Business Ethics ( Corporate Social Responsibility and Individual in business)

When looking at a business decision...

Friedman -identify and follow relevant laws and regulations -identify and follow current social standards and opinions -maximize profit without breaking laws and without disturbing society so much that it decreases profits Freeman -identify all stakeholder groups -identify available options and determine the effect they will have on stakeholders -make an ethical decision that takes stakeholders into account

Example of conflict of interest

I own stock in a construction company that bids on a construction project for my employer. If I have have not been assigned a role in selecting winning bid, then: Potential conflict of interest If I have a role in selecting winning bid, then: Actual conflict of interest If I have no role in selecting the winning bid, have no influence over selection, and my employer does not even know I own the construction company, then: No potential or actual conflict of interest but An Apparent conflict of interest - other bidders may perceive the process as being unfair or unjust

How do i know if my role could create a conflict?

Know general guidelines to determine when an employee's outside interested are significant enough that they could influence his or her job or judgement -what is my position in the firm? -what is the nature of my job? -do i stand to gain from the transaction involved and if so ,how direct is the gain and how much do i stand to gain? -what impact does my action have on others inside and outside of the firm?

alternative views of a business organization

Rational organization -view of the organization that sees it as a structure of formal relationships designed to achieve some technical or economic goal with maximum efficiency Political Organization -a view of the organization as a system of competing power coalitions and formal and informal lines of influence and communication that radiate from these coalitions Caring Organization -view of the organization in which the dominant moral concepts are those that arise from an ethic of care

What are stakeholder rights?

Stakeholders are groups and individuals -who benefit from or are harmed by corporate actions -whose rights are violated or respected by corporate actions narrow definition - groups that are vital to the survival and success of the corporation wide definition -any group or individual who can affect or is affected by the corporation

Look to Employer Guidelines...

To reduce the possibility of a conflict, some employers -specify amount of stock an employee may hold in another company that employer either does business with or competes against -prohibits certain relationships with employees of competitors -require key officers to disclose all their outside financial interests

rational organization

Top management -board of directors -chief executive officer -president -chief financial officer Middle Managers - direct units below them in ascending formal lines of authority -are directed from top management in ascending formal lines of authority Operating Layer - employees and their immediate supervisors who directly produce the goods and services that constitute the essential outputs of the organization -organizations seek to coordinate the activities of members to achieve the organizations goals with maximum efficiency -information rises from the bottom of the organization to the top -contracts govern the relationship between the employer and employee

Employee duties- carefully evaluate gifts

look at the company's policy

Caring Organization

organizations can be thought of as networks of relationships in which "connected selves" form webs of ongoing personal relationships with other "connected selves" -focus of employees is not on pursuit of power, profit or personal goals, but on caring interpersonal relationships among those in company and those with whom the company interacts -caring is an end to itself- not as a means of productivity -caring is essentially personal -caring is growth- enhancing for the cared for - though caring is not a means to an end, it has been argued that business organizations in which such caring relationships flourish will exhibit better economic performance than the organization that restricts itself to contractual and power relationships

Potential Types of Conflict of Interest

potential: occurs when employee has an interest that could influence what the employee does for the employer if the employee were to perform a certain task for the employer but he or she has not yet been given the task to perform actual: occurs when employee has an interest that could influence what the employee does for the employer if the employee were to perform a certain task for the employer and he has been given the task to perform apparent: occurs where employee has no actual conflict of interest, but in which other people looking at the situation may come to believe (wrongly) that there is an apparent conflict of interest

CSR- Kant, Bentham and Aristotle

public has grown increasingly skeptical about the motivations behind CSR efforts by corporations Kant approach: act out of sense of duty, but not one of true respect or empathy Bentham approach: real goal is to make $, CSR efforts come across as calculating and superficial Aristotle approach: focus on character and virtue that is nurtured and developed over time

Shareholder theory

responsible to shareholders/investors

Employee Duties- confidentiality

take appropriate precautions to maintain confidentiality of nonpublic info about company

Shareholder View

the company's only responsibility is to legally and ethically make money for the owners -profits belong to the shareholders- not management -in a competitive marketplace, companies will have to use resources wisely, provide good customer service, and pay good wages to employees in order for company to stay profitable -societal benefits are thus a byproduct of seeking to maximize profits in a competitive market Corporations should be run for the benefit of all stakeholders -managers should give share of profits not only to stockholders, but also to other stakeholders -a stakeholder is any individual who can affect the achievement of the organization's objectives or who is affected by the achievement of the organization's objectives

Political Organization

unlike the focus on contractual obligations of employers an employees under the rational model, the main ethical issues in the political model are related to the moral constraints on the use of power in the organization

Employee rights in the political model

-Power of modern corporate management is similar to that of government Similarity Argument -governments are defined in terms of 4 features 1. a centralized decision making body of officials who 2. have the power and recognized authority to enforce their decision on subordinates (citizens) 3. who have decisions that determine the public distribution of social resources, benefits and burdens among the subordinates 4. and who have a monopoly on the power to which their subordinates are subject

Employee duties- avoid bribes

-a commercial bribe is something of value that is given or offered to an employee by a person outside the employee's company who intends it to lead to the employee dealing favorably with that person or the person's firm

Milton Friedman

-advocate of economic freedom and free enterprise -advocate of limited government -corporation's primary, and perhaps sole purpose, is to maximize profits for the shareholder -social issues should be left to government "there is one and only one social responsibility of business- to use it to resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

Interdependence

-all 4 rationales "focus on the tension between business and society rather than on their interdependence" -create generic rationale not tied to strategy and operations of specific company -successful corporations need healthy society -a healthy society needs successful corporations

rational organization- employee's duties to employer

-an employee's main ethical duty is to work toward the goals of the firm an to do nothing that conflicts with those goals while working with the firm -avoid conflicts of interest -avoid brides -carefully evaluate gifts and theft -maintain confidentiality

Stakeholder theory

-balance multiple claims of stakeholders -"The task of management in today's corporation is akin to that of King Solomon. The stakeholder theory does not give primacy to one stakeholder group over another, though surely there will be times when one group will benefit at the expense of others. In general, however, management must keep the relationships among stakeholders in balance. When these relationships become unbalanced, the survival of the firm is in jeopardy."

