Chapter 3

Chapter 3
Ethics, Social Responsibility, and Sustainability
Learning Objectives
After studying this chapter, you should be able to do the following:
1. Explain why good ethics is good business in strategic management.

2. Explain why whistle-blowing, bribery, and workplace romance are strategic issues.
3. Discuss why social responsibility and policy are key issues in strategic planning.
Although the three sections of this chapter (1) business ethics, (2) social responsibility, and (3)
environmental sustainability are distinct, the topics are quite related. For example, many people
consider it unethical for a firm to be socially irresponsible or to treat animals inhumanely.
Business ethics can be defined as principles of conduct within organizations that guide decision making
and behavior. Good business ethics is a prerequisite for good strategic management; good ethics is just
good business!
Social responsibility refers to actions an organization takes beyond what is legally required to protect or
enhance the well-being of living things.
Sustainability refers to the extent that an organization’s operations and actions protect, mend, and
preserve rather than harm or destroy the natural environment. Polluting the environment, for example,
is unethical, irresponsible, and in many cases illegal, as is treating pigs, cows, chickens, and turkeys
inhumanely.
Why “Good Ethics is Good Business”
The Institute of Business Ethics (IBE) recently did a study titled “Does Business Ethics Pay?” and
concluded that companies displaying a “clear commitment to ethical conduct” consistently outperform
companies that do not display ethical conduct. Good ethics is good business. Bad ethics can disrupt even
the best strategic plans.
Seven Principles of Admirable Business Ethics
1. Be trustworthy; no individual or business wants to do business with an entity it does not trust.
2. Be open-minded, continually asking for “ethics-related feedback” from all internal and external
stakeholders.
3. Honor all commitments and obligations.
4. Do not misrepresent, exaggerate, or mislead with any print materials.
5. Be visibly a responsible community citizen.

6. Utilize your accounting practices to identify and eliminate questionable activities.
7. Follow the motto: Do unto others as you would have them do unto you
Source: Based on http://sbinformation.about.com/od/bestpractices/a/businessethics.htm
Whistle-Blowing, Bribery, and Workplace Romance
As social media and technology have become commonplace globally, three business ethics topics—
whistle-blowing, bribery, and workplace romance—have become important strategic issues facing
companies.
Whistle-blowing refers to employees reporting any unethical violations they discover or see in the firm.
Employees should practice whistle-blowing, and organizations should have policies that encourage
whistle-blowing.
Bribery is defined by Black’s Law Dictionary as the offering, giving, receiving, or soliciting of any item of
value to influence the actions of an official or other person in discharge of a public or legal duty.
A bribe is a gift bestowed to influence a recipient’s conduct. The gift may be any money, goods, actions,
property, preferment, privilege, reward, object of value, advantage, or merely a promise or undertaking
to induce or influence the action, vote, or influence of a person in an official or public capacity.
Workplace romance is an intimate relationship between two consenting employees, as opposed to

sexual harassment, which the Equal Employment Opportunity Commission (EEOC) defines broadly as
unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual
nature. Sexual harassment (and discrimination) is illegal, unethical, and detrimental to any organization
and can result in expensive lawsuits, lower morale, and reduced productivity.
Social Responsibility and Policy
Some strategists agree with Ralph Nader, who proclaims that organizations have tremendous social
obligations. The term social policy embraces managerial philosophy and thinking at the highest level of
the firm, which is why the topic is covered in this text. Social policy concerns what responsibilities the
firm has to employees, consumers, environmentalists, minorities, communities, shareholders, and other
groups.
A sustainability report reveals how a firm’s operations impact the natural environment. This document
discloses to shareholders information about the firm’s labor practices, product sourcing, energy
efficiency, environmental impact, and business ethics practices.

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Chapter 3

Ethics, Social Responsibility, and Sustainability

After studying this chapter, you should be able to do the following:

1. Explain why good ethics is good business in strategic management.

Why “Good Ethics is Good Business”

Seven Principles of Admirable Business Ethics

3. Honor all commitments and obligations.

4. Do not misrepresent, exaggerate, or mislead with any print materials.

5. Be visibly a responsible community citizen.

Source: Based on http://sbinformation.about.com/od/bestpractices/a/businessethics.htm

Whistle-Blowing, Bribery, and Workplace Romance

Workplace romance is an intimate relationship between two consenting employees, as opposed to

Social Responsibility and Policy

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