MGMT 1040 Lecture Notes - Lecture 5: Ibuprofen, Moral Character, Stakeholder Theory

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20 Jul 2016
Amoral businesses that solely focus on the bottom line are expected to be more financially healthy than
businesses that are moral. This is because amoral businesses focus far more on financials through their
allocation of resources. However, in the long run, moral businesses that spend time fulfilling their social
responsibility are highly likely to improve their bottom line (more so than amoral businesses even).
“Reciprocity is the most logical reason for morality (Hosmer, 113).
Reciprocity is referred to as people treating others as how they would like to be treated.
(Thus, ethical treatment is reciprocated). *what goes around comes around*
According to Hosmer, more importantly than reciprocity is the quality of our lives in relevance to how we
balance our duties and responsibilities found in our profession, organizations, communities and our
personal lives.
Trust, Commitment, and Effort
Is a very important focus of managers to create with stakeholders
Stakeholders must be treated in an ethical way to build trust and confidence. It is in the
company’s own best interest to cater towards the needs of their stakeholders in a moral way
because the trust, commitment and effort it creates, will lead to critical and valuable feedback of
the company’s performance.
Trust requires recognition of moral responsibility, application of moral reasoning, and possession
of moral character or courage:
Moral Responsibility
Recognition of moral problems one must understand stakeholder’s benefit or harms and their
rights obeyed or denied.
Managers should oversee the effects on or inflicted by stakeholders. This will avoid the excuse of
not being involved because they didn’t know.
Moral Reasoning
Process of examining and then resolving moral issues in a convincing way
Resolution of these problems can be carried out by: logically presenting decisions or plans in
accordance to rationally integrating economic outcomes, legal requirements and ethical duties in
a fair manner.
Moral Character
Possessing the courage to first recognize a problem and then propose a moral solution.
Stakeholders may not always agree with the decisions of managers, thus calling on the need of
courage for outstanding management.
Courage and integrity (willingness to act upon principle rather preference) is necessary for
building trust, commitment and effort of stakeholders in an extended organization.
Extended Organizations
An advancement of the stakeholder concept
Many stakeholders of companies are becoming more influential in the operations of the company.
For example, suppliers and relied upon institutions are external stakeholders but they are
necessary for the company’s operations.
Page 117 flow chart
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These external but influential stakeholders can alter the functions of company. For example,
suppliers and distributors, through their service fees, can influence the price of a company’s
Cooperation with such stakeholder groups must be obtained in order to succeed in constantly
changing global environment.
Trade associations, public interest groups, political agencies, banks, investment companies and
educational institutions are more examples of external organizations (cannot control or command
hierarchy of company) that can affect a company’s performance.
Cooperation, Innovation and Unification
Moral management is necessary to achieve cooperation, innovation and unification to achieve
success in a competitive global economy
The three basic steps (which each can be considered a thesis of the chapter [5]) that lie in the
progression between moral management and competitive success are:
1. Moral management builds individual attitudes of trust commitment and effort.
-treating people equitably leads to trust. Trust builds commitment and commitment ensures effort.
-not all groups will agree with ideas, but as long as each of their stakes and rights are respected in an
equitable way, there should be an increase in trust, commitment and effort.
2. Individual attitudes of trust, commitment, and effort lead to organizational behaviours of
cooperation, innovation and unification.
-stakeholder trust and commitment spurs a willingness to “go the extra mile” which measures far beyond
a company’s financials (and contributes to cooperation, innovation and unification).
3. Organizational cooperation, innovation and unification is essential for competitive success in a
rapidly changing global economy.
-because of new global competition, the developed attitude of willingness to contribute more than is
expected is especially important.
-companies are more aggressive, technology has advanced, products are more complex, etc.
-to adapt and react to these changes affectively, companies must rely on cooperation, innovation and
Unification and Guide
Control and command cannot be applied to innovation and cooperation, and thus something extra
is needed: unification and guide
Unification: bringing all stakeholders together into an innovative and cooperative whole.
^ Stakeholders refer to those within the company, industry and society.
Recognizing benefits and harms of all stakeholders and then distributes them evenly in an
equitable and fair manner
ultimate responsibility or management
However, the mentioned above is not enough to achieve unification and GUIDE
Unification and Guide
-combination of attention to stakeholders and operations
-managerial method
-moral responsibilities of managers for unifying stakeholders have to be combined with standard
managerial methods of planning, investing, budgeting, measuring and rewarding.
- a mission statement eludes understandability, trust, believable terms and reasons why the
company exists.
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