Trident University Business Ethics and Stakeholder Theory Discussion

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  1. Based on your readings, describe what you consider to be the responsibility of top leadership in a large organization with respect to reaching a balance between profits and stakeholder concerns. Please support your position by giving some examples from the text or from other sources where CEOs did a good or poor job of finding this balance.
  2. Terris discusses the history of business ethics in America since the late 1800s with respect to anti-competitive practices, seeking unfair advantage through immoral arrangements with suppliers and public officials, failing to adhere to laws and regulations, and lack of transparency. Discuss to what extent you believe things to be better or worse in the present day for businesses in general.
  3. On page 41, Terris discusses the ideas of Howard Bowen regarding the evolution of social responsibility of businesses. To what extent do you think his predictions held true since 1953?

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Ethics at Work Daniel Terris Published by Brandeis University Press Terris, Daniel. Ethics at Work: Creating Virtue at an American Corporation. Brandeis University Press, 2013. Project MUSE.muse.jhu.edu/book/23072. For additional information about this book https://muse.jhu.edu/book/23072 Access provided at 19 Nov 2019 11:12 GMT from Trident University International chapter one Titans and Warhogs A   concern about the moral behavior of businesses and business leaders since the earliest years of European settlement in the New World. Even while the United States developed the world’s most productive capitalist environment, ideas about what constituted appropriate behavior in the business community became part of the national conversation. The term “business ethics” did not gain currency until the middle of the twentieth century, but long before that, a series of ideas and opinions about the appropriate limits on corporate activity had developed strong traditions. These traditions developed alongside the ideology of a laissez-faire free-market economy that emerged in the nineteenth century. In some ways these traditions regarding business behavior took their strength from the individualist tendency in American life; in other ways, they drew more on ideas about the common good that had their roots in religion. The emerging corporations of the nineteenth and early twentieth centuries did not, of course, always operate in accord with those traditions; indeed, the relative weakness of government allowed them a lot of latitude. Nevertheless, they operated in an environment where, at the very least, corporate leaders were compelled to make a public case that they ran enterprises that not only made money for the principals but also contributed to the common good. Different people and groups emphasized different aspects of business behavior. So what has emerged over the course of American history is not a single, indivisible conception of what we now call business ethics, but a cluster of interwoven strands of thought. Contemporary attitudes about corporate malfeasance are profoundly affected by the ways in which earlier Americans have responded to successive waves of corporate scandal over the last two centuries. By sorting out these strands, and by examining the legacy that each has left for our own time, we are bet- Titans and Warhogs :  ter positioned to evaluate in a comprehensive way the ethics programs of major corporations like Lockheed Martin. An understanding of these strands of thought is important because, in the end, corporations cannot themselves choose the standards on which their ethics programs will be judged. Lockheed Martin, as an engineering company, is good at measuring things, and its leadership cares a great deal about measuring success. This attitude applies to its ethics program, as much as to airplane, missile, and software design. Its ethics officers are constantly challenged to produce data that show the value of the program, and offer specific suggestions for improvement. How can we judge the success of this “ethical culture”? One measure, which Lockheed Martin’s ethics staff embraces, is that the corporation has managed to avoid a banner-headline scandal since , when the merger of Lockheed and Martin Marietta formed the corporation in its current guise. In an era when other major corporations—including some of Lockheed Martin’s largest competitors in the defense industry—have fallen prey to major scandals, this is no small achievement. Avoiding major scandals and earning the trust of the U.S. government are two important markers, but they are not sufficient. Ultimately, corporations are judged in the court of public opinion, which takes the broad view of the subject of business ethics. Lockheed Martin makes large claims for its ethics program, and for the place of values within its corporate culture. The company puts a premium on “the personal integrity of each of our employees and their commitment to the highest standards of personal and professional conduct that underlie the ethical culture of Lockheed Martin.” 