Ethics:
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How should I live my life?
Study of morality
Questions of right or wrong, fairness and unfairness, good and bad
Rules, standards, principles, rights, obligations though to be of fundamental importance
Business ethics: the study of what constitutes right and wrong, or good and bad, human conduct in a
business context
Values: beliefs or standards that incline us to act or to choose in one way rather than another
Virtues: character traits involved in how we should act, and the type of person we should be
Social ethics: how a society ought to be structured, about how we ought to live together
Moral standards: concern behaviour that is of serious consequence to human welfare that can profoundly
injure or benefit people.
Etiquette: the norms of correct conduct in polite society or any special code of social behaviour and courtesy
Descriptive business ethics: standards, values and principles that operate within business
Normative Business ethics: an academic discipline that not only studies those standards, values, and
principles, but also seeks to articulate and defend the ones that ought or should operate in business
4 types of law: 1) Statutes 2) Regulations 3) Common Law 4) Constitutional Law
* Idea that legality and morality are different. Law cannot sufficiently define morality. An action can be illegal
but morally right and vice versa
Religion:
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Religion is not enough
Differs too widely on the basis on the basis of morality
People have a singular vision of avoiding hell.
Devine command theory: something s wrong only because God commands us not to do it
GOLDEN RULE: Do to others what you would want done to you
Ethical Relativism:
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Idea that what is right is determined by what a culture or society says s right
Only standard for judging an action is the moral system of the society in which the act occurs
KEY PROBLEM: There is no absolute ethical standard independent to cultural context, no criterion for
right or wrong by which to judge other than that of particular societies
What ethical standards should be followed when going to other countries? Example: Abortion is
condemned as immoral in Ireland but is practiced as a morally neutral form of birth control in Japan
How is this relevant to business? Should business have its own standards and should it only be judged
by those standards?
Organizational Norms:
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One’s degree of commitment is a measure of one’s loyalty to the team
Experience pressure from the top to meet corporate goals and comply with corporate norms
Need to meet corporate objectives/be a team player/conform to organization norms, can lead otherwise
honourable individuals to engage in unethical conduct
Conformity:
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Pressure to conform – peer pressure
Experiment: how easily people switched their answers from being correct to incorrect because of the
pressure of not conforming with the rest of the group even though they knew their answer was right
Groupthink:
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Happens when pressure for unanimity within a highly cohesive group overwhelms its members desire
or ability to examine a situation realistically and consider alternative courses of action
Members close their eyes to negative info, ignore warnings that the group may be mistaken, discount
outside ideas that might contradict the thinking or the decisions of the group
Diffusion of Responsibility:
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In a group no single individuals see himself or herself as responsible for what happens, not one is
accountable
Diluted or diminished sense of their own personal moral responsibilities
The greater the number of people observing the event, the less likely any will feel obliged to do anything
Ex. Kitty Genovese Case – 38 of her neighbours witnessed her slaying – not one attempted to intervene,
no one called the police
Reasons why ethics is relevant in business:
1. Ethical errors end careers more quickly and more definitively than any other mistake in judgement or
accounting. (Error is to be human but to be caught lying, cheating, or stealing is not easily forgiven)
2. Ethics provides the broader framework within which business life must be understood.
3. Nothing is more dangerous to a business—or to business in general (tarnished reputations)
3 C’s of Business Ethics:
1. Compliance: with rules, law of the land, principles of morality, customs and expectations of community,
policies etc.
2. Contributions: made to society as a result of quality of products and services, jobs provided for workers
and usefulness of one’s activities to the surrounding community
3. Consequences: of business activities activity inside and outside the company, intended and unintended,
reputation of one’s own company and industry
Governing Principles:
1.
Fiduciary Principle: Carry out the company’s business n a diligent and loyal manner, with the degree of
candour expected of a trustee
2.
Property Principle: Respect property and the rights of those who own it. Refrain from theft and
misappropriation, avoid waste, and safeguard the property entrusted in you.
3.
