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CHAPTER 3 SOCIAL RESPONSIBILITY AND ETHICS IN STRATEGIC MANAGEMENT

After reading this chapter, you should be able to:

1. Compare and contrast Friedman’s traditional view with Carroll’s contemporary view of social responsibility;

2. Understand the relationship between social responsibility and corporate performance;

3. Explain the concept of sustainability;

4. Conduct a stakeholder analysis;

5. Explain why people may act unethically;

6. Describe different views of ethics according to the utilitarian, individual rights, and justice approaches.

3.1 Social Responsibilities of Strategic Decision Makers

* Should strategic decision makers be responsible to shareholders, or do they have broader responsibilities?

* The concept of social responsibility proposes that a private corporation has responsibilities to society that extend beyond making a profit. Strategic decisions often affect more than just a corporation.

* [Example]: A decision to retrench by closing some plants and discontinuing product lines affects not only the firm’s workforce but also the communities where the plants are located and customers with no other source for the discontinuous products. Such situations raise questions of the appropriateness of certain mission, objectives, and strategies of business corporations. Managers must be able to deal with these conflicting interests in an ethical manner to formulate a viable strategic plan.

RESPONSIBILITIES OF A BUSINESS FIRM

• What are the responsibilities of a business firm and how many of them must be fulfilled? See the following two contrasting views of responsibilities of business firms to society suggested by Milton Friedman and Archie Carroll.

Friedman’s Traditional Views of Business Responsibility

- Milton Friedman argues against the concept of social responsibility in the light of a return to a laissez-faire worldwide economy with a minimum of government regulation.

- A business person who acts “responsibly” by cutting the...