The Role of Ethics and Social Responsibility, Essay Example

In business there will always be the line to act with integrity or to lie, cheat, and steal. Famous author Douglas Adams once said, “To give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.” (Heathfield, n.d) The priorities of any business is to serve the needs and wants of the customer and more importantly their stakeholders. Any business decision that is made in major corporations must line up with stakeholder’s interests, but more importantly stakeholders have the social responsibility to act in the best interest of the entire company. With the prevalence of so many major scandals with corporations caught in the public, it is drawing much needed attention on concepts of ethic and social responsibility. Ethics and corporate responsibility is a direct application of the ideas of in actual business practice. The purpose of the paper is to explain the role of ethics and social responsibility in developing a strategic plan while incorporated the stakeholder interests.

Business execs have the responsibility to adhering to the unspoken ethics they have not only been taught but have been enforced by society and the law. Ethics are inherently common sense decisions made by those in authority with the power to affect an entire organization. When business executives make decisions they must consider business ethics and the organizations (stakeholders) values. One the essential questions ask is, “Do the organization’s values reflect accepted society values? (Young, 2004) Business executives must execute strategic business plans where they take into account not only each value associated with each choice, but the consequences of each choice. The interests of the stakeholder is one of the prime obligations of an organization. The demands of the stakeholders are generally to increase profits, this is echoed by economist Milton Friedman, “the “one and only one social responsibility of business” is “to increase its profits,” assuming an honest and open marketplace.” (Bigelow, 2013)  According to Friedman also that corporations owe no responsibilities to society. However, critics will disagree that corporate social responsibility is to always put the customer firs, which ensures a customer’s happiness and loyalty. Stakeholders are not only investors into companies but they also have voting power which carries social and financial influence within the company. Their social responsibility is to the customers and to the employees. (Jones, 2012) They have decision power, and ultimate control over allocation of resources. Corporations and organizations ultimately exist to satisfy the needs and agendas of the stakeholders.

The problem lies in however, when the needs and the agendas of the stakeholders can blur the line between what is ethically right and what can be considered against the law. The organization’s obligation to the stakeholder is as much as a priority as the relationship to the public. “The relationship between a customer and a firm exists because of mutual expectations built on trust, good faith, and fair dealing in their interaction.” (Ferrell, 2004) When creating a strategic business plan the organization must incorporate its social responsibilities for the customer, and prevent any ethical dilemmas. Clear examples that have recently captivated the news over the decade has been the highly publicized cases of Waste Management, Enron, WorldCom, Tyco, HealthSouth which exaggerated earnings to meet the expectations of stakeholders, Freddie Mac, AIG, Bernie Madoff, and host of others. These examples of accounting fraud, manipulation of books, and stealing from clients were made by top executives in the position to meet the expectations of stakeholders and not making ethically sound decisions.

In order to prevent these scandals from occurring and ruining not only the organization and the employees, but also the public’s faith within the corporate world. According to research ethical risk management is an option that is dependent on the infrastructure in which it promotes ethical conduct and standards. The directives and the support from management in the way it manages potential problems with the lack of ethical standards. Due to the number of scandals not only have businesses implemented stronger measures for ethical practices but so have the legal systems. The passage of the Sarbanes-Oxley Act (SOX) in 2002 which came after the scandal of WorldCom, was due to number of major corporations collapsing under the weight of their own unethical practices. According to the SEC, “the Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the “Public Company Accounting Oversight Board,” also known as the PCAOB, to oversee the activities of the auditing profession.” (SEC, 2012) Ethics is a fundamental part of compliance and governance systems. Ethics should be explicitly integrated into the elements of strategic planning in businesses.

In determining the roles that factor into managing stakeholder’s interests ethically organizations must first take into consideration that the business is the first line of defense in taking responsibility for managing and supervising corporate responsibility effective in accordance with the level of impact set by the organization. Executives in a position to communicate to stakeholders must always implement ethical decisions when balancing their needs and the organizations’. The executives must be responsible in providing clarification and verification of ethical standards in place. The executives must drive the culture and work environment of compliance towards ethical standards and practices to ensure the effectiveness. Business ethics is important in every organization and the main responsibility is to act with integrity and honesty.


Ferrell, O.C. (2004). “Business Ethics and Customer Stakeholders.” Academy of Management Executive. Vol. 18. No.2. Retrieved from

Bigelow, Lisa. (2013). “What Are the Social Responsibilities of a Company to Its Stakeholders?” Chron. Retrieved from

Heathfield, Susan. (n.d) “Inspirational Quotes for Business and Work: Integrity.” About. Retrieved from

Jones, Gareth. (2012). Organizational Theory, Design, and Change. 7th Edition. Prentice Hall. New York, NY. Book. “The Laws That Govern the Securities Industry.” (2012). SEC. Retrieved from

Young, Peter. (2004). “Ethics and Risk Management: Building a Framework.” Risk Management. Vol. 6, No.3. pp. 23-34. Retrieved from