corporate social responsibility and ethical business · corporate social responsibility (csr)...

Corporate Social Responsibility and

Ethical Business

Ms. Panagiota Skoulariki Adjunct Lecturer

Business Administration and Economics Department

Welcome to The International Faculty of the

University of Sheffield


CSR and Ethics

• Business and Societal

Relationship

• Society as the

Macroenvironment

• Factors in Society

• Business Criticism and

Corporate Response

• Development of CSR and related notions

• Stakeholders

• Ethics

• Technology and Ethics

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Business and Society

Business The collection of private, commercially oriented organizations ranging in size from sole proprietorships to corporate giants.

Society A community, a nation, or a broad group of people with common traditions, values, institutions, and collective activities and interests.

Business and society interrelate in a macroenvironment as stakeholders.

A macroenvironment is the complete societal context in which the organization resides.

4



Segments of the Macro

Environment

Macroenvironment-Pluralism

A diffusion of power among a society’s many groups.

Involves decentralization and diversity of power concentration.

6

Strengths Weaknesses

Prevents concentration of power.

Pursuit of self-interest.

Maximizes freedom of expression and action.

Proliferates organizations and groups with overlapping goals.

Disperses individual allegiances.

Forces conflicts to center stage.

Creates diversified set of loyalties.

Promotes inefficiency.

Provides checks and balances.


Special Interest Groups

• Make life more complex for business and government

• Can number in the tens of thousands in some societies

• Pursue their own focused agendas

• Are active, intense, diverse and focused

• Can attract a significant following

• Often work at cross purposes, with no unified goals

A special-interest society is pluralism taken to the extreme

7 Business Administration and Economics Department

Business Criticism

• Little concern for the consumer

• Cares nothing about the deteriorating social order

• Has no concept of ethical behavior

• Indifferent to the problems of minorities and the environment

What responsibility does business have to society? Business for Social Responsibility (BSR) is a

consulting firm and global business network helping organizations to develop sustainable business strategies and solutions.


Business Power

•The ability or capacity to produce an effect or to bring influence to bear on a situation or people.

Iron Law of Responsibility

•In the long run, those who do not use power in a manner society considers responsible will tend to lose it.

9

Use and Abuse of Power

Business Criticism


Levels and Spheres of Corporate Power

10

Macro Level

Intermediate Level

Micro Level

Individual Level

Economic

Social/Cultural

Individual

Technological

Environmental

Political

Levels Spheres


Society’s Expectations Versus Business’ Actual Social Performance

11

Society’s

Expectations

of Business

Performance

Soci

al

Perf

orm

an

ce:

Exp

ecte

d a

nd

Act

ual

1960s Time 2010s

Social

Problem

Business’s Actual

Social Performance

Social Problem


Factors in the Social Environment leading to societal expectations

• Affluence and education • Higher expectations of major institutions.

• Growing public awareness through television, film, and Internet.

• Revolution of rising expectations • Expectations vs. performance gap.

• Entitlement mentality

• Rights movement

• Victimization philosophy

• Business scandals 12


Social Environment, Business Criticism and Corporate Response

13

Factors in the Social Environment

Affluence Education Awareness

Rising Expectations Rights Movement

Entitlement

Mentality

Victimization

Philosophy

Business Criticism

Increased Concern for the

Societal Environment A Changed Social Contract


Corporate Social Responsibility (CSR)

Corporate Social Responsibility

•Seriously considering the impact of a company’s actions on society.

Requires the individual to consider his or her acts in terms of a whole social system, and holds him or her responsible for the effects of his or her acts anywhere in that system.


Historical Perspective on CSR

15

Economic Model

Legal Model

Social Model

Stakeholder Model


Modification of the Economic Model

16

Philanthropy

Community obligations Paternalism

Motivation:

Keep government at arm’s length


CSR’s Acceptance and Broadening of

Meaning • From the 1950s to the present, the concept of CSR

has gained acceptance.

• The meaning has been broadened to include specific issues, such as: • Corporate governance

• Product safety

• Honesty in advertising

• Employee rights

• Affirmative action

• Environmental sustainability

• Ethical behavior

• Global CSR 17 Business Administration and Economics Department

Evolving Meanings of CSR

1. Corporate social responsibility is seriously considering the impact of the company’s actions on society.

2. The obligation of decision makers to take actions that protect and improve the welfare of society as a whole, along with their own interests.

