Module 2 DQ 1





According to the topic material "Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility," is there a correlation between corporate social responsibility and competitive advantage? Do you agree or disagree with the authors` conclusions? Why or why not?



LECTURE NOTES 

Ethics and Social Responsibility

Introduction

Sun Microsystems, Citigroup, IBM, HP, Intel, IKEA, Thales Group, Bertelsmann, and Boeing are just a few of the companies that have appointed a Head of Corporate Social Responsibility, Environment, and Climate Change, or VP of Ethics and Business Conduct. In fact, many Fortune 500 companies have formulated and developed a social and environmental (S and E) strategy. Even though bribes, stock option irregularities, and other wrongdoings regularly feed the press, the notion of a sustainable enterprise and ethical considerations are less and less afterthoughts. This module studies the effect of competition on ethical conduct.

This topic should hit close to home for everyone. The emerging global economy has sharpened competition and made the urge to cut ethical corners overbearing. Recognizing this tension and considering how it affects our personal thinking and company thinking is half the battle in managing competitive demands.

Corporate Citizenship

Most companies now aspire to become good corporate citizens. However, doing well for the community (larger stakeholders) while satisfying stockholders and delighting customers and employees may turn out to be contradictory endeavors. Is there a risk of losing a cost advantage against rivals by being socially responsible? Firms must aim for sustainable development. Creating goodwill in the eyes of employees (to gain and retain talents), the public (to enhance its brand), and customers (to grow the firm) is imperative today for an organization to become a sustainable enterprise and maintain a competitive advantage over the long term.

Philanthropy, a form of corporate social responsibility, is about a company`s contributions to the community that go beyond providing jobs. Benefits of corporate philanthropy include the company`s reputation improves; government regulators tend to back off; workers are loyal and happier; leadership skills within the company are enhanced; and an improved quality of life permeates the community (Ferrel et al., 2007). It is good business to be philanthropic, but does true social responsibility require it? Should the impetus to act arise from the desire to do good for the community, rather than to look good to the community? For most, it is probably a combination of the two. Whatever it is, there is broad consensus that a company that strives, through its management and its line workers, to serve its community as it labors to increase market share and revenues enjoys intangible benefits and, sometimes, tangible ones.

The Quest for Ethics

While most of their leaders came from the best MBA programs that taught the importance of ethics, companies like HP, Apple, Arthur Andersen, Enron, Computer Associates, and Boeing still have suffered from ethical issues in varying degrees. Each of these organizations would have much preferred to avoid management distraction and unfavorable publicity. What dragged them into murky waters? Often, the number one driver is greed. This driver is either accentuated (Enron) or attenuated, depending on the context. "People are as corrupt as the system allows them to be. It is where temptation meets permissiveness that corruption takes root on a wide scale" (Transparency International, n.d.).

The role of the general manager (GM) is to create an environment with maximum transparency and predictability, where wrong behaviors are sanctioned immediately and right ones encouraged. Recall Ken Lay`s early attitude, when he learned about the first wrongdoing in the Enron case. He ignored it and did not close the faulty unit as advised. The wrong seed had been planted, and a tragic story was about to unfold.

Organizational leaders must establish a code of ethics. No complacency should be allowed. Those who think that another Enron-like scandal will not happen again should consider the following from the Josephson Institute of Ethics (2006) concerning young people:

• 82 percent admit they lied to a parent within the past 12 months about something significant.

• 62 percent admit they lied to a teacher within the past 12 months about something significant.

• 33 percent copied an Internet document within the past 12 months.

• 60 percent cheated during a test at school within the past 12 months 35 percent did so two or more times (p. 3).

These same young people are tomorrow`s staff and management. In other words, it is very likely that future leaders also will have to face and resolve ethical issues.

Conclusion

Research has shown that companies demonstrating ethical behaviors are more efficient, keep their talents longer, and have stronger market capitalization than those without a code of ethics (Josephson Institute for Ethics, 2004). Firms adopting a conscious stance on corporate responsibility are likely to gain a sustainable competitive advantage. This will help them not just in creating values for stakeholders, but also in playing a key role in solving challenging problems in their communities. Today`s successful managers embrace these issues and proactively contribute to creating a culture within the firm that encourages the highest standards of ethics and global citizenship.

References

Ferrell, O. C., Fraedrich, J., and Ferrell, L. (2007). Business ethics: Ethical decision making and cases (7th ed.). Boston: Houghton-Mifflin.

Josephson Institute of Ethics. (2006, October 15). 2006 Josephson Institute report card on the ethics of American youth: Part one − integrity. Retrieved December 13, 2009, from http://josephsoninstitute.org/pdf/ReportCard_press-release_2006-1013.pdf

Josephson Institute of Ethics. (2004). The hidden costs of unethical behavior. Retrieved December 13, 2009, from http://www.josephsoninstitute.org/pdf/workplace-flier_0604.pdf

Transparency International. (n.d.). Frequently asked questions about corruption. Retrieved December 13, 2009, from http://www.transparency.org/news_room/faq/corruption_faq