Reliability Principle: Honour commitments. Be faithful to our word and follow through on promises,
agreements, and other voluntary undertakings, whether or not embodied in legally enforceable
contracts.
4.
Transparency Principle: Conduct business in a truthful and open manner. Refrain from deceptive acts
and practices, keep accurate records, and make timely disclosures of material information while
respecting obligations of confidentiality and privacy.
5.
Dignity Principle: Respect the dignity of all people. Protect the health, safety, privacy, and human rights
of others; refrain from coercion; adopt practices that enhance human development in the workplace, the
marketplace, and the community.
6.
Fairness Principle: Engage in free and fair competition, deal with all parties fairly and equitably and
practice non-discrimination in employment and contracting.
7.
Citizenship Principle: Act as responsible citizens of the community. Respect the law, protect public
goods, cooperate with public authorities, avoid improper involvement in politics and government, and
contribute to community betterment.
8.
Responsiveness Principle: Engage with parties who may have legitimate claims and concerns relating
the company’s activities, and be responsive to public needs while recognizing the government’s role and
jurisdiction in protecting the public interest.
Capitalism:
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An economic system in which the major portion of production and distribution is in private hands,
operating under a profit or market system
All businesses – small, medium, and large – are also privately owned
No central governing body dictates to these private owners what or how much of anything will be
produced
Socialism:
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Polar opposite of capitalism
An economic system characterized by public ownership of property and a planned economy.
Public bodies own productive equipment
Economic decisions made by government
Mixed Economy:
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Combines features of capitalism and socialism
Major difference between countries is the degree from which they deviate from one or the other
US closer to capitalism
China closer to socialism
Canada somewhere in between
Globalized Capitalism: economies in differing countries become more and more integrated through
international trade
Key Features Of Capitalism
1. Companies: the existence of companies or business firms separate from the humans who work for and
within them
2. Profit Motive: human beings by nature are acquisitive therefore they pursue profit.
3. Competition: free competition is the regulator that keeps a community only by self -interest from
degenerating into a mob of ruthless profiteers.
4. Private Property: central to capitalism. Private ownership of the major means of production and
distribution. Therefore individuals or groups acting on their own in pursuit of profit make major
economic decisions.
Moral Justification Of Capitalism
1. The Natural Right to Private Property
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Live in a socioeconomic system that guarantees us certain property rights
Common defense of capitalism: people have a fundamental moral right to property and that our
capitalist system is simply the outcome of this
When individuals mix their labour with the natural world, they are entitled to the results
2. Adam Smith’s Concept of the Invisible Hand
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People are left to pursue their own self inters, they will, without intending it, produce the greatest
good for all
Markets in an economy driven by certain forces that appear “invisible” to us.
A major force which shapes the market is the promotion of a company’s or an individual’s selfinterest. By doing this, an individual or a person may not know that they are positively or negatively
affecting the self-interests of others in the economy, hence their actions act as an “invisible hand”
which moulds the appearance of an economic system.
Criticisms of Capitalism:
1. Inequality: disparity of personal incomes is enormous; tiny majority of the population own the vast
majority of the countries assets. Leads to inequality of opportunity.
2. Human Nature and Capitalism: humans are reduced to consumers and are treated as pawns in the
play of social and economic forces beyond their control
3. Capitalism Breeds Oligopolies: leads to a concentration of property and resources, and thus economic
power, in the hands of a few. Ex. A few companies with enormous wealth dominate the Canadian
economy. 50 companies accounted for 80% of our GDP.
4. Competition Is Not a Good: often cooperation rather than competitiveness that best enhances both
individual and group achievements. Competition is an extrinsic motivator.
5. Exploitation and Alienation: as the means of production become concentrated in the ands of the few,
the balance of power between capitalist (bourgeoisie) and labours (proletariat) tips further in favour of
the bourgeoisie. Because workers have nothing to sell but their labour, the bourgeoisie is ale to exploit
them by paying them less than the true value created by their labour.
Corporations: an organization that can endure beyond the natural lives of its members. It is a 3-part
organization, made up of stockholders, who provide the capital, own the corporation, and enjoy limited liability;
managers, who run the business operations; and employees, who produce the goods or services.
