1. Social Responsibility, Business Etics, and Corporate Culture
By Prof. Balázs Hámori
&
Prof. Katalin Szabó

2. Outline Identification of organizational stakeholders
Stakeholders mapping
Corporate Social responsibility: internal and external aspects
Ethical issues
Organizational Culture

3. Expectations and Purposes

4. Ethical model Social Ethics: Legal rules, customs Organization’s
Professional Ethics:
Values in workplace
Individual Ethics:
Family influence
Organization’s
Code of Ethics

5. The most important ethical concepts
Moral: Relating to, dealing with, or capable of making the distinction between right and wrong in conduct or character
Ethics: The system or code of morals of a particular person, religion, group or profession.
Ethical: Conforming to moral standards, conforming to the standards of conduct of a given profession or group.
Ethical behaviour is what is accepted as „good” and „right”, and as opposed to „bad” and „wrong” in the context of governing moral code.

6. What are institutions?
“Institutions are the rules of the game in a society; are the humanly devised constraints that shape human interaction” (North 1990, p. 3)
Economic, political and social Interactions
Informal institutions: informal constraints: sanctions, taboos, customs, tradition and code of conduct
Formal institutions: formal rules: constitutions, laws, property rights

7. Types of Institutions (Ellickson 1991)

8. Definition of convention
By a convention, we mean a pattern of behavior that is customary, expected and self-enforcing. Everyone conforms, everyone expects others to conform, and everyone has good reason to conform because conforming is in each person's best interest when everyone else plans to conform (Lewis, 1969)

9. (1) Norms
Definition: Group norms are the informal rules that groups adopt to regulate group members’ behavior.
Sanctions exist to punish those who do not comply.
We can identify norms when they are violated:
Wait for your turn.
Remain quiet on the bus.
Maintain interpersonal distance.
Assume a somber demeanor during a funeral.
How do norms form and what happens when these norms are broken?

10. Model of Business Rules

11. Why Behave Ethically?
Managers should behave ethically to avoid harming others.
Managers are responsible for protecting and nurturing resources in their charge.
Unethical managers run the risk for loss of reputation.
This is a valuable asset to any manager!
Reputation is critical to long term management success.
All stakeholders are judged by reputation.
Moses with the Tablets
of the Law

12. What to be known about Power/Interest Matrix
High power, interested people: these are the people you must fully engage and make the greatest efforts to satisfy
High power, less interested people: put enough work in with these people to keep them satisfied, but not so much that they become bored with your message
Low power, interested people: keep these people adequately informed, and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project.
Low power, less interested people: again, monitor these people, but do not bore them with excessive communication.

13. The Ford Pinto story
In the 1970’s more and more company developed small, simple, and cheap car, for young persons. The Ford Co. delayed, and try th catch up. The management speed up the developments, and enters the market with the Ford Pinto. There were more than 500 thousend car on the market when a serious accident happened: After driving away from the filling station two cars collided, the Ford Pinto blow up, and three girl burned in the car. A magazin investigated the case and realised, that there were more than 10 similar accidects, and there were 5 death
The company investigated the case and the analysis discovered:
Back bumpers were weak, and too near to the fuel tank.
The engineeers know about the problems, however they were in delay
The management found that the car in this form met the existing safety regulations.
Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths.  The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit.  Based on the numbers Ford used, the cost would have been $137 million versus the $49.5 million price tag put on the deaths, injuries, and car damages, and thus Ford felt justified not implementing the design change..

14. Analysis of the story
There are several reasons why such a strictly economic theory should not be used
First, it seems unethical to determine that people should be allowed to die or be seriously injured because it would cost too much to prevent it
Second, the analysis does not take into all the consequences, such as the negative publicity that Ford received and the judgments and settlements resulting from the lawsuits
Also, some things just can't be measured in terms of dollars, and that includes human life
However, there are arguments in favor of the risk/benefit analysis. 
First, it is well developed through existing case law. 
Second, it encourages companies to take precautions against creating risks that result in large accident costs.
Next, it can be argued that all things must have some common measure.  Finally, it provides a bright line which companies can follow.