3. Supposes that the corporation has economic and legal obligations as well as responsibilities to society that extend beyond these obligations.


Arguments Against CSR

• The classical economic view that business’ only goal is the maximize profits for owners.

• Business is not equipped to handle social activities.

• It dilutes the primary purpose of business.

• Businesses have too much power already .

• It limits the ability to compete in a global marketplace.

19

CSR


Arguments For CSR

• It addresses social issues brought on by business, and allows business to be part of the solution.

• Enlightened self-interest: businesses must take actions to ensure long-term viability.

• Wards off future government intervention.

• It addresses issues by using business resources and expertise.

• It addresses issues by being proactive.

• The public supports CSR.


The Pyramid of CSR

21


The CSR Equation

22

Economic Responsibilities

Legal Responsibilities

Ethical Responsibilities

Philanthropic Responsibilities

Total

Corporate

CSR

= +

+

+

A stakeholder perspective focuses on the CSR

pyramid as a unified whole.


Carroll’s Corporate Social Performance Model


Corporate Citizenship Concepts

24

Corporate Social…

Responsibility

Performance

Responsiveness

Emphasizes…

obligation, accountability

outcomes, results

action, activity


Corporate Social Responsiveness

Alternative Views

Sethi’s Three-Stage Schema

Social obligation, social responsibility, and social responsiveness.

Frederick’s CSR1, CSR2, and CSR3

• CSR1 is accountability-focused.

• CSR2 is responsibility-focused.

• CSR3 refers to corporate social rectitude.

Epstein’s Process View

• Emphasizes the process of social responsiveness.



Alternative Views

Sethi’s Three-Stage Schema

Social obligation, social responsibility, and social responsiveness.

Sethi, P.(1975) Dimension of Corporate Social Performance: An Analytical Framework. California Management Review, Spring 1975, p.58-64.



Alternative Views (cont)

Frederick’s CSR1, CSR2, and CSR3

• CSR1 is accountability-focused.

• CSR2 is responsibility-focused.

• CSR3 refers to corporate social rectitude.

Frederick, W. (1994) from CSR1 to CSR2: The Maturing of Business–and-Society Thought. Business and Society, 33(2), p.150-164.



Alternative Views (cont)

Epstein’s Process View

• Emphasizes the process of social responsiveness.

Epstein, E.(1987) The Corporate Social Policy Process: Beyond Business Ethics, Corporate Social Responsibility and Corporate Social Responsiveness.California Management Review, Vol.XXIX (3), p.104.


Corporate Social Performance: Extensions, Reformulations, Reorientations

Wartick and Cochran’s CSP Extensions

Wood’s Reformulated CSP Model

Swanson’s Reorientation of CSP

Wartick, S. and Cochran, P. (1985) The Evolution of the Corporate Social Performance Model. Academy of Management Review,Vol.10, p.765-766.

Wood, D. (1991) Corporate Social Performance Revisited. Academy of Management Review,October (1991), p.691-718.

Swanson, D. (1995) Addressing A Theoretical Problem by Reorienting the Corporate Social Performance Model. Academy of Management Review,Vol.20 (1), p.43-64.


Corporate Citizenship

Corporate citizenship

•Embraces all the facets of corporate social responsibility, responsiveness, and performance.

• Serves a variety of stakeholders.

Companies have certain responsibilities that they must fulfill in order to be perceived as good corporate citizens.

30


Corporate Citizenship (continued)

Broad View

•A reflection of shared moral and ethical principles.

•A vehicle for integrating individuals into the communities in which they work.

•A form of enlightened self-interest that balances stakeholders’ claims and enhances a company’s long-term value.

Narrow View

•Corporate community relations 31


The Drivers of Corporate Citizenship

32

Internal Motivators External Pressures

Traditions and values Customers and consumers

Reputation and image Expectations in the

communities

Business strategy Laws and political

pressures

Recruiting and retaining

employees


Benefits of Corporate Citizenship

Improved employee relations

Improved customer relationships

Improved business performance

Enhanced marketing efforts


Global Corporate Citizenship

• Multinational enterprises are expected to be good corporate citizens in the countries in which they do business.

