Review

• Give 2 principles of Neoclassical economics?1.People have rational preferences between outcomes that

can be identified and associated with values.2.Individuals maximize utility and firms maximize profits.3.People act independently on the basis of full and relevant

information.

• Give a example of 4 types of stakeholders for a company?

• Do you agree with Milton Friedman's idea that the only social responsibility of business is to increase its profits as long as it stays within the law? Why?

• According to Friedman why shouldn’t managers be responsible for social problems?

• Managers have no training or expertise in that area - managers would not allocate resources efficiently due to favoritism.

• Give a practical example of how a company only focusing on short-term profits can be bad for both the company and society?

• Ford made a car called the Pinto. Crash tests revealed a serious flaw in the gas tank. Ford made a cost benefit analysis – it would cost $45million to pay compensation and $137 million to fix the flaw. So they made an unethical decision not to fix the flaw. People were injured they paid out much more money and lost their reputation.

• What is stakeholder management?• How managers should identify and align the interests of a

wide range of individuals and groups

• Define stakeholder? • Any individual or group whose claim on a firms activities

could promote or inhibit company value creation and ultimately company success.

• What kind of claims could an activist group have on a company and are they Mutual stakeholders?

• Activist groups may complain about environmental degradation or global warming or animal testing. They are not mutual stakeholders

• What is social capital? • If people who work together in an enterprise trust one

another because they are all operating according to a set of ethical norms, doing business costs less.

• What are the 2 steps of efficient stakeholder management?• 1. Help all stakeholders by understanding and meeting

their claims• 2. Help mutual stakeholders by developing their

capabilities.

• What are the fiduciary obligations of managers to shareholders?

• Managers should maintain transparency, have truthful reporting and try the best to follow their job description

Rights and obligations

• Give an example of one of each – Legal and political rights, Professional rights, Moral rights?

• Legal and political – e.g product safety• Professional – e.g. Code of behavior for professional

footballers• Moral – e.g. obligation not to steal from others

• Explain the difference between fundamental and derivative rights using examples?

• Fundamental – protect something that is vitally important e.g. Physical security

• Derivative – Not legally or practically essential and may be infringed upon if conflicting with other rights e.g. Privacy - Police search warrant.

• Give an example of a negative and a positive duty?• Negative – respecting a persons freedom of speech• Positive – Protecting someone whose rights are being

violated e.g. police protect people at a demonstration.

• Explain special obligation with an example?• Arise when there is a high degree of vulnerability and

dependence. The needier party can be open for opportunistic exploitation. . E.g. Client and Lawyer.

• Give an example of one right and duty of a manager to employees?

• Right -Right to meaningful work.• Duty – Ensure that decisions about promotion and

demotion are related to job performance.

• What is the main goal of an ethics program? • To provide a practical framework that allows individuals to

overcome the practical barriers that stop them from coming to and acting upon ethical decisions.

• Give an example of a vice, virtue and excess according to Aristotle?

• Wasting Money - Excess, Generous - Virtue, Stingy - Vice

• Give one difference between compliance programs and ethics programs?

• Compliance – rule definition, dissemination, detection and punishment.

• Ethics – incentivizing ethical behavior, encouraging active executive leadership and support, ethics training

• Give 2 examples of what should be included in an ethics vision statement?

1. Long-term success linked to ethical and legal conduct.2. Importance of stakeholders e.g. commitments to product

quality and safety.3. Character traits e.g. honesty4. Executive commitment to ethics program

• Give 2 examples of what should be included in an ethics code of conduct?

1. State executive commitment to promoting ethics.2. Clearly spell out duties and obligations, highlighting

fundamental rights, special obligations and legal compliance duties.

3. Specifically relate to job functions. E.g. sales and marketing, referring to ethics codes for professional groups.

4. Use examples of how to solve common issues

• What is the main objective of adapting a companies organizational process for ethics?

