Business Strategy Development Application Ethics and Corporate Social Responsibility PDF

Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Chapter 5 Ethics and Corporate Social GARY BISSONETTE...

Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Chapter 5 Ethics and Corporate Social GARY BISSONETTE Responsibil 1 Copyright © 2020 McGraw-Hill Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Learning Objectives 1. An understanding of the key challenge managers and members of an organization’s board of directors face when wrestling with the concept of ethics 2. An overview of techniques managers can use when making decisions involving ethical issues 3. An understanding of the role of the board of directors in developing the culture of the organization with respect to ethical codes of conduct and behaviour 4. An introduction to the growing importance of corporate social responsibility (CSR) in the marketplace and the various levels of CSR involvement 5. An understanding of the complexity and challenges associated with integrating CSR and corporate strategy Copyright © 2020 McGraw-Hill 5-2 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Ethics in Management There are many recent examples of poor ethics in management: – Enron (2001) – Bernie Madoff (2009) – Robert Fast - Marathon Leading Corp (2014) What about these? – Apple and Samsung slowing down phones? – Increasing price of life-saving medications? – Bloomindale’s Christmas Ad? – Mexx (2011) marketing campaign Copyright © 2020 McGraw-Hill 5-3 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION What is Ethics? Ethics reflects moral principles or beliefs about what is right or wrong. Need to assess ethics within an organization at two levels: – The individuals themselves – The culture of the organization within which individuals work Copyright © 2020 McGraw-Hill 5-4 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Ethics and the Individual Influenced by norms or social expectations Other influencers: Individual motivations, cultural and environmental upbringing, personal pressures, imperfect information, or ignorance The Dilemma: Each of us has a different interpretation of what is right or wrong. Ethics can be thought of as an invisible hand Who is right? that guides each of us as we make decisions. Copyright © 2020 McGraw-Hill 5-5 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Ethics Wheel Copyright © 2020 McGraw-Hill Figure 5.2 5-6 Limited  Third Edition BUSINESS STRATEGY Ethical Interpretation DEVELOPMENT in APPLICATION Business Managers and employees are challenged with a multitude of decisions, many which carry ethical overtones. There are 4 fundamental sources of ethical interpretation with respect to business decision- making: 1. Individual 2. Societal 3. Professional 4. Business Culture We© 2020 Copyright need to recognize where the boundaries lie McGraw-Hill 5-7 and be able to live with the decision made; Use Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION The “Triple-Yes” Rule Yes #1—Does the decision that I am making fall within the accepted values or standards that typically apply to all organizational environments? Yes #2—Would I be willing to have this decision communicated to all of my organization’s stakeholders, and have it reported on the front page of the newspaper or serve as the lead story on a news channel? Yes #3—Would the people in my life with whom I have a significant personal relationship (family, spouse, etc.), as well as managers of other organizations, approve Copyright of and supportFigure © 2020 McGraw-Hill my 5.3 decision? 5-8 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION The Ethical Decision-Making Process Figure 5.4 Copyright © 2020 McGraw-Hill 5-9 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Ethics and Culture Responsibility of developing an ethical culture lies with the organization’s board of directors. The Board needs to define the parameters of what is meant by ethics and integrity and develop the necessary structure and processes that will enable it to gauge the conscience of the organization. Copyright © 2020 McGraw-Hill 5-10 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Zones of Decision Making Copyright © 2020 McGraw-Hill Figure 5.5 5-11 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Role of the Board of Directors 1. Define and establish boundaries of acceptable behaviour and financial integrity. 2. These boundaries are communicated to all employees with a policy or code of conduct. 3. The Board must appoint a representative to audit performance. 4. The Board must create and support a “whistleblowing” mechanism. 5. The Board must interact with senior management and external agencies monitoring Copyright the organization’s activities. © 2020 McGraw-Hill 5-12 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Ethics and Small Business Small businesses are also challenged daily by ethical dilemmas relating to both individual employee behaviour as well as company-wide interactions with the broader stakeholder community. Small businesses generally do not have the financial resources, knowledge and competencies, and supervisory depth to effectively manage the variety of ethical dilemmas which could challenge both the organization and its employees. Copyright © 2020 McGraw-Hill 5-13 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Ethics and Small Business How can small businesses create and sustain an ethical foundation? 