Ethics Primarily Acts As a Check to Essay

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Ethics primarily acts as a check to ensure that the corporate strategy is enacted effectively. Rarely do firms take ethics into account as a key element of strategy, though it does happen once in a while. Generally, the role that ethics plays is tangential to strategy aside from its role as a check. Robin and Reidenbach (1988) elaborate further on this idea, noting that "without the integration of ethics at the very beginning of the planning process… the organizational culture may not provide the checks and balances needed…" Their argument is that while corporations tend to put the profit motive forward first, a lack of ethics can undermine the objective of maximizing shareholder wealth. Having a strong program of ethics built into the organizational culture reduces the risk of major ethical lapse.

A couple of recent issues highlight the importance of building an ethical culture to maximizing shareholder wealth. Enron designed its entire company around an unethical business model -- accounting fraud was rampant and other practices were just as unsavory. The result was that once such fraud was uncovered, the company went out of business. Other firms involved in accounting scandals suffered similar fates around that time. Even the Martha Stewart issue, where the ethical lapse was unrelated to the company business, resulted in damage to the brand and the loss of the company's CEO while she went to prison, again to the detriment of shareholders.

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Even Milton Friedman, who famously argued against any form of corporate social responsibility (1970), noted that companies needed to work within the boundaries of laws and ethics in their countries.

The role of social responsibility is somewhat different in that it is not as easily defined nor is it integral to the preservation of shareholder wealth. Ethics are easily defined because there are only a few different major systems of ethical thought, and the laws of the land help to determine what the ethical standards for business are. Social responsibility is a much vaguer concept -- ask thirty CEOs what corporate social responsibility is and you will receive thirty answers (Dahlsrud, 2006). Corporate social responsibility therefore becomes a voluntary policy, self-regulation that governs how the business will interact with key stakeholders (Davis, 2013).

Thus, firms build corporate social responsibility into the strategies in different ways. Some firms integrate CSR as a means of improving operations. Such an approach reflects a "balanced scorecard" approach to business, where optimizing multiple facets of the business will ultimately make the business perform at a higher level, to the benefit of the shareholder. Wal-Mart takes this approach, and focuses its social responsibility efforts on things like reducing waste that will allow the company to be more efficient.

Other companies engage….....

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