Limited Liability: members of the corporation are financially liable for corporate debts only up to the extent of
their investments.
Corporate Moral Agency:
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Courts recognize corporations as protected under legislation intended in the first place to protect the
rights of human individuals
Corporations are collective entities, that in some sense exist, with an identity distinct from that of the
people whom they are comprised of
If you view corporations as moral agents then there is responsibility for what they do. They can be seen
as having moral obligations and as being blameworthy for failing to meet those obligations
Responsibilities:
1. Narrow View- PROFIT MAXIMIZATION:
 Milton Friedman argued that business has no social responsibilities other than to maximize
profits and make as much money for stockholders as possible
 Diverting funds to social gains would pervert the meaning of business
 Individuals are free to pursue social aims personally, with their money, but a corporation’s sole
point is to generate profit and reward stockholders
3 arguments in support of the narrow view:
1. The Invisible Hand Argument: If businesses are permitted to seek self-interest, their activities
will inevitably yield the greatest good for society as a whole. To invite corporations to base their
policies and activities on anything other than profit making is to politicize business’s unique
economic function and to hamper its ability to satisfy our material needs.
2. The Let-Government-Do-It Argument: Government regulation – through a system of laws and
incentives, can and should bring corporations to heel. Argument of this: can we expect
politicians to bite the hand that feeds them?
3. Business-Can’t-Handle-It: They can’t handle the job because they lack the necessary expertise
and because in addressing these matters, they will inevitably impose their own materialistic
values on the rest of society.
2. Broad View- CSR:
 Other obligations in addition to pursuing profits
 Nothing wrong with corporate profit however they have other responsibilities to consumers,
employees, suppliers, contractors, surrounding community and society as a whole
 Business decision makers are obliged to take actions that also protect and enhance society’s
interests
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Business must acknowledge and correct their externalities. Externalities are the unintended
negative consequences that an economic transaction between two parties can have on some third
part. Business should absorb the costs, of say, disposing of the waste in an environmentally safe way
and provide products that truly reflect (social) cost of production
Corporations need to create an ethical atmosphere, and prioritize key behaviours:
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Corporations should acknowledge the importance of conducting business morally
Corporations should make a real effort to encourage their members to take moral responsibilities
seriously
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Corporations should end their defensiveness in the face of public discussion and criticism – solicit
views of stockholders, managers, employees, suppliers, customers, and society as a whole
Corporations must recognize the pluralistic nature of the social system of which they are a part
Stakeholder: Individual or group that has one or more of the various kinds of stakes in the organization. They
can be affected or they can affect the organization. Their stakes can range from interest to ownership.
Primary: direct stake, influential, high level
of accountability
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Shareholders and investors
Employees and managers
Customers
Communities
Suppliers and business partners
Natural environment *
Future generations *
Non human species *
Secondary: stake is more representational
of public or special interests than direct,
may be extremely influential, level of
accountability tends to be lower
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Government and regulators
Social pressure groups
Media
Trade bodies
Competitors
Environmental interest groups *
Animal welfare organizations *
* Non-social
Firm Views:
Production View: thought of stakeholders as those that supplied resources or bough products or services
Managerial View: as business saw their responsibilities toward other constituent groups to be essential, the
managerial group emerged. Managers required to change how they perceived the firm and its relationships with
constituent or stakeholder groups.
Stakeholder View: must perceive stakeholders as not only the groups that management think have some stake
in the firm but also those that themselves think or perceive they have stake in the firm.
