10/17/2021
“BUSINESS” ETHICS
Business & Ethics
Three
contrasting perspectives
◦ Novak
◦ Drucker
◦ Carr
1
10/17/2021
Novak’s Perspective
Businesses are special
◦ Different from government, religious
organizations, political organizations, etc.
◦ As an economic association, it has particular
responsibilities
“Seven plus seven” business responsibilities
◦ Internal
◦ External
“Internal” Responsibilities
1.
2.
3.
4.
5.
6.
7.
Make customers happy
Earn ROI
Create new wealth
Create new jobs
Give opportunities
Promote creativity & innovation
Diversify interests
What are the financial implications of
meeting these responsibilities?
2
10/17/2021
“External” Responsibilities
Foster community, positive culture within firm
Foster liberty- encourage ee’s to participate in
political process
Respect the law
Social justice- encourage ee’s to be active in
community
Open communication
Help community at organizational level
Contribute to “moral ecology” of freedom
1.
2.
3.
4.
5.
6.
7.
◦
E.g., Do not advertise on “immoral” TV programs
Drucker’s Perspective
No distinction between personal and
business ethics
We can’t always promise that we’ll make
people better off, but we can promise not
to intentionally cause them harm
“Above all, do no harm”
3
10/17/2021
Carr’s Perspective
Business is a special case with its own set
of rules
◦ If you can’t take the heat, stay out of the
kitchen
Position on bluffing: “Falsehood ceases to
be falsehood when it is understood on all
sides that the truth is not expected to be
spoken.”
The ethics of business are games ethics,
different from the ethics of religion
Business & Ethics
Which perspective do you agree with?
If you agree with Carr, where do you
draw the line?
◦ Where do other people draw the line?
Is “good” behavior for the sake of selfinterest “ethical”?
◦ Novak:Yes
◦ Carr: No
4
10/17/2021
SHAREHOLDER &
STAKEHOLDER
THEORIES
WHAT IS CORPORATE SOCIAL
RESPONSIBILITY?
Two views:
1. Shareholder Theory
Make profits for shareholders.
Milton Friedman
2. Stakeholder Theory
Consider shareholders + others.
R. Edward Freeman
Michael Novak
2
1
10/17/2021
Shareholder Theory
(Milton Friedman)
A corporate executive has a direct responsibility to
his or her employer “to make as much money as
possible while conforming to the basic rules of
society” (i.e., engaging in free & open competition
without deception or fraud).
◦ Breaking the law is impermissible.
“Social responsibilities” are the responsibilities of
individuals, not of business.
◦ As Friedman writes, do we want CEOs acting as
“legislator, executive and jurist”?
◦ “Do we want corporations playing God?”
3
Shareholder Theory
(Milton Friedman)
Executives answer to shareholders, who
most often desire, and are entitled to,
profits.
If an executive is to be a civil servant
fulfilling social responsibilities, then they
should be elected via a democratic, political
process.
Corporate actions in the name of social
responsibility are “window-dressing”!
4
2
10/17/2021
Stakeholder Theory
(a.k.a. Corporate Social Responsibility)
A firm’s stakeholders are those parties affected by
corporate policies and practices. This includes, but
is not limited to, shareholders.
The normative case for CSR stems from a desire
to do good, while the business case for CSR
reflects an enlightened self-interest.
◦ Even the most profit-focused CEO must recognize
financial implications of their firm having a “poor CSR”
image
The operational definition of CSR is somewhat
vague.
5
Stakeholder Theory
(a.k.a. Corporate Social Responsibility)
“Stakeholder engagement” is critical.
Everyone affected should have their voice
heard (figuratively or literally) by those
making decisions.
If a business case exists for a CSR initiative,
there will always be those who regard the
initiative as self-serving (“window-dressing”).
◦ “Greenwashing” (ex. hotel linens)
6
3
10/17/2021
4
10/17/2021
STAKEHOLDER
ANALYSIS
Stakeholder Management Approach
Identifying and understanding multiple and
often competing claims of many
constituencies
Uses analytical methods for identifying,
mapping, and evaluating corporate strategy
with stakeholders
Based on the theory that certain ethical
principles can result in competitive advantage
GOAL: Win/Win vs. Zero Sum
1
10/17/2021
Primary Stakeholders
Owners
Suppliers
Organization
Customers
Employees
Secondary Stakeholders
Local community groups
Special Interest groups
Consumer groups
Environmental groups
Media
Society-at-large
American Civil Liberties groups
Should managers pay attention to the needs of these groups?
What priority should they have?
