ULTIMATUMS:

Implication for ECR:

1. What is meant by being fair is different for different individuals
2. And is different for the same person at different times

(e.g. Bargaining what is a fair price to a customer differs from that of the seller, customer
would want to pay less, but seller wants to sell for higher price)


6 MORAL FOUNDATIONS:
Different people may use different perspectives to make moral decisions

1. Care/Harm
- Ability to feel and dislike the pain of others (suffering and need: care for those in
need or suffering, despise cruelty)
- Liberals care more about care than do conservatives
- Conservatives care more about in-group (local, blended with loyalty); liberals care
more in a universalist sense (all innocent victims)

2. Fairness/Cheating
- Based on evolutionary process of reciprocal altruism
- In nature, humans are selfish (tit-for-tat). Nice to people when we first meet them,
but after that selective; corporate with those who have been nice to us/repay and
give favours) and shun those who take advantage of us.
 - Conservatives concerned about proportionality (rewarded to what they contribute),
liberals concerned about equality (social justice for all)

3. Liberty/Oppression
- Resentment and reactance towards those who dominate and restrict peoples liberty
(bullies and dominators)
- Motivates people to come together to oppose the oppressor

4. Loyalty/Betrayal:
- Originated from tribal creatures who formed cohesive coalitions
- Love for loyal team mates and hatred for traitors
- Includes patriotism and self-sacrifice for the group
- Conservatives towards nationalism, liberals towards universalism

5. Authority/Subversion:
- History of hierarchical social interactions
- Based on responsibility for maintaining order and justice more than raw power
backed by force
- Two directions: up towards superiors and down towards subordinates (forge
beneficial relationships within hierarchies; cultivate protection of superiors and
allegiance of subordinates)
- Includes deference to legitimate authority and respect for traditions (support
existing order/ do not negate the order)

6. Sanctity/Degradation
- Sanctity: the state of being holy, sacred or saintly
- Shaped by the psychology of disgust and contamination (disgust and sacred 2
extreme ends)
- Belief that the body is a temple, it can be desecrated by immoral activities
- Conservatives care more about sanctity of life and sanctity of marriage (i.e.
modesty), liberals care more about degradation of nature and environment

Possible qns: Give 2 quotes, link which moral foundation relates to it, how does It differ for
the two diff people.

Ethical Philosophies

Utilitarianism Deontology/Kantian Virtue
Make decisions based Ethical Ethical principles or Integrity and
on consequences duties character
Core Idea The greatest good Every human being A virtuous person
for the greatest has a human right to is one who has
number be treated with character traits
The ends justify the respect (e.g. cheerful,
means The ends do not truthful, honest,
justify the means friendly) that
would constitute a
 Humans should be good and
treated as their own meaningful life
ends Focuses on who a
person is
W.r.t. business 1.Free and 1. Legal rules, role- 1. actual practices
context competitive markets based/professional found in business
2.Public policy duties and the type of
2. Fundamental people that are
duties: human right created by these
to be treated with practices (shows
respect, to that powerful
autonomy social institutions
businesses and our
role within them
have a profound
influence on
shaping our
character)
Challenges/Limitations 1.How to 1. What rights are 1. Different people
measure/determine genuinely human have different
the consequences of rights? (no perceptions of
the action (benefits agreement on the virtue/are brought
and harm) scope or range of up differently
2. Ignores actions rights + who has the 2. Hard to find a
that maybe duty to provide for virtuous person
inherently wrong. such an exhaustive
E.g. Duties list of rights e.g.
principles and healthcare/right to
personal integrity employment etc)
2. Practical
problems due to
multiple rights (esp
when different
rights come into
conflict)

Implications for ECR:
The same individual may use different perspectives to make decisions

EMOTIONS

Implications for ECR:
Emotions may precede judgments about what is right
Some emotions are likely to affect ethical and responsible behaviors

Strategies to address these issues:

1.Follow the law! (benchmark)

2.Be aware that ...
Yours and others definition of what is fair and right maybe different
And may be based on emotions
And may differ at different times
helps you make better decisions (aware of biases)

