Wheelen Ppt 03 Group 2

STRATEGIC MANAGEMENT & BUSINESS POLICY13TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

Prentice Hall, Inc. ©2012 3-2

Evolution of Social Responsibility• 1930s:

Chester Barnard’s “The Functions of the Executive” J. M. Clark’s “Social Control of Business”

• 1940s: Theodore Kreps “Measurement of the Social Performance of

Business” Media started asking the businessmen about social

responsibilities• 1950s:

The primary focus on businesses responsibilities A book by Howard R. Bowen “Social Responsibilities of the

Businessman• 1960s:

Marked a significant growth in Social Responsibility One of the first and most prominent writers in that period to define CSR

was Keith Davis and


Evolution of Social Responsibility• 1970s:

Business managers applied the traditional management functions when dealing with CSR issues

• 1980s: Business and social interest came closer and firms became more

responsive to their stakeholders• 1990s:

The idea of CSR became almost universally approved, also CSR was coupled with strategy literature and

• 2000s: CSR became definitively an important strategic issue


What is Social Responsibility?

• Innovative approach to giving back to our communities

• It means that corporate should oversee the operation of an economic system that fulfills the expectations of the public.

• Corporation operations should be employed in such a way that production and distribution should enhance total socio-economic welfare


Who is responsible?

• All stakeholders• Decision makers has to plan for it (Include it in

strategic plan)


Responsibility to whom?

• Stockholders• Stakeholders• Society


Responsibilities of a Business Firm

Social Responsibility: proposes that a private corporation has responsibilities to society that extend beyond making a profit

Then, what are these responsibilities?


Two views of Business Responsibility

• Friedman’s Traditional View• Carroll’s Four Responsibilities of Business


Friedman’s argues against the concept of social responsibility:

• There is only one social responsibility – to use its resources and engage in activities

• Primary goal of business is profit maximization, NOT spending shareholder money for the general social interest

• Millions spent in social services could have been invested in new product or given back as dividends

Follow the rules of the game…


Carroll’s View:• Profit maximization is only one side of an

ongoing debate regarding CSR• Profits are merely means to an end

“Survive”, not an end in itself, thus “Maximization profit is like maximizing food” William Byron.


Carroll’s four responsibilities of business (in order of priority):

• Economic• Legal• Ethical• Discretionary



• The ability to enter local and international markets

• Enhanced reputation• Competitive advantage• Cost savings

• The ability to charge premium prices

• Improved relationships with suppliers and distributors

• The ability to attract better talent

• Goodwill in the eyes of public officials

• Access to capital

Social capital refers to the goodwill of key stakeholders and provides a company with:



Characteristics of Sustainability

• Environmental ( Environment protection )

• Economic ( Increasing profit)

• Social ( Helping developing society)



Sustainability

Definition: Sustainability is a business strategy that drive long-term corporate growth and profitability by mandating the inclusion of environmental and social issues in the business model.



Sustainability

Purpose: To generate a maximum increase in company, consumer and employee value by embracing opportunities and managing risks derived from environmental and social development


Corporate Stakeholders

Stakeholders have an interest in the business and affect or are affected by the achievement of the firm’s objectives

Enterprise strategy- articulates the firm’s ethical relationship with its stakeholders


Stakeholder Analysis- the identification of corporate stakeholders in 3 steps:

1. Primary stakeholders have a direct connection with the corporation and have sufficient bargaining power to directly affect corporate activities

• Usually include: consumer, employee,supplier, shareholders , and creditors.

• Relationship between firms and each primary stakeholder is regulated by written or verbal agreements.


2. Secondary stakeholders have an indirect stake in the corporation but are also affected by corporate activities

• Usually include nongovernmental organization ,

local communities ,competitors , trade associations and governments.

• Relations not covered by any written or verbal agreement therefore there is a room of misunderstanding.


3. Estimate the effect on each stakeholder from a particular strategic decision

,) ( من ربحية اقتصاديه تكون ما عادة االبتدائي القرار معايير ألن

وعدم تجاهلهم يمكن الثانويين المصلحة أصحاب المنطلق هذا , . الشركة مسؤوليات تحقيق اجل من لذلك بهم االهتمام

وبجديه االعتبار في تأخذ ان يجب والتقديريه االخالقيةاتخاذه يتم استراتيجي قرار أي في ورغباتهم متطلبات

او يخسر ان ممكن مصلحة صاحب كل كم المثال سبيل علىذلك عن البديل ماهو الخسارة حالة وفي .يكسب

Business Ethics ?

Some people joke that there is no such thing as “business ethics.”


Some people joke that there is no such thing as “business ethics.”

Common questionable behaviors:

• Lying to or deceiving customers• Covering up incidents• Cutting corners on quality• Abusing or lying about sick days

In a survey, 53% of employees in corporations of all sizes admitted that they would be willing to misrepresent corporate financial statements if asked to do so by a superior.


Enron Case • Revenue from long-term contracts being recorded in the first year

instead of being spread over multiple years, and financial reports being falsified to inflate executive bonuses

• In explaining why executives and accountants at Enron engaged in

unethical and illegal actions, Former Enron vice president Sherron Watkins used the “frogs in boiling water” analogy.

