Chat with us, powered by LiveChat Word count is 1200 words or more. Everything must be in own words. For question ONE it needs to be the “Real Time” 2018. ALL QUESTIONS NEEDS TO BE WELL THOUGHT OUT. Must have two or more references. Please NO plagiarism. NO ANSWERS SHOULD BE FROM COURSE H - Study Help
  

 Word count is 1200 words or more. Everything must be in own words. For question ONE it needs to be the “Real Time” 2018. ALL QUESTIONS NEEDS TO BE WELL THOUGHT OUT. Must have two or more references. Please NO plagiarism. NO ANSWERS SHOULD BE FROM COURSE HERO THAT WILL CAUSE ME TO FAIL THE CLASS. Again everything is to be in its own words. There will be two attachments one is the assignment and the other one is the reading

reference; Parnell, J.A. (2008). Strategic management: Theory and practice (3rd ed). Cincinnati, OH: Cengage

guideline 

Guidance for Unit 3 Hello everyone and welcome to Unit 3! Here is a little extra guidance for your Unit 3 COMPLETE assignment. 

1. Case Summary: The case summary is supposed to be on the firm in the RealTime case assigned for the unit. In Unit 3, it is Real-Time Case 23: Nike. In other words, “these firms” refers only to Nike in Unit 3. Do not base your summary on any other firms. Refer to the syllabus for instructions on how to find the case for each unit. Remember to use the narrative format in your summary. 

2. Case Analysis #1: This question is very straightforward. The crux of the matter in this analysis question is, “Is this criticism warranted? Why or why not?” You need to open your essay with a clear thesis statement in the style, “This criticism is warranted (or not warranted) because…” Make sure you support your answer by citing applicable views of ethics discussed in Chapter 5. Note, as well, that additional research is required in order to make a convincing case. 

3. Case Analysis #2: In this essay, you will identify the strategies that have led to Nike’s growth. Hint: Growth is part of Corporate Strategy. Again, you should open with a clear thesis statement such as, “Nike has accomplished considerable growth over the past two decades through ….” Note that growth strategies are discussed in your READ assignment for this unit. In response to the second part of the question you need to identify Nike’s core competencies and assess the ability of such competencies to sustain the growth. 

4. Application: The application question is specifically about changes you would make to the CORPORATE STRATEGY as a result of worldwide ECONOMIC recession. Be very clear in your focus on the corporate strategy rather than the other two levels of strategy. Note that the options available under corporate strategies are discussed in Chapter 6 of the textbook. Even if you recommend no change, you still need to identify the current corporate strategy and give reasons why it would serve well in an economic recession, and thus needs not be changed. 

As always, all the best in you work this week

Case Summary

1.

In a narrative format, discuss Nike from a strategic perspective. Information concerning recent changes in the firm is readily available online and should be accessed. Strategic issues should be discussed in “real time.”

Case Analysis

2.

Some critics—citing previous allegations of sweatshops—have argued that Nike has not been ethical in its approach to production in developing countries. Is this criticism warranted? Why or why not? Additional Internet research may be required to support your position. 

3.

How has Nike accomplished considerable growth over the past two decades? Can this continue? Why or why not?

Application

4.

Suppose you are the CEO of Nike and the world is coping with an economic recession. Would you change the corporate strategy? If so, what changes would you make and why? If not, why not? 



The Organization

Chapter Outline
5-1 Organizational Direction: Mission, Goals, and Objectives

5-1a Global Infl uences on Mission

5-1b Goals and Stakeholders

5-2 Social Responsibility

5-3 Managerial Ethics

5-4 The Agency Problem

5-4a Management Serves Its Own Interests

5-4b Management and Stockholders Share the Same Interests

5-5 Corporate Governance and Goals of Boards of Directors

5-6 Takeovers

5-7 Summary

Key Terms

Review Questions and Exercises

Practice Quiz

Notes

Reading 5-1

5

26061_05_ch05_p093-122.indd 9326061_05_ch05_p093-122.indd 93 1/10/08 7:29:01 PM1/10/08 7:29:01 PM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