3.Be aware of advocacy effects and use alternatives

Advocacy Effects (Self-influence)
Advocacy effect the tendency to have more positive attitudes toward whatever and
whomever one advocates than to whatever or whomever other advocates.
We dont always say what we believe but we often come to believe what we say

Why?
Identify with victim
Cognitive dissonance
Criterion most favorable to candidate becomes the criterion (use the same criteria
for the one you advocate for against all candidates)

Therefore, advocacy may not be the solution (definition of fair is different for different
people)

Alternatives:
Perspective-taking: the active contemplation of others psychological experiences
Ask parties to think about the extreme viewpoints for the position (think about the
other extreme, more likely to consider/change to moderate)
Talk about values/criteria for selection (agree on the same or common criteria, e.g.
for recruitment), get emotional commitment, and propose candidate
Get someone, of the opposing party with similar values, to propose the idea.

4.Be high on distributive and procedural justice (and be seen as such)

Distributive justice: Its about the outcome (whether the outcomes are fair)
Procedural justice: its about the process (whether processes are fair)
Was the distribution determined with consistency and transparency (was this
communicated?)
Was it presented with dignity and respect?
Was it communicated?
Note:
Distributive v procedural justice: when processes are seen as fair, people see
outcomes as fair even if they are not favourable (procedural justice leads to
distributive)
Moral mandates: when people have strong moral convictions about the outcome,
they care more about outcomes than about processes (e.g. Abortion resort to
extreme processes to achieve ends)
Importance of voice: In the SR, giving employees the opportunity to voice reduces
beliefs of injustice, but less likely to work in the LR
Difference between being fair and being seen as fair

5.Think about creative (yet, ethical) solutions, especially for right versus right dilemmas.

Right v Right Dilemmas
Truth v Loyalty Maintain confidentiality or be loyal to a friend?
Individual v Skills development or inclusive growth?
Community
ST v LT After 10 years of work experience,
Spend more time with family v rigorous course to get an advanced
degree?
Justice v Mercy Penalize a surbodinate or forgive due to circumstances?

Solutions:
Utilitarian v deontological: go with utilitarian if not deontogically violating
Stick with a side: remove a right that is less favourable and choose one you can
identify with
Find a balance between a right and right

8 Individual Biases:

1. Want/should conflict:
want self fights for whatever will bring more immediate pleasure; what we want
(self-interested self)
should self fights for long-term interests: what we should have

2.Escalation of commitment, moral licensing and moral compensating

Consistent: Morality is central
Escalation of commitment: Rationalise the unethical choice for the first time, use the same
reason the 2nd time, even with higher intensity
Licensing:
Moral credit: First time you were moral; second-time you have the credit to be
unethical
Conceptual abstraction:
o If morality in time 1 was abstract (distant past), in time 2, you will be more
moral/consistent
o However, in licensing, morality is concrete (near past)
Compensating:
Vice versa of licensing

3.Implicit bias/prejudice
Bias that emerges from unconscious beliefs/unconscious stereotypes and attitudes
Implicit bias arises from the ordinary and unconscious tendency to make
associations -> distinct from conscious forms of prejudice
People who are free from conscious prejudice may still harbor biases and act
accordingly
E.g. Sexism (females implicitly associated to family and males to career)

4.In-group favouritism
Empathies only with people in your in-group (e.g. office woman falling down v
beggar falling down; people only stopped to help the office woman)
Discriminate against those different from you by giving extra credit for in-
group/membership
Not so much of hostility towards those different from you, but more of favoritism
towards those in-group
Affected by appearance: situational influences such as object and clothing
 When it comes to extending help; people more willing to extend help to those in
out-group (tattered clothing asking for money) than someone in your in-group.
More tenacious when membership confers clear advantages (when in-group is
socially dominant)

