UNIVERSITY OF THE CORDILLERAS

College of Arts and Sciences

BeS 103: Principles of Management (Notes)
Compiled by: Ma. Edarlee Racca

STAKEHOLDERS, ETHICS, AND CORPORATE SOCIAL RESPONSIBILITY

I. STAKEHOLDERS AND STAKEHOLDER MANAGEMENT

Stakeholder – an individual, institution, or community that has a stake in the operations

of an organization and in how it does business

 Employees, customers, suppliers, distributors, shareholders, creditors

 Government, local communities, and the general public

1. Stakeholders and the Organization

a. Employees – provide labor and skills in exchange of income, job satisfaction,

job security, and good working condition

b. Customers – provide revenues and want reliable products that represent value
for money

c. Suppliers – provide inputs and seek prompt payments and dependable buyers

d. Distributors – help sell the firm’s output and in return, they seek favorable
payment terms and products that will sell well

e. Shareholders – provide a corporation with risk capital and they are the
company’s legal owners. In exchange, they expect management to maximize
the return on their investment

f. Creditors – provide an organization with capital in the form of debt and expect
to be repaid on time with interest

g. Government – make rules and regulations that they expect to be practiced

(i.e. Paying taxes)

h. Local communities – local infrastructures and want businesses that are

responsible

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 i. General public – national infrastructures and seeks some assurance that the
quality of life will be improved as a result of the organization’s existence

2. Taking stakeholders into account

 Managers cannot always satisfy the claims of all stakeholders. The goals of
different groups may conflict
 Example: Employees – asking for higher wages
Consumers – demanding for reasonable prices
Shareholders – demanding for higher returns

Stakeholders Impact Analysis:

Identify Identify Identify claims

stakeholders stakeholder stakeholders
interest and place on the
concern organization

Take actions, starting Identify actions to Weight

with those that
satisfy claims of stakeholders by
address claims of the
most important
various stake their importance
stakeholders holders to the firm

Most important stakeholders:

1. Customers
2. Employees
3. Shareholders
 Satisfying the claims of shareholders requires managers to first pay close
attention to their customers and employees.

Monsanto’s Case:

 Spent billions of dollars to develop genetically modified crops that were

resistant to common pests

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  Their belief: the farmers will spend less money on chemical insecticides, the
shareholders would appreciate the company’s stock price, and the
employees would have more secure employment
 Failure: forgot the general public
 Concerns of the public: (a) genetically modified food might constitute a
health risk; (b) in the long run, the insects might turn into “superbugs”
because of evolution; and (c) genetic pollution: the DNA inserted into
Monsanto’s crops might jump across species into plants it was never intended
for, hence, producing a pesticide harmful to insects that do not damage
crops
 Should have been better if Monsanto invested in a carefully crafted public
education campaign designed to inform both public and government
officials that genetically modified food poses no health risk and the concerns
regarding superbugs and genetic pollution are exaggerated

II. ETHICS AND SOCIAL RESPONSIBILITY

Ethics – the code of moral principles that sets standards of good or bad, or right or
wrong, in one’s conduct (Schermerhorn, Jr., 2008).

 The study of people’s rights and duties, the moral rules that people apply in
making decisions, and the nature of relationship among people (Stoner,
Freeman, & Gilbert, Jr., 2005).

Business ethics – accepted principles of right or wrong governing the conduct of

businesspeople

Social responsibility – an ethical framework and suggests that an entity, be it an

organization or individual, has an obligation to act for the benefit of the society at
large.

Corporate social responsibility – asserts that businesses, in addition to maximizing

shareholder value, have an obligation to act in a manner that benefits the society.

 “Anything legal should be considered ethical.” Yet slavery was once legal in the
US and laws once permitted only men to vote.
 The quest to maximize profitability should be constrained not just by the law but
also by ethical obligations.
 Make personal telephone calls on company time
 Call in sick to take a day off for leisure
 Fail to report rule violations by a co-worker

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  Sweatshop labor – pejorative term for a workplace that has very poor, socially
unacceptable working conditions. The work may be difficult, dangerous,
climatically challenged, or underpaid. (i.e. Nike)

*Examples of ethical decisions and social responsibility:

1. Burger King, along with IBM has the “Burger and Bytes” program, wherein
computers are donated to schools according to the number of cash-register
receipts generated.
2. Burger King Academy which provides education and social services for
dropouts and truants.
3. Ben and Jerry’s opened stores in Harlem and employed homeless people to
serve ice cream.
4. Reebok launched a new product in 1991 – the BlackTop line of outdoor
basketball shoes. Part of the profits is used to renovate basketball courts.