94 Chapter 5

W
hereas previous chapters discussed the external analysis phase of
the strategic management process, this chapter begins to consider
internal factors. This shift from the industry level to the organiza-
tional level refl ects a change in focus from similarities, or factors

that tend to affect all of an industry’s organizations in a like manner, to differ-
ences, or issues specifi c to a particular fi rm in an industry. This shift also relates
to theoretical perspectives discussed in Chapter 1, marking a movement from an
industrial organization (IO) perspective to a resource-based view of the fi rm.

Crafting a strategy for an organization whose purpose and resources are not
well understood by its members is a diffi cult task, however. This chapter discusses
the role that an organization’s unique mission and resources, as well as social
responsibility and ethics, play in the strategic management process.

5-1 Organizational Direction: Mission,
Goals, and Objectives

Several terms are commonly used to delineate the direction of the organiza-
tion. The mission is the reason for the fi rm’s existence and is the broadest of
these terms. The organization’s goals represent the desired general ends toward
which efforts are directed. Objectives are specifi c and often quantifi ed versions
of goals. Unlike goals, objectives are verifi able and specifi c, and are developed so
that management can measure performance. Without verifi ability and specifi city,
objectives will not provide a clear direction for strategy.

For example, the mission of an Internet Service Provider (ISP) might be “to
provide high-quality, reliable Internet access to the southeastern United States
at a profi t.” Management may establish a goal “to expand the size of the fi rm
through acquisition of small ISPs.” From this goal, specifi c objectives may be
derived, such as “to increase access numbers by 20 percent each year for the next
fi ve years.” As another example, management’s goal may be “to be known as the
innovative leader in the industry.” On the basis of this goal, one of the specifi c
objectives may be “to have 30 percent of sales each year come from new products
developed during the preceding three years.”

5-1a Global Infl uences on Mission
An organization’s mission may be closely intertwined with international opera-
tions in several ways. A fi rm may need inputs from abroad or sell a large percent-
age of its products to global customers. Consider, for example, that virtually all
of Japan’s industries would grind to a halt if imports of raw materials from other
nations ceased, because Japan is a small island nation and its natural resources
are quite limited.

Organizational mission and international involvement are also connected
through the economic concept of comparative advantage, the idea that certain
products may be produced more cheaply or at a higher quality in particular
countries due to advantages in labor costs or technology. Chinese manufactur-
ers, for example, have enjoyed some of the lowest global labor rates for unskilled
or semiskilled production in recent years. As skills rise in the rapidly emerging
nation, some companies have succeeded in extending this comparative advan-
tage to technical skill areas as well. The annual salary for successful engineers in
China rose to around $15,000 in 2007, a level well below their comparably skilled
counterparts in other parts of the world.1

Comparative
Advantage

The idea that certain
products may be pro-

duced more cheaply or
at a higher quality

in particular countries,
due to advantages

in labor costs or
technology

Goals

Desired general ends
toward which efforts are

directed.

Mission

The reason for an
organization’s existence.

The mission statement
is a broadly defi ned but

enduring statement of
purpose that identifi es

the scope of an organi-
zation’s operations and
its offerings to the vari-

ous stakeholders.

Objectives

Specifi c, verifi able, and
often quantifi ed versions

of a goal.