5.Over-claiming credit: (bias that favours you)
Majority of the people consider themselves above average on a host of measures
Tendency to overrate our individual contribution to groups -> leads to an overblown
sense of entitlement
In thinking only of our own contributions -> in fairly judging others whom we
work with
Destabilises alliances (claim too much credit for own contribution, skeptical about
whether the other is doing its fair share -> both tend to reduce contributions to
compensate) -> affects performance and longevity of groups
Reduced employee commitment (feel that he/she is more deserving than other
employees-> when this is not the case, will resent and reduce commitment to
organization which does not seem to appreciate his contribution)

6.Conflict of interest/Motivated Blindness: (bias that favours those who can benefit you)
Look away from unethical behavior because it is more beneficial to do so
Not only leads to intentionally corrupt behavior, can unintentionally skew decision
making
People see what they want to see and easily miss contradictory information when
its in their interest to remain ignorant
Due to powerful conflicts of interests, makes them blind to their own unethical
behavior (other interests supersede ethical concerns)
Executives should work to remove conflicts of interest from the organization -> look
at existing incentive systems

7.Indirect Blindness:
We are instinctively more lenient in our judgment of a person or organization when
an unethical action has been delegated to a third party.
Esp. when there is incomplete information
However, if presented with complete information and reflect on it, indirect
blindness can be overcome
Managers: routinely delegate unethical behaviors to others, and not always
consciously (ends justify the means attitudes) -> must be alert to indirect blindness


8.Overvaluing outcomes:
Managers may reward unethical decisions that produces good outcomes
Many rewards outcomes rather than decisions (do not consider the intention)
When employees behave in undesirable ways, it is most probably due to what you
are encouraging them to do/incentive system
Need to consider the effects of the goals and reward system (sometimes it
unintentionally creates unethical behavior)

Solutions to reduce biases:

1.Be aware! (do not let biases affect decision-making)

2.Label irresponsible behaviors as irresponsible:
Know that such behaviors are irresponsible, less motivated/likely to do so.

3.Question even the little transgressions
The Slippery Slope
When there are minor infractions/gradual ethical decline, more likely to accept
increasing violations
Managers should be on heightened alert for trivial infractions and address them
immediately.

4.Activate the should self
Rehearse how you are going to react when faced with a dilemma (e.g. job
negotiations)
Pre-commitment devices (cash to help undertake things you do not want to do but
you should)

5.Think of (or create) counter stereotypes for implicit biases

6.Consciously consider counter intuitive options, especially in the face of conflict of interest
and over-claiming

Ethical Culture

Formal Systems Informal Systems
Executive Leadership Role Models and Heroes:
Demonstrate moral traits: 1.Role models (mentors) need to exhibit
Being moral ethical behavior
Behaving morally Senior who mentors a junior
Can be a formal/informal process
Conveying the importance of ethical 2.Heroes (symbolic figures) need to exhibit
conduct: ethical behaviors
Role models of ethical conduct Set standards of performance by
Communicate regularly and openly modelling behaviors
about ethics and values May be founders who are no longer
Use of reward systems to hold around, need not be formal leaders
everyone accountable to the set
standards
Selection Systems Norms
Recruiting and hiring new employees: Standards of daily behavior that are
Background checks accepted as appropriate by
References members
Integrity tests the way we do things around here
Ethics-related questions during
interviews
Non-ethics, but related questions
(such as influence of environmental
pressures) during interviews
Explicitly state ethics and integrity
as important (in advertisement and
interview/hiring process)
Policies and Codes: Rituals
More detailed than vision/mission
Provide guidance about behavior in Symbolically informs employees
multiple areas what an organization wants from
Needs to be distributed widely to them
employees + vendors + clients + Can be company-wide or/and
other stakeholders department wide
May be window-dressing
o Needs to be enforced to have
any effect for an organization
Can reduce unethical behavior but
does not promote ethical behavior
Orientation and Training Programs Myths and Stories
Orientation acts as an introduction and
training programs as follow up exercises to Anecdotes/sequence of events
offer more specific guidelines drawn from the organisations
Effective training programs: difficult to history
administer Occur naturally or created through
Training programs have to be story telling sessions
developed to show dilemmas Simple stories work best
employees may face and how to
resolve them
Performance Management Systems: Language
Articulating goals, identifying
performance metrics and providing
 compensation that matches effort Talk about ethics openly and
in relation to goals consistently
Includes formal disciplinary systems Expected that employees talk about
o Figuring out what drives the ethics
results organisations strive for Ethical Talk: requiring discussion of
(financial e.g. bottom-line and ethical issues in all important
non-financial e.g. reputation) decisions
Reflects what is valued in the Avoid euphemisms: sugarcoating
organization actions that may be wrong and
Sanctions: unethical
Sanction systems need to be
extremely strong
Weak sanctions are more useless
than no sanctions (remind people
that they can cheat and get away
with it)
Organisational Authority Structure
Individuals who are independently making
decisions (i.e. think for themselves), with
less direct supervision (i.e. empower
employees) need a strongly aligned ethical
culture to guide them
Whistle-blowing helplines
o Intranets and phone lines ->
Encourage whistle blowing
o Reward whistle blowing (not
good, change the ethical
foundation, once you start
rewarding voluntary action,
people will only do it (for the
reward) or if there is a reward
Ombudsperson (independent and
impartial individual to assist in fair
resolution of complains)
Training programs
Decision Making Processes
Ethical concerns as a formal part of
ALL decision making
Reinforced by:
Regularly addressing ethical
concerns in meetings
Making them an expected part of
managers reports
Less reliance on quantitative analysis (focus
on right thing to do
Appropriate burden of proof (depends on
product & phenomenon)
 Obligation of party to prove its
allegations: Challenger Example

