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1.1 Definitions

The need for corporate governance arises out of the divorce in modern corporations between the rights of shareholders and other suppliers of capital on the one hand, and the operational control, which is in the hands of professional managers, on the other. This can be described as the ‘principal–agent’ problem. Put simply, the question is: will the managers run the corporation exclusively for the long-term benefit of the shareholders, and what mechanisms can be put in place to ensure th
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6.6 The social construction of unknown risk

While some risks can be quantified, many are unknown. In the face of such uncertainty our approach to risk depends on fundamental assumptions about the way the world works which cannot be readily subject to empirical test. Different social groups have different approaches to uncertainty. Schwarz and Thompson (1990) characterise these in terms of what they describe as four myths of nature. Adams (1995) has conceptualised these in terms of a ball on a surface (
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6.3 The psychology of risk

Within the psychological paradigm there is a different starting point for understanding risk. In financial economic accounts, risk is generally regarded as a combination of the expected magnitude of loss or gain and the variability of that expected outcome. Human perception of risk works rather differently. There are two other important components of risk that influence our perceptions: the fear factor – how much we dread the potential outcome – and the control factor
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5.5.1 Coercive pressures

Coercive pressures come from the social sanctions that can be applied if we do not act in socially legitimate ways. The law is one source of coercive pressure, but so too is the knowledge that you will get promoted only if you act in ways which fit accepted ways of doing things in your organisation.


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4.5.2 Anchoring adjustment

Many decisions need revisiting and updating as new information comes available. However, most of us make insufficient anchoring adjustment: this is the tendency to fail to update one's targets as the environment changes (Rutledge, 1993). Once a manager has made an initial decision or judgement then this provides a mental anchor which acts as a source of resistance to reaching a significantly different conclusion as new information becomes available. It is what happens when one has made
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3.3 Limitations of the rational-economic perspective

As an approach to understanding economic life, the assumption of formal rationality has been very successful. For example, there is great deal of evidence that, on average, prices in financial markets behave as if investors were formally rational. However, there is also a great deal of evidence that individuals do not behave in this way (e.g. de Bondt, 1998). Even within the field of financial economics, there is increasing interest in developing theories of market behaviour which take better
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2 The ‘business sense’ of an ethical approach

Sternberg (1995: 125) argues that treating employees ethically is not an optional extra but an essential ingredient in maximising long-term value:

Treating employees ethically simply means treating them with ordinary decency and distributive justice. The ethical business rewards contributions to the business objective, and is honest and fair to its staff; it avoids lying, cheating and stealing, coercion, physical v
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1.2 The relationship between stakeholders and the organisation

Public and voluntary sector organisations do not have the same shareholder obligations as those in the private sector. However, as the distinction between public and private sector organisations becomes blurred, there are concerns that the ethical role of public service organisations – defined as acting in the public interest through a public service ethos – is being undermined. As public service and non-profit organisations are increasingly expected to achieve targets and become more ‘
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Learning outcomes

After studying this course, you should be able to:

  • explain the relationship between strategy and the ethical dimension of organisational purposes.


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References

Bain, P. and Taylor, P. (2004) No Passage to India? UK Unions, Globalisation and the Migration of Call Centre Jobs, Work, Employment and Society Conference 1–3 September 2004, Manchester.
Cowe, R. and Porritt, J. (2002) Government's Business: Enabling corporate sustainability. London: Forum for the Future.
Knox, S. and Maklan, S. (2004), ‘Corporate Social Res
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4 Conclusion

The primary thrust of this course has been to emphasise the need for all organisations to acknowledge the influence of their environments and, in turn, the impact of organisations on their context. We have argued that the commercial environment is characterised primarily by the growing trend toward globalisation. To a much greater extent than ever before we live in a global village where goods and services will be produced wherever they can be provided at the least cost. Consumers in the West
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3.2 CSR reporting

We mentioned earlier three reasons for environmentally friendly behaviour, effectively deriving from personally held values, niche marketing or regulatory pressure. To a large extent the same holds true for ethical behaviour.

Some organisations have a long tradition of good citizenship, ranging from the UK social housing of Bourneville or Port Sunlight, through to community involvement schemes from such as Xerox and IBM. Financial sponsorship of good causes, whether that be artistic end
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3.1 Codes of conduct

One of the principles of the European Union Emissions Trading System discussed by Schultz and Williamson (2005) is that an organisation accepts responsibility for the performance of their suppliers. In an age where multinational corporations are able to reduce the production costs of their goods and services by offshoring it to whoever can meet the specification at the lowest cost, what responsibility do they have for the conditions under which production actually occurs?

One of the fir
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2.2 Regulatory initiatives

Box 2 Political will

‘We know the solution: sustainable development. The issue is political will.’

Prime Minister Tony Blair, World Summit on Sustainable Development, Johannesburg, 2 September 2002


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2.1 The response of business

For most of human history, our influence on the planet has been small (i.e. sustainable). The waste produced by our presence has traditionally been dealt with by a process of dilution; burying things, or perhaps dumping them in the ocean, was a viable proposition because we were few and the land and the oceans were vast. Mankind was a minor perturbation on the planetary ecosystem. But with change as the ever-present factor, we grew in both numbers and influence.

In the last century, the
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1.2 Offshoring

The premise is straightforward. Given modern telecommunications capability, it matters little where telephone support is based. India, with a large population of English-speaking graduates and low (by Western standards) wage rates is an obvious choice. The significant cost-savings look very attractive to many organisations.

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1.1 Globalisation

Globalisation is something we tend to take for granted, mostly in the form of the remarkably low prices we pay for our consumer goods. When the first pocket calculator was launched in the UK in 1972, it cost £79 plus tax, an amount close to the average monthly take home pay.

Ten years later came the original IBM PC. Replete with a 4.77 MHz processor, 64kB RAM, a 12″ monochrome monitor (and an optional floppy disk drive!), it carried a UK price tag in excess of £1500, at that time a
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Learning outcomes

After studying this course, you should be able to:

  • understand the need for organisations to acknowledge the influence of their environments

  • understand the impact organisations have on those environments.


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Introduction

‘Environment’ is one of the more popular words in the management lexicon, most generally understood to be referring to ‘something outside’. But common usage today often interprets the Environment (with or without the capital ‘E’) as referring to the planetary ecosystem. On that basis the Environment includes such things as global warming, the state of the ozone layer, deforestation and the means of energy generation. Organisations need to coexist with their environment, responding
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