Slide 5.1 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Chapter 5 CORPORATE RESPONSIBILITY

Slide 5.2 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Contrasts in business practice Evaluating individual and corporate actions Ethical decision making models Stakeholders, strategy and responsible action Managing corporate responsibility Integrating themes Cases and examples –The Co-operative Group, Bernard Madoff, Facebook, Gap, Wipro

Slide 5.3 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Why study corporate responsibility? Corporate practice affects wider society –corruption, pollution, ‘rewards for failure’, etc. Practice reflects assumptions about acceptability As expectations change, established practices add less value Managers face ethical AND commercial dilemmas Thinking critically means questioning assumptions, and considering contexts, alternatives and limitations.

Slide 5.4 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Contrasts in business practice Malpractice (see also Table 5.1) –Madoff – took money from people to invest, but used it to pay dividends to earlier investors –Barclays – traders provided wrong to the body setting an industry interest rate –Aviva – generous executive pay. Philanthropy and enlightened self-interest –Philanthropy – Bill Gates, Jeff Skoll, many local givers –Enlightened self-interest prompts community sponsorships.

Slide 5.5 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Substance of corporate responsibility Table 5.2 lists the topics that arise in this area: Inputs and resources – dealing fairly with staff and suppliers Transformation – managing workforce responsibly, minimising waste and energy use Outputs – responsible customer relations, clear labelling Process – leadership and stakeholder engagement Context – community activities and support.

Slide 5.6 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Perspectives on individual actions Figure 5.1 Three domains of human action

Slide 5.7 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Four criteria for evaluating actions Moral principles –In line with accepted principles? Utilitarianism –Best outcome for the greatest number? Human rights –Does it maintain individual’s human rights? Individualism –In an individual’s long-term interests?

Slide 5.8 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Table 5.3 Questions within each philosophy

Slide 5.9 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Why people reach different conclusions Figure 5.2 Making ethical judgements Source: Adapted from Business and Society: Ethics and Stakeholder Management, 1st ed., South Western (Carroll, A.B. 1989) Copyright © 1989 South-Western, a part of Cengage Learning, Inc., reproduced by permission,

Slide 5.10 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Role of business in society Milton Friedman (1962) –To increase profits as long as it stays within the rules of the game (no deception or fraud). Corporate responsibility –Business and society depend on each other, and have mutual obligations –Pressure groups and advocates help ensure that public expectations of business change –Expectations vary between countries.

Slide 5.11 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Ethical decision-making models Attempt to place individual decisions within the wider context that will shape them They examine the effects of both –Individual factors Personal value systems, beliefs –Organisational factors Power distribution, incentives and rewards.

Slide 5.12 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 A simple ethical decision model Figure 5.4 A simple model of ethical decision making

Slide 5.13 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Stakeholders and corporate responsibility Stakeholder theory offers a way of managing that recognises conflicting interest groups: –Shareholders, customers, suppliers (Kraft Foods), natural environment (BP) –Figure 5.3 shows the range of positions companies take on responsibility –Processes of mutual influence between managers and stakeholders shape policies.

Slide 5.14 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Stakeholders and corporate responsibility (Continued) Stakeholders’ interests shape policy (Table 5.4) Vogel (2005) on the ‘market for virtue’ – responsible actions need to be financially sustainable. Examples of responsible action: corporate mission –The Body Shop, The Co-op to meet customer needs –stocking Fair Trade goods part of strategy –Kraft, M&S.

Slide 5.15 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Managing corporate responsibility How can managers organise the business to encourage good practice? Leading by example –Senior people set the tone (Wipro) Codes of practice –Formal statements of principles and practices Corporate responsibility structures and reporting –Specific committees and roles (Vodafone, BP) Inclusion in FTSE4Good Index Series –Affects investors’ decisions on holding shares.

Slide 5.16 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Integrating themes Entrepreneurship While owners of new businesses lack the resources for CR investments, taking a long-term view brings returns. Sustainability Carbon trading schemes an example of how companies link CR and strategy. Internationalisation CR reporting practices seem to reflect national management systems rather than directed action. Governance Some environmental management systems impress customers more than they change daily practice.

Slide 5.17 Boddy, Management: An Introduction PowerPoints on the Web, 6 th edition © Pearson Education Limited 2014 Summary The models presented show alternative expectations of business in society. Ethical (responsible) action depends on individual beliefs and the organisational context. Responsible corporate behaviour can only be sustained if it contributes to some strategic advantage. Boards create structures of corporate governance which they hope will help resolve these dilemmas.