Symbols
1.Physical symbols: Value statement posters, architecture
2.Behavioral sybols (rituals): rites, norms and rituals
3.Verbal symbols: language, legends, myths and stories

Strategies to reduce the role of the context:

1.Pause and think about consequences (ethical or not) about actions
Delay signing contract while thinking about it away from the situation

2.Get second opinion

For others (as an organizational leader),

3.Reminding actor about established moral codes
10 commandments; teddy bears; honor code
Teddy bears: think about innocence and purity -> more ethical
Honor code: think about morality -> more aware of ethical behavior -> engage in
more ethical behavior


Enablers to Speak Up

1.Allies

Easier to come up with decisions with allies who are similar (same values)
Know you better, go up to them, get recommendations and help
Within organization
o Friends, family members, or people who work in similar positions at other
organizations
o Attorney or external expert in extreme circumstances

Know yourself: Lone ranger vs. comfortable with network of allies (depends on
which one you prefer)
Create network in advance (especially if value conflicts are common in the industry)
or at the time of choice (especially if they are sudden)
Most important allies need to be cultivated

2.Selection and sequencing of audience

Critical to decide whom to speak to first (must have similar values to the boss)
Boss vs. persons who have the bosss confidence (advocacy effects when boss
confidence informs the boss, he is advocating your viewpoint for you)
May have to choreograph a series of conversations in order to build support and
buy-in for position (who to speak to first and who to speak to later)
Offline, one-on-one (vs. group) conversations
o Easier and less embarrassing for individuals to change their minds in private
(more easy to convince/change their opposing mindsets)
o Build scripts based on the audience (friends vs professional - need facts and
figures)
o Group is best when you believe it will be easy to garner support

3.Importance of information

Knowledge is power!
Test and retest our initial values position (may realize we were wrong)
Gather data on what kinds of arguments had moved the audience in the past
Emotional v rational appeal (Well-framed and compelling story? v Data-based analysis with
spreadsheets?)
Helps identify allies
Provides us with information to counter the reasons and rationalizations we are likely to
hear
Confidence: with knowledge, more assertive and influence other people to listen to you
more.