• Are expected to tailor their initiatives to conform to the cultural environment.

• International academics and business people do research on and advocate CSR and corporate citizenship concepts.

Convergence in global CSR approaches will continue as the world economic stage becomes the common environment within which businesses function.


Business Criticism and Response Cycle

35

Factors in the Societal Environment

Criticism of Business

Increased Concern

for the Social Environment

A Changed

Social Contract

Business Assumption of

Corporate Social Responsibility

Social Responsiveness, Social

Performance, and Corporate Citizenship

A More Satisfied Society

Fewer Factors Leading to

Business Criticism

Increased Expectations

Leading to More Criticism


Business’ Interest in Corporate Citizenship

Non-academic research

•Fortune's ranking of “Most Admired” and “Least Admired” corporations

•Conference Board’s Ron Brown Award for Corporate Leadership

•CRO Magazine Awards

•Chamber of Commerce of the U.S. Corporate Citizenship Awards.


Sustainability

• Sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs.

• Has become one of businesses’ most pressing mandates.

• Includes the following criteria: • Environmental

• Economic

• Social

Concerns businesses’ abilities to survive and thrive over the long term.


“Triple Bottom Line” Perspective

Key Spheres of Sustainability 1.Economic

2.Social

3.Environmental

Corporate sustainability is the goal.


Socially Responsible or Ethical Investing

• Emerged in the 1970s

• Over $2.7 trillion in socially responsible investments in the U.S.

Social Screening

• A technique used to screen firms for socially-responsible investment purposes.


Reasons for the Upsurge in Socially Responsible Investing

1. More reliable research on CSP

2. Investment firms using social criteria have solid track record

3. The socially conscious 1960s generation is making investment decisions


Business and Stakeholder Relationships

41


Stakeholders

Stakeholders

•Individuals or groups with which business interacts and who have a vested interest in the firm.

External stakeholders

Internal stakeholders


Urgent versus Enduring Issues

Short-Term

•Issues or crises arise on the spur of the moment and management must formulate quick responses.

Long-Term

•Issues or problems are a long-term concern and management must develop a thoughtful organizational response.

43

Stakeholders (cont)


Stakeholder Bottom-Line Perspective

• The view that a firm has multiple bottom lines that benefit for corporate social performance.

• The impacts of benefits of social performance cannot be fully measured or appreciated by considering only the impact on the financial bottom line.

44

Stakeholders (cont)


Developing an ethical and socially responsible managerial approach

• What business are we in or ought we be in?

• What changes are occurring or will occur in society’s expectations of business that mandate business’s taking the initiative with respect to particular societal or ethical problems?

• Did business, in general, or our firm, in particular, have a role in creating these problems?

• Can we reduce broad social problems to a size that can be effectively addressed from a managerial point of view?

• What are the specific problems, alternatives for solving these problems, and implications for management’s approach to dealing with social issues?

• How can we best plan and organize for responsiveness to socially related business problems?


Business Ethics

Ethics •Refers to issues of right, wrong, fairness, and justice.

Business Ethics •Focuses on ethical issues that arise in the commercial realm.

Ethics questions permeate business’s activities as it attempts to interact with major stakeholder groups.


Business Ethics

• The public’s interest in business ethics is at an all-time high, spurred by headline-grabbing scandals.

• The Enron scandal impacted business to greatly it is called “The Enron Effect.”

• Business will never be the same.


High-Profile Ethics Scandals

Enron Era

•Worldcom

•Tyco

•Arthur Andersen

Wall Street Financial Scandals Era

•AIG

•Bear Stearns

•Lehman Brothers

•Fannie Mae/Freddy Mac

•Bernard Madoff 48


Inventory of Ethical Issues in Business

49

Employee-Employer Relations

Employer-Employee Relations

Company-Customer Relations

Company-Shareholder Relations

Company-Community/Public Interest


Business Ethics Today versus Earlier Periods

50

Ethical Problem

Ethical Problem

Society’s Expectations

of Business Ethics

Actual

Business Ethics

1960s 2012 Time

Exp

ecte

d a

nd

Act

ual

Lev

els

of

Bu

sin

ess

Eth

ics


Levels at Which Ethical Issues May be

Addressed

Personal level •Situations faced in our personal lives outside the context of our employment.

