Key Terms:
- Utilitarianism: utilitarianism suggests that an ethical action is one whose consequence achieves the greatest good for the greatest number of people.
- Deontology: contends that each of us owes certain duties to others (deon is a Greek word for duty or obligation) and that certain universal rules apply to every situation and bind us to these duties.
- Virtue Theory (Kantianism): focuses on the character of the decision-maker—a character that reflects the training we receive growing up. In this view, our ethical analysis of a decision is intimately connected with the person we choose to be.
- Phrónēsis: a type of practical wisdom that enables us to act virtuously.
- Stockholders: those who own shares of the company’s stock.
- Shareholders: individuals and institutions that own stock (or shares) in a corporation.
- Corporate Social Responsibility (CSR): the practice by which a business views itself within a broader context, as a member of society with certain implicit social obligations and environmental responsibilities.
- Ethical relativism: a philosophy according to which there is no right or wrong and what is ethical depends solely on the context.
- Descriptive approach: sees the company as composed of various stakeholder groups, each with its own interests.
- Instrumental approach: connects stakeholder management and financial outcomes, proposing that appropriate management of stakeholder interests is important and useful because it contributes to a positive bottom line.
- Normative approach: considers stakeholders as ends in themselves rather than simply as means to achieve better financial results.
- Enabling stakeholders: these are regulatory stakeholders including stockholders, legislatures, government regulators, and boards of directors.
- Functional stakeholders: those who influence inputs, such as suppliers, employees, and unions, and those influencing outputs such as customers, distributors, and retailers.
- Diffused stakeholders: include other organizations such as nongovernmental organizations (NGOs), voters, and mass media organizations with less direct relationships but potential for meaningful impacts on firms.
- Normative stakeholders: these include competitors and peers influence the norms or informal rules of the industry
- Key suppliers: these are lucrative or steady customers.
- Triple Bottom Line (TBL): this is a measure described in 1994 by John Elkington, a British business consultant, and it forces us to reconsider the very concept of the “bottom line”, which includes social (people), environmental (planet), and economic factors (profit).
Study Questions:
SQ1 – What are the three approaches for examining the ethical nature of a decision?
- The first normative approach is to examine the ends, or consequences, a decision produces in order to evaluate whether those ends are ethical.
- The second approach does examine the means, or actions, we use to carry out a business decision.
- The third normative approach, typically called virtue theory, focuses on the character of the decision-maker—a character that reflects the training we receive growing up.
SQ2 – What does CSR stand for and what is it concerned with?
CSR (Corporate Social Responsibility) is the practice by which a business views itself within a broader context, as a member of society with certain implicit social obligations and environmental responsibilities.
SQ3 – What are the roles of a company’s internal and external stakeholders?
Regarding internal stakeholders, the board of directors—in a company large enough to have one—is responsible for defining and evaluating the ongoing mission of a business after its founding.
External stakeholders are usually those outside of the organization who most directly influence a business’s bottom line and hold power over the business.
SQ4 – What are the three theoretical approaches to considering a stakeholder claim?
A descriptive approach, an instrumental approach, and a normative approach.
SQ5 – What are the three major components to bringing about change in customer or donor expectations?
(1) customer receptivity to a product or service offered by the company, (2) acknowledgement of the gap between customer receptivity and corporate action to reduce it, and (3) a system to bring about and maintain change in customer desires to bring it in line with precisely what the corporation can deliver.
SQ6 – What are the three components of a TBL? What does TBL stand for?
TBL – or Triple Bottom Line – has the three following components: social, economic, environmental