Ethics & Corporate Social Responsibility

A Case for Companies to be Socially Responsible  A company is a corporate citizen—it should act as a responsible citizen  Improves a company’s reputation  Companies should solve the problems they cause  Example—pollution  Keeps the government out of business  Increased market share

A Case Against Companies being Socially Responsible  Increases costs  A company’s job is to make a good or service, not improve society  Stealing shareholders’ money  A company’s social obligations are discharged when it pays taxes  Gives company’s too much power  Businesses may exert too much influence over charitable causes

Ethics  The code of moral principles and values that govern the behaviors of a person or group with respect to what is right or wrong.

Ethical Dilemma  A situation that arises when all alternative choices or behaviors have been deemed undesirable.  Potentially negative ethical consequences, making it difficult to distinguish right from wrong.

Criteria for Ethical Decision Making  Most ethical dilemmas involve  A conflict between needs of the part & whole.  The individual versus the organization.  The organization versus society as a whole.

Four Considerations in Ethical Decision Making  Utilitarian Approach  Individualism Approach  Moral-Rights Approach  Justice Approach

Utilitarian Approach  Moral behavior produces the greatest good for the greatest number.  Computations can be very complex, simplifying them is considered appropriate.  Critics fear a “Big Brother” approach and ask if the common good is squeezing the life out of the individual.

Individualism Approach  Acts are moral when they promote the individual's best long-term interests.  Individual self-direction paramount.  Individualism is believed to lead to honesty & integrity since that works best in the long run.

Moral-Rights Approach  Asserts human beings have fundamental rights and liberties.  Moral decisions are those that best maintain the rights of those people affected by them.  An ethical decision is one that avoids interfering with the fundamental rights of others.

“Moral Rights” Considerations “Moral Rights” Considerations The right of free consent The right to privacy The right of freedom of conscience The right of free speech The right to due process The right to life & safety

Justice Approach  Moral Decisions must be based on standards of equity, fairness, and impartiality.  Treatment of individuals should not be based on arbitrary characteristics.  Closet thinking to codified law.

Social Responsibility  Organization’s obligation to make choices and take actions that will contribute to the welfare and interests of society and organization.  Distinguishing right from wrong.  Being a good corporate citizen.  Many social responsibilities issues are ambiguous with respect to right and wrong.

Shades of Corporate Green Activist Approach Actively conserve the environment Stakeholder Approach Address multiple stakeholder concerns Market Approach Respond to customers Legal Approach Satisfy legal requirements regarding environmental conservation SOURCE: Based on R.E. Freeman, J. Pierce, and R. Dodd, Shades of Green: Ethics and the Environment (New York: Oxford University Press, 1995).

Total Corporate Social Responsibility SOURCES: Based on Archie B. Carroll, “A Three-Dimensional Conceptual Model of Corporate Performance,” Academy of Management Review 4(1979), 499; and “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Corporate Stakeholders,” Business Horizons 34 (July-August 1991), 42.

Corporate Responses to Social Demands Proactive Take social initiatives. Proactive Take social initiatives. Accommodation Accept ethical responsibility. Accommodation Accept ethical responsibility. Defense Do only what is legally required. Defense Do only what is legally required. Obstruction Fight all the way. Obstruction Fight all the way. High Low Degree of Social Responsibility

Three Pillars of an Ethical Organization SOURCE: Adapted from Linda Klebe Trevino, Laura Pincus Hartman, and Michael Brown, “Moral Person and Moral Manager,” California Management Review 42, No. 4 (Summer 2000),