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Question 1

what is csr

Answer 1

“A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a
voluntary basis”

CSR concerns an organization’s voluntary actions regarding social and environmental issues within it’s operations, products and interactions with stakeholders.

Question 2

Carroll’s (1979) typology of corporate responsibilities

Answer 2

top (peak)

discretionary responsibilities
- contribute resources to the community and improve quality of life

ethical responsibilities
- obligation to do what is right and fair, avoid harm.

legal responsibilities
- law is society’s codification of right and wrong. play by the rules.

economic responsibilities
- the foundation upon which all others rest.

bottom (foundation)

Question 3

the development of csr - the industrial revolution

Answer 3

Characterised by individual (e.g., Rockerfeller, Carnegie) and corporate philanthropy (e.g., Cadbury, Steinway).
• Individual philanthropy part of tradition of wealthy individuals acting as patrons for the arts, commissioning of churches, civic good.
• Corporate philanthropy more concerned with worker welfare, e.g., building of facilities and services for workers, to improve factory conditions. Bound up with improving skills, health and productivity of workers – responsibility or business necessity?
• Emergence of Limited Liability Companies. Tension between individual and corporate philanthropy – appropriate use of shareholder funds?

Question 4

the development of csr - post WW2 (1950s-70s)

Answer 4

Rise of the welfare state in Europe - government role in distributing benefits of economic prosperity more equally (e.g., healthcare, education). Business’ role to aid prosperity through job creation, paying taxes and acting lawfully.
Greater concern with human rights (e.g., UN Universal Declaration of Human Rights).
1960’s – issue driven. Companies active in tackling specific issues, e.g., race, gender equality, air pollution, employee work conditions. Can be seen as reactive - greater number of pressure groups and also tied to legislative change.
Post 1970s – more responsive. Management, organization level and practical changes in response to CSR, e.g., changes to board composition, early forms of social reporting.

Question 5

the development of csr - globalisation era (1980s+)

Answer 5

Rise of multinational corporations – essentially stateless, wielding huge power and influence. CSR seen as a way of balancing this power without global government – demonstrating responsibility to the communities around the world in which they operate.
• 1980’s – Stakeholder theory and business ethics themes develop.
• 1990’s – theme of sustainability emerged, initially focused on environment, broader meaning now. Corporate Social Performance and Corporate Citizenship emerge.
• 2000’s CSR becoming an increasingly formal aspect of corporate governance.

Question 6

why should we care about csr now?

Answer 6

Climate change, the environment and depletion of natural resources.
“Human activity is putting such strain on the natural functions
of Earth that the ability of the planet’s ecosystems to sustain
future generations can no longer be taken for granted” UN 2005

Cost! Reputation, Environmental, Financial, Regulatory, Market Cap….
VW car emissions testing scandal – billions £ wiped off the share price and exposure to huge US fines.

Question 7

what has been done to improve csr

Answer 7

sustainable development goals

principles for responsible management education

Question 8

examples of corporate social responsibility

Answer 8

Reporting
• Annual reports measuring company CSR in line with reporting frameworks and guidelines e.g., the Global Reporting Initiative.
• Often a relatively weak and minimal form of CSR – don’t have to be active.
Dialogue and Engagement
• Dialogue is a two-way process of dissemination and direct stakeholder engagement.
• Understand perceptions of the business and risks to reputation, joint solutions to responsible business – however, sometimes a one-way street.
Employee Volunteering and Community Projects
• Engages workers in CSR., e.g. volunteering days. Benefits: builds employee moral, company identity and reputations as good employer.
• Soft CSR and relatively low cost.

Question 9

Examples of companies improving csr

Answer 9

BT Better Future programme
Net Good: To help society live within planetary constraints.
• Help customers reduce their carbon emissions by at least three
times the end-to-end carbon impact of BT’s business.
- Target of using services and technology to help generate over£1billion for good causes by 2020.

Marks and Spencer’s Plan A
“Through Plan A we are working with our customers and our suppliers to combat climate change”

Question 10

what is a license to operate in csr

Answer 10

The public’s acceptance of an organization’s impact on society and approval for them to operate.
• Some activities may be profitable, but without a strong license to operate they may be restricted, .e.g., oil exploration, financial actives, tobacco, mining, polluting products.
• Building social support for business activities (e.g., through stake holder engagement, transparency) can strengthen the license to operate.

