Ethical Industry Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, you should respo

14 Oct Ethical Industry Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, you should respo

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Ethical Industry

Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, you should respond to two additional posts from your peers. If you have not done so lately, please review the Rules of Discussion.

Throughout this course, we have been discussing how ethics is integrated in all strategic management decisions. Now, consider and address the following: Are there some industries in which ethical practices are more important than in other industries? If so, name the industries that are ethical, and explain how the competitive actions and competitive responses might differ for these industries compared with a typical industry.

Chapter9.pptx

chapter 9 Strategy, Ethics, and Social Responsibility

Arthur A. Thompson The University of Alabama

An e-book published and distributed by McGraw Hill Education

Sixth Edition of Strategy: Core Concepts and Analytical Approaches (2020-2021). Arthur A. Thompson, The University of Alabama. Published and distributed by McGraw Hill Education. Image of globe comprised of puzzle pieces with several pieces dislodged and scattered below the globe. Chapter 5 The Five Generic Competitive Strategy Options: Which One to Employ

“Corporations are economic entities, to be sure, but they are also social institutions that must justify their existence by their overall contribution to society.”

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Henry Mintzberg, Robert Simons, and Kunal Basu, professors

“We don’t think of ourselves as do-gooders or altruists. It’s just that somehow we’re trying our best to be run with some sense of moral compass……”

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Craig Newmark, founder of Craigslist

“The time is always right to do what is right.”

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Martin Luther King Jr., civil rights activist and humanitarian

“It takes many good deeds to build a good reputation and only one bad one to lose it.”

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Benjamin Franklin

Rudyard Kipling

“But I’d shut my eyes in the sentry box so I didn’t see nothing wrong.”

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Chapter Learning Objectives

Understand where ethical standards come from.

Learn what drives companies to sometimes pursue unethical strategies and businesspeople to sometimes engage in unethical conduct.

Thoughtfully consider whether and why company strategies should be ethical and whether it is important for company personnel to display high ethical standards in conducting the company’s business.

Become familiar with the concepts of corporate social responsibility, corporate citizenship, and environmental sustainability.

Decide whether and why businesses should have a social responsibility strategy, display good corporate citizenship, and adopt environmentally sustainable business practices.

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What Do We Mean by Business Ethics?

Where Do Ethical Standards Come From—Are They Universal or Dependent on Local Norms?

The Three Categories of Management Morality

Drivers of Unethical Strategies and Business Behavior

Why Should Company Strategies Be Ethical?

Strategy, Social Responsibility and Corporate Citizenship

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Chapter 9 Roadmap

In the course of trying to craft and execute a strategy that delivers value to both customers and shareholders, it is well-accepted that a company and its personnel will be held accountable for obeying the law and complying with governmental regulations.

But does a firm also have a duty to:

Act in an ethical manner and hold all company personnel to high ethical standards?

Be a committed corporate citizen and allocate some of its resources to improving the well-being of employees, the communities in which it operates, and society as a whole?

Do more than what is legally required in trying to protect the environment, conserve natural resources for use by future generations, and ensure its operations do not endanger the planet?

What Duties Do Firms Have Beyond Delivering Value to Customers and Shareholders?

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What Do We Mean by Business Ethics?

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

The actions of businesses and businesspeople are judged by society’s standards of what is ethically right and wrong, not by a special set of rules that apply to business conduct

If society deems dishonesty to be unethical and immoral, then dishonest behavior in business is unethical

If society deems bribery unethical, then it is unethical for company personnel to offer payoffs or kickbacks to obtain sales or other favors

Core Concept

Business ethics deals with the application of general ethical principles and standards to the actions and decisions of businesses and the conduct of their personnel.

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Where Do Ethical Standards Come From?

There are three schools of thought regarding how ethical standards are determined:

Ethical Universalism

Ethical Relativism

Integrative Social Contracts Theory

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The School of Ethical Universalism

Maintains that the most important concepts of what is right and what is wrong are universal and transcend most cultures, societies, and religions

Being truthful (or not lying or not being deliberately deceitful) strikes a chord of what’s right in peoples of all nations

The same is true for demonstrating integrity of character, not cheating, and treating people with courtesy and respect

In most societies, people concur that it is unethical to knowingly expose workers to toxic chemicals and hazardous materials or to sell products known to be unsafe or harmful to the users or to pillage or degrade the environment

Common moral agreement about right and wrong actions and behaviors across multiple cultures and countries gives rise to universal ethical standards that apply to all members of all societies, all companies, and all businesspeople worldwide.

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Core Concept

According to the school of ethical universalism, common moral agreement about right and wrong actions and behaviors across multiple cultures and countries gives rise to universal ethical standards that apply to the members of all societies, all companies, and all businesspeople.

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Being honest and telling the truth

Being trustworthy

Respecting rights of others

Practicing the Golden Rule

Treating people with dignity and respect

Exercising due diligence in product safety

Acting in a manner that does not

Harm others or put them at risk (as concerns safety)

Unreasonably endanger the environment

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Examples of Universal Ethical Principles or Norms

The strength of the ethical universalism approach to establishing ethical standards is it draws upon the collective views of multiple societies and cultures to put clear boundaries on what constitutes ethical and unethical business behavior, no matter what country or culture a company or its personnel are operating in.