4.Questions, not answers

Open discussion with questions
o Positions oneself as genuinely concerned (not just raising the issue to create
trouble)
 o Pose sincere and real questions
At best, other person reconsiders some viewpoints
At worst, you will uncover the most critical arguments you will need to
counter
o Ask for what you want to hear: Have you ever encountered such a (hypothetical)
situation? How did you or someone else handle this situation?
Specially with allies

5.Framing
When you wish to speak up against a colleague for wrongdoing -> Right versus right
dilemma: loyalty vs integrity frame as loyalty to one friend vs loyalty to other
friends
A risk we all want to avoid for everyone, not to blame others
learning dialogue (rather than confrontation) wherein we want to uncover the true
parameters of a decision
win-win situation all negotiations are win-win situations
Truisms as debatable or even patently false

6.Understanding the interests of others
Try to understand what is truly at stake for the person or persons we need to
persuade and why the person or persons is doing that
Therefore,
Avoid building irrelevant arguments
Reveal the need to identify alternate audiences


Influence/Six Persuasion Principles

1.Reciprocity
By doing a favor, we can enhance the chance that others will comply with one of our
requests (obligation/indebtedness)
This works even if its an unwanted request.
o Coke for money experiment (given coke, which he did not want, he reciprocated by
donating money)
Reciprocity can trigger unfair exchanges (some people may go above and beyond to
repay debt
Be the first to offer something (if even just a token gesture) the other party feels
indebted more receptive to what you have to say.
Isnt always about giving something. Making concessions and intangible offerings
makes other people feel as if youve done them a favor.
Make sure your favor is noticed; people must be able to attribute it to you.
Reciptocity helps with forming allies

2.Authority
We are more willing to follow the suggestions of someone who is a legitimate
authority figure
 Authorities can be of two general varieties
o Authorities in general
o Authorities with respect to a specific topic or area
Mere symbols of authority are enough to influence:
o Titles (degrees, status, etc.)
o Physical appearance:
Clothing. Well dressed individuals are seen as more competent (Lab Coats,
Guard Uniform, Well-tailored Business Suit)
Physical Stature (body size)
Bodily posture (standing up straight) and gestures (firm handshakes)

3.Likeability
We should be more willing to comply with the requests of people we know and like.
People like those who like them and are like them
How to others to like you (at least temporarily)?
Compliments
Cooperation: Those who cooperate toward a common goal are more likely to be
helpful to each other.
Physical attractiveness
o Physically attractive individuals are more persuasive
o Halo Effect: Its a tendency of people to rate attractive individuals (environments,
products etc.) more favorably along personality traits and characteristics
Similarity
o People respond well to mimicry when its subtle (other parties must not detect
that you are using mimicry and must be what the person likes)
o Even meaningless similarities (thumbprint shape, same birthday) enhance liking

4.Social Proof
More willing to comply with a request for behavior if it is consistent with what
others around us think or do -> tend to follow societal norms/ cultural norms of an
organization (impactful form of persuasion to alter behavior to norm)
Society operates because people are supposed to abide by norms:
- when they dont, they face social punishment (negative sanctions)
- when they do, they are rewarded (positive sanctions)
Social Proof is effective when...
There is uncertainty when people are unsure, when the situation is ambiguous ->
more likely to attend to the actions of others and accept those actions as correct
There is similarity people are more inclined to follow the lead of similar others
However...
The wrong kind of social proof can backfire. Dont provide social proof if its not the
behavior you want to encourage.
For example, if you want to discourage a detrimental behavior (like shoplifting), you
dont want to make the mistake of characterizing it as regrettably prevalent
It gives people social proof- I know I shouldnt do it, but most other people do it.

 Data, such as measures of central tendency (e.g. average credit card debt) can
potentially lead to constructive influence for some and destructive for others.
People -> tend to measure the appropriateness of their behavior from how far away
they are from the norm or average.
Being deviant is being above or below the mean. This means that the average info
may serve as a magnetic middle that draws people toward the norm regardless of
whether they are above or below the norm.
What to do?
When the odds are stacked against you, communicate that the detrimental behavior
is strongly disapproved.
Focus on what people should do, not what people actually do.

