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Chapter 4

Bu 111- Chapter 4 - Social Environment.docx

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Department
Business
Course
BU111
Professor
Sofy Carayannopoulos
Semester
Fall

Description
BUS111 Chapter 4 – Social Environment Ethics  Ethics: ethics are based on individual beliefs and social concepts regarding what is right and wrong or good and bad  vary; we are influenced by peers and as experiences shape our lives  Managerial ethics: standards of behaviour that guide individual managers in their work 1. Behaviour toward employees: hiring(who has the ability to do the work) and firing(who is incapable of doing the work), wages, working conditions, privacy and respect 2. Behaviour toward organization: conflict of interest (when an activity benefits an individual at the expense of the employer), confidentiality and honesty 3. Behaviour toward other economic agents: relationship with customers, competitors, stockholders, suppliers, dealers and unions. In dealing with such agents, there is ethical ambiguity in every activity  advertising, financial disclosure, bargaining and negotiation, etc. Assessing ethical behaviour 1. Gather relevant factual information 2. Analyze situation: determine the most appropriate moral values  Utilitarian approach: greatest good for greatest number of people  Rights approach: rights can not be taken away  Fairness/justice approach: equitable distribution of burdens and awards  Caring approach: people’s responsibilities to each other  If no on all 4 criteria, the act/policy is unethical  If yes on 2-3 criteria: - Is there any reason for overriding 1-2 of the ethical norms? - Is one ethical norm more important than the others? - Is there any reason why one may have been forced into committing an act/following a policy? 3. make judgment: based on the rightness or wrongness of the proposed activity or policy Radio Clip on Oil(watched 10 of 20 mins) -ethical oil refers to the way oil is produced, -does it follow environmental laws, - rights of oil workers being paid fairly, - human rights being followed -country supports peace -2 types of oil, conflict and ethical -oil makers in Nigeria don’t have to follow laws that countries such as Canada follows Support -democracy/human rights Against -uneducated -human rights -> other countries controlling -all oil companies -marketing strategy -profits -> money probably doesn’t go to Saudi women BUS111 Managing ethics in organizations  organizations try to promote ethical behaviour, but the unethical and illegal activities of both managers and employees have motivated many firms to take additional steps to encourage ethical behaviour  establish codes of conduct and develop clear ethical positions on how the firm and its employees will conduct their business  hiring criteria -> ensure those hired will be keeping up with the company’s ethical standards  managerial role modeling,  mission statement,  code of conduct ethics booklets and training,  goals and evaluation criteria,  rewards systems-> reward people for keeping up with ethical behaviour  employee protection mechanisms->people who are considered to be whistleblowers(ones that tell when unethical behaviour is going on) should be protected, protect them from other employees and don’t treat them like snitches Johnson & Johnson Example Quick Test- to determine whether an action is ethical  Is the action legal?  Does it comply with our values? BUS111  If you do it, will you feel bad?  How will it look in the newspaper?  If you know it’s wrong, don’t do it!  If you’re not sure, ask.  Keep asking until you get an answer. Stakeholders  people who have an interest in the actions of an organization and who have the ability to influence it, or are significantly affected by the organization’s activities  Stakeholders’ importance depends on situation and the issue  affect willingness and opportunity to act may have conflating expectations Business-Stakeholder connection  stakeholders provide business with the capacity to operate - owners and creditors: capital - customers: purchases - employees: human resources - BOD: leadership - Natural environment: natural resources  Stakeholders have the expectations of the business - Owners and creditors: rules of investment - Customers: quality, choice, communication, safety, respect - Employees: fair pay, meaningful work, safety, fair treatment, training - Board of directors: responsible management - Natural environment: responsible stewardship Strategic importance of stakeholder  When importance is high, use strategic partnering in Savage et al+ Table 2 of Harrison & St. John - Have customers/suppliers work with you to come up with new products  more likely to be successful if customers find it exciting and agree if it works - Suppliers can offer other materials/components that can benefit your products - Partner with the government - Cannot partner with activist groups as it reduces their legitimacy  work with them to understand - Competitors: benefit from working with them - Community and unions: some companies even have unions join on the board of directors. Some even use profit sharing to bring in employees and unions. Unions get an incentive to be paid when the company benefits and thus they behave. BUS111 Why manage stakeholders? 