Question 11

what is a fiduciary duty in csr

Answer 11

Corporate officers have a legal duty to act in the best interests of their shareholders, to safeguard their investment and their money.

Question 12

example of a company who has history of lacking corporate responsibility

Answer 12

• Uber lost its license to operate in London due to a lack of corporate responsibility, including failure to report serious crimes or conduct background checks on drivers.
• uber launched a support hotline in response, enforced hour limits for drivers and published more data.

Question 13

competing views on corporate social responsibility

Answer 13

Friedman (1962) “few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible” (p. 133).

Vs.

Bowen (1953) social responsibilities of “businessmen”: “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society”

Question 14

shareholder theory

Answer 14

The corporation should (ethically) be run primarily for the benefit of its shareholders

Therefore, business managers should seek to maximise profits (within the law)

This is the only ethical duty of business managers

To fail to do so is unethical

Lots of “CSR activities” are unethical on this view, e.g. cutting down pollution over and above cuts required by law, or charity to local communities (assuming that neither of these maximises profit).

Question 15

justifications for shareholder theory

Answer 15

a. Property Rights Justification
b. Utilitarian Justification

Both views associated with
Milton Friedman

Question 16

property rights justification

Answer 16

The company is owned by shareholders.
Company property – including its cash - is ultimately shareholder property which they have a right to.
Therefore shareholders get to decide what to do with it.
Managers are shareholders’ agents. They work for the shareholders.
Therefore, managers have ‘fiduciary’ duties (responsibilities) to follow shareholders’ wishes with respect to the property which has been entrusted to them.

fiduciary duties – special duties that arise out of a relationship of trust.

Spending money on CSR type activity is:

A violation of fiduciary duties; and

An undemocratic form of tax (in the sense of a violation of shareholders’ property rights – using their wealth for things they may not want).

Question 17

objections to the property rights justification

Answer 17

What about CSR type activity that is profitable (the ‘business case’ for CSR)? E.g. A number of consumers now exclusively buy Fairtrade goods.
Corporate Property not same as Personal Property (Desjardins, 2009) – investors put their money into a company, and hire managers to run the company. Thus investors do not have full discretion in the same way they do over personal wealth.

Question 18

utilitarian justification

Answer 18

Utilitarianism is a moral theory, notable exponents include J.S. Mill (1806 – 1873)

The (ethically) right action is the one produces the greatest happiness for the greatest number

Argument: if business managers concentrate on maximising profit within the law that will produce the greatest happiness for the greatest number…Therefore that is what they should do – it is their ethical responsibility.

Competitive free markets where each business focuses on maximising profit for their owners are the most efficient and best at satisfying consumer demand. This is the “Invisible Hand” argument from the economist Adam Smith (1723– 1790). This leads to the greatest happiness for the greatest number, according to this argument.

Question 19

objections to utilitarian justification

Answer 19

The pursuit of profit does not always maximally satisfy consumer demand

Monopolies – businesses which hold a monopoly share of the market – cannot effectively provide for needs/ desires of all.

Tragedy of the Commons
In ToC cases, if all businesses focus on maximising profits for themselves, it leads to worse outcomes for everyone, e.g. over-fishing

The satisfaction of consumer demand is not the same as happiness.
A society in which everyone’s desires are fulfilled is clearly not necessarily a happy society.. So if our goal is really happiness/ general welfare, customer satisfaction may not be the best way.

Question 20

what is a stakeholder

Answer 20

Most widely cited definition:

“Any group or individual who can affect or is affected by the achievement of the organizations objectives.” (Freeman, 1984)

Question 21

stakeholder theory

Answer 21

There are different stakeholder theories

All have in common:

A rejection of shareholder theory

The view that all companies have ethical responsibilities to stakeholders that go beyond those required by law – e.g. ethical responsibilities to communities, or the workforce.

Question 22

what are 2 stakeholder theories

Answer 22

A. Multi-Fiduciary Stakeholder Theory (Evans & Freeman, 1988).

B. Goodpaster’s Stakeholder Theory (Goodpaster, 1991)

Question 23

multi fiduciary stakeholder theory (1988)

Answer 23

Companies should be run for the benefit of all their stakeholders (including shareholders).

Some background:
They describe their theory as ‘Kantian’
Immanuel Kant was an 18th century moral philosopher
Famously argued that one must never use a person solely as a means to an end

Managers have fiduciary duties to all stakeholders

All stakeholders equally important

Must balance competing interests of all stakeholders when making decisions.