Organizational level •Workplace situations faced by managers and employees.

Industry or profession level •A manager or organization might experience business ethics issues at the industry or professional level.

Societal and global levels •Managers acting in concert through their companies and industries can bring about constructive changes.


Three Models of Management Ethics

Immoral Management •An approach devoid of ethical principles and an active opposition to what is ethical. •The operating strategy of immoral management is focused on exploiting opportunities for corporate or personal gain.

Moral Management •Conforms to high standards of ethical behavior or professional standards of conduct.

Amoral Management •Intentional: Does not consider ethical factors. •Unintentional: Casual or careless about ethical factors.


Factors Affecting the Morality of Managers

53

Society’s Moral Climate

Business’s Moral Climate

Industry’s Moral Climate

Individual

One’s Personal

Situation

Superiors

Policies

Peers

Organization’s Moral Climate


Factors Affecting the Organization’s Moral

Climate

1. Behavior of superiors

2. Ethical practices of one’s industry or profession

3. Behavior of one’s peers in the organization

4. Formal organizational policy (or lack of)

5. Personal financial need


Concerns about the compliance orientation

1. Could undermine the ways of thinking or habits of mind that are needed in ethics thinking.

2. Can squeeze out ethics.

3. Managers many not consider tougher issues that a more ethics-focused approach might require.

55

Business Ethics


Four Important Ethical Questions

1. What is? 2. What ought to be?

3. How do we get from what is to what ought to be?

4. What is our motivation in all this?

56

To be put at individual, organizational, industry or professional, societal and global levels.


Improving Ethical Culture

57

Top

Management

Leadership

Moral

Management

Ethics Programs

and Officers

Realistic

Objectives

Ethical Decision-

Making Processes

Codes of

Conduct

Effective

Communication

Ethics Training

Corporate

Transparency

Whistle-Blowing

Mechanisms

Ethics Audits and

Risk Assessments

Board of Directors’

Oversight

Discipline of

Violators


Business Ethics: Types

Descriptive Ethics

•Involves describing, characterizing, and studying morality.

•Focuses on what is occurring.

Normative Ethics

•Concerned with supplying and justifying a coherent moral system of thinking and judging.

•Focuses on what ought or should be occurring.


Three Approaches to Business Ethics

Conventional Approach

•Based on how common society today views business ethics and on common sense.

Principles Approach

•Based upon the use of ethics principles to justify and direct behavior, actions, and policies.

Ethical Tests Approach

•Based on short, practical questions to guide ethical decision making and behavior and practices. 59

Business Ethics: Approaches


Conventional Approach

The conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal

norms.

Ethical Egoism

•An ethical principle based on the idea that the individual should seek to maximize his or her own self interests as a legitimate factor.

60

Decision, Behavior,

or Practice

Prevailing Norms

of Acceptability


Sources of Ethical Norms

61

Fellow

Workers

Family

Friends

The Law

Regions of

Country

Profession

Employer

Society at

Large

Local

Community

Religious

Beliefs

The Individual

One’s Self-

Interest and

Conscience


Types of Ethical Principles or

Theories

Teleological theories

•Focus on consequences or results.

Deontological theories

•Focus on duties.

Aretaic theories

•Focus on virtue. 62


Principles Approach to Ethics

Major principles of ethics

•Utilitarianism

•Kant’s Categorical Imperative

•Rights

•Justice

•Principles of care

•Virtue ethics

•Servant leadership

•Golden Rule

63


Utilitarianism A teleological principle that focuses on acts that produce the greatest good for the greatest number.

64

Strengths Weaknesses

Forces thinking about the

general welfare of stakeholders

Ignores actions that may be

inherently wrong

Allows personal decisions to fit

into situational complexities

May conflict with the notion of

justice

Difficult to formulate

satisfactory rules for decision

making

Ethical Principles


Kant’s Categorical Imperative

• A duty-based, deontological, principle.

Formulations: 1. Act only on rules that you would be willing to see

everyone follow.

2. Act to treat humanity in every case as an end and never as a means.

3. Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law.

65

Ethical Principles


Principle of Rights Moral rights

•Rights that we ought to have based on moral reasoning.

