Ethics Introduction & Stakeholder Theory PDF

Ethics Introduction Source: https://www.nwabr.org/sites/default/files/NWABR_EthicsPrimer7.13.pdf Ethics are the values and moral standards that guide an individual in his/her interactions with others. Individuals interpret ethics differently, and...

Ethics Introduction Source: https://www.nwabr.org/sites/default/files/NWABR_EthicsPrimer7.13.pdf Ethics are the values and moral standards that guide an individual in his/her interactions with others. Individuals interpret ethics differently, and as such, the difference in ethics can be a hindrance especially with the expansion into global businesses and the increase of information technology and communications (Whitman, Towsend and Hendrickson, 1999). These differences in ethical values are manifested in religion, race, environment or nationality. As a matter of fact, something considered ethical to some, may be illegal, or vice versa depending on the country or environment. An example of this is the duplication of software or software "piracy". While illegal in this country, it is considered ethical in some Asian countries to duplicate software at will, and even distribute such software (Swinyard, Rinne and Kau, 1990). Another example is the ability to download music. When polling the students in a telecommunications course, very few saw a problem with this example. Stakeholder Theory Introduction (source: http://www.scielo.br/pdf/rbgn/v17n55/1806-4892-rbgn-17-55-00858.pdf Stakeholder theory promotes a practical, efficient, effective, and ethical way to manage organizations in a highly complex and turbulent environment (Freeman, 1984; Freeman, Harrison and Wicks, 2007). It is a practical theory because all firms have to manage stakeholders – whether they are good at managing them is another issue. It is efficient because stakeholders that are treated well tend to reciprocate with positive attitudes and behaviors towards the organization, such as sharing valuable information (all stakeholders), buying more products or services (customers), providing tax breaks or other incentives (communities), providing better financial terms (financiers), buying more stock (shareholders), or working hard and remaining loyal to the organization, even during difficult times (employees). It is effective because it harnesses the energy of stakeholders towards the fulfillment of the organization’s goals. It is useful in a complex and turbulent environment because firms that manage for stakeholders have better information upon which to base their decisions and, because they are attractive to other market participants, they have a degree of strategic flexibility that is not available to competitors that do not manage for stakeholders. Many management decisions contain an ethical component, and the ethical arguments in defense of managing for stakeholders are as important to the theory as are the practical considerations. Scholars have defended stakeholder theory using a wide variety of theoretical perspectives, including integrated social contacts theory (Donaldson & Dunfee 1999), Kantianism (Evan & Freeman, 1993), the doctrine of fair contracts (Freeman, 1994), the principle of fairness (Phillips, 2003), the principle of the common good (Argandoña, 1998), feminist ethics (Wicks, Gilbert & Freeman, 1994), and pragmatism (Wicks & Freeman, 1998; Freeman, Harrison, Wicks, Parmar & deColle, 2010). Stakeholders typically are defined as individuals, groups and organizations that have an interest in the processes and outcomes of the firm and upon whom the firm depends for the achievement of its goals (Freeman, 1984; Freeman, Harrison & Wicks, 2007). Some individuals, groups and organizations are easily defined as stakeholders because of their involvement in the value producing processes of the firm. They include employees and managers, shareholders, financiers, customers and suppliers. These stakeholders may be referred to as primary stakeholders or legitimate stakeholders (Phillips, 2003). Stakeholder theory suggests that “managing for stakeholders” involves attending to the interests and well being of these stakeholders, at a minimum (Harrison, Bosse & Phillips, 2010). However, frequently other stakeholder groups are included, such as communities, special interest or environmental groups, the media, or even society as a whole. This latter group, society, is a little difficult to comprehend in terms of the core ideas of stakeholder theory because it is, from a practical perspective, impossible to determine what is in the best interests of such a vast and heterogeneous group. An interesting and important aspect of stakeholder theory is that it is comprehensive in its approach. Stakeholder theory advocates for treating all stakeholders with fairness, honesty, and even generosity. As Harrison, Bosse and Phillips (2010, p. 58) put it, “A firm that manages for stakeholders allocates more resources to satisfying the needs and demands of its legitimate stakeholders than what is necessary to simply retain their willful participation in the productive activities of the firm.” Other business disciplines tend to focus on one or a subset of stakeholder groups: human resource theory focuses on employees, marketing theory focuses on customers, financial theory focuses on shareholders and financiers, and so forth. Stakeholder theory proposes that treating all stakeholders well creates a sort of synergy (Parmar, Freeman, Harrison, Wicks, Purnell & de Colle, 2010; Tantalo and Priem, 2014). In other words, how a firm treats its customers influences the attitudes and behavior of the firm’s employees, and how a firm behaves towards the communities in which it operates influences the attitudes and behavior of its suppliers and customers (Cording, Harrison, Hoskisson & Jonsen, 2014; du Luque, Washburn, Waldman & House, 2008). This concept is known as generalized exchange, and it is a core differentiating aspect of the theory (Ekeh, 1974; Harrison, Bosse & Phillips, 2010).