Question 24

Kantian implications

Answer 24

Corporations use stakeholders as a means to an end all the time

e.g. using customers for their cash, suppliers for their products, the environment for its resources…

This is OK as long as not solely as a means

For Evan and Freeman, it is wrong for businesses to use stakeholders solely as a means…

Question 25

2 ways around using stakeholders solely as a means

Answer 25

1. The Principle of Corporate Legitimacy:

“The corporation should be managed for the benefit of its stakeholders…the rights of these groups must be ensured and …the groups must participate…in decisions that substantially affect their welfare.” (Evan & Freeman, p. 103)

2. The Stakeholder Fiduciary Principle:

“Management bears a fiduciary relationship to stakeholders and to the corporation as an abstract entity. It must act in the interests of the stakeholders as their agent, and it must act in the interests of the corporation to ensure the survival of the firm safeguarding the long-term stakes of each group.” (Evan & Freeman, 103)

Question 26

Objections to Multi-Fiduciary Stakeholder Theory

Answer 26

• some would say that the relationship with shareholders is more important… Freeman accepted the criticism and decided that the term ‘fiduciary’ not helpful. Still believes all stakeholders are equal and that managers have duties to all of them
• One cannot (ethically) have fiduciary duties to more than one party at a time if those parties have conflicting interests (cf. lawyer on both sides of a divorce). (Marcoux, 2003).
• Sternberg (1997), Accountability to multiple parties = no accountability… No method given for balancing these interests

Question 27

Goodpasters stakeholder theory

Answer 27

Goodpaster proposes an alternative stakeholder theory:

Business Managers have Fiduciary Duties to Shareholders only

BUT

Business Managers have Non-Fiduciary Duties to other Stakeholders (which may go over and above the law).

Question 28

What are Non-Fiduciary Duties?

Answer 28

They are ordinary moral duties, of the kind that any of us has.

Goodpaster’s examples are the duty not to harm, coerce, lie, cheat or steal.

Everyone has a duty to not harm, coerce, lie, cheat or steal from others (even if it’s legal).

Shareholders have these ordinary non-fiduciary duties too because shareholders are people!

Managers have non-fiduciary duties towards stakeholders because shareholders have non-fiduciary duties towards stakeholders

Question 29

Goodpaster’s “Nemo Dat Principle”

Answer 29

“Nemo dat quod habet”
Translation: Nobody gives what he does not have

Ethically, I cannot hire someone to do something it wouldn’t be ethical to do myself.

Ethically, shareholders can’t give managers the right to pollute the environment, treat employees unfairly etc., because shareholders don’t have that right themselves. In fact they have a (non-fiduciary) duty not to do any of these things.

Question 30

Objections to Goodpaster’s stakeholder theory

Answer 30

1. Too many stakeholders: “[The term ‘stakeholder’ can] include virtually everyone, everything, everywhere. Terrorists and competitors, vegetation, nameless sea creatures and generations yet unborn.” (Sternberg, 1997)
2. Competitive disadvantage

Question 31

Implications of shareholder/ stakeholder theory

Answer 31

Both views have shaped how the private sector operates in society –

The nature of the relationship between managers and shareholders.
The nature of the relationship between companies and society.
The sorts of business practices, including CSR practices, that are permitted/ take place.

Question 32

Legal implications of shareholder theory

Answer 32

In the UK, company law imposes various duties on managers to promote the interests of the company.

Some of these are known as ‘fiduciary duties’. From the latin ‘fidus’ which means ‘trust’. In effect, shareholders ‘entrust’ their investments to managers/ directors, who as a result have certain legal duties to manage that money in particular ways.

In the UK, these are set out in the Companies Act (2006).

While managers “do not normally owe fiduciary duties to individual members or shareholders” (Sealy and Worthington, 2013, p. 321), they do have a duty to the company as a whole – to manage it in the most profitable way.

This legislation is underpinned by the shareholder view - the view that the key obligation of the managers is to make profits for shareholders.

Question 33

Legal implications of stakeholder theory

Answer 33

Companies Act 2006 - S 172 Duties…
(1)to promote the success of the company for the “benefit of its members as a whole”
Includes…
(b) “the interests of the company’s employees,”
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d)the impact of the company’s operations on the community and the environment.