The Shift to Ethics

 “The ethics crisis”

 The aftereffects of silicone breast implants; overcharging for rental cars; unfair
trade practices by large retailers; the Wall Street scandals; and the S & L crisis of
the 1980s have fueled a renewed concern about the role of ethics in business.
 The Gallup polling organization: nearly 50% of all Americans thought that
business ethics had declined over the past 10 years.
 Public confidence in business ethics have declined
 Because most business decisions have an ethical component, managers must
add ethics to their understanding of organizations; hence, many companies
have made their commitment to ethics in business

Alternative Views to Ethics (Philosophical Approaches to Ethics)

1. Utilitarian view (Utilitarian approach) – delivers the greatest good to the greatest
number of people. This is a results-oriented point of view that tries to assess the
moral implications of decisions in terms of their consequences; hence, an action
is judged to be desirable if it leads to the best possible balance of good over
bad consequences.
Does a decision or behavior do the greatest good for the most people?
2. Individualism view – based on the belief that one’s primary commitment is long-
term advancement of self-interests.
Does a decision of behavior promote one’s long-term self-interests?
3. Moral rights view (Rights theories) – respects and protect the fundamental rights
of people. In organizations, this concept extends to ensuring that employees are
always protected in rights to privacy, due process, free speech, free consent,
health and safety, and freedom of conscience.

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 - Along with rights come obligations. Because we have the right to
speech, we are also obligated to make sure we respect the free
speech of others.
Does a decision or behavior maintain the fundamental rights of all human
beings?
4. Justice view (Justice theories) – based on the belief that ethical decisions treat
people impartially and fairly, according to legal rules and standards. This
approach evaluates the ethical aspects of any decision on the basis of whether
it is “equitable” for everyone affected.
- John Rawls: all economic goods and services should be distributed
equally except when an unequal distribution would work to everyone’s
advantage
o Veil of Ignorance: everyone is imagined to be ignorant of all his
or her particular characteristics and people would unanimously
agree on two fundamental principles of justice: (a) each person
should be permitted the maximum amount of basic liberty
compatible with similar liberty for others; and (b) once the
equal basic liberty is ensured, inequality in basic goods is to be
allowed only if it benefits everyone.
o Difference Principle: inequalities are justified if they benefit the
position of the least advantaged person
Does a decision or behavior show fairness and impartiality?
a. Procedural justice – concerned that policies and rules are fairly applied
b. Distributive justice – concerned that people are treated the same regardless
of personal characteristic
c. Interactional justice – the degree to which others are treated with dignity and
respect

Ethical Dilemmas at Work

Ethical dilemmas – situations that require a choice regarding a possible course of

action that, although offering the potential for personal or organizational benefit, or
both, may be considered unethical

 When there is no clear consensus on what is right or wrong

1. Self dealing – when managers find a way to feather their own nests with
corporate funds
2. Information manipulation – situations in which managers use their control over
corporate data to distort or hide information to enhance their own financial
situations or the competitive position of the form
3. Anticompetitive behavior – behavior aimed at harming actual or potential
competitors, most often by using monopoly power

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4. Opportunistic exploitation – unilaterally rewriting the terms of a contract with
suppliers, distributors, or complement providers in a way that is more favorable to
a firm, often using its power to force the revision through
5. Substandard working conditions – tolerating unsafe working conditions or paying
employees below-market rates to reduce costs of production
6. Environmental degradation – taking actions that directly or indirectly result in
pollution or other form of environmental harm. The issue of pollution takes on
added importance because some parts of the environment are a public good
that not one owns but anyone can despoil. No one owns the atmosphere or the
ocean, but polluting them, no matter where the pollution originates, harms all
 Tragedy of the common
7. Corruption – can arise in a business context when managers pay bribes to gain
access to lucrative business contracts
8. Discrimination – denying promotion or appointment to a job candidate because
of the candidate’s race, gender, religion, age, and other non-job-relevant
criterion
9. Sexual harassment – making a co-worker feel uncomfortable because of
inappropriate comments or actions regarding sexuality: requesting sexual favors
in return for favorable job treatment

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 References

Hill, C. & McShane, S.L. (2008). Principles of management. New York, USA: McGraw Hill

Companies, Inc.

Shermerhorn, J. (2008). Management 9e. United States of America: John Wiley &Sons,

Inc.

Stoner, J., Freeman, R.E., & Gilbert D.R. (2005). Management. New Jersey: Prentice Hall,

Inc.

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