Enhancing Organizational & Marketing Efficiency Through Ethical Decision Making: Implications and Propositions for Stakeholders

Abstract

This paper proposes to investigate the relationship between ethical decision-making and organizational efficiency by focusing on the objectives of corporate social responsibility (CSR). Most corporations tend to acknowledge the relationship between the long-term corporate performance and the firm’s ability to reconceive a corporate social model that promotes social responsibility and value sharing (Porter and Kramer, 2011). The marketing literature on corporate social responsibility highlights the importance of ethical marketing practice and its impact on corporate performance (Kotler and Levy, 1969; Kotler, 2005) and underscores the need for adopting an ethical marketing approach when addressing societal issues (Maignan and Ferrell, 2004; Hunt and Vitell, 2006). A significant research corpus has brought to the fore the importance of corporate social responsibility in building organizational capabilities (Carroll, 1991; Donaldson and Preston, 1995). Recent studies have shed light on the links and circular causalities between responsible marketing actions and the stakeholders’ commitment to ethical values, social objectives and value sharing (Bhattacharya and Korschun, 2008; Hult et al., 2011; Maignan et al., 2011; Ferrell et al., 2010). A similar strand of research has emphasized the relationship between marketing objectives and corporate sustainability (Lurenco et al., 2012; Sheth et al. 2011), and highlighted the links between ethical values and corporate governance (Spitzeck, 2009; Jo and Harjoto, 2012; White et al., 2012). Placed within the broad canvas of corporate social responsibility, our research seeks to assess the mediating role of stakeholders in designing and implementing a sustainable value proposition for the firm. Moreover, by making a case for building a multilayer basis of productivity, we reckon that ethical attitude constitutes a deliberate attempt to link the firm’s governance architecture to the way by which stakeholders’ decision-making processes can infuse sensemaking and sensegiving across the firm’s boundary. (Weick,1995; Balogun and Johnson, 2004). It is further argued that by raising the firm’s ethical standards, corporations can enhance transparency and foster trust among stakeholders, a condition that is expected to bring stakeholders together in an attempt to reduce constraints imposed by stakeholders’ interest trade-offs (Freeman, 1984, Freeman et al. 2005). A significant research corpus in social sciences has brought to the fore the mediating role of trust and its impact on market performance and organizational efficacy. Social exchange theories offer an explanation of how value can be created and captured through trust and cooperation among stakeholders (Blau, 1964; Sheth and Parvatiyar, 1995; Tynan, 1997; Wagner and Bouteiller, 2002). Despite an abundant literature on the topic of trust, there has been little field research on how trust can be fostered and sustained within a firm’s boundary. The question of trust and value creation brings to the fore the ethical role and responsibility of stakeholders and their value system. This perspective shapes the strategies of firms themselves where value is no longer bounded by one’s personal value but is instead tied to a broader context of stakeholders’ inter and intra-firm relationships. As such, a corporate value system emanates from not only personal values but also common organizational work ethics, morality, and value system. One should be reminded that individual work ethics is associated with ones’ cognitive state of self-esteem, work experience, justice and altruistic motivations, as well as self-regarded preferences. In contrast, organizational ethics encompasses firm’s choices and dimensions that tie economic and social performance to corporate governance. The domain, nature, geography and size of operation have a direct bearing on the firm’s business and governance models. Corporate social and cultural environments are further shaped by the extent of trust among the firms’ stakeholders. One may note that trust and trust reciprocity are likely to affect stakeholders’ expectations that emanate from moralistic, materialistic, altruistic, opportunistic motivations of stakeholders (Olson, 1965; Hardin, 1968; Ostrom, 1999). A contrario, the absence of trust affects the outcome of corporate actions. Arrow (1951) and North (1990) suggest that the social exchange dynamics depends on the norms and institutions that foster mutual trust and uphold social capacity as a universal value system.