5.Consistency (Commitment)
After committing to a position -> more willing to comply with requests for behaviors
that are consistent with that position.
After taking a stand on a position -> natural tendency to behave in ways that are
stubbornly consistent with the stand.
Public, active, effortful commitments tend to be lasting commitments.
Advocacy effects: when you advocate -> you commit to that viewpoint publicly, less
likely to change mindset/be convinced

Foot-in-the-door technique: (only works if it is in the same domain)
Initial request (small)
By phone, asked women to complete short survey on household products
Intrusive request (big):
3 days later, asked women to allow a few men into the house for 2 hours to
rummage through drawers
o Use small request to get people to commit first and after that they will be more
willing to comply with requests

6.Scarcity
People inclined to secure scarce or dwindling opportunities
People assign more value to opportunities (less available and difficult to attain)
Generally, an adaptive trait because:
o Scarce opportunities/things are generally more valuable, lack of availability
can offer a shortcut cue to its quality.
o As things become less accessible, we lose freedoms.
Techniques that employ the scarcity principle:
o Limited Number/ Deadline/ Only chance

Building Trust:

Has to come across as genuine
1.Reciprocity (same as Persuasion Principle 1)

2.Mere exposure (subconscious)

3.Similarity
Build commonality
Hobbies -> e.g. golf
Education -> SMU Alumnus
(similar to Persuasion Princple 3 likeability)

4.Physical Presence
Same floor, same area (similar to meaningless similarities in Persuasion Principle 3
Likeability)

5.Flattery
Similar to Persuasion principle 3

6.Schmoozing
Small talk: ask about family/friends

7.Self-disclosure/disclaimer

Team Formation

We tend to select team members based on similarity and proximity (rather than
including individuals with diverse expertise, opinions, and viewpoints to harness the
benefits of diverse teams)

Benefits and cost of social diversity:
Homogenous team Diverse team
Type of tasks Higher performance for simple, High performance and innovation
routine tasks (good for creative tasks)
People prefer to work with similar
others, faster and easier to set up a
homogenous team
Group Higher group cohesion Conflict and coordination
Effectiveness Lower turnover problem
Psychological barriers

However, diversity is normatively appropriate and potentially useful for team
performance even if problematic

Psychological Barriers:
Social categorization
Allows us to process social information quickly and also to understand who in-group
members are
Stereotype content model: perceived competence and warmth predicts emotional
and behavioral reactions (Fiske, Cuddy, & Glick, 2007)
 warmth

Competence Warmth:
o Warmth: judged before competence and carries more weight
o Warm (competence) facilitates/hinders other people (self)
o Individuals: warmth and competence are positively correlated
o Groups: opposite (groups that are warm are not competent)
o Warm (Competence) results in active (passive) behaviors

Social categorization sows the seeds for interpersonal conflict
Stereotypes: commonly held beliefs about social groups
o Overgeneralised and resistant to new information (continue to believe in
stereotypes)
o Can affect judgments and behaviors
o Create self-fulfilling prophecies (because of stereotype, stereotyped groups
behave in this manner)
o E.g. Are Emily and Greg more employable than Lakisha and Jamal? A field
experiment on Labor Market Discrimination: looked at numerous
advertisements and sent in CVs. White-sounding names (1/10 chances)
receive 50% more call backs than black-sounding names (1/15 chances)
Stereotype threat: how we judge ourselves wrt stereotype for our group
o Fear that your behavior will confirm a stereotype about a grouo that you
belong to or identify with
o Can enhance/impair performance (e.g. Stereotype that woman are poor
negotiators, if a woman possess stereotype threat, can impair their
negotiation outcomes / Women scored more badly in math tests when they
wore swimsuits compared to sweaters-> conform to stereotypes and tend to
objectify themselves)
Implicit vs. explicit prejudice (Implicit Association Tests)

Information Exchange

Common Knowledge Effect: Group members spend more time discussing
information they have in common.
Why?
Unshared information: less compelling, common knowledge: builds relationship
and trust
Conformity pressures and fear of social exclusion
Group members are anchored by initial preferences
Group members seek confirmatory evidence

Common knowledge leads to Group Polarization: tendency to make more extreme (either
risky or cautious) decisions when in a group than when alone
Why?
Common knowledge effect
Conformity pressures, desire to fit in
Confirmation bias (e.g. when an argument is raised, similar arguments are brought
up)
Dependence on one expert

