Chapter Five Key PointsI. StakeholdersPrimary Stakeholders: Those who feel a direct impact based on the decision.Investors, Owners, and EmployeesSecondary Stakeholders: Those who do not have a direct connection to the business but suffer some consequences in an indirect wayMerchants in town around a plant or residents that may be affected by the safety or environmental impact of a demolitionII. Moral Philosophy and Ethical Decision MakingMorals: generally accepted standards of rights and wrong in a given societyEthics: term to describe having a conscious system in use for deciding moral dilemmasPrinciples-Based Approach: Ethical decisions made according to a set of established principles such as religious tenets.Some believe that humans have certain inherent moral rights that spring from their ability to reason and choose freely what to do with their lives.Kant theorized that rights imply duties and the duty to respect other's rights was paramount in acting morally.Categorical Imperative Test (universalization test): individuals make ethical decisions with an eye toward the potential consequences if everyone in society acted the same way.Consequences-Based Approach: provides the most good for the greatest number of peopleUtilitarian: stream of moral philosophy and method for evaluating ethical dilemmasJeremy Bentham (founder)III. Values ManagementPrioritizing moral values for the organization and ensuring behaviors are aligned with those values.IV. Strategic advantages of values managementCultivation of Strong Teamwork and ProductivityHelps align employee behaviors with the top priority ethical valuesClarity in Business OperationsIdentifies preferred values and ensures organizational behaviors are aligned with those valuesStrong Public ImageAllows a business organization to portray a strong positive image to the publicValues management should have strategic parity with other management prioritiesV. Traits of Effective Ethical ProgramsClear vision of integrity throughout organizationReward systems aligned with the visionResponsibility is seen as individual rather than collectivePolicies and practices are aligned with the visionThe vision of integrity is well integrated into the decision-making processVI. The Enron ScandalCollapsed under ethical lapses by management who ignored the company’s values management policiesEnergy Bank: Retained difference as profits; buy low sell high.Used profits to add business ventures to complement energy trading. (such as operating power plants)Management compensation shot up due to stock.Key PlayersKenneth Lay (Chairman): Public FaceJeffrey Skilling (CEO): Mastermind of scandalAndrew Fastow (CFO): Oversaw financial transactionsRick Causey (Chief Accountant): Deviated from accepted accounting practices and pressured auditors to sign off.Arthur Andersen (Accounting Firm)Government indicted the entire firm on charges of obstruction of justiceAndersen went out of businessInstructed employees to destroy documentsObstruction of Justice: “corruptly persuades”Were jury instructions correctly submitted that the jury needed no consciousness of wrong doing?Ruling: No. Supreme Court ruled that instructions allowed the jury to convict in error without proving the firm had broken the law or a link to official proceedings prohibiting destruction of documents.Words of the Court: Improper Jury InstructionVII. AIG Example (Insurance)Received $173 billion in taxpayer money in exchange for an 80% stake in AIG for the U.S. GovernmentDistributed bonuses months after government bailoutU.S. Secretary knew and didn’t stop itVIII. Corporate Social ResponsibilityConscience resides not just in individuals but also in a corporation.Business organizations committed to CSR aim to achieve commercial success in ways that honor ethical values and respect people, communities, and the natural environment in a sustainable manner while recognizing the interests of its stakeholders.Stakeholders include investors, customers, employees, business partners, local communities, the environment, and society at large.The Narrow View: Invisible HandWhat is good for business is good for America because the market’s efficiencies provide an invisible hand that guides morality and responsibilityStates that only responsibility a business has is to maximize shareholder wealth.Views: Businesses are amoral, managers who pursue social initiatives with corporate funds are violating their fiduciary duties to the owners of the corporation.Moderate View: Government’s HandRegulatory hands of the law and the political process provide the basis for ethical decision makingStates that corporations have responsibility to pursue objectives that are rational, legal and purely economic.The Broad View: Management’s HandStates corporations have a social responsibility and that profitability is secondary. Therefor it is not necessary to justify the need for a greater corporate roll in social responsibility.Social responsibility is in the public’s interest and a company’s self interest and a company does well by employing socially responsible principles in their business operationsFocus on the triple bottom line that emphasizes not only the conventional creation of economic value (profits) but also creation (or destruction) of environmental and social value.It is not enough, then, for managers to aggressively pursue a social agenda, but she/he must not lose sight of financial and environmental performance as well.IX. Grimshaw V. Ford Motor Company.Click and Drag1. Narrow Viewa. The market’s invisible hand and guides a companyb. Competitive advantage is best for society2. Broad Viewa. Company exists mainly for the public good3. Moderate Viewa. Government regulation sets out responsibilityConcept Check4. Which schools of thought emphasize maximizing shareholder wealth as a corporation’s only moral responsibility?a. Narrow view: Invisible handi. Maximizing shareholder wealth is aligned with the narrow view, the “invisible hand” school of thought.5. Business organizations that integrate corporate social responsibility (CSB) principles in their decision making plan to achieve commercial success while still honoring ethical values and respecting ____________________.a. People, communities, and the natural environment6. Which CSR school of thought follows the view that market efficiencies guide morality and responsibility in business?a. Narrow7. Some ethicists refer to the triple bottome line to put