Learning outcomes
After this session, you should have a solid understanding of
- what ethics, business ethics and corporate social responsibility is, including their key components;
- the origins of ethical dilemmas in business and the significance of approaching these;
- the impact of CSR on various stakeholders;
- the strategic advantages and potential challenges associated with implementing business ethics/CSR initiatives in a company;
- and when and why good ethics in strategic management pay back.
Prologue
A single individual can usually only commit small sins; a large firm can commit grandiose ones. Claes Gustafsson in Mintzberg (2014)
If you have integrity, nothing else matters. If you don’t have integrity, nothing else matters. Alan Simpson, Institute for Business Ethics (IBE)
Good ethics is good business. Bad ethics can derail even the best strategic plans.
Ethical strategy
Why strategy?
Following concerns make the idea of an ethical strategy relevant:
Ethics also apply to organizations as they may cause long-term damage, as they are difficult to turn, and as the question of doing right is not easy.
- The concept of ethics and morals applies to corporations just as it applies to individuals/humans.
- Wrong actions by companies can not only prove expensive, but also cause long-term damage.
- The nature of the planning and implementation process in companies makes it difficult to change course mid-way.
- The changing perceptions of what is considered ethical or unethical makes the process complex as well.
Business ethics
Reflection
What is ethics?
Ethics
Ethics is the branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct. Wikipedia contributors (2023)
The term comes from the Greek word ‘ethos,’ which means character. Ethical theories reflect on what is morally good and how individuals ought to behave, offering guidance for making moral decisions.
Reflection
Is there a moral (or social) responsibility for firms?
If so, what is the extend and type of the responsibiliy?
Corporate moral responsibility
Firms do not function in a vacuum. They function in the context of a (wider) social environment, which imposes on them certain moral demands and responsibilities. Mintzberg (2014)
In a nutshell: business ethics is about doing the right thing in business.
- A company is a collection of human and social groupings.
- General expectations regarding acceptable conduct of others underpins such groupings.
- Values such as loyalty, credibility, diligence, cooperation, moral conduct, etc. are manifest in organisations, or at least, expected.
Ethic in business
Business ethics refers to the principles of right and wrong conduct within organizations that guide decision making and behavior.
David and David (2016)
The term business ethics emphasizes the importance of aligning business activities with ethical principles. It is a form of applied ethics that deals with ethical principles and moral or ethical issues that arise in a business environment. It encompasses all aspects of business conduct and is relevant to the behavior of individuals and entire organizations.
Business ethics, according to Drucker (1981), is about ensuring that business practices, decisions, and operations adhere to ethical standards and contribute positively to society while fulfilling the company’s objectives and obligations to its stakeholders. This is particular important when ethical dilemma occur. An ethical dilemma occurs when individuals or groups are faced with a challenging situation that requires them to make a choice between conflicting moral principles or values.
Values
The right conduct includes those lines of actions that are desirable in terms of the objectives and (moral) values of our society (Bowen and Johnson 1953).
Morality is an aspect of culture—different cultures have different moral systems. Moral values also change over time.
- Some moral values change slowly, over centuries
- Others change more quickly, needing just decades.
- Catastrophic events such as war, genocide, epidemic diseases, etc. may cause moral values to change abruptly.
Reflection
What are ethical conflicts in business?
From a strategic point of view, what should companies do to counter these?
For ethical issues that come with generative Ai and how Microsoft intends to deal with them, please check Microsoft Generative AI Services Code of Conduct.
Implications
Identify core values, teach employees about ethics, make your moral views clear, and plan for the future.
Given that there are always grounds for ethical strategic concerns, it is desirable to develop ethics sensitivity in the company, and a routine to probe the general ethical climate of the firm (Mintzberg 2014).
Codes of conduct are a useful means of influencing the ethical climate in the company if they are not enforced through control systems and sanctions. They are an effective means of educating employees, especially when management visibly supports and emphasizes them.
A clear and consistent expression of moral convictions has a strong unifying cultural effect in the organization and gives it the intellectual power to manage ethical conflicts and avoid critical pitfalls.
Another aspect of ethical strategy is predicting and preparing for the future, for example by anticipating possible cultural and value-related changes.
Review and consolidation
The following questions are designed to review and consolidate what you have learned and are a good starting point for preparing for the exam.
- Provide examples of ethical dilemmas in business. How should organizations approach and resolve these ethical challenges?
- Analyze the potential conflicts between profit maximization and ethical decision-making. How can businesses balance these often-competing objectives?
- Explain the intersection between business ethics and CSR.
- Why is it essential for businesses to go beyond mere legal compliance and incorporate ethical practices into their operations?
- Why should business ethics be an important part of strategic management (including strategy formation and implementation)?
- How can business ethics be considered in both the external and internal audit?
- How does leadership impact employee conduct and overall organizational culture?
- Define Corporate Social Responsibility (CSR) and its significance in the modern business landscape.
- Explore the impact of the different levels of CSR on various stakeholders, including employees, customers, communities, and the environment. Give real-life examples.
- Describe the strategic advantages and potential challenges associated with implementing CSR initiatives in a company.
- Provide examples of successful CSR programs or initiatives from prominent companies. What made these initiatives successful?
- How does CSR influence brand perception, consumer behavior, and long-term business sustainability?
Homework
- Listen to the Decoder Episode with Philips CEO Roy Jakobs and take notes on Philips’ organisational structure.
- Read Lorenz and Buchwald (2023) and make notes on following questions:
- What is the difference between a Chief Digital Officer and a Chief Information Officer?
- What are their main responsibilities?
- How do CDOs and CIOs work together to develop digital projects and align them with the company’s overall strategy?
- What is structural ambidexterity and how does it relate to the CIO and CDO roles?