26061_05_ch05_p093-122.indd 9426061_05_ch05_p093-122.indd 94 1/10/08 11:12:22 AM1/10/08 11:12:22 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

The Organization 95

Global involvement may also provide advantages to the fi rm not directly related
to costs. For political reasons, a fi rm often needs to establish operations in other
countries, especially if a substantial proportion of sales is derived abroad. Doing
so can also provide managers with a critical understanding of local markets. For
example, Ford operates plants in western Europe, where manufacturing has
helped Ford’s engineers design windshield wipers for cars engaged in high-speed
driving on the German autobahns.2

5-1b Goals and Stakeholders
At fi rst glance, establishing a mission, goals, and objectives for a fi rm appears
to be fairly simple; however, because stakeholders have different perspectives
on the purpose of the fi rm, this task can become quite complex. Stakeholders
are individuals or groups who are affected by or can infl uence an organiza-
tion’s operations. Firm stakeholders include such groups as shareholders,
members of the board of directors, managers, employees, suppliers, creditors,
and customers (see Table 5-1). As owners, shareholders traditionally represent
the dominant group of stakeholders. Top managers, too, should be concerned
not only with the shareholders’ primary objective of profi ts, but also with
those of other stakeholders.3 Ideally, the mission, goals, and objectives should
emphasize goals of the shareholders, and balance the pressures from other
stakeholders.4

It is not diffi cult to see how stakeholder goals can confl ict with one another. For
example, shareholders are generally interested in maximum profi tability, whereas
creditors are more concerned with long-term survival so that their loans will be
repaid. Meanwhile, customers desire the lowest possible prices, even if offering
them would result in losses for the fi rm. Hence, top management faces the diffi cult
task of attempting to reconcile these differences while pursuing its own set of goals,
which typically includes quality of work life and career advancement.

Source: Ablestock.com

Stakeholders

Individuals or groups
who are affected by or
can infl uence an organi-
zation’s operations.

Stakeholders Goals
Customers The company should provide high-quality products and serv-

ices at the most reasonable prices possible.

General public The company should provide goods and services with mini-
mum environmental costs, increase employment opportuni-
ties, and contribute to social and charitable causes.

Suppliers The company should establish long-term relationships with
suppliers and purchase from them at prices that allow the
suppliers to remain profi table.

Employees The company should provide good working conditions, equi-
table compensation, and opportunities for advancement.

Creditors The company should maintain a healthy fi nancial posture and
a policy of on-time payment of debt.

Shareholders The company should produce a higher-than-average return on
equity.

Board of directors Current directors should be retained and shielded from a legal
liability.

Managers The company should allow managers to benefi t fi nancially
from the growth and success of the company.

TA B L E S u g g e s t e d G o a l s o f S t a k e h o l d e r s5-1

26061_05_ch05_p093-122.indd 9526061_05_ch05_p093-122.indd 95 1/10/08 11:12:23 AM1/10/08 11:12:23 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

96 Chapter 5

This balancing act is evident when one considers the clash that can occur
when top management goals are pitted against those of the board of directors.
Although both groups are primarily accountable to the owners of the corpora-
tion, top management is responsible for generating fi nancial returns and the
board of directors is charged with oversight of the fi rm’s management. Some have
argued, however, that this traditional shareholder-driven perspective is too narrow,
and that fi nancial returns are actually maximized when a customer-driven perspec-
tive is adopted, a view that is consistent with the marketing concept.5 Consumer
advocate and 2000 U.S. presidential candidate Ralph Nader has argued for more
than thirty years that large corporations must be more responsive to customers’
needs.6

Firms create value for various parties, including employees through wages and
salaries, shareholders through profi ts, customers through value derived from
goods and services, and even governments through taxes. Firms that seek to
maximize the value delivered to any single stakeholder at the expense of those
of other groups can jeopardize their long-term survival and profi tability.7 For
example, a fi rm that emphasizes the fi nancial interests of shareholders over the
monetary needs of employees can alienate employees, threatening shareholder
returns in the long run. Likewise, establishing long-term relationships with
suppliers may restrict the fi rm’s ability to remain fl exible and offer innovative
products to customers. Top management is charged with the task of resolving
opposing stakeholder demands, recognizing that the fi rm must be managed to
balance the demands of various stakeholder groups for the long-term benefi t of
the corporation as a whole.8

5-2 Social Responsibility
An organization’s direction is governed in part by its value system. An organiza-
tion’s values can be seen through its stance on service to society, as well as its sup-
port for high ethical standards among its managers. These factors are discussed
in this section.

