Business Ethics, The Changing Environment, And Stakeholder Management Chapter One Business Ethics, The Changing Environment, And Stakeholder Management

Recent Examples of Ethical Events in Corporate America Subprime lending crisis Scandals Enron Tyco WorldCom, etc. Excessive CEO pay and relative firm performance Sarbanes-Oxley Act of 2002 Outsourcing trends

Figure 1.1: Environmental Dimensions

Economic Factors Increasingly global context for trade, markets, resources Business expansion, product expansion Stock & bond market volatility and interdependency The effects of the European Union (currency exchange, negotiating power, etc.) The rise of China and India

Technological Environment Internet and telecommunication innovations Change in jobs, financial transactions, market operations Change in business best-practices Integration of supply chains Access to information What privacy and surveillance issues arise for employers?

Political Environment Rise of global terrorism Change in international coalitions (NATO, EU) Increased awareness of issues via electronic technology Fall of communism/Soviet Union

Governmental and Regulatory Environment Constantly changing/updating laws and procedures Sarbanes-Oxley, 2002 2004 Federal Sentencing Guidelines Changing standards for products, processes (e.g., FDA approval) Judicial actions (e.g., Microsoft) against anticompetitive practices

Legal Environment Competing rights (Patriot Act) Consumer protection (tobacco, gun control, Firestone tires) Corporate copyright protection (Napster vs. recording industry)

Demographic Environment Globalization Workforce diversity and accompanying issues Sexual harassment Discrimination Downsizing and outsourcing work force Aging workforce

Figure 1.2: Stakeholders

Secondary Stakeholders Local community groups Special Interest groups Consumer groups Environmental groups Media Society-at-large American Civil Liberties groups ETC Should managers pay attention to the needs of these groups? What priority should they have?

Stakeholder Management Approach Six Steps to developing win/win strategies: Identifying and prioritizing issues, threats, or opportunities Mapping who the stakeholders are Identifying their stakes, interests, and power sources Showing who the members of coalitions are or may become Showing what each stakeholder’s ethics are and should be Developing collaborative strategies and dialogue from a higher ground perspective to move plans and interactions to the desired closure for all parties

What is Business Ethics? Laura Nash has defined business ethics as “the study of how personal moral norms apply to the activities and goals of commercial enterprise,” as dealing with three basic areas of managerial decision making: Choices about what the laws should be and whether to follow them Choices about economic and social issues outside the domain of law Choices about the priority of self-interest over the company’s interests

Unethical Business Practices of Employees Showing respect to those who act unethically Abusive or intimidating behavior Misrepresentation of hours worked Lying Withholding information Context issues: Companies in transition (mergers, downsizing) Younger employees and employees with lower tenure in the organization

Ethics and compliance Programs Employees believe that nothing will be done if they report unethical behavior, or they are unsatisfied with the actions taken Only 25% of employees: are willing to seek advice about ethics questions that arise; feel they are prepared to handle situations that could lead to misconduct; indicate that they are rewarded for ethical behavior; report that their company does not reward success obtained through questionable means; say they feel positively about their company Employees feel that reports will not be held confidentially

Why does business ethics matter? Financially and Economically Relationships and Reputation Morale and Productivity Culture and Communication Integrity and the Common Good

Figure 1.3: Five Levels of Business Ethics

Key Questions if Faced with an Ethical Dilemma What are my core values and beliefs? What are the core values and beliefs of my organization? Whose values, beliefs, and interests may be at risk in this decision? Why? Who will be harmed or helped by my decision or by the decision of my organization? How will my own and my organization’s core values and beliefs be affected or changed by this decision? How will I or my organization be affected or by the decision?

Figure 1.5: 5 Business Ethics Myths

Why Use Ethical Reasoning In Business? Laws are insufficient Free-market and regulated-market mechanisms are insufficient Complex moral problems require an intuitive or learned understanding and concern for fairness, justice, and due process to people, groups, and communities

Kohlberg’s Levels and Stages Of Moral Development Level 1: Preconventional level (self- orientation) Stage 1: Punishment Stage 2: Reward seeking Level 2: Conventional level (others orientation) Stage 3: Good person Stage 4: Law and order Level 3: Postconventional level (universal, humankind orientation) Stage 5: Social contract Stage 6: Universal ethical principles