Ch 3: Organizational Environments, Stakeholders & Ethical Responsibilities

Stakeholder

People and entities whose interests are affected by an organization

Internal and External

Internal Stakeholders

Owners

Board of Directors

Employees

Internal Stakeholders: Owners

Holds claims against the corporation (legal property)

Internal Stakeholders: Board of Directors

Elected by shareholders to make sure the firm is run according to their interests

Internal Stakeholder: Employees

Includes top managers

External Stakeholders

Customers

Competitors

Supplier

Distributor

Strategic Allies

Government Regulators

Interest groups

External Stakeholders: Competitors

Organizations that compete in the same marketplace for customers or services

External Stakeholders: Supplier

A person or organization that provides raw materials, services, equipment, labor, or energy to other organizations

External Stakeholders: Distributor

An organization that helps another organization sell its goods and services to customers

External Stakeholders: Strategic Allies

Relationship between two or more organizations joining forces to achieve advantages neither can achieve alone

External Stakeholders: Government Regulators

Regulatory agencies that establish ground rules under which organizations operate

External Stakeholders: Interest Groups

Groups seeking influence

Ex. Unions, Local Communities, Greenpeace, NRA, Sierra Club, Amnesty Intl.

General Environments

Economic

Political/Legal

Socio-Cultural

Technological

General Environments: Economic

GDP growth

Business confidence

Employment and wage gains

Inflation and interest rates

General Environments: Political/Legal

The influence of government policies, regulations, and legal frameworks on business operations.

labor, trade, competition, environmental protection, political stability of a region

General Environments: Socio-Cultural

Cultural trends, demographics, lifestyle changes, and societal values that impact how organizations operate and interact with stakeholders

General Environments: Technological in management

Refers to the tools, systems, and innovations that influence how organizations operate.

Includes advancements in communication, information processing, automation, and production techniques

What is Ethics?

Science of how we should behave

Norms and values– “the way we do things around here”

Above and beyond the law

Ethics in Business

Reasonable salaries and working conditions

Environmentally-friendly operations

Good corporate governance

Transparency

4 Approaches to Ethics

Utilitarian

Moral-Rights

Individual

Justice

Utilitarian

Guided by what will result in the greatest good for the greatest number of people

Moral-Rights

Guided by respect for the fundamental rights of human beings

Individual

Guided by the individual’s best long-term interest, which ultimately is in everyone’s self-interest

Justice

Guided by respect for impartial standards of fairness and equity

Kohlberg’s Theories

Level 1- Pre Conventional

Level 2- Conventional

Level 3- Post Conventional

Kohlberg’s Theories- Level 1

Pre Conventional

Follows Rules

Kohlberg’s Theories- Level 2

Conventional

Follows the rules and expectations of others

Kohlberg’s Theories- Level 3

Post Conventional

Guided by internal values

How do you create an ethical working climate?

Start from the top

Ethics training

Screen prospective employees

Protect whistle-blowers

SEB Case

Great year for NY branch (1993): 100M profit

High US taxes and earnings volatility

Solution: swap to temporarily move profit to Sweden right before end of year then reverse transaction next year

The Sarbanes-Oxley Reform Act (2002)

Established requirements for proper financial record keeping for public companies and penalties of as much as 25 years in prison for noncompliance

CEO and CFO personally sign off on financial statements

Corporate social responsibility

The notion that corporations are expected to go above and beyond following the law and making a profit

4 Levels of Social Responsibility

Economic Responsibility

Legal Responsibility

Ethical

Philanthropy

4 Levels of Social Responsibility: Economic Responsibility

Responsibility of an organization to produce goods & services desired by society and earn a profit; to do what is required for the benefit of shareholders

4 Levels of Social Responsibility: Legal Responsibility

Responsibility of an organization to obey the law; to do what is required by global stakeholders

4 Levels of Social Responsibility: Ethical

Responsibility of an organization to make decisions with fairness and to respect the rights of others; to do what is expected by global stakeholders

4 Levels of Social Responsibility: Philanthropy Responsibility

Making charitable donations to benefit humankind