Principle of rights

•Focuses on examining and possibly protecting individual moral or legal rights.

•A negative right is the right to be left alone.

•A positive right is the right to something.

66

Ethical Principles


Principle of Justice

• Involves considering what alternative promotes fair treatment of people.

Types of justice

• Distributive

• Compensatory

• Procedural

• Rawlsian

67

Ethical Principles


Justice Principle In Work Place

Due Process - Process Fairness

1.Have employees been given input into the decision process?

2.Do employees believe the decisions were made and implemented in an appropriate manner?

3.Do managers provide explanations when asked? Do they treat others respectfully? Do they listen to comments being made?

68

Ethical Principles


Rawls’s Principles of Justice

1. Each person has an equal right to the most basic liberties compatible with similar liberties for others.

2. Social and economic inequalities are arranged so that they are both:

Reasonably expected to be to everyone’s advantage, and

Attached to positions and offices open to all.

69

Ethical Principles


Ethic of Care and Virtue Ethics Ethic of care/Principle of caring

•Traditional ethics focus too much on the individual self.

•Views the individual as relational, not individualistic– similar to stakeholder theory.

Virtue ethics

•Focuses on individuals becoming imbued with virtues. If being is virtuous, actions will likely be virtuous.

•Based on Aristotle and Plato.

70

Ethical Principles


Servant Leadership

Servant leadership

•Based on the moral principle of serving others first, such as employees, customers, and community.

71

Ethical Principles


Characteristics of Servant Leaders

• Listening

• Concern/Caring/Empathy

• Healing

• Awareness

• Foresight

• Conceptualization

• Commitment to the growth of people

• Stewardship

• Building community 72

Ethical Principles


The Golden Rule

• Do unto others as you would have them do unto you.

The Golden Rule is:

1. Accepted by most people.

2. Easy to understand.

3. A win-win philosophy.

4. A compass when you need direction. 73

Ethical Principles


Ethical Tests Approach

74

Test of One’s Best Self

Test of Making Something Public

Test of Ventilation

Test of Common Sense

Test of the Purified Idea

Big Four (greed, speed, laziness, or haziness)

Gag Test


Ethics and Technology

Benefits of Technology Increase production of goods and services

Reduce amount of labor needed to produce goods and services

Make labor easier and safer

Increased productivity

Higher standard of living

Increased life expectancy

It can be difficult to spread the benefits of technology beyond the developed world.


Ethics and Technology: Challenges of Technology

• Spreading it to undeveloped world.

• Side Effects of Technology

Environmental pollution

Depletion of natural resources

Technological unemployment

Creation of unsatisfying jobs 76


Technology and Ethics

Two Key Issues

•Technological determinism

• What can be developed will be developed.

•Ethical lag

• Occurs when the speed of technological change far exceeds that of ethical development.


Symptoms of Society’s Technology Intoxication

1. We favor the quick fix.

2. We fear and worship technology.

3. We blur the distinction between what is real and fake.

4. We love technology as a toy.

5. We live our lives distanced and distracted.

Find the right balance! 78


Bibliography

1. Buchholtz, A.K. and Carroll, A.B. (2011) Business And Society. 8th Int. Edition. Cengage Delmar Learning.

2. Soucher, S.J. (2007) Teaching the moral leader: a literature - based leadership course. 1st edition. Routledge.

3. Rainey, D.L. (2006) Sustainable business development: inventing the future through strategy, innovation and leadership. 1st edition. Cambridge University Press.

4. Cairncross, F. (1992) Costing the earth: the challenges for governments, the opportunities for business. 1st edition. Harvard Business School Press.

5. Dunning, J.H. (2003) Making globalisation good: the moral challenges of global capitalism. 1st edition. Oxford University Press.

6. Renouard, C. (2011) Corporate Social Responsibility, Utilitarianism, and the Capabilities Approach. Journal of Business Ethics, 98 (1), p85-97.

7. Shum, P. and Yum, S. (2011) Ethics and Law: Guiding the Invisible Hand to Correct Corporate Social Responsibility Externalities. Journal of Business Ethics, 98 (4), p549-571.

8. Swanton, C. (2010) Heideggerian Environmental Virtue Ethics. Journal of Agriculture & Environmental Ethics, 23(1/2), p145-166.


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