Maximising the benefits of Informational Diversity/Effective Strategies
1.Determine team members knowledge and expertise
2.Suspend initial judgement, wait for evidence
3.Dont rely solely on the majority principle (may lose out unique information)
4.Includes someone who explicitly signals differences (any form of dissenter is a good form
of dissenter)
5.Create psychological safety (e.g. familiarity) and norms for disagreements

Implications
To maximize the benefits of diverse teams, leaders need to consider both individual-level
and organizational-level interventions:
Individual Organisational
Realize that superordinate goals and Realize that contexts may be
values allow people to see past creating stereotype threat (asking
differences someone to fill in their race or
Take the perspective of diverse gender can create stereotype
others to decrease stereotyping and threat)
prejudice (this works better than Encourage openness, personal
stereotype suppression) development, and high expectations
Ensure that processes, structures,
training, and groups are available to
mentor minority members
Create a culture and incentive
system that values diversity



Corporate Governance: Board of Directors
Boards Responsibilities
Legal Framework Governance Framework
To make Set a corporations policy and Take charge of its own focus,
decisions direction agenda, and information flow

Elect and appoint officers and
agents to act on behalf of the
corporation

Act on major matters that affect
the corporation
To monitor Ensure that management not only
corporate performs but performs with
activity integrity

Set expectations about the tone and
culture of the company

Ensure that corporate culture,
agreed strategy, management
incentive compensation, and the
companys approach to audit and
accounting, internal controls, and
disclosure are consistent and
aligned
To advise Work with management to
management formulate corporate strategy

Help the management understand
the expectations of shareholders
and regulators

Board Characteristics
Board Size Should be governed by the skills needed to do the job
smaller boards are generally better
Board Absence of any conflicts of interest through personal or professional ties
Independence with the corporation or its management
Board Ability to comprehend the issues at hand
Expertise
Board Eagerness to exert oneself on behalf of shareholders
Motivation Meaningful ownership
Identify as director
Identify with shareholders
 Board Separation of the Chairman and the CEO positions
Leadership Reduction of conflict of interest
Nonexecutive chairman can serve as a valuable sounding board
Time and effort needed to do both jobs is high

Board Committees
The Audit Committee The Nominating (and The Compensation
Governance) Committee Committee
-Integrity of the companys financial -Determining the eligibility -Human resources
statements and internal controls of proposed candidates policies and
-Compliance with legal and regulatory -Reviewing the companys procedures,
requirements as well as the governance principles and employee benefit
companys ethical standards and practices plans, and
policies -Establishing and compensation
-The qualifications and independence overseeing self-assessment -A report on
of the companys independent by the board executive
auditor and the performance of the -Recommending director compensation for
companys internal audit function and compensation inclusion in the
its independent auditors -Implementing succession companys annual
-Preparing the audit committee planning for the CEO proxy statement
report for inclusion in the companys
annual proxy statement.



Corporate Social Responsibility
Using IKEAs Global Sourcing Challenge
Thinking through second- Banning/disengaging child labour -> unintended
order consequences consequences (dismissals in Bangladesh)
Children move to more hazardous jobs (e.g. mining, sex
slaves) and worse
Understanding the cultural Complexity of child labor + why does it exist:
context Norms in less-developed countries: children could be
bonded to pay off debts incurred by their parents. With
astronomically high interest rates and very low wages, take
years to pay off such loans

In India, government allows child labor in craft industry as
parents pass on specialized handicraft skills/expertise to
their children

Laws against exploitive child labor were rarely enforced and
prosecution rarely severe.