This is particularly beneficial to a multinational firm because when basic moral standards do not vary significantly from country to country, it can:

Apply a single code of ethics across its worldwide operations

Avoid the slippery slope that comes from having different ethical standards for different company personnel depending on where in the world they are working

Why the Ethical Universalism Approach to Establishing Ethical Standards Has Merit

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The School of Ethical Relativism

According to the school of ethical relativism:

While there are a few universal moral prescriptions—like being truthful and trustworthy—that apply in most every society and business circumstance, there are meaningful variations in what societies generally agree to be fair or unfair, moral or immoral, and ethically right or wrong.

Such variations stem from differing religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms across countries and cultures

It is appropriate for each society or culture to rely upon its own religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms to establish its own set of ethical standards—what outsiders think is ethically right or wrong does not overrule local standards

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The Implications of Ethical Relativism

If one accepts the thesis of the school of ethical relativism that each society or culture can rightfully determine its own standards of behavior for what is ethically right or wrong, then

Ethical standards are not absolute or universal—no “one-size-fits-all” set of ethical standards exists

Ethical standards are appropriately grounded in the religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms prevailing within each society or culture

One society’s set of ethical standards is just as valid as another society’s ethical standards—ethical standards are relative and subject to each society’s own judgment. Within each society/culture, local ethical standards govern what is ethically right or wrong

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Core Concept

The school of ethical relativism maintains that differing religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms across countries and cultures give rise to multiple sets of standards concerning what is ethically right or wrong.

As a consequence, whether certain business-related actions or behaviors are ethically right or wrong varies from country-to-country, depending on whatever local ethical standards prevail.

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Ethical Relativism and the Use of Underage Labor

According to the principle of ethical relativism, whether the use of underage labor in hazardous or nonhazardous jobs is ethically right or wrong depends on what country one is in.

In industrialized nations, the use of “underage” workers is considered unethical and is forbidden by law, most especially if some of the job activities are hazardous.

However, in some countries, it is customary to view children as potential, even necessary, workers.

Underage children are a part of the workforce in a number of the countries of the world, and in some countries underage children are employed in jobs with hazardous aspects

But is what prevails as local morality always an adequate or appropriate guide for setting ethical standards?

How can one convincingly maintain that it should be ethically permissible for a firm to hire young children for jobs (which may have hazardous aspects) in some countries but not others?

Given that the use of “underage” workers for hazardous work is illegal and also deemed unethical in some countries but is legal and deemed ethical in a number of countries:

Should ethical relativism prevail in allowing the use of underage labor for nonhazardous jobs where it is customary and socially acceptable?

Should the ethical standard for using underage labor be based on ethical universalism or ethical relativism?

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Ethical Relativism: Should It Govern the Use of Underage Labor?

Strategic Insight

Strict adherence to the principles of ethical relativism leads to the untenable conclusion that child labor is ethically impermissible in countries where it is illegal or contrary to local custom, but is ethically permissible in countries where the use of child labor is common practice.

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Payment of bribes and kickbacks is normal and customary in some countries; in others such payments are illegal, as well as unethical

The Foreign Corrupt Practices Act prohibits U.S. firms from paying bribes anywhere they do business even if such payments are customary

Firms with ethical codes forbidding payment of bribes face a formidable challenge where bribery is an entrenched local custom

Refusing to pay bribes or kickbacks in these countries often means losing sales to competitors willing to make such payments

But going along with the payment of bribes or kickbacks undercuts enforcement of and adherence to firms whose of code of ethics forbids such payments

Should a firm observe ethical principles or wade into the moral quicksand of paying bribes to win sales?

Ethical Relativism and the Payment of Bribes and Kickbacks

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Is a firm that deems it ethically permissible for its personnel to pay bribes and kickbacks in countries where such payments are customary but ethically impermissible to make such payments elsewhere abdicating responsibility for setting the ethical standards that all of the firm’s personnel are expected to observe regarding the payment of bribes and kickbacks?

Is a multinational company that simply tells personnel to observe whatever ethical standards prevail in the countries locations where they work strongly or weakly committed to enforcing high standards of ethical behavior among its employees?

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Questions to Consider

When a firm’s ethical standards vary from country to country, the clear message being sent to employees is that the firm has no ethical standards or convictions of its own and prefers to let its standards of ethically right and wrong be governed by the customs and practices of the countries in which it operates. But is it a defensible practice for a multinational company to:

Condone the payment of bribes/kickbacks in some countries but not others?

Relax worker safety standards in some countries but not others?

Tolerate greater environmental pollution by company plants in some countries than in others?

Source products from foreign manufacturers known to employ child labor?

Applying multiple sets of ethical standards without a higher-order moral compass undercuts the enforcement of high standards of ethical behavior.

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Using the Principle of Ethical Relativism to Create Ethical Standards Is Problematic for Multinational Firms

Strategic Insight

Managers in multinational enterprises have to figure out how to navigate the gray zone that arises when their company operates in two or more countries or cultures with differing customs and ethical standards.

