Shareholder value ideology, reciprocity and decision making in moral dilemmas.

As a top manager of Company X, you have to make a major purchasing decision. You have received two lucrative offers: one from Company A and the other from Company B. Both Company A and B are well-recognized suppliers in the industry. Company B is your current supplier who has provided parts and supplies to your company for several years without any operational problems. Although Company A has not done business with your company before, you know that parts and supplies of Company A and B are very comparable in terms of quality and that Company A has as good a reputation as Company B in terms of reliability, service and honesty. There will not be any operational problems if you decide to work with Company A. Although both offers are considered very good deals, you have noticed that Company A slightly underbids Company B. If you purchase the supplies from Company A, you will make some savings, which will to some degree enhance the bottom-line profits. However, your information-gathering team has informed you that this deal is very important to Company B's survival. Although Company B has strong business fundamentals and great potential, it has recently experienced a financial shock, which suddenly disrupted its cashflow and put the company on the verge of bankruptcy. This major business deal with your company will provide a lifeline and will get Company B back to its normal business track. On the other hand, Company A is very strong financially, reflecting its better offer than Company B's. If you take the offer from Company A, you will further increase your company profits, but as a result Company B will likely go out of business and its employees will lose their jobs. If you take the offer from Company B, you will save Company B from its bankruptcy at the expense of your company's profits. As a top manager of Company X, you realize that your job and your major obligation are to maximize the company's profitability and wealth, and eventually shareholder's wealth. However, you believe that Company B served your company well in the past and if you make a decision in favor of Company B this time, Company B would provide even greater support to your company in the future when it can. (1) You need to make a decision which offer would you take?

a. Company A's offer, or

b. Company B's offer

Vignette #2: Situation at Company Y

Customers regard the quality of Company Y's products as No. 1 in the industry, and are satisfied with the quality they get and the prices they pay for the company's products. This is reflected in the company's prominent status in the industry and consistently high and well above-average profitability. Recently, the company has discovered ways to make products more efficiently while maintaining the same level of quality, resulting in significant cost savings. With such cost savings, the company can significantly increase the bottom-line profits. However, you know that if the company passes on some cost savings to customers in terms of promotions and discounts, a countless number of customers will be very delighted and extremely satisfied at the expense of the company's profits. As a top manager of Company Y, you have to decide whether to greatly increase your company's profit by not giving any promotions/discounts or to further increase customer satisfaction by giving promotions/discounts to customers. You realize that as a top manager, your job and your major obligation are to maximize the company's profitability and wealth, and eventually shareholder's wealth. However, you believe that customers supported your company's products well in the past, and if you make a decision in their favor this time, they would provide even greater support for your company's products in the future when they can. What would be your decision in this situation?

a. Not to give customers promotions/discounts

b. To give customers promotions/ discounts

Vignette #3: Situation at Company Z

Company Z has been on the path of prosperity with consistently high and well above-average profitability. Most employees have been with the company for several years, and the company had a negligible employee turnover rate in the past decade. After critically reviewing the company's business operations, you realize that the company only needs about 80% of current employees to keep the business running and sufficiently growing in years to come. Eliminating 20% of current employees will instantly result in a significant increase in the company's bottom-line profits at the expense of those employees. If you keep the unneeded jobs, the company will not operate at its highest possible level of efficiency and will forgo the opportunity to potentially increase its profits. As a top manager of Company Z, you have to decide whether to keep the current size of your workforce or to downsize/layoff 20% of current employees. You realize that as a top manager, your job and your major obligation are to maximize the company's profitability and wealth, and eventually shareholder's wealth. However, you believe that employees served your company well in the past and if you make a decision in their favor this time, they would provide even greater efforts to serve your company in the future when they can. What would be your decision in this situation? a. To keep the current size of employees

b. To downsize/lay off 20% of current employees

References

Alexander, C. S. and]. Becker. 1978. "The Use of Vignettes in Survey Research." Public Opinion Quarterly 52: 3647.

Axelrod, R. 1984. The Evolution of Corporation. New York, NY: Basic Books Inc.

Babbie, E. 1995. The Practice of Social Research (7th ed.). Harrisonburg, VA: Wadsworth Publishing Company.

Berman, S. L., A. C. Wicks, S. Kotha and T. M. Jones. 1999. "Does Stakeholder Orientation Matter? The Relationship Between Stakeholder Management Models and Firm Financial Performance." Academy of Management Journal 42: 488-507.

