Corporate
Social Responsibility and
Ethical Business
Ms. Panagiota Skoulariki
Adjunct Lecturer
Business Administration and Economics Department
Welcome to
The International Faculty of the
University of Sheffield
Business Administration and Economics Department
CSR and Ethics
Outline
• Business and Societal
Relationship
• Society as the
Macroenvironment
• Factors in Society
• Business Criticism and
Corporate Response
• Development of CSR
and related notions
• Stakeholders
• Ethics
• Technology and
Ethics
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Business Administration and Economics Department
Business and
Society
Business
The collection of private,
commercially oriented organizations ranging in size from sole
proprietorships to corporate giants.
Society
A community, a nation, or a broad group of people with
common traditions, values, institutions, and collective activities
and interests.
Business and society interrelate in a macroenvironment
as stakeholders.
A macroenvironment is the complete societal context in which
the organization resides.
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Segments of the
Macro
Environment
Business Administration and Economics Department
Macroenvironment-Pluralism
A diffusion of power among a society’s many groups.
Involves decentralization and diversity of power
concentration.
Strengths
Prevents concentration of
power.
Maximizes freedom of
expression and action.
Weaknesses
Pursuit of self-interest.
Proliferates organizations
and groups with
overlapping goals.
Disperses individual
Forces conflicts to center
allegiances.
stage.
Creates diversified set of Promotes inefficiency.
loyalties.
Provides checks and
balances.
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Special Interest
Groups
• Make life more complex for business and
government
• Can number in the tens of thousands in some
societies
• Pursue their own focused agendas
• Are active, intense, diverse and focused
• Can attract a significant following
• Often work at cross purposes, with no unified
goals
 A special-interest society is pluralism taken to the
extreme
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Business Administration and Economics Department
Business Criticism
• Little concern for the consumer
• Cares nothing about the deteriorating social
order
• Has no concept of ethical behavior
• Indifferent to the problems of minorities and the
environment
 What responsibility does business have to
society?
 Business for Social Responsibility (BSR) is a
consulting firm and global business network helping
organizations to develop sustainable business
strategies and solutions.
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Business Criticism
Use and Abuse of Power
Business Power
•The ability or capacity to produce
an effect or to bring influence to bear on a situation
or people.
Iron Law of Responsibility
•In the long run, those who do not use
power in a manner society considers responsible
will tend to lose it.
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Levels and Spheres of Corporate Power
Spheres
Levels
Macro
Level
Intermediate
Level
Micro
Level
Individual
Level
Economic
Social/Cultural
Individual
Technological
Environmental
Political
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Society’s Expectations Versus Business’
Actual Social Performance
Social Performance:
Expected and Actual
Society’s
Expectations
of Business
Performance
Social Problem
Business’s Actual
Social Performance
Social
Problem
1960s
Time
2010s
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Factors in the Social Environment leading
to societal expectations
• Affluence and education
•
•
Higher expectations of major institutions.
Growing public awareness through television, film, and
Internet.
• Revolution of rising expectations
•
•
•
•
Expectations vs. performance gap.
Entitlement mentality
Rights movement
Victimization philosophy
• Business scandals
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Social Environment, Business Criticism and
Corporate Response
Affluence
Education
Awareness
Factors in the Social Environment
Rising Expectations
Rights Movement
Victimization
Philosophy
Entitlement
Mentality
Business Criticism
Increased Concern for the
Societal Environment
A Changed Social Contract
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Corporate Social
Responsibility (CSR)
Corporate Social Responsibility
•Seriously considering the impact of
a company’s actions on society.
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
that system.
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Economic Model
Historical
Perspective on CSR
Legal Model
Social Model
Stakeholder Model
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Modification of the
Economic Model
Philanthropy
Community obligations
Paternalism
Motivation:
Keep government at arm’s length
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CSR’s Acceptance and
Broadening of
Meaning
• From the 1950s to the present, the concept of CSR
has gained acceptance.
• The meaning has been broadened to include specific
issues, such as:
•
•
•
•
•
•
•
•
Corporate governance
Product safety
Honesty in advertising
Employee rights
Affirmative action
Environmental sustainability
Ethical behavior
Global CSR
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Evolving Meanings
of CSR
1. Corporate social responsibility is seriously
considering the impact of the company’s actions on
society.