This legislation is underpinned by stakeholder theory – the view that company’s have wider obligations to other parties.

The Climate Change Act imposes obligations on businesses by setting legally binding targets to reduce carbon dioxide emissions in the UK by at least 80% by 2050, from 1990 levels.
Again, this legislation is underpinned by stakeholder theory – the view that businesses have wider obligations, that are now reflected in law.

Question 34

CSR implications of stakeholder and shareholder theory

Answer 34

Both shareholder and stakeholder theory also have an impact on how companies approach CSR in the real world.
One example of this is the ‘sustainability reports’ that many large companies now develop.
Amazon – “At Amazon, we’re constantly looking for ways to further reduce our environmental impact.”

2 interpretations of sustainability reports;

The shareholder theory interpretation – sustainability reports make companies appear good in the eyes of consumers, thus increasing the chances that consumers will buy from these companies, which is in the interests of shareholders.

The stakeholder theory interpretation – companies like Amazon, Apple and BP genuinely care about the environment, and believe they have obligations to protect it.

Question 35

Why should businesses engage in csr?

Answer 35

In some cases such as in MandS plan A it can bring greater benefit to the company than expected.
Originally believed Plan A would cost the company to implement, but that it was the “right thing to do”. Has delivered tangible business benefit.

Question 36

measures of business performance

Answer 36

- Shareholder value
• Revenue
• Operational efficiency
• Access to capital
• Brand value and reputation • Human capital
• Risk management
• Innovation

Question 37

Benefits of organisations making csr investments Kurucz et al (2008)

Answer 37

Cost & Risk Reduction
- Diversity, equality and engagement may reduce employee turnover (stem loss of talent).
• Minimising environmental impact beyond legal requirements may help to reduce cost of complying with future legislation (e.g., 3M), costly law suits related to environmental mismanagement and lower operational costs (e.g., reducing energy or resource use, e.g., BP).
• Improving working conditions in supply chains may improve quality and reduce returns (e.g., GAP).

Gaining Competitive Advantage
CSR activities and performance can help to differentiate from the competition, e.g., Body Shop, Ben & Jerry’s, M&S.
• Can enhance brand loyalty, e.g., Privto et al (2008).
• Can strengthen relationships with current and future clients, e.g.,
collaborative CSR activities or free introductory consultations – e.g.,
Deloitte.
• Can drive technological and product
innovation, e.g., in the automotive industry.

Developing Reputation & Legitimacy
CSR activity may help strengthen license to operate.
• Using publicised charitable giving to social causes to demonstrate the
mutual benefit that the business delivers – that financial goals and social goals are not in conflict, e.g., Waitrose choice of charity at checkout (Carroll & Shabana, 2010).
• Being proactive can avoid brand damage, e.g., News International, Nestlé – or can help rebuild it, e.g., Shell.

Win-Win Outcomes Through Synergistic Value Creation
• Pursuing a win-win where social problems are addressed by business and turned into business opportunities (see Carroll & Shabana, 2010 and Wheeler et al, 2003).

Question 38

the differentiation that csr provides

Answer 38

When Ben Cohen & Jerry Greenfield established their business in 1978 they did so with goal of fulfilling social, environmental and financial needs.
Certifying firms often highlighted how B corporation certification would help them stand out “in the midst of a ‘greenwash’ revolution” among large companies,

Question 39

7 key business benefits of csr by The Doughty Centre & Business in the community (2011)

Answer 39

1. Brand Value and Reputation
2. Employees and Future Workforce
3. Operational Effectiveness
4. Risk Reduction and Management
5. Direct Financial Impact
6. Organizational Growth
7. Business Opportunity

Question 40

link between corporate social performance (CSP) and corporate financial performance (CFP)

Answer 40

• Reviews of individual studies looking at the CSP-CFP link have found both positive, negative and neutral relationships (see Carroll & Shabana, 2010).
• A meta-analysis (a study of studies) supported a positive relationship between CSP and CFP (Orlitzy, et al, 2003).
• However, recent study found little support for the business case between CSR and CFP. Potentially: CSR investment does not yield significant return or managers attempt to mask low financial performance by greater CSR expenditure…(Schreck, 2011).

Question 41

is the ethical consumer a myth?