1.Conduct business in good faith 2.Create a professional code of ethics for your business 3.Emphasize the importance of ethical values 4.Encourage and reward moral courage 5.Develop a mission statement and strong strategic vision 6.Ensure that ethics and social responsibility are part of the decision-making process 7.Realize that social and ethical responsibility define who Copyright you © 2020 are and what your business is truly all about. McGraw-Hill 5-14 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Regulating Ethics Regulations define how organizations should comply with financial integrity obligations and ethical decision-making and behaviour. Examples: US: The Sarbanes-Oxley Act of 2002 Canada: Ontario Bill 198 and Multilateral Instruments The 2008 financial crisis has created a need for financial integrity reform. Copyright © 2020 McGraw-Hill 5-15 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Forensic Accounting Forensic Accounting - The integration of accounting, auditing and investigative skills. – Forensic accountants are specialists looking beyond the numbers. – Forensic audits are critical to determining the potential extent of damage an organization may have incurred due to unethical behaviour – Forensic accountants and audits are also key to legal action. Copyright © 2020 McGraw-Hill Limited 5-16  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Corporate Social Responsibility (CSR) CSR - treating the public interest as a key stakeholder in an organization’s operational success and shifting attitudes from “winning for me” to one of participating in activities that enable the organization to win while serving the public good. CSR creates shareholder value by partnering in environmental, social, and public policy programs that contribute to the long-term Copyright © 2020 McGraw-Hill 5-17 health of society Limited  Third Edition BUSINESS STRATEGY Why APPLICATION is CSR Becoming DEVELOPMENT so Important? Consumers feel CSR means: – Giving back to local communities – Self regulating their actions/ Being accountable for their decisions – Helping others / treating employees fairly – Operating ethically, honestly, and lawfully – Being environmentally responsible Copyright ©– Offering quality products and services 5-18 at 2020 McGraw-Hill Limited  Third Edition BUSINESS STRATEGY Why is CSR Becoming DEVELOPMENT APPLICATIONso Important? Consumers feel companies are unsatisfactory in: – Transparency about product/service risks – Development of socially and environmentally responsible products/services – Fair pricing and appropriate accessibility levels – Issues associated with political influence, profit, and compensation Key conclusions: Customers are paying Copyright © 2020 McGraw-Hill 5-19 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION The Interdependency of CSR and Corporate Strategy The CSR Pyramid illustrates four primary views associated with the integration of CSR into an organization: 1. Personal Projects by a business leader (base level). 2. Philanthropy through cash or in-kind donations (base level). 3. Operational Initiatives (middle level) 4. Strategic Partnering (top Copyright level) © 2020 McGraw-Hill Figure 5.9 5-20 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION CSR and the Four Quadrants of Managerial Responsibili ty5.12 Figure Copyright © 2020 McGraw-Hill 5-21 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION The Challenge Behind CSR Implementation Transitioning to the top of the CSR Pyramid requires significant change, upfront investment and potentially an additional cost layer to the operating budget. Research indicates that customers are willing to pay Investors need to understand the value of CSR and to see how a conscious effort Copyrighttoward the “triple bottom line” enhances © 2020 McGraw-Hill 5-22 Limited  Third Edition BUSINESS STRATEGY A Note Pertaining to DEVELOPMENT APPLICATION Not-For-Profits (NFPs) Goodwill and integrity are fundamental to their existence. Heavily dependent on monetary gifts (donations). Canadians are generous supporters of the not-for- profit sector but recent surveys show a growing uneasiness with the industry as a whole. NFP managers must communicate to Canadians the legitimate outcomes and be fully able/credible in accounting for how their organizations spend donors’ Copyright money. © 2020 McGraw-Hill Limited 5-23  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Management Reflection It IS All About Trust Trust is fundamental Encourage entrepreneurship and innovation. The best asset you can bring to work is your integrity. Successful managers are open and authentic. Copyright © 2020 McGraw-Hill 5-24 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Chapter Summary Ethics in Management What is Ethics? – Ethics and the Individual – Ethics and Culture – Regulating Ethics Copyright © 2020 McGraw-Hill 5-25 Limited  Third Edition BUSINESS STRATEGY DEVELOPMENT APPLICATION Chapter Summary What is Corporate Social Responsibility (CSR)? – Why is CSR Becoming So Important? – The Interdependency of CSR and Corporate Strategy – The Challenge Behind CSR Implementation A Note Pertaining to Not-For-Profits Management Reflection - It Is All About Trust Copyright © 2020 McGraw-Hill 5-26 Limited