1 A corporation may do a spectacular job of rooting out corruption, strengthening the moral fiber of its workforce, and associating itself with worthy social service projects, but if a small cabal of its senior executives succumbs to greed, or if its operations systematically despoil the environment, the company’s claims to excellence in “ethics” will mean little. By looking at history, I am arguing that the “court of public opinion” is not a shallow, fickle, ill-considered instrument of taste. It is, instead, a distillation of ideas and standards that have long and distinguished roots in American culture. A corporation’s ethics programs may satisfy a philosopher, or a management specialist, or even its customers. But it also needs to respond to the full complement of traditional expectations,  : Ethics at Work established and articulated by leaders in business, government, the media, the arts, and other actors in public life. This is especially true for defense contractors, who are, after all, part of a quasi-governmental industry. Lockheed Martin and its competitors are owned by individual private investors, but a significant proportion of their work responds to a public activity, the nation’s capacity to defend itself and to wage war. In some ways this quasi-governmental status gives them an edge in the public eye; they are able to bask in the glow of patriotism and the refracted glory of contributing to the military strength of a democratically elected government. In other ways, however, defense contractors come under especially intense scrutiny, from critics of the U.S. government’s military policies, from skeptics about the “military–industrial complex, ” and from a general public that balks at the idea that corporations might be making exorbitant profits at the taxpayers’ expense. Flagrant corporate greed seems easy to spot and easy to label, but on closer examination it turns out that there are a number of competing and overlapping definitions of business ethics. Or, more precisely, there are several competing analyses of corporate behavior, which lead to different accounts of the standards to which companies should be held, the reasons that they violate those standards, and the remedies for the violations. In this chapter I offer a small number of illustrations of five “strands of thought” that have emerged over the past  years. I am not attempting to paint a comprehensive history of American attitudes toward corporate ethics. My purpose is more modest. I mean only to suggest, through a selective look at aspects of American history, that the extent of historical scrutiny and activity regarding business practices has helped to create a climate where companies are expected to consider ethics in its broadest dimensions. In order to give a quick picture of the landscape, I summarize these five strands of thought briefly here, before turning to a fuller exploration of each in the balance of the chapter: . The sins of the tycoon. The oldest and most persistent conception of business ethics in the United States focuses on the actions and motivations of individual actors: the titans of the business world. This strand of thinking rests on the assumption that corporate entities are extensions of the character of their leaders. Corporate leaders acquire power, Titans and Warhogs :  and then they can use it for good or for ill. These leaders are public men and women playing leadership roles in American society, so there is little distinction between ethics in their corporate capacity and ethics in their private lives. Americans have traditionally been ambivalent about the tycoons of business; admiration for their power and achievements has often softened public judgment of their foibles. This conception of business ethics leads naturally to a crisp and simple remedy for scandal: Replace the chief executive officer (CEO), and trust in the character of the next generation of leadership. . Business conduct. A second conception of business ethics focuses principally on how corporations conduct themselves according to the rules of their industry. The focus here is less on the behavior of individuals, but on how corporate entities act in relation to one another. This conception emerged in the middle years of the nineteenth century, as American industry developed and the frenzied atmosphere of growth and opportunity encouraged companies to cut moral corners in competing with one another. Price fixing, stock watering, aggressive underpricing— these kinds of tactics ultimately affect consumers and the society as a whole, but their immediate impact is felt within the corporate world itself. In our own day, this conception of corporate ethics falls roughly under the rubric of “business conduct,” and it focuses less exclusively on the actions of the top management and more broadly on the various corporate practices that may violate laws or organizational values. . Putting workers first. Some people have been inclined to judge a corporation’s ethics principally on how it treats its employees and on the equity and justice that it practices within. In this conception, the relationship between labor and management is at the crux of a corporation’s moral stature. This standard of corporate behavior became prominent in the second half of the nineteenth century, as the great labor battles in steel and other industries called attention to exploitation of the American worker. In the twentieth century, attention to company policies on working hours, diversity, and gender issues has further complicated this issue. While criticism of corporate labor practice has been a persistent strand in American thinking, we should also pay attention to ways that some companies have tried to instill an “ethical culture” among their workers through active efforts to impose company values on the private lives of their employees.  : Ethics at Work . Social responsibility. A fourth conception of business ethics places priority on the impact of a company on the local, national, and (in more recent times) the international communities of which it is a part. This strand of thinking pays most attention to the corporation as a public actor. The impact of industry on the natural environment was the starting point. In our own era, the notion of “corporate social responsibility” takes into account a host of environmental, economic, and social factors, as well as the impact of business on democratic government in the United States and abroad. What began as assessment of the impact of companies on their immediate environment now also includes an examination of corporations as global players. . The perils of profits. No treatment of business ethics in the United States is complete without a consideration of that small but influential band of Americans that has offered a persistent critique of the moral shortcomings of the profit motive itself. Capitalism by its nature generates a tension between equality and liberty, so skepticism about profits runs through the thinking of Americans of all political stripes concerned about the contours of a just society. Given our attention to Lockheed Martin, it is particularly interesting to examine attitudes over the course of United States history toward profits generated by weaponry and war. These conceptions of business ethics are clearly not mutually exclusive. Adherents of “corporate social responsibility,” for example, are certainly concerned about labor issues overseas, and some are vocal critics both of individual corporate leaders and of the profit motive itself. Yet I believe that these conceptions represent different enough starting points and emphases that they lead to different vocabularies, different standards of judgment, and very different conclusions about moral performance. One person may hold up a corporation as a sterling example of corporate ethics because it has diligently addressed its history of bribery and fraud, while another person may be excoriating the same company for the heartless manner in which it laid off workers by the thousand. It should be said, at the beginning, that American opinion on all these strands of thinking has always been complex. Ambivalence about the country’s powerful engines of economic growth has been an American way of life for more than  years. Keen and biting judgments about corporate greed go hand in hand with admiring encomiums for the power Titans and Warhogs :  and ingenuity and energy of the most ruthless exploiters. This ambivalence also explains a great deal about the contemporary business climate. In the early years of the twenty-first century, the scandals continue to pop up with stunning regularity, thanks in part to American willingness simultaneously to voice public critique and harbor secret admiration. An important goal for every corporation that is undertaking an ethics program in a serious way is to convince the broader public of the depth and effectiveness of its work in this area. More importantly, ethics programs have to be deep and strong enough to address the next crisis, not just the ones that a corporation has suffered or weathered in the recent past. The Sins of the Tycoons In , Robert Keayne began to write his will. A prosperous merchant in the Massachusetts Bay Colony, Keayne used the occasion of his final testament for more than disposing of his estate. The document, which eventually ran to more than , words, was an elaborate account and justification of his commercial dealings in Puritan New England. Over the course of his career in Massachusetts, Keayne had been accused on numerous occasions of extracting too much profit from his fellow colonists; in one of the most vigorously disputed incidents, he was accused of marking up six-penny nails to eight and even ten pence per pound. For these and other similar matters, he had been tried formally in courts of law as well as informally in the court of public opinion, eventually attracting the attention of even such a worthy as Massachusetts governor John Winthrop for his “corrupt practice.”2 Keayne’s anguished “apologia” stands near the beginning of the story of how Americans have fixed on the moral character of leading businessmen as the ultimate measure of business ethics. Like many others after him, Robert Keayne pursued profits through what he considered classic Puritan virtues, like discipline and thrift, only to find himself (as he saw it) both rewarded for his prominence and castigated for his success. He lived in one of the most prestigious houses in colonial Boston, and he served the colony in a variety of appointed posts, yet his neighbors frequently judged his very prosperity as evidence of greed, heartlessness, and betrayal of his faith.  : Ethics at Work One of the challenges for Keayne and other business leaders of his day was to try to establish just what constituted ethical behavior in an era of shifting standards and vigorous moral and theological dispute. In Keayne’s day, for example, some of New England’s most prominent ministers were impassioned opponents of “usury,” which at that time meant accepting any interest on a loan of money. But the view was losing ground to a rising tide of acceptance, even among Puritan clerics. Charging interest on a loan to the poor was still unacceptable, but a consensus was developing that interest-bearing loans between the better classes were an engine of economic growth, and therefore acceptable in furthering God’s plans.3 The success of a merchant was ultimately measured not just by how much wealth he acquired, but by how nimbly he was able to situate his business dealings within the context of disputed moral precepts. Keayne’s story is an early iteration of one of the continuing themes in the story of American business leaders. Admired for their success, American leaders of industry have tended to equate their wealth with righteousness, believing that the success of their competitive tactics justified them morally as well as economically. For a time, public opinion supported their self-assessments—until changing standards of business practice exposed their deficiencies. By the time Benjamin Franklin was making his fortune as a printer in eighteenth-century Philadelphia, the strict local control of the theocracy was a thing of the past, but Franklin was no less zealous than the Puritan divines in declaring the connection between commercial success and his version of the moral life. Franklin famously counseled young men to develop habits of temperance, thrift, discipline, and industry, keeping track by means of a literal moral ledger, a written account of their virtues and their foibles. More important, however, was Franklin’s insistence on the appearance of virtue: A reputation for moderation and integrity, based on well-timed acts of kindness and charity, was for the printer an indispensable business asset. Treating ethics as a matter principally of personal habit and outward appearance, Franklin encouraged Americans to judge their leaders—in business and otherwise—by public manifestations of character, rather than by the ins and outs of their financial dealings. This is not to say that Franklin exactly countenanced fraud or theft, but his moral system was based on weights and balances, so that failings in one department (let’s Titans and Warhogs :  say, shady financial dealings) might be offset by strong performance in another (spending money wisely, perhaps, or donating conspicuously to local institutions for the improvement of the poor). Business ethics, for Franklin, was the glittering example of a man’s public character, and the sum total of his contribution to his society. It is perhaps only slightly unfair to Franklin to suggest that in his influential scheme, the obscure but honest merchant is less “ethical” than the wealthy philanthropist whose fortune was enhanced through the occasional bribe. In the nineteenth century, American attention to the character of its business leaders hit its full stride. Indeed, the question became unavoidable, as the titans of the industrial era developed economic networks on a scale unimaginable to the Puritans and the Founding Fathers. The growth of the nation and the industrial revolution fostered enormous economic enterprises that came to be seen, fairly or not, as living embodiments of their bold and (sometimes) ruthless founders. John Jacob Astor’s American Fur Company exploited the vast frontiers and made its founder the owner of great swaths of the developing metropolis of New York City. Cornelius Vanderbilt made several fortunes through steamships and railroads. Andrew Carnegie in steel, John Rockefeller in oil, J. P. Morgan in banking—the names of the founders became synonymous not only with their companies but with entire industries. Making their way in a highly competitive (and unregulated) era, these early corporate leaders used a variety of unscrupulous means to build their fortunes, and widespread public criticism followed in their wake. Vanderbilt forced competitors in the railroad industry to conform to his will by refusing to ship their goods until his demands were met. (Asked later why he did not simply sue his competitors, the “Commodore” replied, “The law, as I view it, goes too slow for me when I have the remedy in my own hands.”4) Carnegie was painted as the picture of evil for his company’s forceful suppression of striking steel workers. Rockefeller’s Standard Oil created its own economic climate by simply ...
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Business Ethics and Stakeholder Theory

Institution Affiliations


Business Ethics and Stakeholder Theory

Part 1

Top leaders have the responsibility of maintaining the balance of profits with concerns of
stakeholders. The senior leadership must show the need for the organization to earn profits with
the interests of stakeholders, such as the organization employees, clients, and suppliers of
materials, community and their creditors. Top leaders' responsibilities should focus on ensuring
that every concern of the stakeholders is addressed, which is an endeavor to accomplish the
fulfillment of stakeholders, instead of seeking high profits exclusively (Mihelic, Lipicnik &
Tekavcic, 2010).
Leaders at the top in the organization have the responsibility of maintaining a high
market position of the organization through strategic planning. CEO, who is the head of the
organization, needs to work with other leaders in the organization to maintain a strong position in
the market through strategies, such as providing after-sale services to the customers, which
attracts new and retains existing customers. Also, top leaders need to ensure that customers get
the value for their money by providing them with high-quality products that meet their desire
(Mihelic, Lipicnik & Tekavcic, 2010). An example is seen in Toyota Corporation, where
customers are provided with the best quality cars, and offered free services for three m...

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