Ethics & Corporate Social Responsibility

A Case for Companies to A Case for Companies to be Socially Responsiblebe Socially Responsible A company is a corporate citizen—it should A company is a corporate citizen—it should

act as a responsible citizenact as a responsible citizen Improves a company’s reputationImproves a company’s reputation Companies should solve the problems they Companies should solve the problems they

causecause Example—pollutionExample—pollution Keeps the government out of businessKeeps the government out of business Increased market shareIncreased market share

A Case Against Companies A Case Against Companies being Socially Responsiblebeing Socially Responsible

Increases costsIncreases costs A company’s job is to make a good or A company’s job is to make a good or

service, not improve societyservice, not improve society Stealing shareholders’ moneyStealing shareholders’ money A company’s social obligations are A company’s social obligations are

discharged when it pays taxesdischarged when it pays taxes Gives company’s too much powerGives company’s too much power Businesses may exert too much influence Businesses may exert too much influence

over charitable causesover charitable causes

EthicsEthics

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

Ethical DilemmaEthical Dilemma

A situation that arises when all alternative choices A situation that arises when all alternative choices or behaviors have been deemed undesirable. or behaviors have been deemed undesirable.

Potentially negative ethical consequences, making Potentially negative ethical consequences, making it difficult to distinguish right from wrong.it difficult to distinguish right from wrong.

Criteria for Criteria for Ethical Decision MakingEthical Decision Making

Most ethical dilemmas involveMost ethical dilemmas involve A conflict between needs of the part & whole.A conflict between needs of the part & whole.The individual versus the organization. The individual versus the organization. The organization versus society as a whole.The organization versus society as a whole.

Four Considerations inFour Considerations inEthical Decision MakingEthical Decision Making

Utilitarian Approach Utilitarian Approach Individualism Approach Individualism Approach Moral-Rights ApproachMoral-Rights ApproachJustice ApproachJustice Approach

Utilitarian ApproachUtilitarian ApproachMoral behavior produces the greatest good Moral behavior produces the greatest good

for the greatest number.for the greatest number.

Computations can be very complex, Computations can be very complex, simplifying them is considered appropriate.simplifying them is considered appropriate.

Critics fear a “Big Brother” approach and ask Critics fear a “Big Brother” approach and ask if the common good is squeezing the life out if the common good is squeezing the life out of the individual.of the individual.

Individualism ApproachIndividualism Approach

Acts are moral when they promote the Acts are moral when they promote the individual's best long-term interests.individual's best long-term interests.

Individual self-direction paramount.Individual self-direction paramount.

Individualism is believed to lead to honesty & Individualism is believed to lead to honesty & integrity since that works best in the long run.integrity since that works best in the long run.

Moral-Rights ApproachMoral-Rights Approach

Asserts human beings have fundamental rights Asserts human beings have fundamental rights and liberties.and liberties.

Moral decisions are those that best maintain the Moral decisions are those that best maintain the rights of those people affected by them.rights of those people affected by them.

An ethical decision is one that avoids interfering An ethical decision is one that avoids interfering with the fundamental rights of others.with the fundamental rights of others.

“ “Moral Rights” Moral Rights” ConsiderationsConsiderations

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 ApproachJustice Approach

Moral Decisions must be based on standards Moral Decisions must be based on standards of equity, fairness, and impartiality.of equity, fairness, and impartiality.

Treatment of individuals should not be based Treatment of individuals should not be based on arbitrary characteristics.on arbitrary characteristics.

Closet thinking to codified law.Closet thinking to codified law.

Social ResponsibilitySocial Responsibility Organization’s obligation to make choices and Organization’s obligation to make choices and

take actions that will contribute to the welfare take actions that will contribute to the welfare and interests of society and organization.and interests of society and organization.

Distinguishing right from wrong.Distinguishing right from wrong. Being a good corporate citizen.Being a good corporate citizen.Many social responsibilities issues are Many social responsibilities issues are

ambiguous with respect to right and wrong.ambiguous with respect to right and wrong.

Shades of Corporate GreenShades of Corporate Green

Activist Approach

Actively conserve the environment

Stakeholder ApproachAddress multiple stakeholder concerns

Market ApproachRespond to customers

Legal ApproachSatisfy legal requirements regarding environmental

conservationSOURCE: 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 Total Corporate Social ResponsibilitySocial 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 toCorporate Responses toSocial DemandsSocial Demands

Proactive

Take social initiatives.

Accommodation

Accept ethical responsibility.

Defense

Do only what is legally required.

Obstruction

Fight all the way.

High

Low

Degree of Social

Responsibility

Three Pillars of an Ethical Three Pillars of an Ethical OrganizationOrganization

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), 128-142.