1108-BUSN620Week7foruminstructions (1)

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BUSN620 Week 7 forum DUE Tuesday April 18 th at 12 pm/NOON EST. CANNOT BE LATE!!! PART 1 Forum : at least 250 words APA with minimum 1 citation (USA scholarly and relevant resources only). PART 2 To be submitted as separate assignment. W7: Leading an Ethical Organization Questions posed (respond to both questions posed; both A & B): A: Can you identify and comment on personal experiences where some activity fell outside the "mission" of what you were doing. It might be that you and your colleagues took some action and realized after the fact that the action fell outside the mission. On the other hand, you might have been planning to do something and someone in leadership said no because it fell outside the mission. B: If Enron had a lengthy code of ethics, which it did, exactly what happened to ruin their reputation?

Week 7: Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility. Overview: Welcome to week 7 Course Objective(s) CO2: Evaluate strategic initiatives to leverage opportunities and mitigate threats to businesses. Weekly Objectives: LO1: Evaluate and discuss the importance of stakeholder approach to social responsibility. LO2: Examine the role ethical issues play in setting boundaries within which businesses operate. Topic(s) of Discussion Ethics, Corporate Social Responsibility (CSR), Sarbanes-Oxley Act, Corporate Governance, Corporate Scandals, Board of Directors, Corporate Ethics, Golden Parachute. Learning Material The Learning Material section contains the weekly lesson along with readings, videos, and other material that conveys this week's topics.

READ Week 7  Strategic Management Chapter 11  VIDEO: Creating ethical cultures in business: Brooke Deterline at TEDxPresidio  VIDEO: Business Ethics and Social Responsibility | Episode 26 Introduction Topics to be covered: 1. Overview of ethics 2. Ethics in strategic management 3. Social responsibility 4. Global compact principles When organizations practice strategic management and implement strategies, they should strive to do this in an ethical manner. This lesson will define and discuss different approaches to ethics. This will include a discussion of social responsibility, and how being socially responsible can benefit organizations as they practice strategic management. This lesson also will discuss the ethics of sweatshops and outsourced labor, providing the United Nations’ perspective on this. Overview of Ethics To practice ethics as part of strategic management, one must first understand ethics , which is a complex topic. Scholars have offered various definitions for ethics. For example, consider the following.

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 Leys (1943) defined ethics as “the art of making wise choices” (Leys 1943, 10).  Frederickson (1997, 157) said, “the realm of ethics is a world of philosophy, values, and morals, while administration is one of decisions and actions. Ethics will search for right and wrong, while administration must get the job done. Ethics is abstract, while administrative practices are irremediably concrete.”  Bruce (2001) defined ethics as “the study of the nature of morals and moral choices and the rules governing a profession that define professional conduct” (Bruce 2001, xiii).  Cooper (2006, 2) said that ethics “considers what is meant by principles such as justice, veracity, or the public interest; their implications for conduct in particular situations; and how one might argue for one principle over another as determinative in a particular decision.” For a simpler definition, Johnson (2009, xix) argues that “ethics refers to judgments about whether human behavior is right or wrong.” From this perspective, ethical behavior can be defined as conduct that is “accepted as morally ‘good’ and ‘right,’ as opposed to ‘bad’ or ‘wrong,’ in a particular setting” (Schermerhorn, Hunt and Osborn 2005, 33). In this context, moral refers to behavior that is regarded as good and right by the average person. Individuals cannot be ethical unless they also practice moral behavior. Theories and Approaches to Ethics Just as it is challenging to define ethics, it also is challenging to determine how to practice ethical behavior. When making ethical decisions as part of strategic plans, individuals and organizations need a justification for why certain options were selected over others. Theories of ethics can assist in providing this justification. The more widely recognized and accepted theories include the following (Geuras and Garofalo 2002). Deontology Advocated in the eighteenth century by German philosopher Immanuel Kant, deontology is concerned with a leader’s moral obligations and responsibilities to do the right thing. The leader strives to treat others truthfully, with dignity and respect. Deontology is also concerned with consistency and principles. With deontology, it is not sufficient to produce the right result. The actions that led to the result also must be principled and morally sound.