Answer 41

Easy to say you care about an issue or would pay more for particular features, different when you force people to make choices…
• Evidence from experiments that consumers are not willing to sacrifice functionality for social attributes (where participants are forced to make trade-offs these features on different products). – see Auger et al (2008).
• When you are forced to pay a functional cost then demand for an ethical product collapses (evidence across forced choices of consumer products and financial products).
• People don’t respond uniformly to all ethical / social issues, e.g., place different importance on animal welfare, worker rights, sustainability, etc. – e.g., see Auger, Devinney & Louviere (2007).

Question 42

limitations of the business case

Answer 42

Beyond a given point of CSR investment the market will not reward it – “it pays to be good but not too good” (Mintzberg, 1983, p10).
 Suggests that there is a limit to the financial gain from CSR activity – beyond this we are acting altruistically.
• Often reliant upon consumers recognising the value of CSR undertaken or being in a position to reward it.
• Examinations of CSP-CFP have largely been unidirectional (Schreck, 2011) – i.e., they have looked at the relationship of CSP on CFP but not the other way round. Is unclear how CFP may impact on an organization’s CSR practices.

Question 43

output vs outcome

Answer 43

Output
Specific actions required to achieve a bigger result. e.g., CSR Report
Outcome
• A bigger, meaningful result.
• e.g., reduce environmental impact.

Question 44

measuring csr impacts

Answer 44

individual csr reports
rating indices e.g. FTSE4GOOD
case studies e.g. corporate watch

Question 45

measuring csr impact using csr reports

Answer 45

Strengths
• Identification of key social, environmental and economic impacts and
business issues as a basis for credible reporting.
• Explanation of the process behind decisions on key impacts and issues
for the business and report indicators.
• Identification of key stakeholders, including rationale for their selection

Weaknesses:
• Little evidence of coherent and collective management of sustainable
development strategy and any issues arising from it.
• Lack of a clear and credible articulation of the meaning of sustainable
development, consideration of the implications of its pursuit, and any tensions that emerge.

Question 46

what environmental impact has csr achieved

Answer 46

Most evidence regarding environmental impact concerns operations in developed economies.
• Difficult to assess cause and effect – increasing legislation, particularly within EU relating to environmental issues.
– However, within US individual companies, e.g., P&G, Coca Cola, adopted targets in line with Kyoto protocol in the absence of legislative pressure.
• Number of examples of good environmental practice across sectors – often difficult to distinguish between CSR driven change and efficiency driven action.
Wrigley’s Plymouth factory is equipped with rain water harvesting technology. The site captures enough rain water to supply a third of the water needed for its cooling towers.

Question 47

what social impact has csr achieved

Answer 47

• Limited data to assess impact – companies reluctant to release data….
• Some empirical evidence that suggests CSR initiatives
may lead to social improvements.
– e.g., Locke (2006) studied 800 suppliers across 51 countries and concluded that monitoring labour conditions with accompanying action could support improved working conditions.
• Introduction of codes of practice on labour conduct, together with public anti-sweatshop campaigns, produced increased wages in factories that were export focused in Indonesia in the 1990s (Harrison & Scorse, 2004).
Majority of incidents of non compliance with Ethical Trade Initiative that are addressed relate to health and safety.
– Simpler to address?
– Greater cost to the company of health and safety incidents?
– However, huge social and personal cost to those involved.
• Does implementing a code of practice necessary mean working conditions will improve?
• Single issues often focussed on, e.g., physical working conditions, whilst those deemed necessary for competiveness ignored, e.g., zero hours contracts, shift patterns.

Question 48

what economic impact has csr achieved

Answer 48

The extent to which business activity positively impacts local communities (ref. bottom of the pyramid).
– Companies often not distinguishing between social impact and economic.
• Studies of Fair Trade have provided some evidence that CSR practice may provide economic benefit:
– Increased sales volume.
– Greater percentage of the export price of goods and commodities.
– Greater spend within producer countries.
• Micro finance initiatives and multinationals’ engagement in developing economies positively related with social benefits.

Question 49

has csr achieved a significant impact?

