Session Xi (Chapter 9) : Ethical Business For Multibusiness

SESSION XI ( CHAPTER
9)
ETHICAL BUSINESS FOR

MULTIBUSINESS
1
Linking Strategy to Ethics
and Social Responsibility
 Should there be a link between a company’s

efforts to craft and execute a winning
strategy and its duties to
 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
2
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
3
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 managers
to meet or beat earnings targets
 A company culture that places profits and
good performance ahead of ethical behavior
4
The Business Case for an Ethical
Strategy and Business Behavior
5
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
6
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
7
Examples of Universal
Ethical 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
8
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
9
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?
10
Integrative Social Contracts Theory
 According to the integrative social

contracts theory, the ethical standards a
company should try to uphold are governed
by both
1. A limited number of universal ethical
principles that put ethical boundaries on
actions and behavior in all situations
and
2. The circumstances of local cultures, traditions,
and values that further prescribe what
constitutes ethically permissible behavior and
what does not
11
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
12
Corporate Social Responsibility
 Social responsibility calls for companies to

strike a balance between
1. Its economic responsibility to shareholders
2. The legal responsibility to comply with the laws
of the countries where it operates
3. The ethical responsibility to abide by society’s
norms, and
4. The discretionary philanthropic responsibility
to meet the unmet needs of society
13
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
14
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
15
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
16
The Business Case for Socially
Responsible Behavior
 Generates internal benefits

 Enhances recruitment of quality employees
 Increases retention of employees
 Reduces risk of reputation-damaging
incidents
 Avoids criticism from consumer groups and may
lead to increased buyer patronage
 Works in best interest of shareholders
 Preempts costly legal and regulatory actions
17

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Session Xi (Chapter 9) : Ethical Business For Multibusiness

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SESSION XI ( CHAPTER

ETHICAL BUSINESS FOR

 Should there be a link between a company’s

 The view that “the business of business is

 Three schools of thought about the

 According to the school of ethical relativism

 Companies a code of conduct based upon the

 According to the integrative social

 Integrative social contracts theory

 Social responsibility calls for companies to

 Corporate citizenship involves a company’s

 Generates internal benefits

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