Bhide, A. 1996. "The Questions Every Entrepreneur Must Answer." Harvard Business Review 74: 120-30.

Bucar, B. and R. D. Hisrich. 2001. "Ethics of Business Managers Vs. Entrepreneurs." Journal of Developmental Entrepreneurship 6: 59-82.

Campbell, D. and J. Stanley. 1963. Experimental and Quasi-experimental Design for Research. Chicago, IL: Rand McNally.

Cappelli, P., L. Bassi, H. Katz, D. Knoke, P. Osterman and M. Useem. 1997. Change at Work. New York, NY: Oxford University Press.

Cialdini, R. B. 1998. The Psychology Influence of Persuasion. New York, NY: William Morrow.

Donaldson, T. 2003. "Editor's Comments: Taking Ethics Seriously--A Mission Now More Possible." Academy of Management Review 28: 363-66.

Drucker, P. F. 1954. The Practice of Management. New York, NY: Harper & Brothers Publishers.

Evan, W. M. and R. E. Freeman. 1988. "A Stakeholder Theory of the Modern Corporation: Kantian Capitalism." In Ethical Theory and Business. Eds. T. Beauchamp and N. Bowie. Englewood Cliffs, NJ: Prentice Hall. pp. 75-93.

Freeman, R. E. 1984. Strategic Management: A Stakeholder Approach. Boston, MA: Pitman.

Friedman, M. 1987. "The Social Responsibility of Business." In The Essence of Friedman. Ed. R. Kurt. Stanford, CA: Hoover Institution Press.

--. 1982. Capitalism and Freedom. Chicago, IL: University of Chicago Press.

Gattorna, J. 1998. Strategic Supply Chain Alignment: Best Practice in Supply Chain Management. Hampshire, UK: Gower Publishing Limited.

Gbadamosi, G. 2004. "Academic Ethics: What Has Morality, Culture and Administration Got To Do With its Measurement?" Management Decision 42:1145-61.

Gouldner, A. W. 1960. "The Norm of Reciprocity: A Preliminary Statement." American Sociological Review 25: 161-78.

Harris, J. R. 1990. "Ethical Values of Individuals at Different Levels in the Organizational Hierarchy of a Single Firm." Journal of Business Ethics 9: 741-50.

Hoffman, J. J. 1998. "Are Women Really More Ethical than Men? Maybe It Depends on the Situation." Journal of Managerial Issues 10 (1): 60-73.

Hood, J. M. and J. M. Logsdon. 2002. "Business Ethics in the NAFTA Countries: A Cross-cultural Comparison." Journal of Business Research 55: 883-90.

Hughes, C. T. and M. L. Gibson. 1991. "Students as Surrogates for Managers in a Decision-making Environment: An Experimental Study." Journal of Management Information Systems 8: 153-66.

Hunt, S. D., V. R. Wood and L. B. Chonko. 1989. "Corporate Ethical Values and Organizational Commitment in Marketing." Journal of Marketing 53: 79-90.

Jennings, D. F., T. G. Hunt and J. R. Munn. 1996. "Ethical Decision Making: An Extension to the Group Level." Journal of Managerial Issues 8 (4): 425-39.

Joshi, A. W. and S. J. Arnold. 1998. "How Industrial Norms Affect Compliance in Industrial Buying." Journal of Business Research 41: 105-14.

Key, S. 2002. "Perceived Managerial Discretion: An Analysis of Individual Ethical Intentions." Journal of Managerial Issues 14 (2): 218-33.

--. 1997. "Analyzing Managerial Discretion: An Assessment Tool to Predict Individual Policy Decisions." The International Journal of Organizational Analysis 5: 134-55.

Marcoux, A. M. 2003. "A Fiduciary Argument against Stakeholder Theory." Business Ethics Quarterly 13: 1-24.

McKinley, W., J. Zhao and K. G. Rust. 2000. "A Sociocognitive Interpretation of Organizational Downsizing." Academy of Management Review 25: 227-43.

Nozick, R. 1987. Anarchy, State and Utopia. New York, NY: Basic Books.

Nyaw, M. K. and I. Ng. 1994. "A Comparative Analysis of Ethical Beliefs: A Four Country Study." Journal of Business Ethics 13: 543-55.