Answer 49

Despite all the marketing and claims made by companies, it has been suggested that the academic evidence does not suggest that CSR has brought any great shift in every day business practices (Steger, 2006).
The link between Corporate Social Performance and Corporate Financial performance has not been demonstrated (ref. week 3). Does not seem to have a strong impact on firm’s performance.
However, Kanter (2008) believes that working for social good is vital to business success – similar to BT’s claims.
CSR Initiatives have largely been linked to incremental improvements in business practices, e.g., health & safety, floor prices, packaging reduction.
Less evidence of any fundamental shifts in business models – e.g., serious decoupling, developing a circular economy (Steger, 2008).
Power of financial institutions greater than ever – difficult for companies to move beyond focus on short-term financial performance (Steger, 2008).

Question 50

dangers of green washing

Answer 50

Need to be aware of “Green Wash”.
 Unsubstantiated ethical or environmental claims.
 Increasing green washing has contributed to greater consumer cynicism (Jahdi & Acikdilli, 2009) – potentially undermining efforts to engage consumers in necessary behaviours/changes in consumption.
 Underlines the need for rigorous assessments of impact and transparency.
Some CSR driven changes to business practices or products have been poorly communicated to consumers and failed to fulfil their potential, e.g., Unilever (comfort).

Question 51

challenges in measuring impact of csr

Answer 51

Reliance on self-report data – rating indices, case studies and CSR reports often drawn from company data – make them prone to bias.
Outcome data often collected post-change or at an inappropriate level – establishing causality or the role of individual elements of a CSR initiative can be difficult.
Often it may be difficult to operationalise a CSR outcome (to decide what is an appropriate measure of an outcome), e.g., cultural or attitude changes.
Who measures impact – influences the evaluation and reflects their interests and motivation.

Question 52

development of csr in the future

Answer 52

Require greater academic studies rigorously evaluating CSR claims to evaluate impact of initiatives and understand underlying mechanisms (Aguinis & Glavas, 2012).
 Further openness to outside scrutiny and monitoring by corporations, to enable further benchmarking and objective evaluation.
 A move away from description of current CSR practices in the academic literature to an emphasis on the development of greater theory to help guide the development of CSR policy and action.
Require a more systemic approach to tackling the “big problems” – is not enough for companies to act independently. Require joint action – either through voluntary collaboration or legislation (c.f., Steger, 2008)
 Need to go beyond high level CSR policies or piecemeal initiatives - join-up and look across multiple levels, i.e., employee, corporations and sectors (Aguinis & Glavas, 2012).

Question 53

2 examples of unethical decision making

Answer 53

In 2008, Primark faced a number of allegations that its garments came from suppliers who used sweatshops in India and Bangladesh. Some of these sweatshops employed child labourers who were paid 3p an hour (The Independent, 2009).

Subprime mortgages are mortgages sold to customers with a poor financial history who have defaulted on mortgage payments in the past. The sale of unsecured subprime mortgages was one of the main contributors to the global financial crisis in 2007/8.

Question 54

what is ethical decision making

Answer 54

Broadly, making decisions in such a way that is sensitive to ethical considerations.
Ethical considerations may be distinguished from other forms of considerations: i. Legal
ii. Financial
iii. Aesthetic
iv. Prudential
v. Etc.

Question 55

What counts as an ethical consideration?

Answer 55

Harm – bodily, psychological, financial.
Equality – Equal treatment, non-discrimination, treating like cases alike.
Fairness – equity, fair distribution of burdens
Security – freedom from threats and freedom from fear.
Basic needs – respect for basic needs (e.g. healthcare and welfare), and human rights.
Justice – considerations of what people deserve/ don’t deserve.
Dignity – respect for dignity and human rights.
Respect to non-human animals/ the environment.

Question 56

why may some people think that ethics doesn’t really matter in business

Answer 56

Some people think that ethics doesn’t really matter in business, what matters is following the law (famously, this is broadly Milton Friedman’s view – as we discussed in week 2).

There’s a little bit of sense in this – because many laws reflect ethical considerations. E.g. in the UK:
e.g. the criminal law prohibits many forms of physical harm/ property loss (protecting broadly ‘liberal rights’ to person and property.).
the Equality Act (2010) promotes equality and prohibits certain forms of discrimination.
Human Rights Act (1998) protects and promotes rights to basic healthcare, welfare, etc.

Question 57

why may following the law not be sufficient for businesses

Answer 57

Laws are created by governments, they are context specific - subject to the general views of a society at a given time. As such they are not necessarily ethically good (e.g. child labour and slavery were once legal, homosexuality was illegal in the UK until 1967).

To be enforced, laws require both judicial and political will, which are commonly lacking, particularly with respect to big business (example of no criminal sanction for HSBC for laundering billions of drug cartel money).