Utilitarianism With utilitarianism, which was introduced in the eighteenth century by English philosopher Jeremy Bentham, decisions are made by selecting alternatives that generate the greatest good for the greatest number of people, maximizing social benefits while minimizing social costs. The goal is to produce happiness, and actions are justified as long as they produce the greatest amount of happiness for the greatest number of people. Utilitarianism is an example of a teleological theory of ethics. With teleological theories, the end result justifies the means used to achieve the result. If the end result is good, the means are irrelevant Egoism Decisions are made based on whether the outcome will benefit the decision maker. With egoism, if an action promotes a person’s interests, then he or she regards it as ethically and morally right. If it does not, it is regarded as wrong. Virtue Ethics Virtue ethics focuses on helping others, emphasizing an individual’s character and how his or her actions affect others. Ethical relativism Argues that no single ethical standard exists that can be applied to all people in all situations. Instead, ethical standards are relative and what is ethical in a culture, group, or situation depends on the norms for those involved. Ethical relativism falls into two categories.  Social group relativism – Emphasizes the needs of the group, and decisions are made based on what the group feels is right.  Cultural relativism – Decision makers consider societal expectations, and decisions are made based on how they relate to culture, particularly laws. If an action is legal and accepted by society, it is considered to be ethically and morally right. If it is illegal, it is wrong. Situational ethics Argues that all actions should be altruistic in nature and seek to provide the most and best possible help to individuals. Advocates of this approach argue that sometimes, it may be necessary to set aside moral principles in the quest to provide the greatest assistance to others. With situational ethics, moral guidelines should be

flexible and each situation is considered on a case-by-case basis. What is morally correct in one situation might not necessarily be morally correct in another situation. In addition to the various ethical theories, scholars such as Schermerhorn, Hunt and Osborn (2005) have identified the following four approaches to ethics. UTILITARIAN VIEW As with utilitarianism, those who subscribe to this view of ethics argue that ethical behavior consists of actions that create the greatest good for the largest number of people. INDIVIDUALISM VIEW Advocates of this approach to ethics argue that ethical behavior is whatever actions generate long-term self-interest for an individual. MORAL-RIGHTS VIEW Using this perspective, advocates argue that ethical behavior is comprised of actions that respect and protect human rights. JUSTICE VIEW With this perspective, advocates argue that ethical behavior consists of those actions that treat all people equally and fairly. Ethics in Strategic Management Strategies are intended to enable organizations to maximize their successes. To achieve this goal, some organizations are tempted to forego ethical behavior and do whatever it takes to attain success. For example, consider Enron, the energy trading company whose incredible success was a function of corporate fraud and corruption. Ultimately, the company collapsed in bankruptcy, and some of its top executives were sentenced to jail for their crimes. To avoid situations such as this, organizations must make ethics a priority, and this includes instilling an ethical tone and approach in their strategic plans. According to Smith (2005), this begins with using ethical language to communicate a strategic plan. To help achieve this, he argues that strategic plans should avoid pretentious language, which refers to “words or phrases that imply more than is warranted” (Smith 2005, 148). For example, Smith (2005, 148) notes that calling a used car an “experienced vehicle” can appear ridiculous and may confuse a reader. Smith also cautions against doublespeak, which refers to words or phrases that create a false impression and possibly even hide factual information. For example, Smith (2005,