15. Four Possible Ethical Stances
60 years ago
100 years ago
40 years ago
20 years ago

16. Business ethics – the societal expectations of organisations
Macro level
Range from laissez faire to shapers of society
Ethical stance of organisation in society
Extent an organisation exceeds its minimum obligations to stakeholders and society
Corporate social responsibility
Specific ways to exceed minimum obligations imposed by legislation/corporate governance
Reconcile conflicting demands of stakeholders
Individual level
Behaviour and actions of individuals within organisations

18. Ethical Guidelines for Managers
Obey the Law!
A basic tenet of social responsibility and mamagerial ethics is obedience to the law, preferably both the letter and the spirit of the law.
Tell the truth!
Telling the truth is important in building trust with relevant stakeholders.
Show respect for people!
Stick to the „golden rule!.
"Do unto others as you would have them do unto you".
Above all, do not harm!
This principle - the first rule of medical ethics - is considered by some writers to the bottom-line ethical consideration.
Practice participation, not paternalism.
This principle is aimed at learning about the needs of relevant stakeholders, rather than deciding what is the best for them.
Always act when you have responsibility.
Managers have the responsibility of taking action whenever they have the capacity or resources.

19. Four Ways of Rationalize Ethical Misconduct
Convincing yourself that the behaviour is not really illegal
Convincing yourself that the behavoiur is really everyone’s best interests
Convincing yourself that nobody will ever find out what you’ev done.
Convincing yourself that the organization will protect you.

20. Stakeholders, who are affected by behavior and ethical standards of the company
In general stakeholder is an entity ( firm, individual group, etc.) that can be affected by the results of that in which they are said to be stakeholders.
In the business world typical stakeholders are customers, employees, suppliers, communities, and shareholders or other financiers. 
For some purposes, some companies also consider a broader group that includes governments, media, competitors, non-governmental organizations (NGOs) and others.  Business is about managing key stakeholder relationships.ch they have a stake.

21. Stakeholder Management and Stakeholder Analysis
Stakeholder Management is an important discipline that successful people use to win support from others. It helps them ensure that their projects succeed where others fail
Stakeholder Analysis is the technique used to identify the key people who have to be won over. You then use Stakeholder Planning to build the support that helps you succeed.

22. Stakeholders Stakeholders Their main interest Suppliers
Long term connections
Buyers
Quality, quick reaction, low price
Other business partners
Long term connection, liquidity
Potencial entrans
Stable and business-like market
Substitute product producers
Clear roles, and conditions
Workers, and their unions
Good working conditions, wages
Employer’s association
Rule-following behavior
Government’s regulators
Enterprises in the industry
Acceptance some mutual rules

23. Types of stakeholders of a business (2)
Their main interest
Local authorities
Tax, subsidy
Local communities
Help
Trade unions
Acceptance
Customer groups
Consumer-friendly behavior
Employment association
Government
Pay tax, follow the laws
Press, media
Provide infromation, and advertise
Pressure groups
Specific interest
Foreign countries
Follow the local custom

24. Stakeholder Mapping: the Power/Interest Matrix

25. Attitudes to Social Responsibility
Obstructionist Stance (Unconcerned)
Do as little as possible to solve social or environmental problems
Defensive Stance (Damage Control)
Do only what is legally required and nothing more
Accommodative Stance (Compliance)
Meet legal and ethical obligations and go beyond that in selected cases
Proactive Stance (Ethical Culture)
Organization views itself as a citizen and proactively seeks opportunities to contribute to society

26. Continuum of social responsibility
Social obligation - corporate behavior at this level conforms only to legal requirements and competitive market pressures
Social responsibility - Corporate behavior at this level is congruent with prevailing norms, values, and expectations of society.
Social responsiveness - Corporate behavior at this level takes preventive action to avoid adverse social impacts from company activities and even anticipates or takes the lead in future movement beyond current expectations.

27. Corporate social responsibility
Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

28. Corporate Social Responsibility
Internal Aspects
External Aspects
Employee welfare
Environmental issues
Working conditions
Products
Job design
Markets and marketing
Intellectual property
Suppliers
Employment
Community activity
Human rights

29. Questions of corporate social responsibility

30. Questions of corporate social responsibility

31. The most important areas of the corporate social responsibility (1)
Ecology and Environmental Quality
Pollution cleanup and prevention
Dispersion of industry
Land use and beautification
Consumerism
Truth in lending, advertising, and business
Product warranty and service
Control of harmful products
Community needs
Use of expertise for local problems
Aid with health-care facilities and education
Service on voluntary groups
Governmental relations
Restrictions on lobbying
Control of business political action

32. The Most Important Areas of the Corporate Social Responsibility (2)
Minorities and Disadvantages persons
Training of unemployed
Equal employment opportunity
Locating plants and offices in minority areas
Purchasing from minority businesses
Labor relations
Improved occupational health and safety
Provision of day-care centers
Options of flexible work hours
Stockholder relations
Public seats on the board of directors
Improved financial disclosure
Corporate philanthrophy
Financial support for arts and culture
Special scholarships and gifts to education
Financial support for assorted charities

33. Arguments for and againts of corporate social responsibilities
Major arguments againts social responsibility
Major arguments for social responsibility
Loss of business profits
Long-run profit for business
Increased business costs
Public image of business will improve
Dilution of business purpose
Better environment for everyone
Too mach social power for business
Public expectations support business social responsibility
Lack of business accountability to public
Business may avoid more regulation

34. Concepts of corporate social responsibility

35. UN Global Impact Initiative (1)
Human Rights
• Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and  • Principle 2: make sure that they are not complicit in human rights abuses.  
Labour • Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;  • Principle 4: the elimination of all forms of forced and compulsory labour;  • Principle 5: the effective abolition of child labour; and  • Principle 6: the elimination of discrimination in respect of employment and occupation.    