2
10/17/2021
How To Conduct a
Stakeholder Analysis
The stakeholder analysis is a series of steps,
conducted from an objective, third-party point
of view:
1.Mapping stakeholder relationships
2.Mapping stakeholder coalitions
3.Assessing the nature of each stakeholder’s interest
4.Assessing the nature of each stakeholder’s power
5.Constructing a matrix of stakeholder moral
responsibilities
6.Developing specific strategies and tactics
7.Monitoring shifting coalitions
Step 1: Questions for
Stakeholder Review
Who are our current stakeholders?
1.
◦
For each division and business, who are the
stakeholders?
Who are our potential stakeholders?
3. How does each stakeholder affect us?
4. How do we affect each stakeholder?
2.
3
10/17/2021
Sample Stakeholder Map for a Large
Corporation
Steps 2, 3 and 4: Assessing Coalitions,
Interests and Power
Map any stakeholder coalitions that may help or
hinder your strategy or decision
Assess the nature of each stakeholder’s interest
Assess the nature of each stakeholder’s power
◦
◦
◦
◦
◦
◦
◦
◦
Voting power
Political power
Economic power
Technological
Legal
Environmental
Cultural
Power over target individuals and/or groups
4
10/17/2021
Step 5 – Stakeholder Moral Responsibility
Matrix
Step 6: Develop Specific Strategies and
Tactics
1.
2.
3.
4.
Consider whether to approach each
stakeholder directly or indirectly
Decide to do nothing, monitor, taken an
offensive or a defensive position with the
stakeholder
Decide to accommodate, negotiate,
manipulate, resist, avoid, or take a ‘wait and
see’ approach
Decide which combination of strategies will
work best with each stakeholder
5
10/17/2021
Stakeholder Strategies
Step 7: Monitor Shifting Coalitions
Use the matrix from Step 6 to routinely
monitor progress and the evolution of
issues and actions by stakeholders (e.g., do
they move from a ‘Marginal’ to a ‘Nonsupporter’, or from a ‘Supporter’ to a
‘Marginal’?)
6
10/17/2021
Summary
Two predominant views of ethics at the
organizational level: Shareholder theory and
Stakeholder theory
Stakeholder analysis allows firms to systematically
evaluate strategic interactions with stakeholders
◦ Important for shareholder adherents as well
Remember:Your beliefs may not be shared by
others
◦ CEOs with a shareholder mindset must consider
financial implications of discounting other
stakeholders’ needs
7
Purchase answer to see full
attachment
“BUSINESS” ETHICS
Business & Ethics
Three
contrasting perspectives
◦ Novak
◦ Drucker
◦ Carr
1
10/17/2021
Novak’s Perspective
Businesses are special
◦ Different from government, religious
organizations, political organizations, etc.
◦ As an economic association, it has particular
responsibilities
“Seven plus seven” business responsibilities
◦ Internal
◦ External
“Internal” Responsibilities
1.
2.
3.
4.
5.
6.
7.
Make customers happy
Earn ROI
Create new wealth
Create new jobs
Give opportunities
Promote creativity & innovation
Diversify interests
What are the financial implications of
meeting these responsibilities?
2
10/17/2021
“External” Responsibilities
Foster community, positive culture within firm
Foster liberty- encourage ee’s to participate in
political process
Respect the law
Social justice- encourage ee’s to be active in
community
Open communication
Help community at organizational level
Contribute to “moral ecology” of freedom
1.
2.
3.
4.
5.
6.
7.
◦
E.g., Do not advertise on “immoral” TV programs
Drucker’s Perspective
No distinction between personal and
business ethics
We can’t always promise that we’ll make
people better off, but we can promise not
to intentionally cause them harm
“Above all, do no harm”
3
10/17/2021
Carr’s Perspective
Business is a special case with its own set
of rules
◦ If you can’t take the heat, stay out of the
kitchen
Position on bluffing: “Falsehood ceases to
be falsehood when it is understood on all
sides that the truth is not expected to be
spoken.”
The ethics of business are games ethics,
different from the ethics of religion
Business & Ethics
Which perspective do you agree with?
If you agree with Carr, where do you
draw the line?
◦ Where do other people draw the line?
Is “good” behavior for the sake of selfinterest “ethical”?
◦ Novak:Yes
◦ Carr: No
4
10/17/2021
SHAREHOLDER &
STAKEHOLDER
THEORIES
WHAT IS CORPORATE SOCIAL
RESPONSIBILITY?
Two views:
1. Shareholder Theory
Make profits for shareholders.
Milton Friedman
2. Stakeholder Theory
Consider shareholders + others.
R. Edward Freeman
Michael Novak
2
1
10/17/2021
Shareholder Theory
(Milton Friedman)
A corporate executive has a direct responsibility to
his or her employer “to make as much money as
possible while conforming to the basic rules of
society” (i.e., engaging in free & open competition
without deception or fraud).
