MGT504 - Organization Theory and Design - Lecture Handout 27

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Managerial ethics and social responsibility are influenced by a variety of external stakeholders, groups outside the organization that have a stake in the organization’s performance. Ethical and socially responsible decision making recognizes that the organization is part of a larger community and considers the impact of a decision or action on all stakeholders. Important external stakeholders are government agencies, customers, special interest groups such as those concerned with the natural environment, and global market forces.

Companies must operate within the limits of certain government regulations, such as safety laws, environmental protection requirements, and many other laws, and regulations. At Columbia / HCA, part of the training program is designed to make sure all employees are familiar with health care laws and regulations. Customers are concerned about the quality, safety, and availability of goods and services. For example, even though Dow Corning has an ambitious ethics program, the company’s reputation as an ethical company was seriously damaged by the failure to keep customers satisfied with the safety of its silicone breast implants.

Special interest groups continue to be one of the largest stakeholder concerns that companies face. Today, those concerned with corporate responsibility to the natural environment are particularly vocal. Thus, environment is becoming an integral part of organizational planning and decision making for leading companies. The concept of suitable development, a dual concern for economic growth and environmental sustainability, has been gaining ground among many business leaders. The public is no longer comfortable with organization focusing solely on profit at the expense of the natural environment. Environmental sustainability meaning that what is taken out of the environmental system for food, shelter, clothing, energy, and other human uses is restored to the system in waste that can be reused – is a part of strategy for companies like Monsanto, interface, IKEA, Electrolux, Scandic Hotels, and MacMillan-Bloedel. Interface, the $ 1-billion leader in the floor covering industry, is instituting changes that will allow the company to manufacture without pollution, waste, or fossil fuels. CEO Ray Anderson is so committed to the concept of environment sustainability that he had the following lowing credo set in bronze at his never factory, ‘if we are successful, then we will spend the rest of our days harvesting yesteryear’s carpet and other petrochemicals derived products, recycling them into new materials, converting sunlight into energy – with zero scrap going into the landfill and zero emissions going into the ecosystem. And we’ll be doing well – very well – by doing well.

Another growing pressure on organization is related to the rapidly changing global market, Companies operating globally face difficult ethical issues. Thousands of U.S. workers have lost jobs or earning power because companies can get the same work done overseas for lower costs. For example, Yakima Porducts, located in Arcata, California, transferred all production of its cartop carrying systems for bikes, skis and other sporting gear to Mexico. Although the decision was financially sound and clearly served the interests of share holders, employees and the local community felt angry and betrayed. Levi Strauss contracted for low – cost labor in Burma and China but, later felt ethically compelled to pull out of those contracts because of human rights violations in those countries. As the business world becomes increasingly global, issues of ethics and social responsibility will likely become even more difficult.

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