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149) regards using the word “downsizing” to describe the process of laying off employees as doublespeak. Dess, Lumpkin and Taylor (2005) recommend that to instill ethics into strategic management and strategic plans, organizations must have an ethical organizational culture. They argue that this is achieved by taking the following steps:  Hiring Hire ethical employees using a hiring process intended to identify individuals who have good ethics and are more likely to practice good ethics as members of the organization.  Ethical Leadership Ensure that the organization’s leaders practice ethical leadership and act as role models for ethical behavior.This is important because the leaders of an organization set the tone at the top , which determines the type of organizational culture that will prevail, including the ethical atmosphere that the organization’s leadership creates in the workplace. The tone will trickle- down to the rest of the organization’s employees. If the tone at the top makes ethics and integrity a priority, employees will be more likely to espouse those same morals. But if the leaders do not make ethics a priority, employees may place less emphasis on ethics.  Written Documents Have written documents that promote ethical behavior and provide guidance to the organization’s members for how to practice ethical behavior. The written documents that can assist in this process include the following. Management philosophy – Refers to a written philosophy that links an organization’s goals and objectives with its work processes to develop guidelines for how the organization will function. Code of Ethics – A written document that outlines an organization’s mission and values. It explains the ethical principles that the organization promotes based on its mission and values. It also details the standards of professional behavior that employees are expected to maintain, including how they should approach problems. Code of Conduct – A written set of rules that delineates the specific types of behavior that employees are expected to practice at work. This includes specifying norms for on-the-job behavior, particularly as they pertain to each

job. A code of conduct is related to the code of ethics, but it is more detailed and specific.  Evaluation and Reward Systems Establish evaluation and reward systems that monitor the behavior of the organization’s members and reward them when they practice good ethics. Dess, Lumpkin and Taylor (2005, 398-399) caution that such systems must be carefully structured to ensure that an organization’s employees are not motivated to commit unethical behavior by doing whatever it takes to attain a reward. They explain that to avoid this, such systems should include policies and procedures that clearly specify the behavior expected of employees as they perform their work. Ethical Culture To determine if an organization has an ethical culture, Ethics Quality Inc. has provided a list of 10 questions that organizations should answer using yes or no. The more questions that can be answered with “yes,” the more likely it is that the organization has an ethical organizational culture. The questions are as follows (Schermerhorn, Hunt and Osborn 2005, 438): Are you proud of your group’s ethics? Do the group’s ethics work positively for everyone? Is there cooperation in resolving problems and creating opportunities? Is the group improving processes routinely? Do improvements matter and/or last? Is there serious resistance to change? Is there sufficient trust and openness to solve problems? Are there any damaging standards? Does the leadership set good examples and reward good ethics? Are bad ethics risking or hurting business results?

Scholars such as Verschoor (2007) also recommend that organizations should periodically undergo ethics audits and evaluations to determine if an organization has an organizational culture that promotes ethical behavior. Verschoor (2007) recommends that ethics audits should check the following:  The effectiveness of written materials, such as codes of ethics and codes of conduct.  Whether management has communicated this information to everyone in an organization.  Whether management has investigated ethics violations and handled them appropriately.  Whether whistleblowers have been treated appropriately, without retaliation.  Whether improvements have been made when issues have been discovered. Social Responsibility As part of their efforts to be ethical, organizations are expected to practice corporate social responsibility . This refers to the idea that organizations have an obligation to conduct their affairs in a way that promotes the best interests of the communities where they operate, as well as the best interests of society in general. From this perspective, organizations should not focus entirely on achieving goals and objectives such as maximizing profits. Practicing social responsibility can be advantageous to an organization. For example, it promotes their image as a good neighbor practicing ethical behavior. This gives them a better reputation, making them more attractive to potential employees who value ethical behavior and strive to be good citizens. Once hired, such individuals are more likely to practice ethical behavior in their work habits, helping maintain an ethical organizational culture. This enhances an organization’s reputation even further and can help them succeed by attracting both investors and customers who value ethical behavior and social responsibility in the organizations they patronize. In this way, social responsibility has the potential to bolster profits, despite the fact that the point of being socially responsible is not to maximize profits. To practice social responsibility, organizations should fulfill the four aspects of social responsibility—economic, legal, ethical, and philanthropic responsibilities. An organization can be socially responsible only if it meets the standards for all four of these responsibilities (Scilly n.d.). Economic

