ACTION PAPER 3

Leadership, Social Responsibility, and Ethics

Leadership, Social Responsibility, and Ethics

Introduction

Strategic ethics and social responsibility are two of the most important, yet perhaps most misunderstood concerns in the world of business today. By their very nature, these fields are controversial, and there is no universally accepted approach for solving their questions. On the other hand, government is encouraging organizational accountability for ethical conduct, and organisations are being asked to prevent and control misconduct by implementing ethics programs. By defining strategic ethics, we can link and compare it with the concept of social responsibility. In this way, we can examine applications in the business context, thus drawing conclusions about their roles in strategy.

Strategic ethics "comprises principles and standards that guide behaviour in the world of business" Ferrell and Fraedrich (2000:6). Social responsibility on the other hand is the obligation a business assumes toward society. Jennings (2003:6) defines these responsibilities as being economic, legal, ethical and philanthropic. A business' economic responsibilities are to produce goods and services that society needs and wants at a price that can perpetrate the business and satisfy its obligation to investors. The legal responsibilities are the laws that they must obey. Ethical responsibilities are defined as behaviours or activities that are expected of business by society but are not codified in law. Philanthropic responsibilities are those behaviours and activities that society desires and business values dictate.

Social responsibility then can be viewed as a contract with society, whereas business ethics involves carefully thought out rules of business organizational conduct that guide decision making. Business ethics relates to rules and principles that guide individual and work group decisions, whereas social responsibility concerns the effect of organizational decisions on society.

The role of ethics and social responsibility in strategy

When a corporation's values and ethics support its strategy, the company's stability and success is enhanced. Ethics and social responsibility are components of strategy because every business secures its future by making a contribution. Identifying that contribution and maximizing its value is a strategic initiative. Profit is the value the market attaches to an organization's contribution and the efficiency with which it makes that contribution. Swanson (1999:43) states that "employees who see their company making a valued contribution (with profits as outcome) rather than merely generating shareholder wealth, commit to their work with greater passion. This leads to a partnership between employees and corporate leadership that boosts innovation and uplifts performance". Ethics and social responsibility play vital roles in the preservation of this priceless partnership, which can thrive only in an atmosphere of trust and integrity. Trust and integrity result from integrating an organisation's disparate strategic objectives.

Integrating disparate corporate values

According to Meznar et al (1997:47-49), many companies operate with at least three separate and usually non-aligned value systems. Measuring the degree of alignment between these value systems, and determining what drives each of them, highlights opportunities for change. The three value systems are The Espoused Value System (the values that management communicates both orally and in writing); The Perceived Value System (the values that ...