Ethics and Strategy

Ethical principles in business are not materially different from ethical principles in general because business actions have to be judged in the context of society’s standards of right and wrong. There is not a special set of rules that businesspeople decide to apply to their own conduct. Business ethics involves the application of general ethical principles to the actions and decisions of businesses and the conduct of their personnel. It’s incumbent on strategic managers to recognize conditions that give rise to unethical business strategies and behavior.

While it is undoubtedly true that unethical business behavior may sometimes contribute to higher company profits, deliberate pursuit of unethical strategies and tolerance of unethical conduct are risky practices from both a shareholder perspective and a reputational standpoint. Shareholders suffer major damage when a company’s unethical behavior is discovered and punished. Making amends for unethical business conduct is costly, and it takes years to rehabilitate a tarnished company reputation.

It’s important for strategic managers to gain an understanding of the costs of business ethics failures. Social responsibility refers to a company’s duty to operate in an honorable manner, provide good working conditions for employees, encourage workforce diversity, be a good steward of the environment, and actively work to better the quality of life in the local communities in which it operates and in society at large.

A company’s corporate social responsibility strategy is defined by the specific combination of socially beneficial activities it opts to support with its contributions of time, money, and other resources. Companies that take social responsibility seriously can improve their business reputations and operational efficiency while also reducing their risk exposure and encouraging loyalty and innovation.

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