2. The obligation of decision makers to take actions
that protect and improve the welfare of society as a
whole, along with their own interests.
3. Supposes that the corporation has economic and
legal obligations as well as responsibilities to society
that extend beyond these obligations.
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CSR
Arguments Against CSR
• The classical economic view that business’ only goal
is the maximize profits for owners.
• Business is not equipped to handle social activities.
• It dilutes the primary purpose of business.
• Businesses have too much power already .
• It limits the ability to compete in a global
marketplace.
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Arguments For CSR
• It addresses social issues brought on by business, and
allows business to be part of the solution.
• Enlightened self-interest: businesses must take
actions to ensure long-term viability.
• Wards off future government intervention.
• It addresses issues by using business resources and
expertise.
• It addresses issues by being proactive.
• The public supports CSR.
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The Pyramid of
CSR
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The CSR Equation
Economic Responsibilities
+
Legal Responsibilities
+
Ethical Responsibilities
=
Total
Corporate
CSR
+
Philanthropic Responsibilities
A stakeholder perspective focuses on the CSR
pyramid as a unified whole.
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Carroll’s Corporate Social Performance Model
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Corporate Citizenship Concepts
Corporate Social…
Emphasizes…
Responsibility
obligation, accountability
Responsiveness
action, activity
Performance
outcomes, results
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Corporate Social Responsiveness
Alternative Views
Sethi’s Three-Stage Schema
Social obligation, social responsibility, and social responsiveness.
Frederick’s CSR1, CSR2, and CSR3
• CSR1 is accountability-focused.
• CSR2 is responsibility-focused.
• CSR3 refers to corporate social rectitude.
Epstein’s Process View
• Emphasizes the process of social responsiveness.
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Corporate Social Responsiveness
Alternative Views
Sethi’s Three-Stage Schema
Social obligation, social responsibility, and social
responsiveness.
Sethi, P.(1975) Dimension of Corporate Social Performance: An Analytical
Framework. California Management Review, Spring 1975, p.58-64.
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Corporate Social Responsiveness
Alternative Views (cont)
Frederick’s CSR1, CSR2, and CSR3
• CSR1 is accountability-focused.
• CSR2 is responsibility-focused.
• CSR3 refers to corporate social rectitude.
Frederick, W. (1994) from CSR1 to CSR2: The Maturing of Business–and-Society
Thought. Business and Society, 33(2), p.150-164.
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Corporate Social Responsiveness
Alternative Views (cont)
Epstein’s Process View
• Emphasizes the process of social
responsiveness.
Epstein, E.(1987) The Corporate Social Policy Process: Beyond Business Ethics,
Corporate Social Responsibility and Corporate Social Responsiveness.California
Management Review, Vol.XXIX (3), p.104.
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Corporate Social Performance: Extensions,
Reformulations, Reorientations
 Wartick and Cochran’s CSP Extensions
 Wood’s Reformulated CSP Model
 Swanson’s Reorientation of CSP
Wartick, S. and Cochran, P. (1985) The Evolution of the Corporate Social Performance Model.
Academy of Management Review,Vol.10, p.765-766.
Wood, D. (1991) Corporate Social Performance Revisited. Academy of Management
Review,October (1991), p.691-718.
Swanson, D. (1995) Addressing A Theoretical Problem by Reorienting the Corporate Social
Performance Model. Academy of Management Review,Vol.20 (1), p.43-64.
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Corporate
Citizenship
Corporate citizenship
•Embraces all the facets of corporate
social responsibility, responsiveness,
and performance.
•
Serves a variety of stakeholders.
Companies have certain responsibilities that they must
fulfill in order to be perceived as good corporate citizens.
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Corporate Citizenship
(continued)
Broad View
•A reflection of shared moral and ethical principles.
•A vehicle for integrating individuals into the communities in
which they work.
•A form of enlightened self-interest that balances
stakeholders’ claims and enhances a company’s long-term
value.
