95
AssurAnce of LeArning exercises
The following exercises are found at the end of this chapter:
exercise 3A
Sustainability and Nestlé
exercise 3B
How Does My Municipality Compare to Others on Being Pollution-Safe?
exercise 3c
Compare Nestlé versus Mars, Inc. on Social Responsibility
exercise 3D
How Do You Rate Nestlé’s Sustainability Efforts?
exercise 3e
The Ethics of Spying on Competitors LeArning oBjectives
After studying this chapter, you should be able to do the following:
3-1. Explain why good ethics is good business in strategic management.
3-2. Explain why whistle-blowing, bribery, and workplace romance are strategic issues.
3-3. Discuss why social responsibility and policy are key issues in strategic planning.
3-4. Discuss the nature of environmental sustainability and why it is a key issue in strategic planning.
3-5. Explain why animal welfare is a strategic issue for firms.
Ethics, Social
Responsibility, and
Sustainability
A
lthough the three sections of this chapter [(1) business ethics, (2) social responsibility, and (3) environmental sustainability] are distinct, the topics are quite related. For exam- ple, 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 organiza- tions 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. Business ethics, social responsibility, and envi- ronmental sustainability issues therefore are interrelated and impact all areas of the strategic- management process, as illustrated in Figure 3-1 with white shading.An example of a high-performing, highly ethical, privately held company is Bank Audi S.A.L., the largest Lebanese bank integrating CSR and sustainability into core business activities.
Another high-performing, highly ethical, publicly held company is Chipotle Mexican Grill, which recently stopped selling a pork product at one third of its U.S. restaurants because one of its sup- pliers failed an animal welfare audit. That particular supplier could not ensure that pigs have out- door access or “deeply bedded barns” instead of being raised in tight cages. In response, Chipotle stopped offering carnitas, or pork meat, in its burritos or bowls. An increasing number of firms like Chipotle are raising their standards for animal welfare in terms of its beef, pork, and poultry suppliers raising animals with respect and also avoid using various antibiotics and growth hor- mones. A Chipotle spokesman remarked, “This is fundamentally an animal welfare decision and is rooted in our unwillingness to compromise our standards where animal welfare is concerned;
we hope the vendor will solve its problems and return as a regular supplier for Chipotle.”
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. Philippa Foster Black of the IBE
exempLAry compAny showcAseD
Bank Audi S.A.L
As of 2015, Bank Audi S.A.L, headquartered in Beirut, Lebanon, is the largest Lebanese bank, employing 6,720 individuals, including 3,087 employees in Lebanon. Its total assets amounted to 63,783 billion Lebanese pounds (around $42 billion); customer deposits were 54,430 billion Lebanese pounds ($36 billion); and it had a net profit of 305 billion Lebanese pounds ($200 million) in the first half of 2015. Over the last decade, Bank Audi’s strategy included regional expansion.
Apart from Lebanon, it operates across Egypt, Qatar, Saudi Arabia, Syria, Jordan, and Sudan; it also operates in France, Switzerland and Monaco. It is exploring opportunities in Sub-Saharan Africa, which may prove to be advantageous for the company as Africa becomes more interesting for the Turkish market. With its Latin American clients lead- ing to a turnover of $2.1 billion in 2014, Bank Audi plans to begin operations in Latin America and make the most of its Latin American employees in Lebanon and Switzerland.
In 2014, Bank Audi began integrating CSR and sustainabil- ity into core business activities. It continued implementing its
Environmental and Social Management System that guided its approach in eval- uating the environ- mental and social risks associated with its corporate and
commercial activities. In an attempt to reduce its carbon footprint and increase environmental awareness within the company, and among the youth, Bank Audi initiated an employee-volunteering program called “Be a Hero for a Day,” with employees representing a culture of ethics and responsibility.
Source: Based on information from Bank Audi Group’s website, http://www .bankaudi.com.lb; and http://www.bankaudi.com.lb/GroupWebsite/openAud iFile.aspx?id=2783.
stated, “Not only is ethical behavior in business life the right thing to do in principle, it pays off in financial returns.” Alan Simpson remarked, “If you have integrity, nothing else matters. If you don’t have integrity, nothing else matters.” Good ethics is good business. Bad ethics can derail even the best strategic plans. This chapter provides an overview of the importance of business ethics in strategic management. Table 3-1 provides some results of the IBE study.
Does It Pay to Be Ethical?
A rising tide of consciousness about the importance of business ethics is sweeping the United States and the rest of the world. Strategists such as CEOs and business owners are the individu- als primarily responsible for ensuring that high ethical principles are espoused and practiced in an organization. All strategy formulation, implementation, and evaluation decisions have ethical ramifications.
As indicated in Academic Research Capsule 3-1, it does pay to be ethical; high-performing companies generally exhibit high business ethics. Investor’s Business Daily reported on 7-20-15
Strategy Formulation
Strategy Implementation
Strategy Evaluation Chapter 3: Ethics, Social Responsibility, and Sustainability
Strategy Execution Chapter 10 Strategy
Implementation Chapter 9 Types of
Strategies Chapter 4
Vision and Mission Analysis
Chapter 5
Strategy Generation and Selection
Chapter 8
The External Audit Chapter 7 The Internal
Audit Chapter 6
Strategy Monitoring Chapter 11 Chapter 2: Outside-USA Strategic Planning
Figure 3-1
A Comprehensive Strategic-Management Model
Source: Fred R. David, adapted from “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988): 40,
© Fred R. David.v
(p. A4) that character-driven leaders deliver five times greater profitability results and 26 percent higher workforce engagement than self-focused leaders. Those were the results of a seven-year study by Fred Kiel, author of “Return on Character,” who followed 8,000 employees and 84 top executives of Fortune 500 companies.
Daily, newspapers and business magazines report legal and moral breaches of ethical con- duct by both public and private organizations. Being unethical can be expensive. For example, Cisco Systems in 2015 sued Arista Networks for copying verbatim sections of its user manuals.
In addition to plagiarism, literally hundreds of business actions are unethical, including:
1. Misleading advertising or labeling 2. Causing environmental harm 3. Poor product or service safety 4. Padding expense accounts 5. Insider trading
6. Dumping banned or flawed products in foreign markets 7. Not providing equal opportunities for women and minorities 8. Overpricing
9. Sexual harassment
10. Using company funds or resources for personal gain
Increasingly, executives’ and managers’ personal and professional decisions are placing them in the crosshairs of angry shareholders, disgruntled employees, and even their own boards
AcADemic reseArch cApsuLe 3-1
What Can We Learn from High-Performance Companies?
