Business 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
 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
 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
 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
 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
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
 Reasons 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
 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
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
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
 What is Meant by Corporate Social
Responsibility?
 5 Components of Socially Responsible Business Behavior
 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
 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
 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