◦ Breaking the law is impermissible.
“Social responsibilities” are the responsibilities of
individuals, not of business.
◦ As Friedman writes, do we want CEOs acting as
“legislator, executive and jurist”?
◦ “Do we want corporations playing God?”
3
Shareholder Theory
(Milton Friedman)
Executives answer to shareholders, who
most often desire, and are entitled to,
profits.
If an executive is to be a civil servant
fulfilling social responsibilities, then they
should be elected via a democratic, political
process.
Corporate actions in the name of social
responsibility are “window-dressing”!
4
2
10/17/2021
Stakeholder Theory
(a.k.a. Corporate Social Responsibility)
A firm’s stakeholders are those parties affected by
corporate policies and practices. This includes, but
is not limited to, shareholders.
The normative case for CSR stems from a desire
to do good, while the business case for CSR
reflects an enlightened self-interest.
◦ Even the most profit-focused CEO must recognize
financial implications of their firm having a “poor CSR”
image
The operational definition of CSR is somewhat
vague.
5
Stakeholder Theory
(a.k.a. Corporate Social Responsibility)
“Stakeholder engagement” is critical.
Everyone affected should have their voice
heard (figuratively or literally) by those
making decisions.
If a business case exists for a CSR initiative,
there will always be those who regard the
initiative as self-serving (“window-dressing”).
◦ “Greenwashing” (ex. hotel linens)
6
3
10/17/2021
4
10/17/2021
STAKEHOLDER
ANALYSIS
Stakeholder Management Approach
Identifying and understanding multiple and
often competing claims of many
constituencies
Uses analytical methods for identifying,
mapping, and evaluating corporate strategy
with stakeholders
Based on the theory that certain ethical
principles can result in competitive advantage
GOAL: Win/Win vs. Zero Sum
1
10/17/2021
Primary Stakeholders
Owners
Suppliers
Organization
Customers
Employees
Secondary Stakeholders
Local community groups
Special Interest groups
Consumer groups
Environmental groups
Media
Society-at-large
American Civil Liberties groups
Should managers pay attention to the needs of these groups?
What priority should they have?
2
10/17/2021
How To Conduct a
Stakeholder Analysis
The stakeholder analysis is a series of steps,
conducted from an objective, third-party point
of view:
1.Mapping stakeholder relationships
2.Mapping stakeholder coalitions
3.Assessing the nature of each stakeholder’s interest
4.Assessing the nature of each stakeholder’s power
5.Constructing a matrix of stakeholder moral
responsibilities
6.Developing specific strategies and tactics
7.Monitoring shifting coalitions
Step 1: Questions for
Stakeholder Review
Who are our current stakeholders?
1.
◦
For each division and business, who are the
stakeholders?
Who are our potential stakeholders?
3. How does each stakeholder affect us?
4. How do we affect each stakeholder?
2.
3
10/17/2021
Sample Stakeholder Map for a Large
Corporation
Steps 2, 3 and 4: Assessing Coalitions,
Interests and Power
Map any stakeholder coalitions that may help or
hinder your strategy or decision
Assess the nature of each stakeholder’s interest
Assess the nature of each stakeholder’s power
◦
◦
◦
◦
◦
◦
◦
◦
Voting power
Political power
Economic power
Technological
Legal
Environmental
Cultural
Power over target individuals and/or groups
4
10/17/2021
Step 5 – Stakeholder Moral Responsibility
Matrix
Step 6: Develop Specific Strategies and
Tactics
1.
2.
3.
4.
Consider whether to approach each
stakeholder directly or indirectly
Decide to do nothing, monitor, taken an
offensive or a defensive position with the
stakeholder
Decide to accommodate, negotiate,
manipulate, resist, avoid, or take a ‘wait and
see’ approach
Decide which combination of strategies will
work best with each stakeholder
5
10/17/2021
Stakeholder Strategies
Step 7: Monitor Shifting Coalitions
Use the matrix from Step 6 to routinely
monitor progress and the evolution of
issues and actions by stakeholders (e.g., do
they move from a ‘Marginal’ to a ‘Nonsupporter’, or from a ‘Supporter’ to a
‘Marginal’?)
6
10/17/2021
Summary
Two predominant views of ethics at the
organizational level: Shareholder theory and
Stakeholder theory
Stakeholder analysis allows firms to systematically
evaluate strategic interactions with stakeholders
◦ Important for shareholder adherents as well
Remember:Your beliefs may not be shared by
others
◦ CEOs with a shareholder mindset must consider
financial implications of discounting other
stakeholders’ needs
7
Purchase answer to see full
attachment