Research at DePaul University in Chicago by Frigo and Litman found a pattern of strategic activities of high-performance com- panies. Their research involved screening the financial perfor- mance of more than 15,000 public companies using 30 years of financial data and identifying about 100 high-performance com- panies. Here are three lessons from high-performance companies studied:
1) Commitment to Return on Investment and Ethical Business Conduct: High-performance companies demonstrate a strong commitment to creating shareholder value by focusing on sus- tainable return on investment (ROI). These companies achieve superior ROI and growth while adhering to ethical business conduct, such as Johnson & Johnson, which is famous for its credo as a foundation for ethical business conduct at the company.
2) Focus on Unmet Customer Needs in Growing Market Segments: To avoid commoditization, high-performance com- panies concentrate on fulfilling unmet customer needs and target growing market segments. Harley-Davidson targets cus- tomer needs (lifestyle, freedom, community) with their unique Harley experience while pursuing a growing customer group (the Baby Boom generation).
3) Innovate Offerings: High-performance companies constantly reexamine their products and services (their offerings), modify- ing existing ones and developing new ones that will better fulfill customers’ unmet needs. For example, Apple demonstrate this characteristic through its innovation strategy.
Source: Based on Mark L. Frigo and Joel Litman, DRIVEN: Business Strategy, Human Actions and the Creation of Wealth, Strategy and Execution (Chicago: Strategy & Execution LLC, 2008).
Table 3-1 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
of directors—making the imperious CEO far more vulnerable to personal, public, and corporate missteps than ever before. “Certainly, anybody who is doing something that can be construed as unethical, immoral or greedy is being taken to task,” says Paul Dorf of Compensation Resources, a consultant to boards of directors.1
Social media and business-centric websites such as glassdoor.com and vault.com as well as disclosure mandates required under Sarbanes-Oxley are just several among hundreds of outlets that today quickly spread fact and rumor about the inside dealings of corporations and organizations, revealing ethical breaches and internal business practices that may never have surfaced years ago. Wendy Patrick, who teaches business ethics at San Diego State University, states, “God forbid anyone who isn’t squeaky-clean these days or misrepresents their creden- tials. Anything embarrassing and you begin to question everything. If you aren’t making good decisions in your personal life, it can bleed over to your career (professional life).”
How to Establish an Ethics Culture
A new wave of ethics issues has recently surfaced related to product safety, employee health, sexual harassment, AIDS in the workplace, smoking, acid rain, affirmative action, waste dis- posal, foreign business practices, cover-ups, takeover tactics, conflicts of interest, employee pri- vacy, inappropriate gifts, and security of company records. A key ingredient for establishing an ethics culture is to develop a clear code of business ethics. Internet fraud, hacking into company computers, spreading viruses, and identity theft are other unethical activities that plague every sector of online commerce.
As indicated in Academic Research Capsule 3-2, anyone is prone to be unethical in a busi- ness, so Donald Palmer provides six procedures to establish an ethics culture.
Merely having a code of ethics, however, is not sufficient to ensure ethical business behavior. A code of ethics can be viewed as a public relations gimmick, a set of platitudes, or window dressing. To ensure that the code is read, understood, believed, and remembered, periodic ethics workshops are needed to sensitize people to workplace circumstances in which ethics issues may arise.2 If employees see examples of punishment for violating the code as well as rewards for upholding the code, this reinforces the importance of a firm’s code of ethics. The website www.ethicsweb.ca/codes provides guidelines on how to write an effective code of ethics.
Reverend Billy Graham once said, “When wealth is lost, nothing is lost; when health is lost, something is lost; when character is lost, all is lost.” An ethics “culture” needs to permeate organizations! To help create an ethics culture, Citicorp developed a business ethics board game that is played by thousands of employees worldwide. Called “The Word Ethic,” this game asks players business ethics questions, such as “How do you deal with a customer who offers you football tickets in exchange for a new, backdated IRA?” Diana Robertson at the Wharton School
AcADemic reseArch cApsuLe 3-2
Who Is Prone to Be Unethical in a Business?
Prior research suggests that being unethical is abnormal, rare, and most often perpetrated by people who are abhorrent. However, Donald Palmer recently reported that misconduct is a normal phe- nomenon and that wrongdoing is as prevalent as “right doing,” and that misconduct is most often done by people who are primarily good, ethical, and socially responsible. Palmer reports that individu- als engage in unethical activities due to a plethora of structure, pro- cesses, and mechanisms inherent in the functioning of organiza- tions—and, importantly, all of us are candidates to be unethical under the right circumstances in any organization. Implications of this new research abound for managers. In light of his findings, Palmer con- cludes that organizations should implement the following six proce- dures as soon as possible:
1) Punish wrongdoing swiftly and severely when it is detected.
2) Be careful to hire employees who possess high ethical standards.
3) Develop socialization programs to reinforce desired cultural values.
4) Alter chains of command so subordinates report to more than one superior.
5) Develop a culture whereby subordinates may challenge their superior’s orders when they seem questionable.
6) Develop a better understanding of internal policies, procedures, systems, and mechanisms that could lead to misconduct.
Source: Based on Donald Palmer, “The New Perspective on Organizational Wrongdoing,” California Management Review, 56, no. 1 (2013): 5–23.
of Business believes the game is effective because it is interactive. Many organizations have developed a code-of-conduct manual outlining ethical expectations and giving examples of situ- ations that commonly arise in their businesses.
One reason strategists’ salaries are high is that they must take the moral risks of the firm.
Strategists are responsible for developing, communicating, and enforcing the code of business ethics for their organizations. Although primary responsibility for ensuring ethical behavior rests with a firm’s strategists, an integral part of the responsibility of all managers is to provide ethics leadership by constant example and demonstration. Managers hold positions that enable them to influence and educate many people. This makes managers responsible for developing and implementing ethical decision making. Gellerman and Drucker, respectively, offer some good advice for managers:
All managers risk giving too much because of what their companies demand from them.