Shareholder Attributes:
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Legitimacy: perceived validity or appropriateness of a stakeholder’s claim to a stake
Power: ability or capacity to produce an effect – to get something done that otherwise not have been done
Urgency: degree to which the stakeholder claim on the business calls for immediate attention or response
Stakeholder Approaches:
Strategic Approach
 Views stakeholders primarily as factors to be taken into consideration and managed while the firm pursues
profits for its shareholders
 Take into account because they might be offended and resist or retaliate
 Sees stakeholders as instruments that may facilitate or impede firm’s objectives
Multifiduciary Approach
 Views stakeholders as more than just individuals or groups who can wild economic or legal power
 Embrace stakeholders on roughly equal footing with shareholders
 Shareholders no longer of exclusive importance (as they were in strategic)
Stakeholder Synthesis Approach
 Business has moral responsibilities to stakeholders but should not be seen as part of a fiduciary obligation
 Management's basic fiduciary responsibility toward shareholder is kept intact
 Ethical responsibility: it’s a business’s duty not to harm, coerce, lie, cheat, steal and so on.
Stakeholder Management – 5 Key Questions:
1. Who are our stakeholders?
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“Stakeholder identification”
2. What are our stakeholders’ stakes?
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Even groups in the same generic category frequently have different specific interests, concern,
perceptions of rights, and expectations.
Identify the nature and legitimacy of a group’s stake(s) and the group’s power to affect
organization - Nature, legitimacy, power and urgency identified
3. What opportunities and challenge do our stakeholders present?
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Opportunities are to build decent, productive working relationships with the stakeholders
Challenges – threats, expectations, demands. Arise because stakeholders fell their needs not being
met adequately
Potential for cooperation
Potential for threat
4. What responsibilities does the firm have towards its stakeholders?
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Corporate social responsibility
Economic, legal, ethical and philanthropic responsibilities
Economic responsibilities towards itself and shareholders
5. What strategies or actions should the firm take to best address stakeholders?
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Contemplate strategies and actions for addressing stakeholders
Prioritize stakeholder demands
Obligations to the Firm:
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Accepting employment – agreeing to preform certain tasks, during specified hours, in exchange for
money
Mutual obligations between you and your employer
Contract – determines what you are supposed to accomplish for employer
Loyalty to the Company:
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Because you are hired by the firm, you have obligations to them, and ought to act to promote the firm’s
interest
Employees willing to sacrifice for organization beyond their job descriptions, view loyalty as an
important value
Conflicts of Interest:
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In an organization, a conflict of interest arises when employees at any level have special or private
interests that are substantial enough to interfere with their job duties
Loyal employees can find their self interest collide with those of the organization
Personal interests could lead them to make decisions detrimental to employers
Ex. Bart William, sales manager for Leisure Sports World, gives all his firm’s promotional work to
Impact Advertising because its chief officer is Bart’s brother-in-law, As a result, Leisure Sports World
pays about 15% more in advertising costs than it would if its work went to another agency. Here Bart
has allowed his decision as an employee to e influenced by personal interest.
Financial Investment:
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Conflicts may exist when employees have financial investments in suppliers, customers, or distributors
with whom their organizations do business
Ex. Monica Walters, purchasing agent for Trans-Can Trucking owns a substantial amount of stock with
Timberline Office Works. When ordering office supplies, Walters buys only from Timberline when there
are places that she could get it for a cheaper price.
Abuses of Official Position:
1.
Insider Trading:
 Buying or selling of stocks (or other financial securities) by business ‘insiders’ on the basis of
information that has not been generally disclosed (to the public) and could reasonably be expected
to significantly affect the market price or value of a security
 Ex. Raj Rajaratnam case – he bought and sold shares on the basis of information that was given to
him by his close friends before the information became public
2.
Proprietary Data:
 Legally protected trade secrets
 A formula for a particular cookie dough recipe for example
 Individuals that might switch employment for competing rivals may be legally required to not
disclose information
 Arguments for protecting trade secrets: 1) trade secrets are intellectual property 2) the theft of
trade secrets is unfair competition 3) employees who disclose trade secrets violate the
confidentially owed to their employers
3.
Bribes and Kickbacks:
 Bribe: a compensation for the performance of an act that is inconsistent with the work contract or
the nature of the work one has been hired to perform. The compensation can be money, gifts,
entertainment, preferential treatment or any object or activity of value
 Kickbacks: practice that involves a percentage payout to a persona able to influence or control a
source of income
4.
