Companies have ethical and social responsibilities to society that extend beyond making a profit. Strategic decisions often affect more than just the corporation. Certain decisions that a company makes can affect the company’s workforce, the community where the company is located, and the customers who use the products or services provided by the company. In this paper, the subject to explain is the role of ethics and social responsibility in developing a strategic plan while considering stakeholder needs and agendas. An example of a company overstepping ethical boundaries for stakeholder agendas and what types of preventative measures could be taken to avoid this type of situation will also be provided.
According to Archie Carroll, the managers of business organizations have four responsibilities: economic, legal, ethical, and discretionary. Economic responsibilities of a business organization’s management are to produce goods and services of value to society so that the firm may repay its creditors and shareholders. Legal responsibilities are defined by governments in laws that management is expected to obey. For example, U.S. business firms are required to hire and promote people based on their credentials rather than to discriminate on non-job-related characteristics such as race, gender, or religion. Ethical responsibilities of an organization’s management are to follow the generally held beliefs about behavior in a society. For example, society generally expects firms to work with the employees and the community in planning for layoffs, even though no law may require this. The affected people can become very upset if an organization’s management fails to act according to generally prevailing ethical values. Discretionary responsibilities are the purely voluntary obligations a corporation assumes. Examples are philanthropic contributions, training the hard-core unemployed, and providing day-care centers. The difference between ethical and discretionary responsibilities is that few people expect an organization to fulfill discretionary responsibilities, whereas many expect an organization to fulfill ethical ones (Wheelen & Hunger, 2010). These four responsibilities were listed in a specific order. To stay in existence, a company must make a profit to satisfy its economic responsibilities and shareholders. The company must also fulfill its legal responsibilities. Companies that act illegally often do not exist long or lose too much business to stay in business. The remaining two responsibilities, ethical and discretionary, are considered social responsibilities. Ethical responsibilities can be fulfilled by taking actions that have a value to society but are not considered laws. People tend to respect companies more that have a good ethical reputation. Once a company has fulfilled its ethical responsibilities, it can focus on discretionary responsibilities. Discretionary responsibilities add value to a company because they are voluntary actions that have not yet been deemed important by society. Generally, only well-established companies can fulfill discretionary responsibilities.
When developing a strategic plan, companies must pay close attention to ethics and social responsibility. Management should collaborate with stakeholders before implementing a strategic plan because profits can be affected. Strategic plans often begin in business units before they are sent to headquarters for approval. Some companies value the input from the field whereas others choose to initiate the strategic plan through top management only. Regardless of how the company develops the plan, the outcome will affect profits and should gain stakeholder approval.
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