But the same superiors who keep pressing you to do more, or to do it better, or faster, or less expensively, will turn on you should you cross that fuzzy line between right and wrong. They will blame you for exceeding instructions or for ignoring their warnings. The smartest managers already know that the best answer to the question “How far is too far?”
is don’t try to find out.3
A man (or woman) might know too little, perform poorly, lack judgment and ability, and yet not do too much damage as a manager. But if that person lacks character and integ- rity—no matter how knowledgeable, how brilliant, how successful—he destroys. He de- stroys people, the most valuable resource of the enterprise. He destroys spirit. And he destroys performance. This is particularly true of the people at the head of an enterprise because the spirit of an organization is created from the top. If an organization is great in spirit, it is because the spirit of its top people is great. If it decays, it does so because the top rots. As the proverb has it, “Trees die from the top.” No one should ever become a strategist unless he or she is willing to have his or her character serve as the model for subordinates.4
No society anywhere in the world can compete long or successfully with people stealing from one another or not trusting one another, with every bit of information requiring notarized confirmation, with every disagreement ending up in litigation, or with government having to regulate businesses to keep them honest. Being unethical is a recipe for headaches, inefficiency, and waste. History has proven that the greater the trust and confidence of people in the ethics of an institution or society, the greater its economic strength. Business relationships are built mostly on mutual trust and reputation. Short-term decisions based on greed and questionable ethics will preclude the necessary self-respect to gain the trust of others. More and more firms believe that ethics training and an ethics culture create strategic advantage. According to Max Killan,
“If business is not based on ethical grounds, it is of no benefit to society, and will, like all other unethical combinations, pass into oblivion.”
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. Missteps in any of these three areas can severely harm an organization.
Whistle-Blowing
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. Three individuals recently received $170 million for helping investigators obtain a record $16.65 billion penalty against Bank of America for inflating the value of mortgage properties and selling defective loans to investors. The whistle-blower payouts are among the highest ever in financial institution cases. Thousands of firms warn managers and employees that failing to report an ethical violation by others could bring discharge. The Securities and Exchange Commission (SEC) recently strengthened its whistle-blowing policies, virtually mandating that anyone seeing unethical activity report such behavior.
Whistle-blowers in the corporate world receive up to 25 percent of the proceeds of legal proceedings against firms for wrongdoing. Such payouts are becoming more and more common.
J.P. Morgan Chase employee Keith Edwards recently received a $63.9 million payout for his whistle-blowing tips that led J.P. Morgan to pay $614 million to the U.S. government for ille- gally approving thousands of FHA loans and hundreds of VA loans that did not meet underwrit- ing requirements. The SEC recently paid $30 million to a non-U.S. citizen whistle-blower who reported an ongoing fraud matter. Sean McKessy, the SEC’s whistle-blower top executive, com- mented about the case, “Whistleblowers from all over the world should feel similarly incentivized to come forward with credible information about potential violations of the U.S. securities laws.”
An accountant who recently tipped off the IRS that his employer was skimping on taxes received $4.5 million in the first IRS whistle-blower award. The accountant’s tip netted the IRS
$20 million in taxes and interest from the errant financial-services firm. The award represented a 22 percent cut of the taxes recovered. The IRS program, designed to encourage tips in large-scale cases, mandates awards of 15 to 30 percent of the amount recouped. “It’s a win-win for both the government and taxpayers. These are dollars that are being returned to the U.S. Treasury that otherwise wouldn’t be,” said lawyer Eric Young.
Ethics training programs should include messages from the CEO or owner of the business, emphasizing ethical business practices, the development and discussion of codes of ethics, and procedures for discussing and reporting unethical behavior. Firms can align ethical and strategic decision making by incorporating ethical considerations into strategic planning, by integrating ethical decision making into the performance appraisal process, by encouraging whistle-blowing, and by monitoring departmental and corporate performance regarding ethical issues.
Avoid Bribery
Managers, employees, and firms must avoid bribery. 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, emolument, 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. Bribery is a crime in most countries of the world, including the United States.5 For example, Avon Products has been plagued by bribery charges over the last 8 years. French engineering firm Alstom S.A.
recently pleaded guilty to criminal charges that the company paid tens of millions of dollars in a
“widespread” bribery scheme to win energy contracts globally. Alstom paid a fine of $772 million for falsifying financial records and paying bribes to win contracts around the world.
The U.S. Foreign Corrupt Practices Act (FCPA) governs bribery in the United States and has stepped up enforcement. This act, and a new provision in the Dodd-Frank financial-regulation law, allows company employees or others who bring cases of financial fraud, such as bribery, to the government’s attention to receive up to 30 percent of any sum recovered. Bribery suits against a company also expose the firm to shareholder lawsuits. Hewlett-Packard (HP) recently paid $108 million to resolve bribery investigations in Russia, Poland, and Mexico. The HP brib- ery activities included the use of slush funds and shell companies to funnel monies to politicians, as well as free trips to Las Vegas with free cash to gamble.
A recent Wall Street Journal article titled “Bribery Law Dos and Don’ts” provides a syn- opsis of the recent 130-page document released by the U.S. Justice Department and the SEC to respond to complaints from companies that ambiguity in the FCPA has forced them to aban- don business in high-risk countries and spend millions of dollars investigating themselves.6 Numerous examples of bribery are given, such as “providing a $12,000 birthday trip for a gov- ernment official from Mexico that includes visits to wineries and museums” and “$10,000 spent on a government official for drinks, dinners, and entertainment.” The U.S. Justice Department and the SEC each file about 100 bribery cases annually.
The United Kingdom Bribery Law forbids any company doing any business in the United Kingdom from bribing foreign or domestic officials to gain competitive advantage. The British law is more stringent even than the similar U.S. FCPA. The British Bribery Law carries a maximum 10-year prison sentence for those convicted of bribery. The law stipulates that “failure to prevent bribery” is an offense and stipulates that facilitation payments, or payments to gain access, are not a valid defense to
prevent bribery. The United Kingdom law applies even to bribes between private businesspersons, and if the individual who makes the payment does not realize the transaction was a bribe, he or she is still liable. The new bribery law is being enforced by Britain’s Serious Fraud Office (SFO) and boosts the maximum penalty for bribery from 7 years to 10 years in prison, and sets no limits on fines. More and more nations are taking a tougher stance against corruption, and companies worldwide are installing elaborate programs to avoid running afoul of the FCPA or the SFO.
In some foreign countries, paying bribes and kickbacks has historically been acceptable.