Narrow View
•Corporate community relations
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The Drivers of Corporate Citizenship
Internal Motivators
External Pressures
Traditions and values
Customers and consumers
Reputation and image
Expectations in the
communities
Business strategy
Laws and political
pressures
Recruiting and retaining
employees
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Benefits of Corporate Citizenship
 Improved employee relations
 Improved customer relationships
 Improved business performance
 Enhanced marketing efforts
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Global Corporate Citizenship
• Multinational enterprises are expected to be good corporate
citizens in the countries in which they do business.
• Are expected to tailor their initiatives to conform to the
cultural environment.
• International academics and business people do research on
and advocate CSR and corporate citizenship concepts.
 Convergence in global CSR approaches will continue as the
world economic stage becomes the common environment
within which businesses function.
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Business Criticism and Response Cycle
Factors in the Societal Environment
Criticism of Business
Increased Concern
for the Social Environment
A Changed
Social Contract
Business Assumption of
Corporate Social Responsibility
Social Responsiveness, Social
Performance, and Corporate Citizenship
A More Satisfied Society
Fewer Factors Leading to
Business Criticism
Increased Expectations
Leading to More Criticism
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Business’ Interest in Corporate
Citizenship
Non-academic research
•Fortune's ranking of “Most Admired” and “Least
Admired” corporations
•Conference Board’s Ron Brown Award
for Corporate Leadership
•CRO Magazine Awards
•Chamber of Commerce of the U.S. Corporate Citizenship
Awards.
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Sustainability
• Sustainable development meets the needs of the
present without compromising the ability of future
generations to meet their own needs.
• Has become one of businesses’ most pressing
mandates.
• Includes the following criteria:
•
•
•
Environmental
Economic
Social
 Concerns businesses’ abilities to survive and thrive
over the long term.
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“Triple Bottom Line” Perspective
Key Spheres of Sustainability
1.Economic
2.Social
3.Environmental
Corporate sustainability is the goal.
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Socially Responsible or Ethical
Investing
• Emerged in the 1970s
• Over $2.7 trillion in socially responsible
investments in the U.S.
Social Screening
• A technique used to screen firms for sociallyresponsible investment purposes.
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Reasons for the Upsurge in Socially
Responsible Investing
1. More reliable research on CSP
2. Investment firms using social criteria have
solid track record
3. The socially conscious 1960s generation is
making investment decisions
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Business and Stakeholder
Relationships
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Stakeholders
Stakeholders
•Individuals or groups with which business interacts
and who have a vested interest in the firm.
External stakeholders
Internal stakeholders
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Stakeholders (cont)
Urgent versus Enduring Issues
Short-Term
•Issues or crises arise on the spur of the moment and
management must formulate quick responses.
Long-Term
•Issues or problems are a long-term concern and
management must develop a thoughtful organizational
response.
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Stakeholders (cont)
Stakeholder Bottom-Line Perspective
• The view that a firm has multiple bottom lines that
benefit for corporate social performance.
• The impacts of benefits of social performance cannot be
fully measured or appreciated by considering only the
impact on the financial bottom line.
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Developing an ethical and socially responsible
managerial approach
•
What business are we in or ought we be in?
•
What changes are occurring or will occur in society’s expectations of
business that mandate business’s taking the initiative with respect to
particular societal or ethical problems?
•
Did business, in general, or our firm, in particular, have a role in
creating these problems?
•
Can we reduce broad social problems to a size that can be effectively
addressed from a managerial point of view?
•
What are the specific problems, alternatives for solving these
problems, and implications for management’s approach to dealing
with social issues?
•
How can we best plan and organize for responsiveness to socially
related business problems?
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Business Ethics
Ethics
•Refers to issues of right, wrong,
fairness, and justice.
Business Ethics
•Focuses on ethical issues that arise
in the commercial realm.
Ethics questions permeate business’s activities as it
attempts to interact with major stakeholder groups.
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Business Ethics
• The public’s interest in business ethics is at
an all-time high, spurred by headlinegrabbing scandals.
• The Enron scandal impacted business to
greatly it is called “The Enron Effect.”
• Business will never be the same.