Gifts and Entertainment
 Business gifts and entertainment of clients raise conflict of interest and border on bribery
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Take into accounts several factors such as the value of the gift, the purpose of the gift, the
circumstances, the company’s policy, etc.
Whistleblowing:
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An employee informing the public about the illegal or immoral behaviour of an employee or an
organization
Whistleblowing is justified when:
 It is done from an appropriate moral motive
 The whistleblower, except in special circumstance, has exhausted all internal channels for dissent
before going public
 Whistleblower has compelling evidence that wrongful actions have occurred
 Whistleblower has acted after careful analysis of danger
 Whistleblower has some chances of success
Corporate Governance:
Legitimacy: organizations are legitimate to the extent that their activities are congruent with the goal and
values of the social system within which they function
Legitimation: a dynamic process by which business seeks to perpetuate its acceptance
Companies seek legitimacy in 3 ways:
A company may adapt its methods of operating to conform to what it perceives to be the prevailing
standard.
2. A company may try to change the public’s values and norms to conform to its own practices by advertising
and other techniques.
3. A company may seek to enhance its legitimacy by identifying itself with other organizations, people,
values, or symbols that have a powerful legitimate base in society.
1.
Corporate Governance: the method by which a firm is being governed, directed, administered, or controlled
and to the goal it’s working towards
4 major groups of an organization:
1.
2.
3.
4.
Shareholders: owners of corp. They should have ultimate control of corporation.
Board of Directors: govern and oversee the management of the business
Management: hired by board to run the company on a daily basis.
Employees: those hired by the company to perform the operational work
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Separation of ownership from control = dispersion of ownership into hundreds of thousands of
shares mean that no one person or group owned enough shares to exercise power.
Agency problems = developed when the interests of shareholders were not the same as the
interests of the managers and managers began to pursue self interest
CEO Pay – Firm Performance Relationship:
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Concern regarding large salaries for CEOs while profits were falling, workers being laid off and
shareholder return was dropping
Stock options: designed to motivate the recipient to improve the value of the firm’s stock
CEO Excessively Paid:
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2009- ratio of CEO pay to average worker was 319 to 1
Transparency:
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Address some of the problems by making the entire pay packages of top executives transparent
Poison Pills:
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Intended to discourage or prevent hostile takeover
When the acquirer tries to swallow a company, the poison pills makes the company very difficult to
ingest
Improving Corporate Governance:
Sarbanes-Oxley Act:
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Amends the securities law to provide better protection to investors in public companies by improving
the financial reporting of companies
Limit the nonauditing services an auditor can provide
Require auditing firms to rotate the auditors who work with a specific company
Make it unlawful for accounting firms to provide auditing services where conflicts of interest exist
Reporting of balance sheet transactions
Prohibiting of personal loans to executives and directors
Whistleblowers are afforded protection
Must disclose if a code of ethics is adopted for senior financial officers (provide reason if not)
Less attractive to sit in CFO position
Changes in Board of Directors
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Boards undergoing changes because of the growing belief that CEOs and executive teams need to be
made more accountable to stakeholders
Board Diversity
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Small percentage of corporations with women on their boards
Given a diversity of stakeholders, a diverse board is better. Able to hear stakeholder concerns and
respond to their needs.
Diverse boards less likely to fall prey to groupthink because of range of perspectives
Board diversity could also help financial performance
Outside Directors
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Pressures have led firm to seek greater number of outside directors
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Outside directors are those board members who have no other relationship with the firm and its top
managers
Outside directors correlated with dimensions of social responsibility (with people and product quality)
Outside directors – ability to ask difficult questions and speak truthfully about concerns without letting
ties to the firms get in the way
Normative Theories
Normative theories: propose some principle or principles for distinguishing right actions from wrong actions
Two kinds:
Consequentialist: moral rightness of an action is determined solely by its results. If consequences are good
then the act is good; if bad, the act is bad. Ratio = the right action is the one that produces at least as great a ratio
of good to evil as any other course of action. Consequentialist theories:
 Egoism: advocates individual self-interest as its guiding principle.