But now, antibribery and extortion initiatives are advocated by many organizations, including the World Bank, the International Monetary Fund, the European Union (EU), the Council of Europe, the Organization of American States, the Pacific Basin Economic Council, the Global Coalition for Africa, and the United Nations. Tipping is even now considered bribery in some countries.
Taking business associates to lavish dinners and giving them expensive holiday gifts and even outright cash may have been expected in some countries, such as South Korea and China, but there is now stepped-up enforcement of bribery laws virtually everywhere. The world’s third- largest commercial aircraft manufacturer, Embraer S.A., headquartered in Brazil, is currently being investigated for allegedly paying a $3.5 million bribe to a Dominican Republic Air Force colonel, who then pressured Dominican legislators to approve a $92 million contract for Embraer to provide attack planes to that country.
Several pharmaceutical companies, including Merck, AstraZeneca PLC, Bristol-Myers Squibb, and GlaxoSmithKline PLC, are currently being investigated for allegedly paying bribes in certain foreign countries to boost sales and speed approvals. Four types of violations are being reviewed: bribing government-employed doctors to purchase drugs, paying company sales agents commissions that are passed along to government doctors, paying hospital committees to approve drug purchases, and paying regulators to win drug approvals. Johnson & Johnson recently paid $70 million to settle allegations that it paid bribes to doctors in Greece, Poland, and Romania to use their surgical implants and to prescribe its drugs. Pfizer paid $60 million to resolve similar probes to win business overseas.
Workplace Romance
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 con- duct 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.
Workplace romance between two consenting employees simply happens, so the question is generally not whether to allow the practice, or even how to prevent it, but rather how best to manage the phenomena. An organization probably should not strictly forbid workplace romance because such a policy could be construed as an invasion of privacy, overbearing, or unnecessary.
Some romances actually improve work performance, adding a dynamism and energy that trans- lates into enhanced morale, communication, creativity, and productivity.7
However, it is important to note that workplace romance can be detrimental to workplace morale and productivity, for a number of reasons that include:
1. Favoritism complaints can arise.
2. Confidentiality of records can be breached.
3. Reduced quality and quantity of work can become a problem.
4. Personal arguments can lead to work arguments.
5. Whispering secrets can lead to tensions and hostilities among coworkers.
6. Sexual harassment (or discrimination) charges may ensue, either by the involved female or a third party.
7. Conflicts of interest can arise, especially when well-being of the partner trumps well-being of the company.
In some states, such as California, managers can be held personally liable for damages that arise from workplace romance. Organizations should establish guidelines or policies that address workplace romance, for at least six reasons:
1. Guidelines can enable the firm to better defend against and avoid sexual harassment or discrimination charges.
2. Guidelines can specify reasons (such as the seven listed previously) why workplace romance may not be a good idea.
3. Guidelines can specify resultant penalties for romancing partners if problems arise.
4. Guidelines can promote a professional and fair work atmosphere.
5. Guidelines can help assure compliance with federal, state, and local laws and recent court cases.
6. Lack of any guidelines sends a lackadaisical message throughout the firm.
Workplace romance guidelines should apply to all employees at all levels of the firm and should specify certain situations in which affairs are especially discouraged, such as supervi- sor and subordinate. Company guidelines or policies in general should discourage workplace romance because “the downside risks generally exceed the upside benefits” for the firm. Best Buy CEO Brian Dunn recently resigned when directors learned of his inappropriate relationship with a young subordinate, which was a violation of that company’s code of ethics. Based in Fremont, California, IGate Corp. fired its CEO, Phaneesh Murthy, recently for allegedly failing to report a workplace romance relationship that turned into a sexual harassment issue with a subordinate.
Flirting is a step down from workplace romance, but a full-page Wall Street Journal arti- cle titled “The New Rules of Flirting” reveal the dos and don’ts of flirting.8 Flirting is defined by researchers as “romantic behavior that is ambiguous and goal oriented,” or said differently,
“ambiguous behavior with potential sexual or romantic overtones that is goal-oriented.” A few flirting rules given in the article are:
1. Do not flirt with someone you know is looking for a relationship if you are not interested in a new relationship.
2. Do flirt within a relationship that you want to strengthen.
3. Do not flirt to make your partner jealous because this is manipulative behavior.
4. Flirting between power differences, such as boss and employee or professor and student, usually leads to trouble, as many defendants in sexual harassment complaints know.
5. Do not make physical contact with the person you are flirting with, unless it is within a desired relationship.
Among colleges and universities, the federal Office of Civil Rights (OCR) has stepped up its investigation of sexual harassment cases brought forward by female students against professors.
Numerous institutions are currently being investigated. At no charge to the student, the OCR will investigate a female student’s claim if evidence is compelling.
A Wall Street Journal article recapped U.S. standards regarding boss and subordinate love affairs at work.9 Only 5 percent of all firms sampled had no restrictions on such relationships;
80 percent of firms have policies that prohibit relationships between a supervisor and a subordinate.
Only 4 percent of firms strictly prohibited such relationships, but 39 percent of firms had policies that required individuals to inform their supervisors whenever a romantic relationship begins with a coworker. Only 24 percent of firms required the two persons to be in different departments.
In Europe, romantic relationships at work are largely viewed as private matters and most firms have no policies on the practice. However, European firms are increasingly adopting explicit, U.S.-style sexual harassment laws. The U.S. military strictly bans officers from dating or having sexual relationships with enlistees. At the World Bank, sexual relations between a super- visor and an employee are considered “a de facto conflict of interest which must be resolved to avoid favoritism.” World Bank president Paul Wolfowitz recently was forced to resign as a result of a relationship he had with a bank staff person.
A recent Bloomberg Businessweek article reports that employees are filing sexual harass- ment complaints as a way to further their own job security. Many of these filings are increas- ingly third-party individuals not even directly involved in the relationship but alleging their own job was impacted. Largely the result of the rise of third-party discrimination claims, the EEOC recovers about $500 million on behalf of office romance victims.10
Social Responsibility and Policy
Some strategists agree with Ralph Nader, who proclaims that organizations have tremendous social obligations. Nader points out, for example, that ExxonMobil has more assets than most countries, and because of this, such firms have an obligation to help society cure its many ills.
Other people, however, agree with the economist Milton Friedman, who asserts that organiza- tions have no obligation to do any more for society than is legally required. Friedman may con- tend that it is irresponsible for a firm to give monies to charity.
