BUSINESS ETHICS

MBA 6301, Business Ethics 1

Course Learning Outcomes for Unit II Upon completion of this unit, students should be able to:

2. Assess the ethical issues facing business leaders. 2.1 Explain the role of corporate reputation in an organization.

6. Analyze the influence of corporate culture, including leadership, power, and motivation, on business ethics in the workplace. 6.1 Explain the concept of stakeholders and stakeholder trust. 6.2 Define power, urgency, and legitimacy with respect to

stakeholder theory.

Unit Lesson How do companies determine which stakeholders are more important than others? Which group of stakeholders should the company be accountable to? Every company more than likely has customers, is part of a community, and publicly traded companies have hundreds if not thousands of stockholders; therefore, not all of them can be of equal importance. Stakeholder theory attempts to answer this question by applying three attributes to groups of stakeholders; power, legitimacy, and urgency. As defined by Stanwick and Stanwick (2014), “Power is the extent to which the organization can influence or impose its will on the stakeholder group” (p. 42). When an organization has the power to make a difference or to change a pattern in society, we would expect that they would. For example, the March of

Dimes was started in 1938 by President Franklin D. Roosevelt to combat polio, which he was diagnosed with in 1921, and had left him unable to move his legs. After many years, its original goal of eliminating polio was accomplished, and the organization then had to make a decision to disband the organization or dedicate its resources to a new mission. The March of Dimes decided to change their focus to prevention of birth defects and infant mortality. Since they had such a successful accomplishment with combatting polio, it was seen that they would be a success in

this mission also. In 1976 the organization changed its name to the March of Dimes Birth Defects Foundation. By using their power of influence and after

President Franklin Roosevelt, himself a victim of polio, meets with March of Dimes executive Basil O'Connor (March of Dimes Birth Defects Foundationi, ca. 1944)

Reading Assignments Chapter 3: Stakeholders and Corporate Social Responsibility

Supplemental Reading See information below.

Suggested Further Reading See information below.

Learning Activities (Non-Graded) See information below.

Key Terms 1. Constricted

philanthropy 2. Corporate

philanthropy 3. Corporate social

responsibility 4. Dispersed

philanthropy 5. Distribution

expectations 6. Engaged firm 7. Idealistic firm 8. Legitimacy 9. Moral managers

10. Peripheral philanthropy

UNIT II STUDY GUIDE

Stakeholders Needs in

Ethical Foundation

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such a successful program combatting polio, the organization continues today to make a difference in many lives. Stanwick and Stanwick (2014) define legitimacy as, “the assumption that the actions of the corporation are desirable, proper or appropriate within the limits of the corporation” (p. 42). For example, both Chick-fil-A and Hobby Lobby have chosen to close on Sundays. Both corporations believe that Sunday is a day of rest, worship, and to spend time with family and friends; therefore, they decided to close on Sundays. Urgency is defined as, “the degree on which the issues raised by the stakeholder must be dealt with in a time-sensitive manner” (Stanwick & Stanwick, 2014, p. 42). In 1982, Tylenol was faced with an urgency to recall all its Extra-Strength Tylenol after seven people died after taking the over-the- counter pills which were laced with cyanide in them. This was in the Chicago area, and it was later discovered that someone in the area had went in and tampered with the pill bottles, placing cyanide in them. Johnson & Johnson, the owner of Tylenol, acted urgently to take all of the Tylenol bottles off the shelves for fear of other people dying. Tylenol issued a recall for 31 million bottles worth 100 million dollars. Most believed that this was the end of Tylenol and people would never purchase another pill from them. However, Tylenol came up with a public relations campaign. The Tylenol situation is a good example of corporate social responsibility in action. This was the first mass recall in the United States, and therefore, Tylenol set the bar for corporate social responsibility and this situation was the model for other corporations to consider the impact of their legal responsibility and fiduciary duty within a moral context. Corporate philanthropy is used to improve the image and reputation of the firm, and the result will be an enhanced competitive advantage. Often times when we see a corporation involved in philanthropy, society believes that organization is in a position where they are either giving back to the community or looking for a tax write off. Bill and Melinda Gates are examples of corporate philanthropy; their organization has embraced 150 billionaires to donate a portion of their wealth for combating AIDS and improving the health of third world countries. There are four common types of corporate philanthropy. These consist of community grants, employee matching gifts, employee volunteer grants, and volunteer support grants. Community grant programs offer local communities the advantage to get funding from their local corporations and organizations. Often times, we will see local small businesses that will sponsor a little league baseball team or a local track team. When natural disasters happen in a local community, corporations are willing to give back to their communities that support their businesses. Most of these community teams or organizations are non-profits that have a 501c3 where the corporation or company can receive a tax break. Wal-Mart often grants local community funding. They use this process through their team of Wal-Mart associates at each store. Employee matching gift programs are when the company matches the employees’ contributions and together give to a needy organization. For example, in some fortune 500 corporations employees can chose to give into a list of non-profit organizations where the employees can have money come out of their paychecks or give a one-time donation and the corporation then matches the employees’ giving. Several corporations use this matching gift program; even the U.S. Army used this in the 1980s, allowing soldiers to give

