept of “escalation” in which matters starting as small issues become crises. Objectives

3. 8 Steps to Sound Ethical Decision-Making(Chapter 4, pp. 85-90) • Gather the Facts of the Situation • Define the Ethical Issues • Identify the Affected Parties (Stakeholder Analysis) • Identify the Consequences (Long v. Short-term, Symbolic Consequences) • Identify the Obligations • Consider Your Character and Integrity • Think Creatively About Potential Actions • Check Your Gut.

4. A “Stake” • A “Claim” • A right to something • A demand for something due or perceived to be due.

5. Stakeholder Analysis(also called “Constituent Analysis”) see: pg. 86 • Identify the parties affected (both harm & benefits) by your decisions. • Being able to see the situation through others’ eyes is a key moral reasoning skill. • “Role taking” (Kohlberg) • Start with those most immediately affected and work outward to include those who potentially may feel ‘collateral effects’.

6. Employees Mangers Owners (Shareholders) Customers Suppliers Community Stakeholders Include ~ Internal ~ ~ External ~

7. Groups or individuals with whom the organization has a contractual relationship. Customers, employees, shareholders, vendors & suppliers and government Groups or individuals to whom the organization has obligations, but who are not contractual partners. Community groups, citizens, other businesses, professional entities. Classifying Stakeholders ~ Primary ~ ~ Secondary ~

8. Factors that Affect Ethical Behavior Issue Intensity Individual Characteristics MODERATORS Ethical Dilemma Stages of Moral Development Ethical/ Unethical Behavior Structural Characteristics of Organization Organizational Culture

9. Issue Escalation • Through mismanagement, denial, or malevolence, small problems mushroom into huge ethical, legal and public relations nightmares.

10. Ethics and Consumers Marketing : an exchange-based function in which relationships, trust and norms play critical roles. As a consequence, the marketing function is fundamentally intertwined with ethical issues.

11. Consumer Ethics Few laws protecting consumers before 1960’s. Pure Food & Drug Act (1906) prohibited adulteration of food & drugs. McPherson v. General Motors gave the right to sue auto mfgs. For defective vehicles. 1962 Kennedy Principles: 4 Consumer Rights • Right to Safety • Right to be Heard • Right to Choose • Right to be Informed

12. “Due Care” TheoryConsumer Products & Services • Design:meet gov’t regs & specs; be safe under all foreseeable conditions, including misuse. • Materials:meet govt regs; be durable to withstand reasonable use. • Production:products made without defects. • Quality Control:products inspected regularly. • Packaging, Labels, Warnings:safely packed; clear directions for use; clear description of hazards. • Notification: manufacturers should have system to recall dangerous products after distribution.

13. Shareholder Ethics • Clear ethical obligation to “owners” • Serve the interest of owners & try to perform well economically over time. • Perform well in long term, not just short run.

14. Community Obligations • Companies are citizens in their communities. • Because of their size and complexity of relationships w/ community, they can have a disproportionate impact. • The most common issues are environmental.

15. Corporate Social Responsibility INSTITUTIONALIZATION PARTNERSHIPS VOLUNTARISM PHILANTHROPY