 Underlying it, is the social issues and poverty in India. Lack
of access to education -> children work instead as parents
have poor health and family is large
Responsibility that In India, government allows child labor in craft industry as
companies (and parents pass on specialized handicraft skills/expertise to
particularly MNCs) face in their children
countries where the local
norms and practices do Laws against exploitive child labor were rarely enforced and
not meet the companys prosecution rarely severe.
own internal standards in
the area of human rights IKEA: appointed Barner as Childrens Ombudson, reporting
to the CEO. Advocates for IKEAs responses to be in the best
interests of the child
Whether to walk away Actively engaged:
from such issues or to IKEA funds partnered with UNICEF, covering 200 villages,
become actively engaged built 103 Alternative Learning Centers to bring 24,000
with the problem and take children back to school
on the role as an agent of 429 Womans Self-help thrift groups to help 6000 woman
change pay back loans or start businesses
IKEAs partnership with WHO to inoculate 150,000 mothers
to be and 140,000 infants over a five-year program
Viewing the problem from Systemic in dealing with the problem:
a systemic perspective ST solutions (attending the show, making decision whether
to partner with Rugmark, decision on whether to terminate
the supply contract)
LT solutions (address underlying problems in India and
directly devise strategies to reduce child labor in India)

Managing Crisis
Trust Radar

 Transparency 1. What you do know, what you do not know, and when you will follow
(what you tell up;
the public) Speed: respond within 8-24 hours (longer the decision maker takes
to decide, public will view as less moral/having smth to hide/guilty)
2. Not the same as full disclosure (i.e. contracts/trade agreements):
But keep an open mind about sharing as much as possible
Do not make no comment (give the impression that the
organisation is hiding something)
3. Is considered violated when the audience believes that relevant
information was wilfully withheld (e.g., no comment);
4. Information needs to be understood.
Do not use technical jargon (public assume you are hiding behind
incomprehensible jargon), speak in a straightforward manner
Expertise 1. Is the organization competent to do the needful?
(capability to Need to convince the public of the organisations competence and its
resolve the motivations (we rarely doubt that the company can do the right thing,
crisis + but we believe that it chooses not to do, due to costs etc.)
whether you 2. For-profits > not-for-profits and government institutions;
want to) (Non-profits: perceived to be caring, but not competent; for-profit: vice
versa)
3. Bringing in third-party experts with credibility may help
If customer perceive a lack of expertise; BODs can nudge management
Commitment 1. Communicating that a problem is being addressed or that a process
(who you use for improvement is moving forward;
+ show Signaled by top management being present & involved in the crisis,
dedication) shows the organisations accountability and care. (may not be true
in all cases- depends on magnitude of crisis)
Using PR professionals as spokespeople may not be effective as they
lack operational responsibilities, people want to hear from leaders
with power to resolve the issue
2. Signalled most effectively by senior management (in most cases)
taking care of the crisis is the companys top priority;
3. When in doubt, use someone a little higher in the management
hierarchy than necessary
Empathy Most important, easiest to be done
(reach out to 1. Needs to be warm, authentic, and sincere;
victims) 2. Not an apology;
A formulaic and insincere apology may appear cynical and calculated
(does more harm than good)
An apology does not need to be an admission of fault and guilt
3. Easiest to overlook

Others:
During reputational crises, companies must act to protect their reputational equity.
Do not conceptualise it as threats and danger and see it as an opportunity to
improve your companys reputation
 Because reputational crises are decisive moments/turning points (how a company
handles have a lasting impact on its reputation) -> companies are on stage during
crises; people pay attention and remember what they do
Global news cycle has shrunk dramatically. Companies must act before they know all
the facts (do not let media reveal its wrongdoings, reassure customers to maintain
and enhance trust in an environment of fear and skepticism)
Building and maintaining trust is most important task during a reputational crisis,
questions of guilt are secondary. Since CEOs and corporations are not trusted, must
be earned through decisive action.
Managing a crisis is the responsibility of business leaders and not legal/public
relations experts. They play a critical role but the focus needs to be on the business
issue at stake, not just legal or technical dimensions

Needs to Consider

1.Reputational Terrain
Does the company have a valuable brand name that can be damaged?
Is the company a multinational firm with global operations?
Is the companys value chain vulnerable on any of the preceding (top and bottom) six
dimensions?

2.Effectiveness of potential boycotts
Do the companys products have credence good qualities?
o A credence good is one whose value depends principally upon what people
believe about it than some verifiable performance characteristic
Are there activists that care a lot about the credence good aspects of the product?
Does the company sells consumer products?
Are there close substitute products available that are easy and inexpensive to switch
to?