Mgts 4461 Business and Society

MgtS 4461 – Business and Society

Lesson plan: 15 September 2004

“Why be ethical?”

The text identifies many reasons why managers and executives care about ethics, yet we observed on Monday that many firms, managers, and executives have been guilty of severe moral lapses. How do you explain this apparent disconnect? There are many managers / executives who fail to do as the text suggests. People are “disconnected” rather than “whole” beings – e.g., Ken Lay was seen as a very generous person and a devout Christian, yet still became greedy. Firms may have “official” stances toward ethical behavior, yet their reward systems may promote getting ahead at any cost (“rice” – respect, integrity, XX, excellence at Enron vs. “doing the deal”). (5 min)

How important is working for an “ethical” company to you? Why is it important or unimportant? How would you determine whether a firm is “ethical”? Relatedly, could you work for a firm whose products you did not endorse? (Tobacco, alcohol, etc.) Would you be willing to sign a “graduation pledge” like that talked about on page 29? Why or why not? (10 min)

Who are a firm’s stakeholders? How can you decide which stakeholders have a “legitimate” interest in the firm’s decisions? Is there an economic reason as well as a philosophical reason for paying attention to anyone other than shareholders? Does a firm have a responsibility to anyone other than the shareholders? Why or why not? Gets down to Friedman’s arguments. In any event, there are strong economic arguments to attend to stakeholders other than the shareholders. (March & Simon’s coalition of interests theory argues that one must attend to interests of multiple constituencies.) (10 min)

Do you agree with the CSR pyramid presented on page 31? What are the advantages and disadvantages of presenting social responsibilities as a pyramid? If you could change this diagram, what would it look like? Problems with the diagram are that it presumes that (a) the business has a responsibility beyond its shareholders, and (b) that economic responsibilities undergird legal. Really, they must be in parallel. Moreover, a firm may use philanthropic endeavors to “compensate” for unethical activities (e.g., DuMaurier and arts support). If a firm could not be economically viable and operate legally (e.g., slumlords), what should it do? Gets down to question of whether businesses have any responsibility beyond the legal. (10 min)

Does it pay to be socially responsible? Why or why not? Does it make sense for investors to “screen” investments on the basis of social responsibility? Why or why not? How much of a “hit” on your investments would you take to invest in a socially responsible manner? Mixed evidence. There is support for the CSR → CFP relationship, but much is based on cross-sectional data rather than longitudinal data. The problem is that the relationship may be CFP → CSP; not the way we’d “like” it to be. Evidence suggests mixed support for socially responsible investing. May be little cost in terms of return. Problem is deciding what “screen” to use. (10 min)

MgtS 4461 – Business and Society

Lesson plan: 15 September 2004

“Why be ethical?”