Do you agree more with Nader or Friedman? Surely we can all agree that the first social responsibility of any business must be to make enough profit to cover the costs of the future, because if this is not achieved, no other social responsibility can be met. Indeed, no social need can be met if the firm fails. Strategists should examine social problems in terms of potential costs and benefits to the firm and focus on social issues that could benefit the firm most. For example, if a firm avoids cutting jobs to protect employees’ livelihood, and that decision forces the firm to liquidate, then all the employees lose their jobs. As indicated in Academic Research Capsule 3-3, most economists suggest that firms should not engage much, if any, in philanthropy, because simply making a profit is difficult, and shareholders expect a high return on their investment.
Design and Articulate a Social Policy
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. After decades of debate, many firms still struggle to determine appropriate social policies. The impact of society on business and vice versa is becoming more pronounced each year. Corporate social policy should be designed and articulated during strategy formula- tion, set and administered during strategy implementation, and reaffirmed or changed during strategy evaluation.11
Firms should strive to engage in social activities that have economic benefits. Merck & Co.
once developed the drug ivermectin for treating river blindness, a disease caused by a fly-borne parasitic worm endemic in poor tropical areas of Africa, the Middle East, and Latin America.
In an unprecedented gesture that reflected its corporate commitment to social responsibility, Merck then made ivermectin available at no cost to medical personnel throughout the world.
Merck’s action highlights the dilemma of orphan drugs, which offer pharmaceutical companies no economic incentive for profitable development and distribution. Merck did, however, garner substantial goodwill among its stakeholders for its actions.
Social Policies on Retirement
Some countries around the world are facing severe workforce shortages associated with their aging populations. The percentage of persons age 65 or older exceeds 20 percent in Japan, Italy, and Germany—and will reach 20 percent in 2018 in France. In 2036, the percentage of persons age 65 or older will reach 20 percent in the United States and China. Unlike the United States, Japan is reluctant to rely on large-scale immigration to bolster its workforce. Instead, Japan provides incentives for its elderly to work until ages 65 to 75. Western European countries are doing the opposite, providing incentives for its elderly to retire at ages 55 to 60. The International Labor Organization says 71 percent of Japanese men ages 60 to 64 work, compared to 57 percent of American men and just 17 percent of French men in the same age group.
AcADemic reseArch cApsuLe 3-3
Does It Pay to Be Socially Responsible?
Economists generally say no, and philanthropists say yes to this question. Recent research by Barnett and Salomon examined the relationship between corporate social performance (CSP) and cor- porate financial performance (CFP). They hypothesized, and then confirmed, that the CSP–CFP relationship is U-shaped. Specifically, Barnett and Salomon reported that firms with low CSP have higher CFP than firms with moderate CSP, but firms with high CSP have the highest CFP. They also found that firms with the highest CSP
generally have the highest CFP. In addition, the researchers reported that the accrual of social responsibility deeds causes the benefits of CSP to increase at a higher rate than the costs, producing an even- tual upturn in the CSP–CFP relationship.
Source: Based on Michael Barnett and Robert Salomon, “Does It Pay to Be Really Good? Addressing the Shape of the Relationship Between Social and Financial Performance,” Strategic Management Journal, 33 (2012): 1304–1320.
Sachiko Ichioka, a typical 67-year-old man in Japan, says, “I want to work as long as I’m healthy. The extra money means I can go on trips, and I’m not a burden on my children.” Better diet and health care have raised Japan’s life expectancy now to 82, the highest in the world.
Japanese women are having, on average, only 1.28 children compared to 2.04 in the United States. Keeping the elderly at work, coupled with reversing the old-fashioned trend of keeping women at home, are Japan’s two key remedies for sustaining its workforce in factories and busi- nesses. This prescription for dealing with problems associated with an aging society should be considered by many countries around the world. The Japanese government is phasing in a shift from age 60 to age 65 as the date when a person may begin receiving a pension, and premiums paid by Japanese employees are rising while payouts are falling. Unlike the United States, Japan has no law against discrimination based on age.
Worker productivity increases in Japan are not able to offset declines in number of workers, thus resulting in a decline in overall economic production. Like many countries, Japan does not view immigration as a good way to solve this problem. Japan’s shrinking workforce has become such a concern that the government just recently allowed an unspecified number of Indonesian and Filipino nurses and caregivers to work in Japan for two years. The number of working-age Japanese—those between ages 15 and 64—is projected to shrink to 70 million by 2030. Using foreign workers is known as gaikokujin roudousha in Japanese. Many Filipinos have recently been hired now to work in agriculture and factories throughout Japan.
Forbes best companies globally in regard to being socially responsible are listed in Table 3-2.
Bill Gates, former CEO of the number-one ranked firm Microsoft, established the well-known Bill and Melinda Gates Foundation, which sets a high standard for any person or company.
Environmental Sustainability
The ecological challenge facing all organizations requires managers to formulate strategies that preserve and conserve natural resources and control pollution. Special natural environment issues include ozone depletion, global warming, depletion of rain forests, destruction of animal habitats, protecting endangered species, developing biodegradable products and packages, waste management, clean air, clean water, erosion, destruction of natural resources, and pollution con- trol. Firms increasingly are developing green product lines that are biodegradable or are made from recycled products. Green products sell well. Managing the health of the planet requires an understanding of how international trade, competitiveness, and global resources are connected.
Managing environmental affairs, for example, can no longer be simply a technical function per- formed by specialists in a firm; more emphasis must be placed on developing an environmental perspective among all employees and managers of the firm.
Businesses must not exploit and decimate the natural environment. Mark Starik at George Washington University believes, “Halting and reversing worldwide ecological destruction and deterioration is a strategic issue that needs immediate and substantive attention by all businesses and managers.” According to the International Standards Organization, the word environment
Table 3-2 The Ten Best Socially Responsible Companies in the World 1. Microsoft
2. Google
3. Walt Disney Company 4. BMW
5. Apple
6. Daimler (Mercedes-Benz) 7. Volkswagen
8. Sony
9. Colgate-Palmolive 10. LEGO Group
Source: Based on information at http://www.forbes.com/pictures/efkk45mmlm/no-1-microsoft/
is defined as “surroundings in which an organization operates, including air, water, land, natural resources, flora, fauna, humans, and their interrelation.” This chapter illustrates how many firms are gaining competitive advantage by being good stewards of the natural environment.
