Stakeholder relationships

Ethics at
organizations

• The practice of ethics in business does not happen in a vacuum.

• In every decision and action there are several persons involved.

• Unethical decisions are usually not made by one person alone but
become the result of several relationships at play in the organization
Ethics at
organizations

• Businesses exist because of relationships between managers,

employees, customers, shareholders, stakeholders, investors,
suppliers or buyers – all interacting with one another

• Frequently in many large organizations (such as privately listed or

publicly listed companies) there is a governing body known as the
Board of Directors (usually called ‘The Board’)
Ethics at organizations: oversight by
BoD
• The Board of Directors (B o D) is supposed to set strategic objectives and
provide oversight into the company’s actions

• The Board of Directors is made up of Directors appointed by company’s

major shareholders to protect and further their interests.
• The Directors may sometimes be the major shareholders themselves or
someone appointed by them. Sometimes a major shareholder may be a
large corporation, trust or government body. In that case they will appoint
someone as Director on the Board
• The Directors on the Board are tasked with ensuring that the company is
properly managed and fulfils the strategic objectives set by the Board for
the company
 Ethics at
organizations
• When unethical acts are discovered in organizations usually it is found
to have been the result of:
i. Acceptance (people knew it was happening but did not want to
disturb things), or of
ii. Complicity (several people turned a blind eye to what was
happening) or of
• Poor reporting systems (no one knew what loopholes existed and
iii.what gaps needed to be plugged)
Ethics at
organizations

• Some companies may make a lot of money by doing unethical acts

but this does not necessarily mean that they want their employees to
also make lots of money breaking the law unless that money is being
made by the company

• Companies that carry out unethical acts knowingly also do not want
to be caught nor do they want their employees making money at
their expense.
Ethics at
organizations
• Many companies thus see honesty as the best policy (Honesty is the best policy) .

• Basically the more honest a business is, the more your customers, regulators and
employees will trust you and that makes it less expensive to do business.

• So for example Eli Lilly, a large privately managed US multinational had some
issues with people dying from its drugs. Its positive image in the minds of
consumers, meant that they would not believe the company had done anything
wrong and it must be some other issue.

• By contrast when Pakistani Pharma companies’ have issues, the public always
feels like it must be their fault because they are perceived as dishonest
Ethics at
organizations
• Very few decisions are made by a single person.
• Similarly, very few decisions are carried out by a single person

• Thus, relationships between people, departments, business areas and

between businesses are what carries out the order.

• And just as relationships result in organizational success, so too do

they result in organizational failure and in organizational
misconduct
Stake Holder
Framework
• This framework allows us to identify both internal and external
stakeholders
• The Stakeholders are all those persons, institutions or firms who have
a stake in the successful functioning of the organizations
• The Internal Stakeholders are employees (they have a stake in
the successful functioning of organization t secure their jobs and
livelihoods), investors (who put their money into the organization),
the Board of directors (who oversee the management of the
organization) and manager (which includes the management)
Stakeholder
Framework
• The External Stakeholders are customers (who have a stake in buying
from the organization), government agencies (because of the taxes paid by
the organization), regulators (who need to regulate the organization),
special interest groups and others

• All of these stakeholders agree, collaborate and engage in activities

necessary to ensure organizational success.

• Most ethical issues exist because of conflicts of interest in values, beliefs

and practice of what is right and wrong among and within stakeholders
Stakeholder
framework
• The Stakeholder framework in organizations allow us to identify,
monitor and respond to the needs, values and expectations of
different stakeholder groups.

• The Formal System of accountability and control is known as

Corporate Governance.

• Theoretically Boards of Directors provide oversight for a all

management decisions and the use of resources by the organization