Social responsibility refers to the expectation that business fi rms should serve
both society and the fi nancial interests of the shareholders. A fi rm’s stance on
social responsibility can be a critical factor in making strategic decisions. If social
responsibility is not considered, decisions may be aimed only at profi t or other
narrow objectives without concern for balancing social objectives that the fi rm
might embody. The degree to which social responsibility is relevant in strategic
decision making is widely debated, however.

From an economic perspective, businesses have always been expected to
provide employment for individuals and meet consumer needs within legal
constraints. Today, however, society also expects fi rms to help preserve the
environment, to sell safe products, to treat their employees equitably, and to
be truthful with their customers.9 In some cases, fi rms are even expected to
provide training to unemployed workers, contribute to education and the arts,
and help revitalize urban areas. Firms such as Home Depot, Coca-Cola, UPS, and
Johnson & Johnson recently earned high marks for social responsibility, whereas
Bridgestone and Philip Morris were at the bottom of the list.10 Figure 5-1 illustrates
the approach to social responsibility at Johnson & Johnson, a fi rm whose corpo-
rate reputation ranked number one in 2002 and 2003 in the Harris Interactive
survey.11

Many economists, including such notables as Adam Smith and Milton Friedman,
have argued that social responsibility should not be part of management’s

Social Responsibility

The expectation that
business fi rms should

serve both society and
the fi nancial interests of

shareholders.

26061_05_ch05_p093-122.indd 9626061_05_ch05_p093-122.indd 96 1/10/08 11:12:25 AM1/10/08 11:12:25 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

The Organization 97

decision-making process. Friedman has maintained that business functions best
when it concentrates on maximizing returns by producing goods and services
within society’s legal restrictions. According to Friedman, corporations should
be concerned only with the legal pursuit of profi t, while shareholders are free
to pursue other worthy goals as they individually see fi t. Even if one accepts
Friedman’s argument, fi rms should act in a socially responsible manner for two
primary reasons.

F I G U R E J o h n s o n & J o h n s o n C re d o5-1

Source: Reprinted by permission of Johnson & Johnson

26061_05_ch05_p093-122.indd 9726061_05_ch05_p093-122.indd 97 1/10/08 11:12:25 AM1/10/08 11:12:25 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

98 Chapter 5

First, acting responsibly can reduce the likelihood of more costly government
regulation. Historically, regulations over business operations often were enacted
because certain fi rms refused to act responsibly. Had some organizations not
damaged the environment, sold unsafe products, or engaged in discrimination
or misleading advertising, legislation in these areas would not have been nec-
essary. Government regulation is always possible when companies operate in a
manner contrary to society’s interests, even if doing so is clearly within the legal
jurisdiction of the fi rm.

Second, stakeholders affected by a fi rm’s social responsibility stance—most
notably customers—are also those who must choose whether to transact business
with the fi rm. Prospective customers have become more interested in learning
about a company’s social and philanthropic activities before making purchase
decisions. Those who believe a fi rm is not socially responsible may take their busi-
ness elsewhere. The social responsibility debate aside, many executives—espe-
cially those in large fi rms—have concluded that their organizations must at the
minimum appear to be socially responsible or face the wrath of angry consumers.
As such, they are greatly concerned about both the actual behavior of the fi rm
and how it is perceived. Evidence suggests that consumers want the fi rms that
produce the products and services they buy not only to support public initiatives,
but also to uphold the same values in terms of the day-to-day decisions of running
the company.12 By defi nition, a fi rm that is socially responsible is one that is able
to generate both profi ts and societal benefi ts; but exactly what is good for society
is not always clear.13 For example, society’s demands for high employment and
the production of desired goods and services must be balanced against the pol-
lution and industrial wastes that may be generated by manufacturing operations.
The decisions made to balance these concerns, however, can be quite diffi cult to
make (see Strategy at Work 5-1).