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Economic Responsibilities – Refers to the process of generating profits and managing budgets well so an organization can provide jobs to employees and help strengthen the economy. Legal Legal Responsibilities – Refers to an organization’s obligation to comply with requirements legislated by law that dictate how an organization is expected to conduct business. Legal responsibilities can include labor laws, legal requirements regarding securities, and environmental laws. Ethical Ethical Responsibilities – Organizations are not required to be ethical beyond complying with legal requirements. Much ethical behavior, such as the idea that an organization should treat employees with dignity and respect, is not mandated by law. As such, organizations can decide not to practice ethical behavior. But being ethical is important if an organization wishes to develop a good reputation and enhance its success. Ethical responsibilities include providing employees with fair wages and benefits, conducting business in an accountable and transparent manner, and ensuring that business operations do not harm the environment. Philanthropic Philanthropic Responsibilities – Refers to activities focused on benefiting society. Examples include donating money to charities, providing services to community organizations, and leading projects to improve the environment. Sweatshops and Outsourced Labor SWEATSHOPS Sweatshops are not regarded an ethical business activity under any conditions. In addition, outsourced labor can be problematic. Although some sweatshops exist in the United States, most of them are in foreign countries. With the global economy, more companies do business overseas and have access to foreign workers. They

can hire foreign workers in sweatshops. They also can outsource operations to foreign laborers who do not work in sweatshops. OUTSOURCED LABOR Outsourcing can be a viable alternative for saving money provided it is used appropriately. It is sometimes more cost effective to purchase goods or services from another company than it is to produce these items internally. Provided a business compensates suppliers fairly for goods and/or services, there are no ethical issues with outsourcing. Global Compact Principles Organizations tend to pay foreign workers less than they pay employees in the United States, regardless of whether those foreign workers are outsourced or working in sweatshops. When organizations treat employees in the United States well while they pay lower wages to foreign workers and disregard ill treatment in sweatshops, this creates a double standard. For example, workers in the United States may receive benefits such as health insurance and paid vacations. While at work, they are allowed to take breaks and interact with their co-workers. Such perks may be denied to foreign workers, both in sweatshops as well as to those who perform outsourced labor. In response to such problems, the United Nations (UN) developed the Global Compact, a voluntary initiative intended to encourage businesses to operate overseas in a socially responsible manner. As the UN’s website states, “Responsible businesses enact the same values and principles wherever they have a presence, and know that good practices in one area do not offset harm in another. By incorporating the Global Compact principles into strategies, policies and procedures, and establishing a culture of integrity, companies are not only upholding their basic responsibilities to people and planet, but also setting the stage for long-term success” (United Nations n.d.). The Compact has ten principles that fall under four categories—human rights, labor, environment, and anti-corruption. Labor Principle 1 Principle 2 Businesses should support and respect the protection of internationally proclaimed human Businesses should make sure that they are not complicit in human rights abuses. This means

Labor Principle 1 Principle 2 rights. This means businesses should take care to avoid disregarding human rights, ensuring that they do no harm. businesses should not be involved in human ri abuses indirectly through contacts with other companies that violate human rights. Environment Principle 1 Principle 2 Principle 5 Principle 6 Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. Businesses should uphold the elimination of all forms of forced and compulsory labor. This includes ensuring that individuals are providing their labor freely and have the option to leave at any time. Businesses should uphold the effective abolition of child labor. Businesses should uphold the eliminat discrimination in re of employment and occupation. Human Rights Principle 7 Principle 8 Principle 9 Businesses should support a precautionary approach to environmental challenges. This means that if there’s a chance that action will harm the environment, businesses should not do it. Businesses should undertake initiatives to promote greater environmental responsibility. This means responding to society’s support for businesses to practice sustainability and protect the environment. Businesses should encourag development and diffusion environmentally friendly technologies. This includes finding ways to recycle mo and pollute less> Anti-corruption Principle 10 Businesses should work against corruption in all its forms, including extortion and bribery. Conclusion Organizations should strive to meet their goals and objectives, achieving success in their operations. As part of their efforts, they must practice ethical behavior. Ethics is challenging because it can be defined in several ways and practiced using different approaches. Behavior that is ethical to one organization may not be ethical to another one. Organizations will need to evaluate their operations,