Employees, consumers, governments, and societies are especially resentful of firms that harm rather than protect the natural environment. Conversely, people today are especially appre- ciative of firms that conduct operations in a way that mends, conserves, and preserves the natural environment. Consumer interest in businesses preserving nature’s ecological balance and foster- ing a clean, healthy environment is high.
What Firms Are the Best Stewards?
Lennar Corporation, the nation’s second-largest homebuilder, now offers solar panels as stan- dard equipment on thousands of its new homes, especially in the southwestern United States.
Homeowners can either lease the solar panels from Lennar or purchase the panels outright.
Even with oil and gas prices at decade lows, solar panels have become quite cost effective, and
“exhumes good ethics rather than bad fumes.” Walmart is installing solar panels on its stores in California and Hawaii, providing as much as 30 percent of the power in some stores. It may go national with solar power if this test works well. Also moving to solar energy is department-store chain Kohl’s Corp., which is converting 64 of its 80 California stores to use solar power. There are big subsidies for solar installations in some states.
In October of every year, three world-renowned corporate sustainability rankings are pub- lished: (1) the Dow Jones Sustainability Index (DJSI), (2) the Carbon Disclosure Project, and (3) Newsweek’s “Green” rankings. The DJSI annually reveals the best corporations in the world in various industries in terms of sustainability. Note in Table 3-3 that Sodexo, for example, leads all Table 3-3 The Best “Environmental Sustainability” Company in Various
Industries (2014–2015)
company industry
BMW AG
AG Westpac Banking
Automobiles & Components Banks
Siemens AG Capital Goods
SGS SA Commercial & Professional Services
LG Electronics Inc Consumer Durables & Apparel
Sodexo Consumer Services
ING Group NV Diversified Financials
Thai Oil PCL Energy
Woolworths Ltd Food & Staples Retailing
Unilever NV Food, Beverage & Tobacco
Abbott Laboratories Health Care Equipment & Services
Kao Corp Household & Personal Products
Swiss Re AG Insurance
Akzo Nobel NV Materials
Telenet Group Holding NV Media
Roche Holding AG Pharmaceuticals & Biotechnology
GPT Group Real Estate
Lotte Shopping Co Ltd Retailing
Taiwan Semiconductor Manufacturing Semiconductors
Wipro Ltd Software & Services
Alcatel Lucent Technology Hardware & Equipment
Telecom Italia SpA Telecommunication Services
Air France-KLM Transportation
EDP Energias de Portugal SA Utilities
Source: Based on information at http://www.sustainability-indices.com/review/annual-review-2014.jsp
“consumer services” companies in “environmental sustainability;” consumer services includes providing food services in the cafeteria at many colleges and universities.
The strategies of both companies and countries are increasingly scrutinized and evaluated from a natural environment perspective. Companies (e.g., Walmart) now monitor not only the price their vendors offer for products but also how those products are made in terms of environ- mental practices, as well as safety and infrastructure soundness—particularly of Southeast Asia factories. A growing number of business schools offer separate courses and even a concentration in environmental management.
In terms of megawatts of wind power generated by various states in the nation, Texas’s 8,000 megawatts dwarfs all other states. Minnesota also is making substantial progress in wind power generation. New Jersey recently outfitted 200,000 utility poles with solar panels. A Wall Street Journal (6-29-15, p. B1) article says Hawaii leads all states in the most electricity per capita (21%) generated from solar or wind. A new Hawaii mandates that 100 percent of the state’s electricity be supplied by wind turbines and solar panels by 2045. States that get the most electricity per capita from residential solar panels are Hawaii 168 watts per capita, followed by California at 47, Arizona at 44, and New Jersey at 25.
Sustainability Reports
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 sourc- ing, energy efficiency, environmental impact, and business ethics practices.
No business wants a reputation as being a polluter. A bad sustainability record will hurt the firm in the market, jeopardize its standing in the community, and invite scrutiny by regulators, investors, and environmentalists. Governments increasingly require businesses to behave respon- sibly and require, for example, that businesses publicly report the pollutants and wastes their facilities produce. It is simply good business for any business to provide a sustainability report annually to the public.
With 60,000 suppliers and more than $350 billion in annual sales, Walmart works with its suppliers to make sure they provide such reports. Many firms use the Walmart sustainability report as a benchmark guideline, and model to follow in preparing their own report. Walmart encour- ages and expects its 1.35 million U.S. employees to adopt what it calls Personal Sustainability Projects, which include such measures as organizing weight-loss or smoking-cessation support groups, biking to work, or starting recycling programs. Employee wellness can be a part of sus- tainability. Home Depot, the world’s second-largest retailer behind Walmart, recently more than doubled its offering of environmentally friendly products such as all-natural insect repellent.
Home Depot has made it much easier for consumers to find its organic products by using special labels similar to Timberland’s (the outdoor company) Green Index tags.
The Global Reporting Initiative recently issued a set of detailed reporting guidelines specify- ing what information should go into sustainability reports. The proxy advisory firm Institutional Shareholder Services reports that an increasing number of shareholder groups are pushing firms to provide sustainability information annually. Two companies that released sustainability reports for the first time were Hyatt Hotels & Resorts and Las Vegas Sands Corporation. Rival firm Hilton Worldwide does not have a stand-alone sustainability report, but Marriott and Wyndham Worldwide do release annual sustainability reports and report excellent reductions in energy, water, waste, and carbon dioxide emissions.
Managers and employees of firms must be careful not to become scapegoats blamed for company environmental wrongdoings. Harming the natural environment can be unethical, illegal, and costly. When organizations today face criminal charges for polluting the environ- ment, they increasingly turn on their managers and employees to win leniency. Employee firings and demotions are becoming common in pollution-related legal suits. Managers were fired at Darling International, Inc., and Niagara Mohawk Power Corporation for being indi- rectly responsible for their firms polluting water. Managers and employees today must be careful not to ignore, conceal, or disregard a pollution problem, or they may find themselves personally liable.
