Week 2 Individual assignment Abstract Reviews the role of ethics and social responsibilities in developing a strategic plan while considering stakeholder needs and agendas. Reviews the four key responsibilities and priorities as stated by Carroll; economic, legal, ethical, and discretionary responsibilities. Discusses the importance of integrating ethical and social responsibilities in a strategic plan. Uses Enron an example of a company overstepping ethical boundaries and discusses measures that could be taken to avoid future unethical behavior by a company. Ethics
According to Lantos (2001) “It is no news that today’s business organizations are expected to exhibit ethical behavior and moral management. However, over the past half century the bar has been steadily raised. Now, not only are firms expected to be virtuous, they are being called to practice “social responsibility” or “corporate citizenship”(Carroll 2000, p. 187), accepting some accountability for societal welfare” (p. 1). Ethical and social responsibilities are a necessity in developing a strategic plan. There are four key responsibilities an organization needs to establish when developing a strategic plan.
These four responsibilities integrated together will meet most needs and agendas of the stakeholders. Role of Ethics and Social Responsibility in Developing a Strategic Plan “Should strategic decision makers be responsible only to the shareholders, or do they have broader responsibilities? ” (Wheelen & Hunger, 2010, p. 72). The strategic decision makers are the individuals creating the strategic plan, incorporating both ethical and social responsibilities into the company’s plan can be a burden and compromises need to be taken into consideration to meet both ethical and social responsibilities while meeting stakeholders needs and agendas.
Stakeholders are referred to as individuals who are “affected or are affected by the achievement of the firm’s objectives” Wheelen, T. , ; Hunger, J. (2010). Archie B. Carroll, a business management author and professor states, “proposes that the managers of business organizations have four responsibilities listed in order of priority: Economic responsibility to produce goods or services of value to society so the firm can repay its creditors and shareholders. Legal responsibility as defined by government laws, the management is expected to obey. Ethical responsibility to follow generally held beliefs about behavior in a society.
Discretionary responsibility are voluntary obligations a corporation assumes” (Wheelen ; Hunger, 2010, p. 73). With these four responsibilities, a company when establishing their strategic plan, they must incorporate these fundamental responsibilities in a means that would satisfy the stakeholders needs and agendas. The company must consider all risks, company performance, strategies to meet performance, and social responsibility policies while creating measurable indicators to demonstrate the progress of the company when developing the strategic plan.
Once the strategic plan has been developed, communication of the plan to the stakeholders is an important part of the process. By communicating the strategic plan to the stakeholders, all affected individuals or groups will become aware of the path the company is headed. Example of Overstepping Ethical Boundaries As referenced earlier, a company has responsibilities to meet when establishing a strategic plan. Ethical responsibility is listed as the second priority a company needs to meet according to Carroll.
When overstepping ethical boundaries, a company exposes stakeholders to risks that do not meet their needs. An example of an organization that has displayed this behavior and acting in the company’s interest was Enron. Enron overstepped the ethical boundaries which in the end cost the stakeholders, which mainly was the employees, billions of dollars for their own personal gain. Enron through various unethical decisions, mislead employees and investors by manipulating the accounting entries to make the company to be more profitable than the true represented dollars were.
At the time of the Enron incident, there were inadequate government legal or regulatory process in place, if such processes were in place, the Enron incident could have been prevented. Preventative measure that have been established by the government have assisted in reducing the risk to the stakeholders in an organization. A financial auditing company approved by the government is now required to audit financial reports of a company. Pension plans are no longer administered by the company, a third party firm is required to administer a company’s pension plan to prevent overstepping ethical boundaries. Conclusion
With past scandals in the business world, companies have been establishing roles of ethics and social responsibility in developing a strategic plan while considering stakeholder needs and agendas. Carroll has identified four key responsibilities a company needs to address when developing a strategic plan. Economic, legal, ethical, and discretionary responsibilities, listed in order of priority, are represented to show how an organization can integrate social and ethical responsibilities in a strategic plan. The example provided of Enron has illustrated how a company has overstepped the ethical boundaries and causing risks to the stakeholders.
Since the Enron incident, the government established processes to prevent unethical behavior as what happened with Enron to protect the stakeholders of the company. References Carroll, A. B. (2000), “The four faces of corporate citizenship,” in Business Ethics 00/01, Richardson, J. E. (Ed). , Dushkin/McGraw-Hill, Guilford, CT, pp. 187-191. Lantos, G. (2001, June). The Boundaries of Strategic Corporate Social Responsibility. Wheelen, T. , ; Hunger, J. (2010). Concepts in strategic management and business policy achieving sustainability (12th ed. ). Retrieved from The University of Phoenix eBook Collection.