• According to Watkins :Enron’s accounting moved from creative to

aggressive, to fraudulent, like the pot of water moving from cool to lukewarm to boiling;



Reasons for Unethical Behavior in business

• Unaware that behavior is questionable• Lack of standards of conduct• Different cultural norms and values• Different values between business people and

stakeholders• Relationship-based governance systems

Governance System

• Relationship-based governance.

Transactions are based on personal and implicit agreements, not on formal contracts enforceable by a court.

“What you know is less important than who you know”

Relationship-based countries tend to be less transparent and have a higher degree of corruption ( See Transparency International )

• Rule-based governance

The developed nations and the business firms within them follow well-recognized rules in their dealings and financial reporting. Finland, the United Kingdom, Hong Kong, the United States, and Australia have very transparent business climates.



Moral Relativism claims that morality is relative to some personal, social, or cultural standard and that there is not a method for deciding whether one decision is better than another


Types of Moral Relativism include:• Naïve relativism :Moral decisions are deeply personal

and that individuals have the right to run their own lives• Role relativism :Based on the belief that social roles

carry with them certain obligations to that role• Social group relativism :decision is considered

legitimate if it is common practice, regardless of other considerations

• Cultural relativism : morality is relative to a particular culture, society, or community

Moral Relativism

Are you agree with Moral Relativism ?

What are the roots of Moral Relativism ?Karl Marx and Fiedrich Nietzsche concept of Morals

Is Moral relativism accepted in our Islamic Culture?



Kohlberg’s Levels of Moral Development

• Preconventional level: concern for one’s self

• Conventional level: considerations for society’s laws and norms

• Principled level: guided by an internal code of ethics


Encouraging Ethical Behavior

• Code of Ethics- specifies how an organization expects its employees to behave while on the job

• Whistleblowers- employees who report illegal or unethical behavior on the part of others

3-31

Whistleblowers-


Key Terms in Ethical Behavior

Ethics- the consensually accepted standards of behavior for an occupation, trade, or profession

Morality- the precepts (تعاليم ( of personal behavior based on religious or philosophical grounds

Law is the formal codes that permit or forbid certain behaviors and may or may not enforce ethics or morality


Approaches to Ethical Behavior

Utilitarian- actions are judged by consequences

Individual rights- fundamental rights should be respected

Justice- decisions must be equitable, fair and impartial in the distribution of costs and benefits to individuals or groups



Cavanagh’s questions to solve ethical problems:

1. Utility- does it optimize the satisfactions of the stakeholders?

2. Rights- Does it respect the rights of the individuals involved

3. Justice- Is it consistent with the canons of justice?



Kant’s categorical imperatives:

1. Actions are ethical only if the person is willing for the same action to be taken by everyone who is in a similar situation

2. Never treat another person simply as a means but always as an end

3-36

- Sincerity (Ikhlas)

- Trust (Amanah)

- Justice (‘Adl)

�ه� ( �ق�ن �ت �ن�ي أ � ع�م�ال �م� �ح�د�ك أ ع�م�ل� �ذ�ا ِإ �ح�ب� ي �ع�الى ت �ه� الل �ن� ِإ (

( � خبيرا تعملون بما كان الله فإن وتتقوا تحسنوا (وِإن

- Benevolence (Ihsan)

The Principles Of Islamic Ethics

http://www.al-jazirah.com/2013/20131122/ec5.htm

http://www.al-jazirah.com/2013/20131122/ec5.htm


1. What is the relationship between corporate governance and social responsibility?

"Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals

Corporate social responsibility is concerned with treating the stakeholders of the firm ethically or in a socially responsible manner.

2. What is your opinion of GAP International’s having a code of conduct for its suppliers? What would Milton Friedman say? Contrast his view with Archie Carroll’s view.


3. Does a company have to act selflessly to be considered socially responsible? For example, when building a new plant, a corporation voluntarily invested in additional equipment that enabled it to reduce its pollution emissionsbeyond any current laws. Knowing that it would be very expensive for its competitors to do the same, the firm lobbied the government to make pollution regulations more restrictive on the entire industry. Is this company socially responsible? Were its managers acting ethically?

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4. Are the people living in a relationship-based governancesystem likely to be unethical in business dealings?

5. Given that people rarely use a company’s code of ethicsto guide their decision making, what good are the codes?

- A comprehensive code of ethics can provide extra protection if a single employee commits a criminal act in the name of your company

- can garner a positive image among consumers and job-seekers - Important for all employees to fully understand the expectations of the company and the ethical guidelines in which to make decisions

- can provide a foundation on which to base all decisions that affect internal and external stakeholders


PowerPoint created by:Ronald Heimler

• Dowling College- MBA• Georgetown University- BS Business Administration• Adjunct Professor- LIM College, NY• Adjunct Professor- Long Island University, NY• Lecturer- California State Polytechnic University, Pomona, CA• President- Walter Heimler, Inc.

For the purpose of lecture - Edited By:• AbdulJawad Chaudhry• Ahmed Alghamdi• Mohamed Alobsefi• Mohamed GorashiUniversity of Business and Technology,College of Business Administration, MBA Program

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any

means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the

United States of America.

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall

Wheelen Ppt 03 Group 2

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