A Question of Ethics Towards a Common Goal

First Golden Rule of

Corporate Governance

Discussions include:
Ethics 1. What is Ethics
2. Examples of Ethical behavior

3. Ethical Dilemma

4. Ethics: Stakeholder viewpoint

5. Questionnaires about Ethics

6. A graphical presentation
7. Business Ethics Award 2006
 1. What is Ethics ?

Moral Principles Right or Wrong

& Standards Decision

ETHICS

Just not about Internal & External

Compliance of Law perspective
 2. Examples of Ethical Behavior

Internal Perspective:
Fair treatment of staff.
Trust and loyalty between employees and
management.
Transparency in all business activities.
External Perspective:
Keeping environment safe.
Supporting local communities.
Consumers feeling towards the company.
 3. Ethical Dilemma

 Ethical Dilemma:
Corporation’s viewpoint of Ethics may vary with
Stakeholders viewpoint of Ethics.
 Effects:
Lack of high standard of ethical behavior in a
company is contrary to trust and loyalty which in turn
has a detrimental effect on the company.
 What to do:
Ultimately there must be a balance of ethical behavior
between the company and stakeholders perception
to ensure corporate governance. So Corporate Ethics
is mainly determined by key stakeholders.
 4. Ethics - Stakeholders Viewpoint

Ethics

Corporate social responsibility – Does the

company behave responsibly towards all
stakeholders?

To know about this, company

must find some answers from its
stakeholders.
Continued…..
5. How to know stakeholders perception on
ethics of a company?

1.Questions on the general views on ethics-

 Environmental and human right issues
 Support for local community / society in general.
 Honesty / transparency.
 Fair treatment with staffs etc.
 Responsibility regarding pension / consideration
of pensioners.
Continued…..
5. How to know stakeholders perception on
ethics of a company?

2.Questions on particular stakeholder views-

 Customer’s belief’s when purchasing -How
much do ethical issues actually affect their
purchasing behavior?
 Employees moral values- How important is it for
them to work in an ethically sound company?
 Local communities interest- How much are
they interested in the company’s active
involvement in the community?
Continued…..
 4. Ethics - Stakeholders Viewpoint
-An Example
What stakeholders
say
1. "Cataracts and sight projects are
good deeds, but does the Bank
How SCB engaged
do anything that uses their with stakeholders
banking skills and resources to 1. Regular series of Corporate
help people get out of the poverty Responsibility forums; a
trap?” chance to ask questions
directly.
2. “Employees are approachable,
2. SCB’s Country Managers
friendly and helpful– I get a feel
conference that brought all 56
from the people that they're Chief Executives of country
happy and enjoy it.” operations together and
3. “Corporate Responsibility discuss key issues.
activities outside community
activity is very low.”
 Responding to
stakeholders
1. Produce an annual Corporate
Responsibility Report.
Reviewing how SCB
2. Upgrade the information held on
engaged with stakeholders
the Corporate Responsibility
section of the Group website. 1. SCB strives the best to ensure
all the relationships work in an
3. Create a Corporate Responsibility open and honest way,
and Community Committee, comprehensive plan is made at
inviting external stakeholders to the beginning of the year.
take part in meetings. 2. SCB can receive direct feedback
on stakeholders issues.
4. Understand more about how
SCB’s core skills can be used to 3. SCB is always serious to learn
tackle the global issue of poverty. from stakeholders, Corporate
Responsibility Report will detail
5. Develop a comprehensive SCB’s progress with the plan.
complaint monitoring system to
understand where and how often
customers believe they have not
been treated fairly.
6. A Graphical Presentation of Ethics Rule
Towards Corporate Governance

Define Company must

Corporate Ethics differ
Corporate with stakeholder perception balance Ethical issues
Ethics with stakeholders

Ensures Corporate Governance

7. Business Ethics - Recent Attraction

Business Ethics Award- 2006

 Business Ethics Magazine gives Awards
on “Business Ethics” since 1989.
 Year 2006 -18th Awards.
 Analysis is based on each company’s:
1. Environment
2. Community relations
3. Employee relations
4. Diversity
5. Customer relations
6. Human Rights
7. Corporate Governance
Source: www.business-ethics.com
Continued…
7.Business Ethics - Recent Attraction

Business Ethics Award- 2006

Top Five Corporate Citizens of 2006

1. Green Mountain Coffee Roasters, Inc.

2. Hewlett-Packard
3. Advanced Micro Devices, Inc.
4. Motorola, Inc.
5. Agilent Technologies, Inc.

Continued…
Johnson & Scholes on Business
Ethics
business ethics is often discussed in relation to
corporate governance and the stakeholder

Corporate Governance
Determines

Whom how the purposes

the organization and priorities
is there to serve of the organization
should be decided

Johnson and Scholes, 1999: 2003

Johnson, Gery and Kevan Scholes
on Business Ethics
Ethical Issues in Private and Public Sector
Exist at 3 levels:

Macro Corporate Individual

Level Level Level
 Johnson & Scholes on Business
Ethics
Broad ethical stance about the
role of business in the
Macro Level
national and international
organization of society

Within the macro framework,

Corporate corporate social responsibility
Level beyond minimum obligations
of corporate governance
 Johnson & Scholes on Business
Ethics

Individual Behavior and actions of

Level individuals within organizations

Johnson and Scholes identify 4 major grouping

from a report produced in 1981
finding 10 roles of organization
Johnson & Scholes on Business
Ethics

Believers of (After Friedman) only social

responsibility of organizations is
to earn profit and government’s duty
is to tell how to operate for greater good.
Johnson & Scholes on Business
Ethics

Believers of 1 but recognize a well

managed stakeholder relationship
and controlling short term
doubtful ethical issues is beneficial
for long term.
Johnson & Scholes on Business
Ethics

Believers of Stakeholders need to

be incorporated more in organization's
objective and no trading in products
harmful for the health of organization
In long term.
Johnson & Scholes on Business
Ethics

Believers of community need where

financial consideration is secondary
to society need and finance becomes
simply as a constraint for serving
stakeholders as beneficiary.
 What is Congruence of goal & Why does it
necessary?

Congruence An appropriate goal by properly

of goal Reflecting the weighted
expectations of the Stakeholders

Why necessary:
A. A misjudgment of the weighting of stakeholders’
expectation may do serious damage to the totality of
the business.
B. Lack of understanding of the need for congruence
between the aims of different stakeholders may
make the business impossible to run.
Case Study: Losing sight of the need for a
common goal
Case Background:
- Within the Engineering Industry, a organization
named Directorate for Optimum Operating
Methods & Enhanced designs (DOOMED) was
formed by the Trade association members drawn
from the leading UK engineering firms to
introduce self regulations into the sector.
- All the board members are non-executive, not
true reflection of the representatives of all parties,
Specially excluding the final customers.
- Nearly 50% of the Engineering firms were under
the umbrella of DOOMED organization
Case Study: Losing sight of the need for a
common goal
Case Background:

- Lack of goal congruence had been built in from the

start.

- Couple of certification bodies started approaching

members with a ‘cut-price’ offer using the same
standards developed by DOOMED which deteriorate
the trading position of DOOMED rapidly.

- DOOMED was the first in the field and was the market
leader.

- In due course DOOMED disappeared.

Case Study: Losing sight of the need for a
common goal
Problem Identification:
- Lack of goal congruence had been built in from
the start.

- All the board members of DOOMED

organization are Non-Executive.

- The Chief Executive, charged with running a

successful organization, denied guidance from
the Board, of which he was not a member.
- The board was riven by conflicts of interest.
- Failed to balance all stakeholders expectations.
Case Study: Losing sight of the need for a
common goal
Suggestions:

- There must be a congruence of goals.

- The Board of Directors must have the

participation of all parties.

- The Chief Executive must be a member of

the Board of Directors, least of all must
have speech in board.
- The Shareholders must have an active
participation in the organization.
 What Should be the Goal?

Goal means right goal or appropriate goal

which properly reflects the expectations of
the stakeholders.
Goal
Methodology

Position Analysis Congruence of goals

Internal Analysis
External Analysis
Stakeholder analysis Expectations of the Stakeholders
 What does checking the goal mean?

Checking the goal means to flash out the

perceptions and the expectations of the
Stakeholders before setting the final goal
attached to the Business Strategy.

Checking the goal and ethics is of fundamental

importance to ensure the proper reflection of the
interest of the different Stakeholders.

By Checking the goal we can weight the

expectations of the stakeholders to be placed as
input to the final corporate goal and strategy.
 How can we check the goal?

1. Strategy Analysis

The strategy analysis can be done by having

some parameters by which we can explore the
perceptions and expectations of the stakeholders
and make perfect alignment between perceptions
and expectations in order to place this as input to
the ultimate corporate goal.
The major parameters are:

Position Performance Capabilities

Strategy analysis aligning perceptions &
expectations?
BA
Figure: The Goal – aligning perceptions BA
Position and expectations (Point A to Point B)
Performance BT
Capabilities BA
BA

Aims of various
AA Stakeholders
AA
BA

AT
Directional Route
from A to B
AA
Perceptions of various
Stakeholders
AT= True position for point A
AA=Various assumed position for point A
Time
BT= True position for point B
BA= Various assumed position for point B
 How can we check the goal?
2. Goal Discussion Meeting
It enables the management to explore the extent
to which the organization’s current goal appears to
be both clear and appropriately representative of
the aspirations of the Stakeholders.
The main purposes of Goal Discussion meeting
are:
A. Focus on appropriate & Feasible goal.
B. Approach the goal by taking into account
the interests of the stakeholders.