Social responsibility is a prominent issue in some industries. Pharmaceutical
manufacturers, for example, spend billions of dollars to develop drugs for treating
a wide range of ailments. The costs of the drugs, however, can determine the extent
to which patients will benefi t from them. In the United Kingdom, government offi –
cials called on physicians to stop prescribing various drugs for Alzheimer’s disease,
acknowledging their benefi ts but arguing that they do not justify the cost.14 The same

S T R A T E G Y A T W O R K 5 – 1

GMAbility: Social Responsibility in Action

The public emphasis that General Motors places on
social responsibility is quite noteworthy. The company’s
“GMAbility” initiative (www.gm.com/company/gmabil-
ity) highlights a number of GM activities. For exam-
ple, according to its 2001 sustainability report, GM
has taken action to reduce emissions and water and
energy consumption, while increasing its community
support and number of partnerships. GM is also active
in a variety of recycling, education, hazardous waste
collection, and pollution prevention programs.

GM has partnered with The Nature Conservancy, an
international environmental organization. GM spends
$1 million annually to assist in the preservation of land

and water systems in North America, Latin America,
the Caribbean, and the Asia/Pacifi c region.

GM also participates in a variety of philanthropic
activities, such as violence reduction programs in
schools, Special Olympics, and community development.
For example, GM partnered with Sun Microsystems
and EDS to contribute more than $211 million in com-
puter-aided design, manufacturing, and engineering
(CAD/CAM/CAE) software, hardware, and training to
Virginia Tech.

Sources: R. Alsop, “Perils of Corporate Philanthropy,” Wall Street
Journal, 16 January 2002, B1, B4; General Motors, www.gm.com/
company/gmability, accessed March 14, 2002.

Source: Ablestock.com

Source: Ablestock.com

26061_05_ch05_p093-122.indd 9826061_05_ch05_p093-122.indd 98 1/10/08 11:12:26 AM1/10/08 11:12:26 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

The Organization 99

realities can be true for medical procedures, especially in emerging economies. The
pay-as-you-go system for medical treatment in China ultimately can deny costly life-
saving treatment for the majority of its citizens who lack health insurance.15

In some instances, society’s expectations of an organization may increase as
the fi rm grows. For example, various constituencies have charged Wal-Mart with
socially irresponsible behavior in recent years. Critics allege that the mega-retailer
often competes unfairly, does not always follow fair hiring and promotion prac-
tices, and even contributes to local economic problems by abandoning strip-mall
locations when larger stores are constructed. In 2004, CEO Lee Scott signaled a
more assertive approach to countering such claims. As Scott put it, “When we’re
wrong, we change, so our detractors don’t have a foothold in attacking us. Where
we are right, we will fi ght and take each issue to the wall.”16

A broader notion of social responsibility, sustainable strategic management
(SSM), has received increased attention in recent years. SSM refers to the strate-
gies and related activities that promote superior performance from both market
and environmental perspectives. Hence, an ideal strategy should seek market
sustainability by meeting buyer demands and environmental sustainability by
proactively managing fi nite resources. Organizations able to meet this challenge
are more likely to perform well and benefi t society over the long term.

5-3 Managerial Ethics
Although social responsibility and managerial ethics are often grouped together
in the popular business press, the terms are not synonymous. Whereas social
responsibility considers the fi rm’s ability to address issues beyond the fi nancial
concerns of the shareholders, managerial ethics refers to an individual’s respon-
sibility to make business decisions that are legal, honest, moral, and fair. Strategic
decisions should not require managers or other employees to perform activities
inconsistent with their ethical convictions concerning the role that they may be
expected to play in fi rm activities (see Strategy at Work 5-2). The ethics test in
Figure 5-2 provides an assessment of employees’ ethics.

Managerial Ethics

An individual’s respon-
sibility to make business
decisions that are legal,
honest, moral, and fair.

