Ethics and social responsibility in strategic planning with stakeholder considerations

¶ … Balanced Business Ethics

Ethics and Social Responsibility in Strategic Planning

Business ethics may be much easier to understand in the hypothetical world of academia than they are to apply on behalf of business organizations in the real world of business. That is particularly true when doing the proverbial "right thing" comes at substantial financial costs to the organization. On one hand, the needs and agendas of shareholders and other stakeholders in the business of the organization are among the most important considerations in business planning. On the other hand, some of the decisions that are in the best interests of shareholders and other stakeholders in the business of the organization necessarily come at the expense (or at great risk in other respects) of other entities. Strategic planners have fiduciary and due diligence (and other) responsibilities to maximize profit and to benefit the organization in other ways. Meanwhile, those responsibilities frequently conflict directly with the needs and agendas of external stakeholders including the general public.

Therefore, efficient strategic planning is a more complex process than simply charting the best conceivable business strategy for the organization. It must also incorporate ethical responsibilities and a means for optimizing business objectives within the appropriate parameters outlined by applicable ethical concerns of all stakeholders. In contemporary industry and big business, incorporating ethics into strategic planning involves much more than isolated decisions about specific elements of business. Business ethics cannot be introduced for the first times to the executives making strategic decisions: ethical training must be part of academic and other formal training, employee development, and more generally, throughout the organizational culture.

Strategic Business Planning Scenarios

In the 1990s, the Nike Corporation had to respond to ethical criticism of its business practices as a result of some of their outsourcing strategy to reduce overhead costs (Zadek, 2004). It eventually became clear that Nike had never made any conscientious effort to monitor the working conditions and practices in the impoverished foreign nations where Nike contracted out much of their production processes. In fact, initially, Nike actually defended its non-regulation of working conditions in its foreign facilities under the argument that every sovereign nation maintained its own labor laws and public policies (Zadek, 2004). However, in the late 1990s, Nike reversed its position and developed a corporate code of conduct to ensure that all of its facilities adhered to basic ethical business practices according to the same principles that govern human welfare in the workplace in the U.S.

Conversely, British Petroleum and its various subsidiaries responsible for the 2010 Deepwater Horizon Oil Rig disaster never rectified the flawed ethical design within their collective business strategy. Retrospective investigation and analysis revealed that the initial blowout of the wellhead could have been prevented if the primary stakeholders had fulfilled their ethical responsibilities to the general public, the environment, and to the workers in harm's way. Specifically, equipment that should have been replaced on the wellhead assembly to prevent a blowout was deliberately not replaced because operational managers refused to interrupt oil extraction to do so (Foley, 2011).