Strategic Management

Ethics, Social Responsibility, and Sustainability

Business ethics
-Defined as principles of conduct within organizations that guide decision making and behavior.
Good business ethics is a prerequisite for good strategic management; good ethics is just good business!

Social responsibility
-Refers to actions an organization takes beyond what is legally required to protect or enhance
the well-being of living things.

Sustainability
-Refers to the extent that an organization’s operations and actions protect, mend, and preserve
rather than harm or destroy the natural environment.

Seven Principles of Admirable Business Ethics

1. Be trustworthy; no individual or business wants to do business with an entity it does not

trust.

2. Be open-minded, continually asking for “ethics-related feedback” from all internal and
external Stakeholders.

3. Honor all commitments and obligations.

4. Do not misrepresent, exaggerate, or mislead with any print materials.

5. Be visibly a responsible community citizen

6. Utilize your accounting practices to identify and eliminate questionable activities

7. Follow the motto: Do unto others as you would have them do unto you.

How to Establish an Ethics Culture

 A new wave of ethics issues has recently surfaced related to product safety, employee health,
sexual harassment, AIDS in the workplace, smoking, acid rain, affirmative action, waste disposal,
foreign business practices, cover-ups, takeover tactics, conflicts of interest, employee privacy,
inappropriate gifts, and security of company records. A key ingredient for establishing an ethics
culture is to develop a clear code of business ethics.

 A code of ethics can be viewed as a public relations gimmick, a set of platitudes, or window
dressing. To ensure that the code is read, understood, believed, and remembered, periodic
ethics workshops are needed to sensitize people to workplace circumstances in which ethics
 issues may arise. If employees see examples of punishment for violating the code as well as
rewards for upholding the code, this reinforces the importance of a firm’s

What Can We Learn from High-Performance Companies?

Research at DePaul University in Chicago by Frigo and Litman found a pattern of strategic
activities of high-performance companies. Their research involved screening the financial performance
of more than 15,000 public companies using 30 years of financial data and identifying about 100 high-
performance companies. Here are three lessons from high-performance companies studied:

 Commitment to Return on Investment and Ethical Business Conduct: High-performance

companies demonstrate a strong commitment to creating shareholder value by focusing on
sustainable return on investment (ROI). These companies achieve superior ROI and growth while
adhering to ethical business conduct, such as Johnson & Johnson, which is famous for its credo
as a foundation for ethical business conduct at the company.

 Focus on Unmet Customer Needs in Growing Market Segments: To avoid commoditization,

high-performance companies concentrate on fulfilling unmet customer needs and target
growing market segments. Harley-Davidson targets customer needs (lifestyle, freedom,
community) with their unique Harley experience while pursuing a growing customer group (the
Baby Boom generation).

 Innovate Offerings: High-performance companies constantly reexamine their products and

services (their offerings), modifying existing ones and developing new ones that will better fulfill
customers’ unmet needs. For example, Apple demonstrate this characteristic through its
innovation strategy.

How to Establish an Ethics Culture

A key ingredient for establishing an ethics culture is to develop a clear code of business ethics.

Who Is Prone to Be Unethical in a Business?

Prior research suggests that being unethical is abnormal, rare, and most often perpetrated by
people who are abhorrent. However, Donald Palmer recently reported that misconduct is a normal
phenomenon and that wrongdoing is as prevalent as “right doing,” and that misconduct is most often
done by people who are primarily good, ethical, and socially responsible. Palmer reports that individuals
engage in unethical activities due to a plethora of structure, processes, and mechanisms inherent in the
functioning of organizations— and, importantly, all of us are candidates to be unethical under the right
circumstances in any organization. Implications of this new research abound for managers. In light of his
findings, Palmer concludes that organizations should implement the following six procedures as soon as
possible:

 Punish wrongdoing swiftly and severely when it is detected.

 Be careful to hire employees who possess high ethical standards.

 Develop socialization programs to reinforce desired cultural values.

