Role of Ethics and Social Responsibility in Strategic Planning
Ethics refers to the rules and regulations set by various agencies, which must be followed by all stakeholders in a certain industry. They refer to the principles that define the behavior of organizations. Social responsibility is the act of giving back to the society whereby organizations come up with programs aimed at benefiting the locals. Ethics and social responsibility have the role to play as far as market competition is concerned. Organizations that observe ethics perform well in the market because consumers tend to trust them. In the same way, organizations that establish programs aimed at benefiting the locals are always perceived positively. From time to time, organizations are frequently faced with the problem of handling stakeholders. This means that the role of the management is not only to satisfy shareholders and employees. Some decisions that organizations make have direct effects to the public (Snider, Hill, & Martin, 2003). In this regard, organizations must make decisions that cater for the interests of all stakeholders. In many cases, organizations focus on the needs of stakeholders to an extent of forgetting its own interests. This should never be the case because the management must ensure that it arrives at a win–win situation.
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The Role of Ethics and Social Responsibility
As earlier noted in the introduction, organizations have a role to play in order to satisfy their stakeholders. Without satisfying stakeholders, the organization might lose their trust hence affecting their market share. Therefore, whenever the organization makes decisions, the process must take into consideration the wishes of the public. In this case, the decisions must observe the internationally recognized standards and norms. Without considering the interests of stakeholders, the organization might blemish its reputation. An organization must always follow the established believes in order to win the public trust. In this case, ethics has a role of ensuring that the organization achieves its financial needs and targets. Whenever the organization deals with the public, it must always be courteous. For instance, the management must always communicate to the public in the right time each time new policies are introduced. In particular, the organization should inform the public the reasons why a retrenchment program is undertaken (Kratschmer, 2011).
Many organizations tend to close their businesses each year without informing the public their financial performance. This is unethical because the community might thing the organization is hiding something. The management should try as much as possible to keep the public updated on the progress of the organization. Through this, the public can easily adjust to new changes because change is always hard to embrace. When the organization introduces new policies without informing all stakeholders, it may lead to hostility and anger. Keeping in touch with the community helps other stakeholders to adjust to change gradually as opposed to radically.
The organization should not just focus on making profits. It should also consider the needs of stakeholders who rely on the organization. Ethics helps the organization in keeping away from unnecessary criticism. In many cases, organizations are taken to court on matters related to environmental degradation. Observing ethics would avoid legal tussles, which affect the performance of the organization in a number of ways. Corporations have paid huge fines owing to claims that they contribute to air and water pollution. Corporate social responsibility strengthens the relationship between the firm and the community. For instance, a firm can come up with a program that would ensure that the locals receive water, medication, education, and sanitation. Whenever the organization faces the charges of misconduct, the community will be quick to support.
Overstepping Ethical Boundaries
A number of organizations have overstepped their mandate in the market. This means that organizations engage in unethical behaviors, which affect their images in the community. The Enron scandal is one of the examples showing how organizations engage in unethical activities. The Enron scandal affected the corporate image of America. In the scandal, business executives overstated the financial capabilities of firms yet firms were facing serious financial crisis. Investors were fooled to believe that their stocks were doing well in the market yet organizations were simply registering losses. After sometime, the real financial positions of many firms were revealed. Many individuals lost their investments. Some were forced to close down their business because they depended on Enron. Whenever this happens, shareholders lose trust in the organization. This means that they would probably keep off from the organizational goods and services. Some would definitely shy away from organizational stocks. This affects the organization because it would not make adequate profit (Snider, Hill, & Martin, 2003).
An organization can take preventive measures to ensure that stakeholders do not lose trust. For instance, the board directors can force the management to give accurate information to the public. This is done through incorporating the services of financial consultants, who should undertake regular assessment and report to the directors in time. Through this, the management cannot have time to take the community for a ride.
Kratschmer, P. (2011). Organizational Culture is Highly Resistant to Change: Discuss. New York: GRIN Verlag.
Snider, J., Hill, R., & Martin, D. (2003). Corporate social responsibility in the 21st century: A view from the world’s most successful firms. Journal of Business Ethics, 48(2),175–187.