1. Cope with environmental turbulence and uncertainty, To improve ability to predict/control the external environment 2. To keep pace with societal change in which stakeholders want a voice, To align company values with societal values (moral and philosophical basis) 3. To avoid financial or legal adverse actions by stakeholders, -> ie. Strikes, boycotts, bad press 4. To improve the percentage of successful new product/service introductions 5. To promote higher levels of operating efficiency and organizational flexibility 6. To promote more favorable legislation/regulation  ex. Green gym, talked to government to pass safety laws 7. To promote higher entry barriers leading to more favourable competitive environment 8. To promote higher levels of trust  more likely to negotiate efficiently with trust 9. To potentially improve profitability 10. To increase media power  everybody likes a story, tell a bad story more often than a good one BUS111 Savage et al’s approach to managing stakeholders 1. Identify key organizational stakeholders. Importance of stakeholder varies by issue.  manage the most important stakeholders because there is only so much time available 2. Diagnose them along two critical dimensions of potential for threat and potential for cooperation 3. Formulate appropriate strategies both to enhance or change current relationships with those key stakeholders and to improve the organization’s overall situation 4. Effectively implement strategy  Stakeholders that depend on your organization are more likely to cooperate Threatening = increase uncertainty. Determined by relative power, capacity and willingness to act. Cooperative = decrease uncertainty. Determined by dependence on organization and capacity to expand interdependence. High potential for threat Low potential for threat High potential cooperation MIXED BLESSING SUPPORTIVE (customer, Strategy: collaborate to prevent suppliers,investor) them from becoming non- Strategy: involve, let them give supportive you their ideas Low potential cooperation NON-SUPPORTIVE MARGINAL Strategy: defend against high Strategy: monitor what they threat, always challenging think of you Low potential cooperation-ex. CA associates, consumer groups (consumer watch dog groups-only act once something seems to change or go wrong) Type 1- High potential cooperation Type 2 - Supportive Type 3- Non-Supportive -strategy to define, and reduce dependency on a particular group -ex. Apple vs. Greenpeace, Greenpeace told Apple their products were not up to code, Apple found Greenpeace changed their standards whenever they wanted Type 4- Mixed Blessing -collaborate with them - make them feel important and give them benefits if they help you to become more profitable, - try to encourage them to be more the SUPPORTIVE type -don’t want them to become a NON-SUPPORTIVE type, and lower their cooperation Social Responsibility  Areas of social responsibility  Corporate social responsibility (CSR) refers to the way in which a business tries to balance its commitments to organizational stakeholders how business addresses ethical conduct at the organizational level “collective code”  Managerial capitalism: a company’s only social responsibility is to make money for its shareholders, as long as it doesn’t break any laws in doing so  focus only on profits  Opposing view is that companies must be responsible to many stakeholders BUS111 CSR-Clip- Duke Univeristy -do companies that are socially responsible actually do better financially -need to have specific metrics on how to measure areas such as diversity, and as well as how much good a company does CSR-Clip- Everyone’s taling CSR -the opportunity everyone has when working for an organization -corporations have a role, as well as the individuals within that company, and it’s about the relationship between the two -not always about money, but about the difference you make in the world and the types of people your company attracts Towards the natural environment  air pollution, land pollution - results when a combination of factors lowers air quality large amounts of chemicals  government regulations and social pressures increased leading to “corporate greening” measures The sustainability challenge (Dr. David Bell)  States that we have to learn to live differently  2 billion to 9 billion is the predicted population increase in 2050  Dominant paradigm: take from the environment, make stuff, waste it  As soon as we take from the environment, we quickly make stuff and them throw it out  Model of the 1 industrial revolution is not sustainable want sustainability not waste  99% of goods produced in U.S. are in waste stream in 6 months  Need “closed loop, cradle to cradle” approach -products can be broken down and used to make new products  Business may be the primary cause of the problem, but it’s likely to be the solution History of business & sustainability(don’t need to know dates for our exam) o 1994, J. Elkington extended concept of “sustainable development” to “Triple Bottom Line” o Equity, environment, economy  equity = how fair we are in terms of how we impact people. o people, planet, and profit o 2000: K. Annan initiated United Nations Global Compact it is a policy initiative for businesses. It has 10 universally accepted principals covering 4 areas: human rights, labor, environment, and anti- corruption. This compact has 130 countries, and 52 companies. o 2006: executives agreed that there are numerous financial justifications for businesses to solve social environmental challenges. 10% believed you should only focus on profit. o 2009: Accenture and the Sustainable Value Creation – Stua World Business Council for Sustainable Development reported that 3 major waves of concern that impact business with respect to environmental and social issues A. Regulatory pressures become more responsible rt Hart BUS111 B. Market demands as a market we care where/how our organizations produce  but only 26% of people think about what we buy C. Global integration o When we develop strategies, social responsibilities, we must think of today and tomorrow, external and internal environment o Transparency: we can see how they are doing business  companies cannot hide anything o
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