 Contends that an act is morally right if and only if it best promotes the agent’s own long-term
interests
 Egoist use their best long term advantage as the standard for measuring an action’s rightness
 Misconceptions: all egoists endorse hedonism (the view that pleasure or happiness is the only thing
that is good in itself). Another misconception is that egoists cannot act honestly, be gracious and
helpful, or otherwise promote other people’s interest.
 Egoism tells us to benefit others, if we expect that our doing will be reciprocated
 Psychological egoism: asserts that all actions are in fact selfishly motivated ant that truly unselfish
actions are impossible.
 Utilitarianism: one must take into account everyone affected by the action
 1. When deciding which action will produce the greatest happiness, we must consider unhappiness
or pain as well as happiness
 2. Actions affect different people to different degrees
 3. Because utilitarians evaluate actions according to their consequences, and action produce
different results in different circumstances, almost anything might be morally right in some
particular circumstance
 4. Utilitarians wish to maximize happiness not simply immediately but in the long run as well
 5. Utilitarians acknowledge that we often do not know with certainty what the future of
consequences of our actions will be
 When choosing among possible actins, utilitarianism does not require you to disregard our own
pleasure.
 Problems: allows for the sacrifice of the few to benefit the many, allows for things that are
intuitively wrong if they maximize happiness, and not only permits immoral actions, but requires
them if they will maximize happiness
Non-consequentialist (deontological): right and wrong are determined by more than just the likely
consequences of an action. Believe that other factors are also relevant to the moral assessment of an action.
* Not just the results but also the nature of the act
 Kant’s Ethics: does not rely on contingencies, and define actions as inherently right or wrong. Moral rules
can, in principle, be known as a result of reason alone and are not based on observation. Holds that we don’t
have to know anything about the likely results.
 Goodwill: only when we act from duty does our action have moral worth
 Categorical Imperative: what you must do – what your obligations are
Categorical Imperative (two versions):
1. Universalizability: An action such as lying cannot become a universal rule, because it contains
within it a contradiction that would undermine the entire notion of truth telling.
When considering what to do, you must consider what all rational beings should do. If the law is
valid for you, it must be valid for everybody.
2. Respect: Act so that you treat humanity, whether in your own person or in that of another, always
as and end and never as a means only. Human beings have intrinsic worth because they are rational
agents. Treating them as “ends-in-themselves” means respecting their rationality.
Other non-consequentialist theories:
 Prima Facie Obligations: Different relationships and circumstances generate a variety of specific moral
obligations. What I ought to do will depend on circumstances and the relative importance of the conflicting
obligations. Although I have an obligation to teach on Friday mornings, it is a prima facie obligation, one that
other moral considerations can outweigh (say, if I see an injured child on my way to school).
 Moral Rights: A right is an entitlement to act or have others act in a certain way. We have moral rights, and
legal rights. Moral right, that are not a result of particular roles are called human rights. Human rights are
universal, equal, and not transferable.
The Nature of Justice includes:
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Justice refers to fairness, the fair treatment of members of groups of people
Equality, our treatment of people must reflect their fundamental more equality
The Utilitarian View
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What it identifies as rights are most certain moral rules, the observance of which is of the utmost
importance for the long run, overall maximization of happiness
Would support increased worker participation and a more equal distribution of income
The Libertarian Approach
Liberty is the prime value, and justice consists in permitting each person to live as he or she pleases without
interference. Utilitarians are willing to interfere with liberty to maximize happiness, Libertarians are not.
Rawls’s Theory of Justice
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Modern alternative to utilitarianism
Justice must be associated with fairness and the moral equality of persons
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Conceives of society as a cooperative venture among its members and elaborates a theory of justice that is
fundamentally social
The Original Position
Rawls argues that people in the original position would agree on two principles as the basic governing
principles of their society and that these principles are, accordingly, the principles of justice.
1. A guarantee of certain familiar social and fundamental liberties to each person,
2. Social and economic inequalities are justified only if these inequalities benefit the least
advantaged members of society.
