Corporate Social Responsibility
 Obligation corporations have to constituencies
and the nature and extent of those obligations
 Focus on the “oughts” of conducting business
 Constituencies include:
 shareholders, customers, employees, specific
communities, society at large, governments
 Issue: constituencies may not share same
expectations
 Two Fundamental Perspectives
 Efficiency vs. Social Responsibility
1
Efficiency Perspective
Maximize profits for the owners of the
business
MANAGERS AS OWNERS
Self-interests of the
manager-owner are best
achieved by serving the
needs of society
MANAGERS AS AGENTS
Managers have no
obligation to act
on behalf of society
if it does not
maximize value for
the shareholders
2
Social Responsibility Perspective
 Firms have responsibilities and obligations to
society as a whole, not just shareholders
Key Stakeholders
Employees
Suppliers
Shareholders
FIRM
Communities
Society
Financiers
3
Corporate Responses
Defenders
Belief
Focus
We must fight against
efforts to restrict or
regulate our activities
and profitmaking potential.
Maximize profits.
Find legal loopholes.
Fight new restrictions
and regulations.
Accommodators
We will change when
legally compelled to
do so.
Maximize profits.
Abide by
the letter of the law.
Change when
legally compelled to
do so.
Adapted from Exhibit 2.24
Corporate Responses (cont.)
Reactors
Belief
Focus
We should respond to
significant pressure even
if we are not legally
required to.
Protect profits. Abide
by the law. React to
pressure that could
affect business results.
Anticipators
We owe it to society to
anticipate and avoid
actions with harmful
consequences, even if
we are not pressured or
legally required to do so.
Obtain profits, Abide
by the law. Anticipate
harmful consequences
independent of
pressures and laws.
Adapted from Exhibit 2.25
Strategic Corporate Social Responsibility
Perspective
 Three fundamental criteria guide managers:
Inside-Out
Approach
Look inside
company at
issues
that are
important
to the
company
Outside-In
Approach
Outside-Out
Approach
Look outside
company at
issues
that
company has
an impact
upon
Look at social
issues in
general in
terms of the
extent to
which they
are
problematic
6
Ethics
 What are ethics?
A set of principles governing right and wrong behavior by
individuals and groups
 What is managerial ethics?
Concerned with morality and standards of business
behavior
 Why is it important to consider business ethics?
Good ethical behavior can result in positive
consequences for the organization
Unethical behavior results in negative consequences
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The Development of Individual Ethics
Family
Life
Experiences
Friends
Individual
Ethics
Job
Experiences
Religion
Peers
Teachers
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Basic Approaches to Ethics
Ethical Dilemmas
 The choice between two competing but arguably valid
options
Ethical Lapses
 Decisions that are contrary to an individual’s stated
beliefs and policies of the company
Frameworks for ethical decision making:
 Utilitarian approach
 Moral rights approach
 Universalism approach
 Justice approach
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Utilitarian Approach
Which will result in the “greatest good?”
Focused on the consequences of an action
Cost/benefit analysis – choose decision in
which benefits most outweigh costs
Different people may see the outcome
differently in terms of good or bad
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Moral Rights Approach
Focused on moral standing of actions,
independent of their consequences
Some things are simply “right” or “wrong”
When two actions have moral standing,
then the positive or negative consequences
of each will determine the more ethical one
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Universal Approach
 “Do unto others as you would have them do
unto everyone, including yourself.”
 The “Golden Rule”
 Choose a course of action you believe can
apply to all people under all situations
 Decisions or actions that limit rights like
freedom and autonomy generally lack moral
justification and are unethical
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Justice Approach
Focuses on the how equitable the process and outcomes
are
 Distributive justice
 Costs and benefits should be equitably distributed
 Equitable distribution is based on performance
 Procedural justice
 Rules should be impartially applied
 Ensure that people consent to the decision-making process
 Ensure that the process is administered impartially
 Compensatory justice
 Those damaged should be compensated
 If distributive and procedural justice fail, those hurt by inequitable
distribution of rewards are compensated
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Moral Intensity in Ethical Decision Making
Social
Consequences
Moral
Intensity
Proximity
Moral intensity
The degree to
which people
see an issue as
an ethical one
6 components
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How Managers Make Better Ethical Decisions
By improving the ethical climate through
improving their own facility with ethical
reasoning.
By becoming more aware of the factors of
moral intensity and the basic ethical
reasoning systems
By developing their skill at ethical decision
making and making more ethically
consistent decisions.
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How Firms Make Better Ethical Decisions
Code of ethics: a formal one-to-three page
statement outlining the types of behavior
that are and are not acceptable
Codes generally stress:
Being a good “organization citizen”
Guiding employee behavior away from
unlawful or improper acts that could harm
the organization
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Successfully Implementing Codes of Ethics
Implementing
a Code
of Ethics
Communication
Training
Reward &
Recognition
Whistleblowing
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The Government:
Foreign Corrupt Practices Act
 Cannot corrupt actions of foreign officials,
politicians, or candidates
 Cannot make payments to any person when they
have "reason to know" that the payments might
be used to corrupt the behavior of officials
 Must take steps to provide "reasonable
assurance" that transactions are in compliance
with the law and to keep detailed records of them
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