Social responsibility and ethics are the integral components of organizational performance; they play a relevant part in developing a company’s strategic plan. The researchers define the mentioned plan as the scope of measures aimed at achieving long-term objectives and strengthening the firm’s position in the market (Setó-Pamies & Papaoikonomou, 2016). The present paper focuses on examining the two outlined components of business and specifies their role in a company’s operation. It also addresses the cases of how corporations can overstep the boundaries of ethics and what outcomes it usually leads to. The example of Enron brightly demonstrates that unethical corporate behavior can sometimes impact the state’s economic sectors (energy sector in this particular case).
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The Role of Ethics and Social Responsibility
Ethics is the set of rules that guide policies and practices involved in the process of strategy making. Ethical decisions are always addressed when the company’s operation is expected to impact the environmental or economic situation in the region (Setó-Pamies & Papaoikonomou, 2016). Organizations act ethically and follow the rules of societal behavior when informing the community of all changes in a chosen market course and asking them to share their opinions regarding the matter. This way, companies allow stakeholders to adjust to new initiatives without infringing upon the interests of the latter. In their attempts to remain compliant with stakeholders’ needs and agendas, firms may either resort to cost advantage or product differentiation advantage tactics (Dyer, Godfrey, Jensen, & Bryce, 2017). However, as the example of Delta Airlines shows, cutting prices, although ethical, is not always a strategically correct decision. Dyer et al., (2017) admit that hurried drop in ticket costs “had had disastrous effects on revenue because the expected growth in passenger volume never materialized” (p.215). The given fact proves that ethical decisions should have long-term objectives and not simply pursue short-lived goals.
Organizations always have responsibilities whenever it comes to implementing the strategic plan. These responsibilities can be defined as compliance with the norms of production and adjusting quality standards to consumers’ demands. Some researchers interpret social responsibilities as following the existing legislative statutes and obeying the principles of civil law (Kolk, 2016). Again, the needs and agendas of the key stakeholders are being prioritized; the role of responsibilities is to make the organization’s strategic plan approved by the former. To remain socially responsible, a company must avoid decisions that tarnish its reputation and impact competitiveness. What sort of reputation an organization will develop utterly depends on which cost-management and acquisition strategies are applied, what negotiating tactics are used, and so on (Dyer et al., 2017). The higher is the reputation the more engagement is tracked in stakeholders’ behavior.
Companies that Overstepped Ethical Boundaries
One of the most frequently discussed cases of overstepping ethical boundaries is the scandal around Enron. Differences in values between the company owners and the key stakeholders laid the ground for the occurrence of unethical behavior (Dyer et al., 2017). Enron has gained the reputation of an organization with questionable tactics due to such methods as hiding deteriorating finances, providing false revenue figures, manipulating the California electricity market, and more (Dyer et al., 2017). Its operation had severely impacted the state’s energy sector: “millions of California power uses paid higher utility bills and suffered from power backouts due in part to Enron’s deception” (p. 257).
Maytag Corporation is another example of how ethical boundaries can be overstepped. The owners of the corporation were looking for a way to reduce operating costs, which forced them to consider the option of transporting business assets. Their decision to move refrigeration production to Mexico had a disruptive impact on stakeholders: a lot of employees and local officials lost their jobs due to the changes in strategic planning (Setó-Pamies & Papaoikonomou, 2016). The company’s shareholders were the only party who benefited from this decision. The lowering of production expenses helped the organization to save funds. However, the methods they used to achieve this goal cannot be treated as ethically correct.
Regarding the situation with Enron, preventive measures could include enforcing ethical practices and establishing the code of ethics within an organization. The given code would specify how employees are expected to perform at work. In what refers to the company-stakeholder relationship, the corporation should “run for the benefit of its entire stakeholder set, with no group enjoying primacy in decision making” (p. 259). A similar approach should be taken by Maytag Corporation: an enterprise strategy must be developed with the consideration of stakeholders’ interests and values. Also, a thorough analysis should be conducted to study the concerns of every stakeholder in particular.
Social responsibilities and corporal ethics are the business constituents that predetermine the organization’s market integrity, compatibility, and relationships with the key stakeholders. Each strategic plan requires adhering to the ethical norms and considering a set of responsibilities. The examples of both Enron and Maytag Corporation demonstrate that unethical behavior always leads to deplorable consequences not only for a company but for the area of its operation as well.
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Dyer, J. H., Godfrey, P., Jensen, R., & Bryce, D. (2017).Strategic management: Concepts and cases. Hoboken: NJ, Wiley Global Education.
Kolk, A. (2016). The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business, 51(1), 23-34.
Setó-Pamies, D., & Papaoikonomou, E. (2016). A multi-level perspective for the integration of ethics, corporate social responsibility and sustainability (ECSRS) in management education. Journal of Business Ethics, 136(3), 523-538.