  Alter chains of command so subordinates report to more than one superior.
 Develop a culture whereby subordinates may challenge their Superior’s orders when they seem
questionable.

 Develop a better understanding of internal policies, procedures, Systems, and mechanisms that
could lead to misconduct.

Whistle-Blowing, Bribery, and Workplace Romance

As social media and technology have become commonplace globally, three business ethics
topics—whistle-blowing, bribery, and workplace romance—have become important strategic issues
facing companies. Missteps in any of these three areas can severely harm an organization.

Whistle-Blowing: refers to employees reporting any unethical violations they discover or see in
the firm. Employees should practice whistle-blowing, and organizations should have policies that
encourage whistle-blowing.

Avoid Bribery: Managers, employees, and firms must avoid bribery. Bribery is defined by Black’s
Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions
of an official or other person in discharge of a public or legal duty. A bribe is a gift bestowed to influence
a recipient’s conduct. The gift may be any money, goods, actions, property, preferment, privilege,
emolument, object of value, advantage, or merely a promise or undertaking to induce or influence the
action, vote, or influence of a person in an official or public capacity.

Workplace Romance: is an intimate relationship between two consenting employees, as

opposed to sexual harassment, which the Equal Employment Opportunity Commission (EEOC) defines
broadly as unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct
of a sexual nature. Sexual harassment (and discrimination) is illegal, unethical, and detrimental to any
organization and can result in expensive lawsuits, lower morale, and reduced productivity.

However, it is important to note that workplace romance can be detrimental to workplace

morale and productivity, for a number of reasons that include:

1. Favoritism complaints can arise.

2. Confidentiality of records can be breached.

3. Reduced quality and quantity of work can become a problem.

4. Personal arguments can lead to work arguments.

5. Whispering secrets can lead to tensions and hostilities among coworkers.

6. Sexual harassment (or discrimination) charges may ensue, either by the involved female or a
third party.
7. Conflicts of interest can arise, especially when well-being of the partner trumps well-being of
the company.
 Social Responsibility and Policy: Some strategists agree with Ralph Nader, who proclaims that
organizations have tremendous social obligations. Nader points out, for example, that ExxonMobil has
more assets than most countries and because of this, such firms have an obligation to help society cure
its many ills.

Design and Articulate a Social Policy: The term social policy embraces managerial philosophy
and thinking at the highest level of the firm, which is why the topic is covered in this text. Social policy
concerns what responsibilities the firm has to employees, consumers, environmentalists, minorities,
communities, shareholders, and other groups.

Social Policies on Retirement: Some countries around the world are facing severe workforce
shortages associated with their aging populations. The percentage of person’s age 65 or older exceeds
20 percent in Japan, Italy, and Germany—and will reach 20 percent in 2018 in France. In 2036, the
percentage of persons age 65 or older will reach 20 percent in the United States and China. Unlike the
United States, Japan is reluctant to rely on large-scale immigration to bolster its workforce. Instead,
Japan provides incentives for its elderly to work until ages 65 to 75. Western European countries are
doing the opposite, providing incentives for its elderly to retire at ages 55 to 60. The International
Labor Organization says 71 percent of Japanese men ages 60 to 64 work, compared to 57 percent of
American men and just 17 percent of French men in the same age group.

The Ten Best Socially Responsible Companies in the World

1. Microsoft
2. Google
3. Walt Disney Company
4. BMW
5. Apple
6. Daimler (Mercedes-Benz)
7. Volkswagen
8. Sony
9. Colgate-Palmolive
10. LEGO Group
Source: Based on information at http://www.forbes.com/pictures/efkk45mmlm/no-1-microsoft/

Reference (module week 1 to week 2)

Fred r. David
Francis Marion University
Florence, South Carolina

Forest r. David
Strategic Planning Consultant

http://dl.booktolearn.com/ebooks2/management/9781292148496_Strategic_Management_2e1b.pdf