• Prevent unethical conduct before it occurs. Checking and reducing the likelihood is preferable to increasing the means of detection.

• What are the 2 most common moral philosophies?• Consequentialist and Deontology (Rights)

• Give 2 examples of what should be included in an ethical continual improvement program?

1.Have regular audits.2.Anonymous stakeholder feedback systems for reporting

unethical conduct. E.g. ethics hotlines.3.Implement a system of corrective E.g “5 whys”, 4.Regular reviews of ethic program effectiveness by

executive managers.

• What is the difference between Strategic action and communicative action?

• Strategic action – exert influence through inducements or threats. Can damage the sense of solidarity and integrity.

• Communicative actions – Attempts to reach mutual understanding and co-ordinate behavior in terms of a collective agreement as to the way things should be. Can build a sense of solidarity and integrity.

• What are the 8 steps of ethical decision making?1. Gather the facts2. Identify all stakeholders3. Identify stakeholder claims4. Think about long and short term consequences5. Identify obligations to stakeholders6. Consider your character and integrity

7. Think creatively about potential actions (best practice)

8. Form an argument that supports your decision .

• What is corporate governance?• Systems put in place to monitor the managers and ensure

that the organizations obligations are met.

• What is the agency effect?• The agency effect assumes that people are at heart

untrustworthy. The managers of a company have a duty to work for the owners benefit. Managers have control over information and can use this for their own advantage e.g. large pay packages

• Give 2 reasons why Non Executive directors might not be doing an effective job of supervising managers?

• 1. NEDs spend less time than executive directors and may mean more power for executive directors.

• 2. The vast majority of NED’s are executive directors at other companies so there may be an issue of group think.

• What is Network governance?A more humanistic approach involving multiple stakeholders in the

governance process and introducing various boards at different levels.

• What is the difference between transactional and humanistic leadership?

• Transactional leaders set goals and make incentives and ensure compliance.

• Humanistic leaders believe people want personal recognition and personal growth. They believe people are more motivated if included in decision making.

• How can a company benefit financially by being socially responsible?

• Improve reputation, attract private investment, risk management.

• Give an example of a voluntary standard that companies can take to improve their social responsibility?

• ISO 14001 Environmental Management System (EMS)• UN global compact Global• Reporting Initiative (GRI) (2002) • OECD Guidelines for • Multi-National Enterprises (2003)• UN Principles of Responsible Investment (2006)

• What does sustainable development call for?• Sustainable development calls for socially inclusive and

environmentally sustainable economic growth.

• What does the human development index measure?• The HDI uses income per capita, indicators of educational

attainment, and indicators of health,

• Give 2 reasons why some countries stay poor?1.Poverty trap e.g. Africa2.Bad economic policies3.Financial insolvency of government.4.Physical geography e.g. Haiti5.Poor governance6.Cultural barriers7.Geopolitics e.g. Afghanistan

• Give 2 solutions for how we can make less CO2 in the environment?

1.Energy efficiency 2.Electrification 3.Low-carbon electricity

• What is Backcasting?• Rather than forecasting what will happen in 2040 or 2050,

one sets the target for a certain date, and then analyzes the problem from the target to the present in order to chart a course between today and the future goal.

• What is neoliberal market globalism?• This is based upon a deregulation of the corporate sector,

the privatization of public enterprises and institutions, tax reductions for businesses and so on.

• Give 2 examples of challenges to the traditional nation sate?

1.Global market for commodities and cultural products.2.Global markets for corporate enterprises.3.Global markets can reward a small group of citizens while

inflicting hardship on a larger group.4.MNCs lack of loyalty to the state. E.g. Colgate, GE5.Global labor market.6.Unrestricted movement of investment capital not

concerned with social consequences.7.MNCs tax avoidance schemes

• What is a “national champion”?• The government makes a decision that special resources

are going to be invested in this particular corporation because it represents a promising enterprise, and one that is going to be able to compete well in the international market with other big multinationals.