A few years ago, firms could get away with placing “green” terminology on their products and labels, using such terms as organic, green, safe, earth-friendly, nontoxic, or natural because there
were no legal or generally accepted definitions. Today, however, these terms carry much more spe- cific connotations and expectations. Uniform standards defining environmentally responsible com- pany actions are rapidly being incorporated into the legal landscape. It has become more and more difficult for firms to make “green” claims when their actions are not substantive, comprehensive, or even true. Lack of standards once made consumers cynical about corporate environmental claims, but those claims today are increasingly being challenged in courts. According to Joel Makower,
“One of the main reasons to truly become a green firm is for your employees. They’re the first group that needs assurance than any claims you make hold water.”12
Around the world, political and corporate leaders now realize that the “business green” topic is not going away and in fact is gaining ground rapidly. Strategically, companies more than ever must demonstrate to their customers and stakeholders that their green efforts are substantive and set the firm apart from competitors. A firm’s social performance (facts and figures) must back up their rhetoric and be consistent with sustainability standards.
The Office of Environmental Affairs
Many companies are moving environmental affairs from the staff side of the organization to the line side, thus making the corporate environmental group report directly to the chief operating officer. Firms that manage environmental affairs will enhance relations with consumers, regu- lators, vendors, and other industry players, substantially improving their prospects of success.
Environmental strategies could include developing or acquiring green businesses, divesting or altering environment-damaging businesses, striving to become a low-cost producer through waste minimization and energy conservation, and pursuing a differentiation strategy through green- product features. In addition, firms could include an environmental representative on their board of directors, conduct regular environmental audits, implement bonuses for favorable environmen- tal results, become involved in environmental issues and programs, incorporate environmental values in mission statements, establish environmentally oriented objectives, acquire environmen- tal skills, and provide environmental training programs for company employees and managers.
Preserving the environment should be a permanent part of doing business, for the following reasons:
1. Consumer demand for environmentally safe products and packages is high.
2. Public opinion demanding that firms conduct business in ways that preserve the natural environment is strong.
3. Environmental advocacy groups now have more than 20 million Americans as members.
4. Federal and state environmental regulations are changing rapidly and becoming more complex.
5. More lenders are examining the environmental liabilities of businesses seeking loans.
6. Many consumers, suppliers, distributors, and investors shun doing business with environ- mentally weak firms.
7. Liability suits and fines against firms having environmental problems are on the rise.
More firms are becoming environmentally proactive—doing more than the bare minimum to develop and implement strategies that preserve the environment. The old undesirable alterna- tive of being environmentally reactive—changing practices only when forced to do so by law or consumer pressure—more often today leads to high clean-up costs, liability suits, reduced market share, reduced customer loyalty, and higher medical costs. In contrast, a proactive policy views environmental pressures as opportunities and includes such actions as developing green products and packages, conserving energy, reducing waste, recycling, and creating a corporate culture that is environmentally sensitive.
ISO 14000/14001 Certification
Based in Geneva, Switzerland, the International Organization for Standardization (ISO) is a net- work of the national standards institutes of 147 countries, with one member per country. The ISO is the world’s largest developer of sustainability standards. Widely accepted all over the world, ISO standards are voluntary because it has no legal authority to enforce their implementation; the organization itself does not regulate or legislate. Governmental agencies in various countries, such
as the Environmental Protection Agency (EPA) in the United States, have adopted ISO standards as part of their regulatory framework, and the standards are the basis of much legislation. Adoptions are sovereign decisions by the regulatory authorities, governments, or companies concerned.
Businesses and municipalities should consider becoming ISO certified to help attract business.
ISO 14000 refers to a series of voluntary standards in the environmental field. The ISO 14000 family of standards concerns the extent to which a firm minimizes harmful effects on the environment caused by its activities and continually monitors and improves its own environmen- tal performance. These standards have been adopted by thousands of firms and municipalities worldwide to certify to their constituencies that they are conducting business in an environmen- tally friendly manner; these standards offer a universal technical benchmark for environmental compliance that more and more firms are requiring not only of themselves but also of their sup- pliers and distributors. Included in the ISO 14000 series are the ISO 14001 standards in fields such as environmental auditing, environmental performance evaluation, environmental labeling, and life-cycle assessment.
ISO 14001 is a set of standards adopted by thousands of firms worldwide to certify to their constituencies that they are conducting business in an environmentally friendly manner. The ISO 14001 standard offers a universal technical standard for environmental compliance that more and more firms are requiring not only of themselves but also of their suppliers and distributors.
According to the ISO 14001 standard, a community or organization is required to put in place and implement a series of practices and procedures that, when taken together, result in an environmental management system (EMS). The ISO 14001 is not a technical standard and as such does not in any way replace technical requirements embodied in statutes or regulations. It also does not set prescribed standards of performance for organizations. Not being certified with ISO 14001 can be a strategic disadvantage for towns, counties, and companies because people today expect organizations to minimize or, even better, to eliminate environmental harm they cause.13 There are six major requirements of an EMS under ISO 14001:
1. Show commitments to prevention of pollution, continual improvement in overall environmental performance, and compliance with all applicable statutory and regulatory requirements.
2. Identify all aspects of the organization’s activities, products, and services that could have a significant impact on the environment, including those that are not regulated.
3. Set performance objectives and targets for the management system that link back to three policies: (a) prevention of pollution, (b) continual improvement, and (c) compliance.
4. Meet environmental objectives that include training employees, establishing work instruc- tions and practices, and establishing the actual metrics by which the objectives and targets will be measured.
5. Conduct an audit operation of the EMS.
6. Take corrective actions when deviations from the EMS occur.
Wildlife Welfare
Consumers globally are becoming increasingly intolerant of any business or nation that directly or indirectly destroys wildlife, especially endangered wildlife, such as tigers, elephants, whales, songbirds, and coral reefs. Affected businesses range from retailers that sell ivory chess pieces to restaurants that sell whale meat. The United States recently crushed over 6 tons of elephant ivory as part of a global effort to combat elephant poaching; one elephant is killed every 16 minutes.14 The Chinese government recently destroyed more than 6.1 tons of elephant ivory to help stop illegal ivory smuggling that is fueling poaching and decimating elephant populations in Africa.
There are today less than 100,000 elephants in Africa, down from more than 300,000 in 2002, primarily because the demand for ivory remains robust in Asia, particularly China.
African giraffes are in danger of becoming extinct due to hunting and poaching in Africa that has decimated the giraffe population. There are only about 80,000 giraffes left in the wild, down from 140,000 giraffes 15 years ago. Fewer than 300 West African giraffes remain in Niger, and only 700 Rothschild’s giraffes remain in Uganda and Kenya. Poaching is especially det- rimental in eastern and central Africa, partly because some people (in Tanzania) erroneously believe the giraffe’s meat and/or bone marrow is an HIV cure.