36. UN Global Impact Initiative (2)
Environment
• Principle 7: Businesses should support a precautionary approach to environmental challenges;  • Principle 8: undertake initiatives to promote greater environmental responsibility; and  • Principle 9: encourage the development and diffusion of environmentally friendly technologies.    
Anti-Corruption • Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. 
For further information, guidance material, please visit the Global Compact website: 

37. Organizational Culture
Definition
Organizational culture is a communicatively constructed, historically based system of assumptions, values, beliefs, behaviors, customs, and attitudes that help the members of the organization understand what it stands for, how it does things, and what it considers important
It is taught to new members as the correct way to think, feel, and behave
Organizational culture exists
at two levels
Observable symbols
Underlying values

38. Organizational Culture Characteristics
Three common characteristics
Culture is SHARED
Frameworks of understanding and interpreting organizational phenomena
Culture is INTANGIBLE
Consists of values, assumptions, norms, and frameworks
Culture AFFECTS HUMAN BEHAVIOR
Construction of human interaction that affects and is affected by the behavior of all members of the organization
Other characteristics
Communicative creations
Cultures are created, sustained and and influenced by and through human interaction
Historical
Cultures emerge and develop over time

39. Culture strength and Subcultures
Culture strength is the degree of agreement among members of an organization about specific values
Subcultures reflect the common problems, goals, and experiences of a team or department
Different departments may have their own norms

42. The Importance of Organization Culture
Culture determines the overall “feel” of the organization, although it may vary across different segments of the organization
Culture is a powerful force that can shape the firm’s overall effectiveness and long-term success

43. Organizational Culture Individual Personality
Levels of Culture
Societal Culture
“Who we are,” customs
Organizational Culture
“The way we do things here”
Team Norms
What’s (un)acceptable; “This is what we do”
Individual Personality
Values, beliefs, temperament, habits; “Who I am”

44. Determinants of Organizational Culture
Organization’s founder (personal values and beliefs)
Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization
Corporate success that strengthens the culture.
Shared experiences that bond organizational members together

45. Managing Organizational Culture
Understand the current culture to decide whether to maintain or change it
Articulate the culture through slogans, ceremonies, and shared experiences
Reward and promote people whose behaviors are consistent with desired cultural values

46. Corporate Rewards Culture
Corporate Rewards Culture manifests in innovative incentive, recognition and reward systems.for some of the world's most successful companies.
Market leaders inspire, engage and mobilise their people who matter most to them - their staff, dealer networks, sales force and customers.

47. Changing Organizational Culture
Companies must develop a clear idea of what kind of culture they want to develop
They can bring in outsiders to important managerial positions
Adopt new slogans, stories, ceremonies, and purposely break with tradition
Culture is important to learning and innovation during challenging times
Strong adaptive cultures often incorporate the following values:
The whole is more important than the parts
Equality and trust are primary values
The culture encourages risk taking, change, and improvement

48. Critical approach to organizational culture
Organization as a Site of Domination
Power, Hegemony, and Concertive Control
Power - the possibility of imposing one’s will upon the behavior of other persons
Hegemony - the predominant influence over others
Concertive Control - based on adherence to socially constructed norms and values developed by organizational members as they attempt to structure the environment
Communication and Critical Theory
Habermas - goal to develop a theory of society that aims at the self-emancipation of people from domination (the ideal speech situation)
The utterances are truthful
There is a legitimate relationship established between the participants
The utterances are sincere
The utterances are comprehensible

49. Literature
Robert C. Ellickson (1991):Order Without Law: How Neighbors Settle Disputes,. Cambridge: Harvard University Press, 
Guiso, L., Sapienza, P.& Zingales. L.( 2013): The Value of Corporate Culture. NBER Working paper.
ttp://faculty.chicagobooth.edu/luigi.zingales/papers/research/The_Value_of_Corporate_Culture.pdf
Lewis, David (1969). Convention: A Philosophical Study. Cambridge,Mass.: Harvard University Press,