Chapter 11

Corporate Responsibility, Ethics and Strategic HRM

This chapter aims to:

• Explore the growing interest in ethics and Corporate Social Responsibility

• Understand the economic and socio-political context of HRM

• Discuss the relevance of ethical theories, the law and theories of rights and justice to HRM

• Consider organisations as human organisations and how people within them are critical to the delivery of ethical behaviour, at all levels

• Assess the nature and use of organisational values and ethical codes

• Assess HRM as a profession and its role in organisational ethics and Corporate Social Responsibility (CSR)

Corporate Social Responsibility and Business Ethics

• What’s in a name?

• Corporate Responsibility/Social Responsibility/CSR

• All imply taking into account range of stakeholders in considering economic, social / political and environmental factors

Other terms include:

• Corporate Philanthropy ‘giving to others in need’

• Corporate Citizenship ‘acting as agents in economic, social and political issues’

• Sustainability ‘the link between a sustainable business and a sustainable planet’

CSR – Definitions• ‘business decision-making linked to ethical values,

compliance with legal requirements, and respect for people, communities, and the environment’ Originates from a US organisation that encourages corporate social responsibility, Business for Social Responsibility (www.bsr.org)

• ‘process by which a company manages, measures and reports its commitment to improve its positive impact on society and the environment’ Emphasises that ‘to be successful and sustainable’ CSR approaches ‘must be integrated into the very heart of the business and not left as a separate function or responsibility’ (www.bitc.org.uk)

Growing Interest and Awareness of Ethics and CSR

• High-profile scandals and unethical behaviour• Demand for ethical behaviour• Globalisation and instant communications• Public awareness and consumer behaviour• Reputational risk• Used as a ‘competitive advantage’• Offensive and defensive marketing

Other Pressures and Influences

• Government policies and regulations• Laws / policies / funding, e.g regeneration• Tax supportive / punitive

• Charities and NGOs (‘civil society’)

• HRM Strategy issues • Recruitment• Retention• Corporate culture

Market Economics and Differing Views

• ‘There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits (so long as it stays within the rules)’

Milton Friedman, The Social Responsibility of Business is to Increase its Profits, The New York Times Magazine, 13 September 1970

• ‘A “business of business” outlook has blinded companies to outcomes (or shifts in their implicit social contract) which often could have been anticipated’ Ian Davis, The Biggest Contract, The Economist, 28 May 2005

A stakeholder is defined as any group or individual who is

‘either harmed by or benefits from the corporation; or whose rights can be violated or have to be respected, by the corporation’

Evan and Freeman (1993)

Steps of Social Responsibility

• Philanthropic

• Ethical

• Legal

• Economic

A. Carroll, The Pyramid of Corporate Social Responsibility (1991)

Stakeholders

Examples

• Shareholders• Customers• Employees• Suppliers• Communities – local and global• Governments• Civil society

Globalisation can be defined as:‘the progressive eroding of the relevance of territorial bases for social economic and political activities, processes and relations’(Scholte, 2000)

Strategic HRM IssuesConflicts of interest create complexity in ethical dilemmas in the workplace (and how to handle them) This can include decisions about recruitment and training as well as approaches to reward management and employee relations

Ethics or ‘Values in Action’

Ethical theories provide rules that can be applied to any given situation. Most fall into two broad groups:

1. those that base the judgement of the decision on the outcome of the actions

2. those that do not look at the whether the outcomes are desirable but at the underlying principles of the motivation to act(see downsizing example in chapter)

Virtue Ethics – ‘good actions come from good people’

Absolutism v Relativism (important in globalisation):

• Absolutists maintain that if an ethical principle is valid, it must be applicable everywhere

• Relativists would say that there is no one view of ethics and what is ethical is always related to the social, cultural and historical context

Further theories to consider:

• Discourse Ethics (using discourse to resolve conflict and achieve mutually acceptable solutions)

• Feminist Ethics (emphasising care for others and the promotion of harmonious relationships)

• Postmodern Ethics (using moral impulses and emotions to address ethical dilemmas)