Moral Obligation

-companies have a duty to be good citizens and "do the right thing" but -while it is the "nature of moral obligations to be absolute mandates", many corporate social choices involve balancing competing values, interests and costs with no clear guidelines -moral calculus to weigh one social benefit against another, or against its financial costs has yet to be developed

Porter and Kramer's argument

-companies must shift from a fragmented, defensive approach to an integrated, affirmative approach - the focus must move away from an emphasis on image to an emphasis on substance -"the current preoccupation with measuring stakeholder satisfaction has it backwards. What needs to be measured is social impact"

License to operate

-company needs tacit or explicit permission from government, communities, and stakeholders to do business but... -while this is more pragmatic than other justifications, "by seeking to satisfy stakeholders... companies cede primary control of their CSR agendas to outsiders."

Successful corporations need a health society

-education, health care and equal opportunity are essential to a productive workforce -efficient utilization of land, water, energy and other natural resources makes business more productive -good government, rule of law, and property rights are essential for efficiency and innovation

Sustainability

-emphasizes environmental and community stewardship: meeting the needs of the present without compromising the ability of future generations to meet their own needs but... -while sustainability works well when decisions happen to be environmentally friendly but are justified apart from environmental concerns -"the notion of sustainability can become so vague as to be meaningless" offering little basis to balance long-term objectives against short term costs

What are employee rights in the political organization?

-if there are moral limits to the power government officials can exercise over citizens, are there also moral limits to the power managers can exercise over their employees? -if the power of government must respect civil rights of citizens, should the power of managers respect moral rights of employees?

Traditional Justifications for CSR

-moral obligation -sustainability -license to operate -reputation -but each of these traditional justifications has its limitations

A healthy society needs successful companies

-no social program can rival the business sector when it comes to creating jobs, wealth, and innovation that improve standards of living and social conditions over time -as corporate and regional competitiveness fade, wages stagnate, jobs disappear, and the wealth the pays for taxes and supports nonprofit contributions evaporates

Edward Freeman's theory of stakeholder interests

-reciprocal relationships owners: provide $ employees: provide labor/ receive jobs and livelihood suppliers: provide raw materials/ receive $ in return customers: receive materials/provide revenue to firm community: approves facilities/ receives tax revenue

Edward Freeman

-stakeholder theory -corporations have evolved... the corporation "has attained a degree prominence entitled it to be dealt with as a major social institution" -we need to "replace the notion that managers have a duty to stockholders with the notion that managers bear a fiduciary duty to stakeholders." -the "corporation is a legal person, existing in contemplation of the law."

Friedman on social responsibility

-used as a cloak -perpetuate misperception that making money is a bad thing

What do do if you have a conflict?

- disclose conflict to employer -recuse yourself from the task in which the conflict of interest arises; eliminate or change the obligation of the employee -eliminate the interest that created the conflict of interest

What is corporate social responsibility?

-"today's consumers hold companies to a higher standard. they're looking for more than just material products or quality services -expect companies to operate responsibly to address social and environmental issues

Two views of Corporate Social Responsibility

1. Shareholder-Centric Model 2. Corporate Citizen Model

Employee Duties-avoid commercial extortion

extortion occurs when an employee demands a consideration forepersons outside the firm as a condition for dealing favorably with those persons when the employee transacts business with the firm

goals of CSR

-CSR efforts that do not focus on identification with employees/customers risk losing those employees/customers -virtue ethics are supposed to lead to happiness- csr strategy should aim for the same goal -corporate virtues, once nourished and established can lead to happy stakeholders and better performance

Reputation

-CSR will improve company's image, strengthen brand, enliven moral, and even raise value of its stock but... -"the reputation argument seeks that strategic benefit but rarely finds it" -it "risks confusing public relations with social and business results"

Friedman on spending money for "social responsibility"

-If it reduces returns to shareholders-spending their money - if it raises price to customers- spending their money -if it lowers wages of some employees- spending their money

Friedman on the Role of the Corporate Executive

"The whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal. This justification disappears when the corporate executive imposes taxes and spends the proceeds for 'social' purposes. He becomes in effect a public employee, a civil servant, even though he remains in name an employee of a private enterprise."

A suggested approach

1. Identify points of intersection between a company and society -inside/out linkage (the value chain) -outside/ in linkage 2. Choose which social issues to address - generic social issues: may be important to society but are neither significantly affected by the company's operations nor influence the companies long term competitiveness -value chain social impacts: significantly affected by the company activities in the ordinary course of business -social dimensions of competitive context: factors in the external environment that significantly affect he underlying drivers of competitiveness intros places that the corporation operates 3. Create a social agenda -responsive CSR: acting as a good citizen, mitigating existing or anticipated adverse effects from business activities -strategic CSR: transforms value chain activities to benefit society while reinforcing strategy, goal is to "mount a small number of initiatives whose social and business benefits are large and distinctive" -invests in social aspects that strengthen company's competitiveness