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including their strategic plans, to determine the best way to approach ethics. As part of this, they should practice social responsibility and, if they operate globally, they should strive to follow the principles outlined in the United Nations’ Global Compact. References Besanko, David, David Dranove, Mark Shanley, and Scott Schaefer. Economics of Strategy, Fifth Edition. Hoboken, New Jersey: John Wiley and Sons, 2010. Bruce, Willa. Classics of Administrative Ethics, Boulder, Colorado: Westview Press, 2001. Carpenter, Mason A. and Wm. Gerard Sanders. Strategic Management, A Dynamic Perspective: Concepts and Cases. Upper Saddle River, New Jersey: Pearson Prentice Hall, 2007. Collins, James C. and Jerry I. Porras. “Building Your Company’s Vision” in HBR’s 10 Must Reads on Strategy. Boston, Massachusetts: Harvard Business Review Press, 77-102, 2011. Cooper, Terry L. The Responsible Administrator: An Approach to Ethics for the Administrative Role, Fifth Edition, San Francisco: Jossey-Bass Publishers, 2006. Dess, Gregory G., G.T. Lumpkin, and Marilyn L. Taylor. Strategic Management, Creating Competitive Advantages, Second Edition. New York: McGraw-Hill Irwin, 2005. Frederickson, H. George. The Spirit of Public Administration, San Francisco: Jossey- Bass Publishers, 1997. Geuras, Dean and Charles Garofalo. Practical Ethics in Public Administration. Vienna, Virginia: Management Concepts, 2002. Johnson, Craig E. Meeting the Ethical Challenges of Leadership: Casting Light or Shadow, Third Edition, Thousand Oaks, California: Sage Publications, Inc., 2009. Johnson, David W. and Frank P. Johnson. Joining Together Group Theory and Group Skills. Boston, Massachusetts: Pearson Learning Solutions, 2009. Kaplan, Robert S. and David P. Norton. “Using the Balanced Scorecard as a Strategic Management System” in HBR’s 10 Must Reads on Strategy. Boston, Massachusetts: Harvard Business Review Press, 167-190, 2011. Leys, Wayne A. R. “Ethics and Administrative Discretion,” Public Administration Review, 3:1 (1943), 3-12.

Nickels, William G., James M. McHugh, and Susan M. McHugh. Understanding Business, Tenth Edition. New York: McGraw-Hill Irwin, 2013. Schermerhorn, John R. Jr., James G. Hunt, and Richard N. Osborn. Organizational Behavior, Ninth Edition. Hoboken, New Jersey: John Wiley and Sons, Inc, 2005. Scilly, M. “Four Types of Corporate Social Responsibility.” Chron. Accessed http://smallbusiness.chron.com/four-types- corporate-social-responsibility-54662.html. Smith, Ronald D. Strategic Planning for Public Relations, Second Edition. Mahwah, New Jersey: Lawrence Erlbaum Associates, 2005. Verschoor, Curtis C. Ethics and Compliance: Challenges for Internal Auditing. Altamonte Springs, Florida: Institute of Internal Auditors Research Foundation, 2007. United Nations. “The Ten Principles of the UN Global Compact.” Accessed https://www.unglobalcompact.org/what-is- gc/mission/principles (this link opens in a new window/tab) . Activities & Assessment The Activities & Assessment section includes the activities and assessments for the week that provide you an opportunity to practice the material and then demonstrate what you've learned.

1108-BUSN620Week7foruminstructions (1)

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