JusticeDistributive – concerned

with outcomes and equity

Procedural – concerned with processes and activities

Interactional – concerned with communication, including trust and openness

• Trust, fairness and justice all affect the expectations of individuals’ psychological contracts

• Individual personal values and integrity are important

• Kohlberg (1969) developed stages of moral reasoning and cognitive development

• Mismatch between an individual employee’s stage of moral reasoning and that of an organisation (or those in positions of power within it) can result in actions such as ‘whistleblowing’

The Nature of Organisations

• ‘Organisations are collections of people working together in a coordinated and structured fashion to achieve one or more goals’ (Barney and Griffin, 1992, p2)

• It is the people within organisations (their individual morals, values and attitudes that affect decisions, behaviour and actions at all levels) who are critical to the delivery of ethical behaviour

Ethics & HRM• Human Resource Management evolved from Personnel

Management with its roots in the welfare officer’s role in the original philanthropic business organisations such as Cadburys and Rowntrees in the 1900s

• HRM is seen to promote working relationships, employee involvement, development, equal opportunities and justice. Yet it is unitarist in its approach, minimising the role of trade unions

• ‘The strategy of justifying its existence in accounting terms may cede too much to the dominant accounting culture which in turn may also achieve little security for the HRM function’ (Armstrong, 1999)

Rights & Duties of Employees

The rights & duties include: The issues include:• freedom from discrimination race, gender, age,

disability,• privacy surveillance of employees,

work-life balance• due process disciplinary / dismissal,

promotion, grievance • participation and association, trade unions, participation

and involvement• healthy & safe working occupational health, working

conditions conditions• fair wages pay, new forms of work,

industrial action• freedom of conscience & whistleblowing

speech • work access to employment and

opportunities

(Adapted from Crane & Matten (2007) Business Ethics, 2nd edn, Oxford University Press)

Ethical Principles / Codes & Values

Mission or value statements

Codes of ethics

• Organisation codes They should be aspirational and set out rules / expectations for employees

• Professional codesObligations to obey the law, be competent and character-based norms

HR’s Role in Ethics and CSR

‘CSR is an opportunity for HR to demonstrate a strategic focus and act as a business partner. CSR needs to be embedded in an organisation’s culture to make a change to actions and attitudes, and the support of the top team is critical to success’

CIPD’s Corporate Social Responsibility fact sheet (June 2006)

CSR Competency Framework

Understanding society Building capacity Questioning ‘business as usual’ Stakeholder relations Strategic view Harnessing diversity

There are five levels of attainment for each characteristic.

These range from basic awareness to understanding, application, integration and leadership

(www.bitc.org.uk)

In developing a strategy for

Corporate Responsibility, Ethics and

Strategic HRM it is important to pay

as much attention to ‘how’ such as

strategy will be implemented as to

the strategy itself

Key Principles of Implementation

1. Establish and clarifying the organisation’s core values and principles. These are the thread that binds all the policies and principles together

2. Ensure that there is clear leadership throughout the organisation in establishing the core values and principles

3. Develop an understanding of the organisation’s stakeholders, the nature of the relationships and responsibilities towards them

4. Ensure that the business strategy, ethical principles, CSR and HR practices are aligned

5. Communicate consistently and effectively to all stakeholders

6. Provide timely and appropriate training to reinforce values and principles

7. Review strategy, policy, procedures and practices to ensure consistency and compliance

Challenges of this Chapter

• To understand the key strategic role that HRM practitioners in organisations can play in Corporate Responsibility and Ethics

• For all engaged in HRM to appreciate the different philosophies, perspectives and cultures in developing approaches to ethical decision- making

• To bring together literature from the many different disciplines contributing to the debates about Corporate Responsibility, Ethics and Strategic HRM to develop theoretical frameworks for the conduct of HRM in organisations

• To ensure that higher education and professional bodies follow the UN ‘Principles for Responsible Management Education' in the design and delivery of management education, including HRM

• To develop reliable methodologies for exploring the difference between the espoused and the enacted organisational strategies and policies in relation to corporate responsibility and ethics

• To explore models and strategies that develop thinking and analytical skills using ethical frameworks to promote the integration of responsible and ethical decision-making in HRM