Sustainable Strategic
Management (SSM)

Strategies and related
activities that promote
superior perform-
ance from both market
and environmental
perspectives.

S T R A T E G Y A T W O R K 5 – 2

Good Neighbor or Good Business?

After creating considerable destruction in the Caribbean,
Hurricane Ivan hammered the Gulf Coast of the United
States in September 2004. Because meteorologists
had forecast the magnitude of the storm several days
prior, many Americans soon to be affected turned to
rivals Lowe’s and Home Depot for plywood to board up
their homes, for power generators, and for other sup-
plies. Both retailers stepped into high gear to meet con-
sumer needs.

Neither chain raised prices amidst the storm prepa-
ration and most stores made valiant attempts to remain
open as long as possible. In one respect, Home Depot
and Lowe’s went the extra mile to assist customers in
a crisis. In reality, however, remaining open extra hours
was simply good business and helped to minimize local

inventories that could be damaged if the stores were
devastated by the storm.

Indeed, the two rivals were well aware of possible
long-term effects that could stem from their ability
to help customers prepare for the storm. As Home
Depot’s eastern division president, Tom Taylor, put it,
“They’ll remember who got them stuff. They’ll remem-
ber who stayed open. The better job we can do during
a hurricane, [the more] we can gain market share [after
the storm].”

Could the Lowe’s and Home Depot actions be
described as good neighbor or good business? The
answer is probably both.

Sources: D. Morse, “Competing in a Crisis,” Wall Street Journal,
16 September 2004, B4, B5.

26061_05_ch05_p093-122.indd 9926061_05_ch05_p093-122.indd 99 1/10/08 11:12:29 AM1/10/08 11:12:29 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

100 Chapter 5

F I G U R E E m p l o y e e E t h i c s Te s t5-2

The line between social responsibility and managerial ethics can be diffi –
cult to draw, as what may be considered by some to be socially irresponsible
fi rm behavior may be a direct result of unethical managerial decision making.
Nonetheless, while the debate over social responsibility continues, few would
argue that managers should not behave ethically. When executives shun clear
ethical principles, corporate scandal or even demise can follow (see Strategy at
Work 5-3).

What is morally right or wrong continues to be a topic of debate, especially
when fi rms operate across borders where ethical standards can vary considerably.

26061_05_ch05_p093-122.indd 10026061_05_ch05_p093-122.indd 100 1/10/08 11:12:29 AM1/10/08 11:12:29 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

The Organization 101

S T R A T E G Y A T W O R K 5 – 3

Ethical Concerns and the Corporate Scandals of 2001 and 2002

The period from mid-2001 to mid-2002 witnessed an
unprecedented number of ethical allegations and cor-
porate misdoings that jolted Americans’ confi dence in
corporate America. In August 2002, Forbes published
“The Corporate Scandal Sheet” in an effort to keep track
of the dearth of ethical violations and allegations ram-
pant at that time. The Wall Street Journal also followed
in January 2003 with an extensive chronicle of events
for 2002. In November 2001, Enron, once one of the
world’s largest electricity and natural gas traders, admit-
ted overstating its earnings by $567 million between
1997 and 2001 and fi led for Chapter 11 bankruptcy
protection the following month. In another case, the
astute craft and décor authority Martha Stewart sold a
large number of her ImClone Systems shares one day
before the company released damaging news about an
experimental cancer drug, raising the specter of insider
information and thus resulting in a conviction.

Although the deluge of news surrounding such
scandals began to slowly subside in late 2002, public
fervor concerning a perceived lack of corporate

accountability and widespread corporate legerdemain
has not. This fervor has been sparked further by press
reports of executive prosecutions associated with these
scandals several years later. U.S. governmental agen-
cies have responded with new policies and procedures
designed to foster a more complete disclosure of cor-
porate fi nancial doings and make it more diffi cult for
executives to mislead investors about the performance
of their fi rms. These actions notwithstanding, however,
it is clear that a key part of the solution to this problem
lies in a willingness of managers at all levels to commit
to a sense of fair play and uphold ethical standards at
a personal level.