Many New Zealanders, supported by Australians, are outraged about Japan’s large-scale whaling operations in the Antarctic. Japan recently issued permits allowing its whalers to kill up to 935 Antarctica minkes, 50 fin whales, and 50 humpbacks as part of “research into sustainable hunting.” Whale meat is regarded as a delicacy in Japan and can fetch up to US$38 for 100 grams.
Japan ironically is a member of the International Whaling Commission that has banned commercial whaling in a 31 million square-mile area around Antarctica known as the Southern Ocean Whale Sanctuary. Unfortunately, South Korea recently resumed whaling, despite a 1986 moratorium on commercial whaling. Many countries are upset with whaling, including Australia, where the Prime Minister Julia Gillard asserted, “We are completely opposed to whaling; there’s no excuse for sci- entific whaling.” Only a few countries—such as Norway, Japan, and Russia—favor and engage in commercial whaling. Norway was soundly criticized globally in mid-2015 for launching whale- hunting expeditions, to follow up on their killing 729 whales the prior year, the most annual whale killings by Norway in two decades. Countries, municipalities, and companies increasingly run the risk of being boycotted and exposed for direct or indirect wildlife endangering practices.
About 50 million sharks are killed every year solely to cut off (and sell) their fins.15 Although
“shark-finning” was outlawed in U.S. waters in 2000, the law does not ban fin imports or serving the fins in food, so about 57 metric tons of fins are imported in the United States annually. Only eight U.S. states have laws banning the sale of shark fins in food: Hawaii, Oregon, Washington, Illinois, California, Maryland, New York, and Delaware. The problem is much worse in some countries, especially China. More than 25 percent of the world’s shark species now face extinc- tion, according to the International Union for Conservation of Nature.
Table 3-4 reveals the impact that bad environmental policies have on songbirds and coral reefs, two of nature’s many ecosystems.
Table 3-4 Songbirds and Coral Reefs Need Help
Songbirds
Please be a good steward of the natural environment to save our songbirds. Bluebirds are one of 76 songbird species in the United States that have dramatically declined in numbers in the last two decades. Not all birds are considered songbirds, and why birds sing is not clear. Some scientists say they sing when calling for mates or warning of danger, but many scientists now contend that birds sing for sheer pleasure. Songbirds include chickadees, orioles, swallows, mockingbirds, warblers, sparrows, vireos, and the wood thrush.
“These birds are telling us there’s a problem, something’s out of balance in our environment,” says Jeff Wells, bird conservation director for the National Audubon Society. Songbirds may be telling us that their air or water is too dirty or that we are destroying too much of their habitat. People collect Picasso paintings and save historic buildings. “Songbirds are part of our natural heritage. Why should we be willing to watch songbirds destroyed any more than allowing a great work of art to be destroyed?” asks Wells. Whatever message songbirds are singing to us today about their natural environment, the message is becoming less and less heard nationwide. Listen when you go outside today. Each of us as individuals, companies, states, and countries should do what we reasonably can to help improve the natural environment for songbirds.16 A recent study concludes that 67 of the 800 bird species in the United States are endangered, and another 184 species are designated of “conservation concern.” The birds of Hawaii are in the greatest peril.
coral reefs
Please be a good steward of the natural environment to save our coral reefs. The ocean covers more than 71 percent of the earth. The destructive effect of commercial fishing on ocean habitats coupled with increasing pollution runoff into the ocean and global warming of the ocean have decimated fisheries, marine life, and coral reefs around the world. The unfortunate consequence of fishing over the last century has been overfishing, with the principal reasons being politics and greed. Trawl fishing with nets destroys coral reefs and has been compared to catching squirrels by cutting down forests because bottom nets scour and destroy vast areas of the ocean. The great proportion of marine life caught in a trawl is “by-catch” juvenile fish and other life that are killed and discarded. Warming of the ocean as a result of carbon dioxide emissions also kills thousands of acres of coral reefs annually. The total area of fully protected marine habitats in the United States is only about 50 square miles, compared to some 93 million acres of national wildlife refuges and national parks on the nation’s land. A healthy ocean is vital to the economic and social future of the nation—
and, indeed, all countries of the world. Everything we do on land ends up in the ocean, so we all must become better stewards of this last frontier on earth to sustain human survival and the quality of life.17
Food Suppliers and Animal Welfare
Humane treatment of animals matters! Walmart, other retailers, and restaurants are demand- ing that food suppliers treat animals better, and consumers are flocking to organic foods. Thus, numerous food companies, such as Tyson Foods, the largest U.S. meatpacker, are phasing out use of human antibiotics and are “housing” animals more humanely. Walmart says its suppliers must begin to “raise animals with sufficient space for them to express normal behaviors and free- dom from discomfort.” Walmart wants the use of battery cages for chickens, gestation crates for hogs, and veal crates for cows to be eliminated, although such small confined areas are currently used to raise many chickens, pigs, and cows in the United States. Wayne Pacelle, CEO of the Humane Society of the United States, wants Walmart to set a timeline for compliance. Parents want their children to eat food raised without use of growth hormones and antibiotics. Sales of organic milk, eggs, and other food products are booming, even at the higher prices. Walmart is by far the largest grocer in the United States, with grocery accounting for 56 percent of the com- pany’s $288 billion in sales in 2014.18
impLicAtions for strAtegists
Figure 3-2 reveals that the whole strategic-management process is designed to gain and sustain competitive advantages, but all can be lost with ethical violations, ranging from bribery to sexual harass- ment to selling whale meat. Trees die from the top; strategists are at the top of the firm. Consequently, strategists must set an exemplary
example personally and professionally to establish and continually reinforce an organizational culture for “doing the right thing.” Social responsibility and environmental sustainability policies, practices, and procedures must reinforce that good ethics is good business,” and that good ethics is the foundation for everything we do and say.”
Establish A Clear Vision & Mission
Evaluate & Monitor Results:
Take Corrective Actions; Adapt To Change
Gain & Sustain Competitive Advantages
Formulate Strategies:
Collect, Analyze, &
Prioritize Data Using Matrices; Establish A Clear Strategic Plan
Implement Strategies:
Establish Structure;
Allocate Resources;
Motivate & Reward;
Attract Customers;
Manage Finances
Figure 3-2
How to Gain and Sustain Competitive Advantages
