Ethical Issues in Strategic Management

Strategic management focuses on how an organization uses a strategic planning process to make decisions. All managerial actions must theoretically match an organization's central goals and department-level operational goals. Ethical issues in strategically managed organizations surface when managers make decisions to advance goals that have negative consequences.

One of the biggest problems a company could face in terms of corruption occurs when a manager or another powerful person uses a position of power to make deals that benefit himself while not benefiting the company or its stakeholders, including shareholders and workers. A company must define a code of ethics to hold all of its employees accountable for their decisions, including prohibiting them from using their business relationships, knowledge, equipment and other resources belonging to the company for personal financial gain.

A business strategy may call for finding the most cost-effective ways to produce goods for the company. For example, contracting out to factories in developing countries because labor and materials are cheaper could save tons of money for the company; however, the social impact for the company brand might not be worth it if workers are employed in sweatshops with very low wages and poor working environments. A company must consider the ethics of services it pays for inside and outside of the country to demonstrate its social responsibility.

Companies can develop and operate in such a large arena that the amount of resources they control makes them more powerful than a small or resource-poor country. In this way, the decisions of the company that seem to benefit one part of the company and be in the public interest and economic interest for one country might hurt the interests of another country. A company should study the impact of its business strategies across national borders and within regions and smaller communities to gauge whether they are in the public interest.

Companies also take actions that negatively affect the natural environment, such as pollution and natural resource exploitation, in one or more operational locations. A firm can make better decisions and protect the environment using standards of an environmental management system. This system might include standards shared by companies in the same industrial or commercial sector, including compliance with laws and regulations, studying health and safety effects of business practices and products, and working with the public and government agencies in an open way to comply with acceptable standards.