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High-Profile Ethics
Scandals
Enron Era
•Worldcom
•Tyco
•Arthur Andersen
Wall Street Financial Scandals Era
•AIG
•Bear Stearns
•Lehman Brothers
•Fannie Mae/Freddy Mac
•Bernard Madoff
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Inventory of Ethical
Issues in Business
Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community/Public Interest
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Business Ethics Today versus Earlier
Periods
Expected and Actual Levels
of Business Ethics
Society’s Expectations
of Business Ethics
Ethical Problem
Actual
Business Ethics
Ethical Problem
1960s
Time
2012
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Levels at Which Ethical
Issues May be
Addressed
Personal level
•Situations faced in our personal lives outside the context of our
employment.
Organizational level
•Workplace situations faced by managers and employees.
Industry or profession level
•A manager or organization might experience business ethics issues
at the industry or professional level.
Societal and global levels
•Managers acting in concert through their companies and
industries can bring about constructive changes.
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Three Models of
Management Ethics
Immoral Management
•An approach devoid of ethical principles and an active opposition to
what is ethical.
•The operating strategy of immoral management is focused on
exploiting opportunities for corporate or personal gain.
Moral Management
•Conforms to high standards of ethical behavior or professional
standards of conduct.
Amoral Management
•Intentional: Does not consider ethical factors.
•Unintentional: Casual or careless about ethical factors.
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Factors Affecting the
Morality of Managers
Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
Organization’s Moral Climate
Superiors
Individual
One’s Personal
Situation
Policies
Peers
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Factors Affecting the
Organization’s Moral
Climate
1. Behavior of superiors
2. Ethical practices of one’s industry or
profession
3. Behavior of one’s peers in the organization
4. Formal organizational policy (or lack of)
5. Personal financial need
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Business Ethics
Concerns about the compliance
orientation
1. Could undermine the ways of thinking or habits
of mind that are needed in ethics thinking.
2. Can squeeze out ethics.
3. Managers many not consider tougher issues
that a more ethics-focused approach might
require.
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Four Important Ethical
Questions
1.
2.
What is?
What ought to be?
3.
How do we get from what is to what ought to be?
4.
What is our motivation in all this?
To be put at individual, organizational, industry or
professional, societal and global levels.
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Improving Ethical
Culture
Ethics Programs
and Officers
Realistic
Objectives
Ethical DecisionMaking Processes
Codes of
Conduct
Board of Directors’
Oversight
Top
Management
Leadership
Moral
Management
Discipline of
Violators
Ethics Audits and
Risk Assessments
Effective
Communication
Ethics Training
Corporate
Transparency
Whistle-Blowing
Mechanisms
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Business Ethics: Types
Descriptive Ethics
•Involves describing, characterizing, and studying morality.
•Focuses on what is occurring.
Normative Ethics
•Concerned with supplying and justifying a coherent moral
system of thinking and judging.
•Focuses on what ought or should be occurring.
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Business Ethics:
Approaches
Three Approaches to Business Ethics
Conventional Approach
•Based on how common society today views business ethics
and on common sense.
Principles Approach
•Based upon the use of ethics principles to justify and direct
behavior, actions, and policies.
Ethical Tests Approach
•Based on short, practical questions to guide ethical
decision making and behavior and practices.
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Conventional
Approach
The conventional approach to business ethics involves a
comparison of a decision or practice to prevailing societal
norms.
Decision, Behavior,
or Practice
Prevailing Norms
of Acceptability
Ethical Egoism
•An ethical principle based on the idea that the individual
should seek to maximize his or her own self interests as a
legitimate factor.
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Sources of Ethical
Norms
Fellow
Workers
Family
Friends
The Law
Local
Community
Regions of
Country
The Individual
Profession
One’s SelfInterest and
Conscience
Employer
Religious
Beliefs
Society at
Large
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Types of Ethical
Principles or
Theories
Teleological theories
•Focus on consequences or results.
Deontological theories
•Focus on duties.
Aretaic theories
•Focus on virtue.
