Final Exam Review Part II
9. Ethics, Corporate Social Responsibility, Environmental Sustainability, and Strategy
a) Ethics concerns standards of right and wrong. Business ethics concerns the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel. Ethical principles in business are not materially different from ethical principles in general.
b) There are three schools of thought about ethical standards for companies with international operations: 1. Ethical universalism. There are common understandings across multiple cultures and countries about what constitutes right and wrong behaviours give rise to universal ethical standards that apply to members of all societies, all companies, and all businesspeople. 2. Ethical relativism. Different societal cultures and customs have divergent values and standards of right and wrong. Thus what is ethical or unethical must be judged in the light of local customs and social mores and can vary from one culture or nation to another. 3. Integrated social contracts theory. Universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a “social contract” that all individuals in all situations have a duty to observe. Within the boundaries of this social contract, local cultures or groups can specify what additional actions are not ethically permissible. However, when local ethical norms are more permissive than the universal mores, universal norms always take precedence.
c) Confusion over conflicting ethical standards may provide one reason why some company personnel engage in unethical strategic behaviour. But three other factors prompt unethical business behaviour: 1) faulty oversight that implicitly sanctions the overzealous pursuit of wealth and personal gain, 2) heavy pressures on company managers to meet or beat short-term earnings targets, and 3) a company culture that puts profitability and good business performances ahead of ethical behaviour. In contrast, culture can function as a powerful mechanism for promoting ethical business conduct when high ethical principles are deeply ingrained in the corporate culture of a company.
d) Business ethics failures can result in three types of costs: 1) visible costs—fines, penalties, and lower stock prices, 2) internal administrative costs—legal costs and costs of taking corrective action, and 3) intangible costs—customer defections and damage to reputation.
e) Corporate social responsibility concerns a company’s duty to operate at an honourable manner, provide good working conditions for employees, encourage workforce diversity, be a good steward of the environment, and support philanthropic endeavours in local communities where it operates and in society at large. The particular combination of socially responsible endeavours a company elects to pursue defines its CSR strategy.
f) The triple bottom line refers to company performance in three realms: 1) economic, 2) social, and 3) environmental. Increasingly, companies are reporting their performance with respect to all three performance dimensions.
g) Sustainability is a term used in various ways,, but most often it concerns a firm’s relationship to the environment and its use of natural resources. Sustainable business practices are those capable of meeting the needs of the present without compromising the world’s ability to meet future needs. A company’s environmental sustainability strategy consists of its deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against ultimate endangerment of the planet.
h) CSR strategies and environmental sustainability strategies that both provide valuable social benefits and fulfill customer needs in...