Sources: R. Alsop, “Corporate Scandals Hit Home,” Wall Street
Journal, 19 February 2004, B1, B2; P. Patsuris, “The Corporate
Scandal Sheet,” Forbes,www.forbes.com/2002/07/25/account-
ingtracker.html, accessed August 26, 2002; L. S. Egodigwe, J. C. Long,
and N. Warfi eld, “A Year of Scandals and Sorrow,” Wall Street Journal
Interactive Edition, 2 January 2003; P. Behr, “Ailing Enron Files for
Chapter 11 Bankruptcy Protection,” Washington Post, 3 December
2001, A7; C. Gasparino and S. Craig, “Merrill Worker Casts Doubt on
Stewart’s Stop-Loss Pact,” Wall Street Journal Interactive Edition,
24 June 2002.

In the United States, for example, bribes to government offi cials to secure favor-
able treatment would be considered unethical. In other countries—especially
those with developing economies—small “cash tips” are an accepted means of
transacting business and may even be considered an integral part of an under-
paid government offi cial’s compensation.

Ethics is a key consideration, especially at top management levels.
Selecting the right individual to serve as CEO can be a perilous task, especially
when a leader departs abruptly. Although evaluating a person’s professional
qualifications is still important, personal characteristics are gaining promi-
nence. Consider that Boeing’s CEO Harry Stonecipher was dismissed in
March 2005 after directors became aware of explicit e-mails to a female
employee with whom he was having an affair. Events such as these have
prompted directors to search for personal behavior that might disqualify
them as leaders, including sexual harassment, drinking problems, or failing
to file income taxes properly.17

Wal-Mart’s Thomas Coughlin ended his twenty-seven-year stint with the fi rm
in 2005. Originally appointed as director of loss prevention in 1978, Coughlin
was promoted to director of human resources in 1983 and president of the Wal-
Mart Stores division in 1999. In 2003, Coughlin was elected to Wal-Mart’s board.
He retired as an executive in January 2005 due to health reasons, but was forced
to resign from the board two months later when a pattern of expense account
abuses was uncovered. The investigation that uncovered the abuses began when

26061_05_ch05_p093-122.indd 10126061_05_ch05_p093-122.indd 101 1/10/08 11:12:31 AM1/10/08 11:12:31 AM

9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning

W
I
L
L
I
S
,

K
A
S
S
A
N
D
R
A

2
1
6
1
T
S

102 Chapter 5

Coughlin asked a fi rm lieutenant to approve $2,000 in expense payments without
providing any receipts.18

Ethical decisions are not always resolved easily and can even be observed
differently at different times. In 1991, for example, the U.S. Food and Drug
Administration (FDA) banned silicone breast implants in most instances, a deci-
sion that fueled the demise of many of its original marketers who lost billions of
dollars in lawsuits alleging product fl aws, breast cancer, and other serious health
concerns. Dow Corning lost $3.2 billion in settlements and remained in bank-
ruptcy protection from 1995 to 2004. Since that time, however, several major
studies found no link between silicone implants and major diseases. In 2006, the
FDA reapproved the sale of silicone implants. Hence, what was originally termed
as “unethical” behavior by Dow Corning is once again being touted as an accept-
able product.19

What constitutes ethical behavior can be viewed in a number of ways, six of
which are discussed here. The utilitarian view of ethics suggests that anticipated
outcomes and consequences should be the only considerations when evaluating
an ethical dilemma. The primary shortcoming associated with this approach,
however, is that a decision may have multiple consequences, some of which may
be positive, others negative, and still others undetermined. For example, a deci-
sion to layoff 10 percent of an organization’s workforce will harm those who lose
their jobs but may help shareholders by increasing the projected returns on their …

error: Content is protected !!