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Principles Approach
to Ethics
Major principles of ethics
•Utilitarianism
•Kant’s Categorical Imperative
•Rights
•Justice
•Principles of care
•Virtue ethics
•Servant leadership
•Golden Rule
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Ethical Principles
Utilitarianism
A teleological principle that focuses on acts that produce
the greatest good for the greatest number.
Strengths
Weaknesses
Forces thinking about the
general welfare of stakeholders
Ignores actions that may be
inherently wrong
Allows personal decisions to fit
into situational complexities
May conflict with the notion of
justice
Difficult to formulate
satisfactory rules for decision
making
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Ethical Principles
Kant’s Categorical Imperative
• A duty-based, deontological, principle.
Formulations:
1. Act only on rules that you would be willing to see
everyone follow.
2. Act to treat humanity in every case as an end and never
as a means.
3. Every rational being is able to regard oneself as a maker
of universal law. We do not need an external authority
to determine the nature of the moral law.
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Ethical Principles
Principle of Rights
Moral rights
•Rights that we ought to have based on moral reasoning.
Principle of rights
•Focuses on examining and possibly protecting individual
moral or legal rights.
•A negative right is the right to be left alone.
•A positive right is the right to something.
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Ethical Principles
Principle of Justice
• Involves considering what alternative
promotes fair treatment of people.
Types of justice
• Distributive
• Compensatory
• Procedural
• Rawlsian
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Ethical Principles
Justice Principle In Work Place
Due Process - Process Fairness
1.Have employees been given input into the decision process?
2.Do employees believe the decisions were made and implemented
in an appropriate manner?
3.Do managers provide explanations when asked? Do they treat
others respectfully? Do they listen to comments being made?
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Ethical Principles
Rawls’s Principles of Justice
1. Each person has an equal right to the most basic liberties
compatible with similar liberties for others.
2. Social and economic inequalities are arranged so that they
are both:
 Reasonably expected to be to everyone’s advantage, and
 Attached to positions and offices open to all.
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Ethical Principles
Ethic of Care and Virtue Ethics
Ethic of care/Principle of caring
•Traditional ethics focus too much on the individual self.
•Views the individual as relational, not individualistic–
similar to stakeholder theory.
Virtue ethics
•Focuses on individuals becoming imbued with virtues. If
being is virtuous, actions will likely be virtuous.
•Based on Aristotle and Plato.
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Ethical Principles
Servant Leadership
Servant leadership
•Based on the moral principle of serving others first,
such as employees, customers, and community.
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Ethical Principles
Characteristics of Servant Leaders
•
Listening
•
Concern/Caring/Empathy
•
Healing
•
Awareness
•
Foresight
•
Conceptualization
•
Commitment to the growth of people
•
Stewardship
•
Building community
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Ethical Principles
The Golden Rule
• Do unto others as you would have them do unto
you.
The Golden Rule is:
1. Accepted by most people.
2. Easy to understand.
3. A win-win philosophy.
4. A compass when you need direction.
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Ethical Tests Approach
Test of Common Sense
Test of One’s Best Self
Test of Making Something Public
Test of Ventilation
Test of the Purified Idea
Big Four (greed, speed, laziness, or haziness)
Gag Test
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Ethics and
Technology
Benefits of Technology
Increase production of goods and services
Reduce amount of labor needed to produce
goods and services
Make labor easier and safer
Increased productivity
Higher standard of living
Increased life expectancy
It can be difficult to spread the benefits of technology
beyond the developed world.
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Ethics and Technology: Challenges
of Technology
•
Spreading it to undeveloped world.
•
Side Effects of Technology
 Environmental pollution
 Depletion of natural resources
 Technological unemployment
 Creation of unsatisfying jobs
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Technology and Ethics
Two Key Issues
•Technological determinism
•
What can be developed will be developed.
•Ethical lag
•
Occurs when the speed of technological change far
exceeds that of ethical development.
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Symptoms of Society’s Technology
Intoxication
1. We favor the quick fix.
2. We fear and worship technology.
3. We blur the distinction between what is real and
fake.
4. We love technology as a toy.
5. We live our lives distanced and distracted.
Find the right balance!
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1.
2.
3.
4.
5.
6.
7.
8.
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Business Administration and Economics Department