11. Power 12. Pragmatic firm 13. Skeptical firm 14. Stakeholder 15. Strategic philanthropy

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to their favorite charity and they in return would match the giving. This giving is usually done for one year or giving once a year during a fund-raising drive. Volunteer grant programs are local organizations that give back to their community during natural disasters or in time of need. We have seen organizations such as local churches that will partner with a homeless organization to aid in feeding the homeless, therefore, giving back to communities. Also we have seen local city government partnering with Homeland Security to aid communities hit with natural disasters. For example, when Hurricane Ike hit the Houston area in September 2008 and 96% of the city of Houston was without electricity, Homeland Security employees partnered with city and state government to assist citizens in need of water and food. In this process, local organizations such as the churches and non-profit organizations volunteer their services in the disaster.

References

March of Dimes Birth Defects Foundation. (ca. 1944). President Franklin

Roosevelt, himself a victim of polio, meets with March of Dimes executive Basil O'Connor. [Photograph]. Retrieved from http://commons.wikimedia.org/wiki/File:Roosevelt_OConnor.jpg

Stanwick, P. A., & Stanwick, S. D. (2014). Understanding business ethics (2nd

ed.). Thousand Oaks, CA: Sage.

Supplemental Reading Click here to access the Chapter 3 PowerPoint Presentation. (Click here to access a PDF version of the presentation.)

Suggested Further Reading These videos and web resources provide further insight into business ethics. Although you are not required to view these, watching a few of the videos and becoming familiar with the web resources will further your understanding of the topic. Captions are available for most videos by clicking the “Transcript” button below the video in YouTube. Videos: Corporateethics. (2009, October 1). What is stakeholder theory? - R. Edward

Freeman [Video file]. Retrieved from http://youtu.be/bIRUaLcvPe8

Education Futures. (2011, May 18). Ethical cheating - Dr. Arthur Harkins [Video

file]. Retrieved from http://youtu.be/JmKiNIF8qYo

TEDx Talks. (2010, October 8). TEDxToronto - Bruce Poon tip "Beyond the

triple bottom line” [Video file] Retrieved from http://youtu.be/xbeUftMoFUQ

Web Resources: CSR Wire. (2014). The corporate social responsibility newswire. Retrieved

from http://www.csrwire.com/categories/23-Corporate-Social- Responsibility/press_releases

Net Impact. (2014). From the blog. Retrieved from https://netimpact.org/

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Learning Activities (Non-Graded)

NOTICE: These are all non-graded Learning Activities, so you do not have to submit them. If you experience difficulty in mastering any of the concepts, contact your instructor for additional information and guidance. Visit the Student Study Site at www.sagepub.com/stanwick to access the following resources:

 Video Links

 SAGE Journal Articles  Web Resources  Web Quizzes (enter your own e-mail address to submit results to)