One can argue that having a code of ethics containing multiple standards that vary by locale is equivalent to having no standard. Do you agree?

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Ethics and Integrative Social Contracts Theory

Takes a middle position between the schools of ethical universalism and ethical relativism

Maintains that ethical standards are governed:

First by a limited number of universal ethical principles widely recognized as legitimately putting boundaries on actions and behavior in all situations

and

Second by the circumstances of local cultures, traditions, and shared values that further prescribe ethically permissible behaviors in a given locality provided they do not conflict with universal principles

However, in the event of conflict , universal ethical standards must always take precedence over locally acceptable ethical behaviors

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Core Concept

According to integrated social contracts theory, universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a “social contract” that all individuals, groups, organizations, and businesses in all situations have a duty to observe.

So long as the boundaries of this social contract are observed, there is legitimate room for local cultures or groups to prescribe what other actions may or may not be ethically permissible. However, according to integrated social contracts theory, adherence to universal or “first-order” ethical norms must always take precedence over local or “second-order” norms.

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Integrated social contracts theory incorporates the best parts of ethical universalism and ethical relativism

It is indisputable that cultural differences impact how business is conducted in various parts of the world and that these cultural differences sometimes give rise to different ethical norms.

But it is just as indisputable that some ethical norms are more authentic or universally applicable than others, meaning that in many instances of cross-country differences one side may be more “morally or ethically correct” or “more right” than another.

In instances where universal and local ethical norms are in conflict, integrated social contracts theory maintains that complying with universal ethical norms takes precedence—the obligation to observe universal or “first-order” ethical norms outranks the permission to observe local or “second-order” ethical norms should there be conflict between the first-order and second-order ethical norms.

Why Relying on Integrated Social Contracts Theory Has Appeal

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The Three Categories of Management Morality

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Types of managers as concerns their ethical and moral principles

Managers that are moral

Managers that are amoral

Managers that are immoral

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Traits of Moral Managers

Moral managers are:

Dedicated to high standards of ethical behavior in their own actions and in how the firm’s business is conducted

Act as organizational stewards of ethical behavior

Believe it is important to pursue success in business within the confines of both the letter and the spirit of what is ethical and legal

Regard complying with the law as an ethical minimum and habitually operate well above what the law requires as concerns ethics-related matters

Has no regard for ethical standards in business

Pays no attention to ethical principles in making decisions and conducting the firm’s business

Believes good people cannot spend time watching out for others and agonizing over “the right thing to do”

Thinks nice guys come in second and that in the business world you either trample on others or get trampled yourself

What matters is the single-minded pursuit of one’s best interests

Has few scruples, little or no integrity, and is willing to do most anything if unlikely to be caught

May even be willing to short-circuit legal and regulatory requirements

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Traits of an Immoral Manager

Traits of an Amoral Manager

Is of the strong opinion that businesses ought to be able to do whatever the prevailing laws and regulations allow them to do

If business actions and behaviors are legal and do not violate prevailing rules and regulations, then they should not be seen as unethical

Views observing high ethical standards (doing more than what laws and regulations require) as too naïve for the tough competitive world of business

However, often believes that observing higher ethical considerations may be appropriate in life outside of business

Has a lawyer-driven moral concept of right and wrong:

“How much can we get by with?”

“What are the risks of going ahead if a particular action is borderline?”

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Strategic Insight

Amoral managers believe that businesses ought to be able to do whatever current laws and regulations allow them to do without being shackled by any ethical considerations. They think that what is permissible in business situations and what is not are governed entirely by prevailing laws and regulations, not by societal concepts of right and wrong.

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Questions for Simulation Company Co-Managers

How would you characterize your company’s management team?

Moral?

Immoral?

Amoral?

A mixed bag (we do not all think the same on this)?

Be honest!!!!

(Political correctness here is out of bounds!!!)

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Evidence indicates a sizable majority of managers are either amoral or immoral

Ongoing research by Transparency International shows corruption among public officials and in business transactions is widespread across the world

The 2018 global average across 176 countries and territories was below the midpoint of the scale of 0 (highly corrupt) to 100 (very clean).

Table 9.1 shows some of the countries where public corruption was perceived to be lowest and highest

Evidence of Managerial Immorality in the Global Business Community

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TABLE 9.1 Corruption Perceptions Index, Selected Countries, 2018

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(The CPI scores are based on a 100-point scale, where 100 = very clean and 0 = highly corrupt)

What Are the Drivers of Unethical Strategies and Business Behavior?

Lax board oversight of unscrupulous managerial pursuit of personal gain, wealth and other selfish interests.

Heavy pressures on company managers to meet or beat performance targets.

A company culture that puts profitability and good business performance ahead of ethical behavior.

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People obsessed with wealth accumulation, greed, power, status, and other selfish interests often

Push ethical principles aside in their quest for self gain

Exhibit few qualms in skirting the rules or doing whatever is necessary to achieve their goals

Engage in all kinds of unethical strategic maneuvers and behaviors

Overzealous Pursuit of Wealth and Other Selfish Interests</p

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14 Oct Ethical Industry Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length, and, you should respo

Ethical Industry

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