The Veil of Ignorance
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Rawls proposes that we imagine that those in the original position do not know their personal talents,
characteristics and holdings
Under the veil of ignorance, the people in Rawls’ original position have no knowledge about themselves
or their situation that would lead them to argue from a partial or biased point of view.
Rawls’s Two Principles
1. Each person is to have an equal right to the most extensive total system of equal basic liberties compatible
with a similar system of liberty for all.
2. Social and economic inequalities are to satisfy two conditions:
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They are to be attached to positions and offices open to all under conditions of fair equality of
opportunity; and
They are to be to the greater expected benefit of the least advantaged members of society.
Globalization: Refers to the increasing unification of the world's economic order through reduction of such
barriers to international trade as tariffs, export fees, and import quotas. The goal is to increase material wealth,
goods, and services through an international division of labour by efficiencies catalyzed by international
relations, specialization and competition. It describes the process by which regional economies, societies, and
cultures have become integrated through communication, transportation, and trade.
Relativist perspective: The relativist perspective is that moral values differ across all cultures and there is no
objective way to discern whether one culture’s set of values is better than another's. Therefore, when doing
business abroad, one only has to conform to the standards of the host nation.
Herd Mentality: describes how people are influenced by their peers to adopt certain behaviours, and follow
trends). People act in appalling ways when they think they can shift the responsibility elsewhere. Similar to
groupthink. Milgram experiment.
Corporate Social Responsibility: “... The idea of social responsibility ... Requires the individual to consider his
[or her] acts in terms of a whole social system, and holds him [or her] responsible for the effects of his [or her]
acts anywhere in the system.”
Arguments against CSR
Classical Economics
- Corporation has one responsibility: maximizing profits
- Milton Friedman: social issues are not concern of businesspeople
- If free market cannot solve social problem, it is up to government/legislation
Business Not Equipped
- Managers oriented towards finance/operations do not have expertise to make social decisions
Dilutes Business Purpose
- Puts business into fields not related to its goals; dilutes purpose
Too Much Power Already
- Business has too much power already: economic, environmental, technological
Global Competitiveness
- Business must internalize costs that it normally passed on to society (such as pollution), costs of
products will rise, making them less competitive in the international market
Arguments for CSR
Enlightened Self-Interest
- In order to survive in the long-term, a business must be responsive to society’s expectations
Warding Off Government Regulation
- If business is socially responsible, this would avert future government intervention
Resources Available
- Business is a reservoir of management talent, functional expertise; capable of making changes
Being Proactive vs. Reacting
- Anticipating and initiating is more practical and less costly than reacting to problems that have already
occurred
Public Support
- Public strongly supports CSR
Economic Responsibilities
• Think of long term financial investment – revenue, profit, investors, and employees
• To produce goods and services of value to society
• Key stakeholders: shareholders, creditors, consumers
• “Must do” responsibilities
Legal Responsibilities
• Responsibilities as defined by government laws and regulations
• Code of ethics
• Laws are mandatory but not adequate
• “Have to do” responsibilities
Ethical Responsibilities
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Responsibilities expected by society
Moral philosophies that can be applied
Not required by law (yet)
“Should do” responsibilities
Philanthropic or Discretionary Responsibilities
• Responsibilities that are voluntary
• Doing well by doing good
• Different from ethical responsibilities in that few stakeholders expect them
• “Might do” responsibilities
Triple Bottom Line:
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This concept seeks to encapsulate for business the three key spheres of sustainability (economic, social,
and environmental).
At its narrowest, the term is used as a framework for measuring and reporting corporate performance
in terms of economic, social and environmental indicators.
At its broadest, the concept is used to capture the whole set of values, issues, and processes that
companies must address to minimize harm resulting from their activities and to create economic, social,
and environmental value.
Environmental ethic: the set of values or principles that govern a corporation’s practices relating to the
environment.
Sustainable development: development ensuring that the use of resources and the impact on the environment
today does not damage prospects for the use of resources or the environment by future generations