STRATEGIC MANAGEMENTCG, SR, AND ETHICS

Corporate GovernanceCG involves the interaction of 3 groups…

Phantom>Rubber Stamp>Minimal Review>Nominal Participation>Active Participation>Catalyst

30% (Active/Catalyst)

30% (Minimal/Nominal)

40% (Phantom/Rubber Stamp)

Boards of Directors‘Inside’ and ‘Outside’ directors

Board composition: former CEOs and COOs, academicians, lawyers, government officials, and bankers.

Financial institutions and investment companies as Board Members: Germany, Denmark, Sweden, Belgium, and Italy

Agency theory

Holding Boards/Board Members accountable

Ethics and Management

Stakeholders – anyone who has a financial interest, stake, or claim in an organization and/or what it does

Shareholders, customers, employees, interest groups, government, etc.

StakeholdersWhat are a company’s responsibilities to its owners/investors?

What are the company’s responsibilities to customers?

What are a company’s responsibilities to its employees?

Prioritize the three stakeholders above from most important to least.

Group Task

Q: In order, list the most important stakeholder to the least important e.g. 1,2,3,4 : Government, employees, owners (shareholders), customers

Be ready to support your ranking with sound reasoning.

Ethics

Ethics – a code, usually belonging to a profession or occupation, indicating what is right and wrong; acceptable practices and behavior

Ethical behavior has to do with adhering to a code of ethics

Social Responsibility ?

There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. –Milton Friedman

Carroll4 Responsibilities

Economic (Must Do)

Legal (Have to Do)

Ethical (Should Do)

Discretionary (Might Do)

MoralityMorality has to do with adhering to principles of good versus bad behavior; usually on the basis of philosophy or religious belief

Kohlberg’s Levels of Moral Development:

Pre-conventional

Conventional

Principled

Ethical Decision Making“When in Rome…” (Moral Relativism)

The “American Express” Approach

Utilitarian

Individual Rights

Is there such a thing as universal truth?

Ethical Decision MakingJustice Approach

Distributive Justice

Retributive Justice

Compensatory Justice

Kant and CavanaughKant: A person’s action is ethical, only if he is willing to have that same action

taken by everybody else, who is in a similar situation.

A person should never treat another human being simply as a means, but always as an end.

Cavanaugh:

Utility

Individual

Justice

Application: Adding false expenses to a company expense account.