The private sector is deregulated in some places – (e.g. subprime mortgages were perfectly legal), even though they look to unfairly target and out at risk those who are less well-off.

And ethics and the law come apart in many cases – lying, adultery and breaking promises are perfectly legal , but generally regarded as being ethically questionable.

As we’ll consider later – laws are different between countries. And in some countries, laws are ethically problematic, either due to poor enforcement, or because they are substantively unjust. This has a significant impact on business decision-making, as we’ll see.

Question 58

Why should we care about ethical decision- making?

Answer 58

Intrinsic moral reasons

Self-interested reasons

To avoid legal sanction

Question 59

intrinsic moral reasons for being ethical

Answer 59

There are many reasons we may offer in support of this. We may think that certain ethical values are intrinsically important.

Here’s a list of possible contenders – dignity, freedom, justice, safety, basic subsistence.

Because these things are inherently valuable, we should not do things which violate them. And this applies to business as well.

Return to the Primark case.

Suppose as a senior manager at Primark I choose to employ a supplier who uses sweatshops. What would be wrong there?

There could be financial issues, reputational damage, I could lose my job, etc.

But also it could be exploitative to child workers, assault their dignity, force them to work in awful conditions, pose a risk to their safety. And these things might just be inherently bad and wrong, and things that businesses should not do for those reasons

Question 60

self interested reasons for being ethical

Answer 60

. Self-interested reasons – e.g. to avoid getting fired, or to get a promotion..

Crane and Matten (2010, p. 140) give the example that in 2008 BP Oil company fired nearly 1,500 people for ‘non-compliance or unethical behaviour’.

It’s likely that these people would still
have their jobs if they had behaved
ethically.

Question 61

why is avoiding legal sanction a reason to be ethical

Answer 61

To avoid legal sanction

As noted, the law often track ethical considerations, so if we act ethically from the outset, there’s a good chance we’ll avoid legal sanctions.

This is particularly important in deregulated environments.

Question 62

2 ways of understanding ethical decision making in business

Answer 62

Descriptive decision-making theory – seeks to describe how individuals make decisions within organisations.

2. Normative decision-making theory – seeks to describe how individuals ought make decisions in organisations – i.e. what is the morally optimal decision.

Question 63

normative theories

Answer 63

Questions of how decisions ought to be made…

Two key schools of thought:

Consequentialist – focuses on the consequences of actions in determining their rightness/ wrongness.

Deontological – focuses on non-consequentialist reasons for action e.g. the principles/ motivations of the agent.

Question 64

varieties of consequentialism

Answer 64

There are different views amongst consequentialists about which consequences or outcomes matter to ethical decision making.

Utilitarianism – happiness or utility are the most important outcomes
E.g. Bentham or J.S. Mill.

Hedonism – gaining pleasure or avoiding pain.
e.g. Epicurus.

Preference utilitarianism – preference satisfaction and avoiding the frustration of desires.

Question 65

varieties of deontology

Answer 65

Deontologists point to different principles/ motivations in ethical decision making.

‘Agent-centred’ theories – the agent must act on a moral duty
E.g. Immanuel Kant or W.D. Ross.

‘Patient-centred’ theories – the agent must act with respect to the
moral rights of others.
E.g. John Locke.

Question 66

cultural relativism

Answer 66

“Relativism…is the view that truth and falsity, right and wrong, standards of reasoning, and procedures of justification are products of differing conventions and frameworks of assessment and that their authority is confined to the context giving rise to them.” (Stanford Encyclopedia of Philosophy).

More simply – in ethics, relativism is the view that there are no absolute standards of rightness or wrongness. Rather, standards of right or wrong depends on context, community or person.

Cultural relativism is the view that morality and norms are dependent on culture

Question 67

examples of cultural relativism

Answer 67

Historical cases

• In Ancient communities (like the Aztecs), human sacrifice was a common practice, seen as a means of appeasing the Gods.
• Many Western countries grew rich from slavery.

contemporary cases

• Views on the wrongness of child labour differ between communities.
• Minority rights are often not protected around the world. Racism is still relatively common, even in developed states.
• Views of women’s rights differ between societies. In traditional religious societies, women are not viewed as equal.

Question 68

cultural relativism in philosophy

Answer 68

Despite the fact that norms do (as a matter of fact) differ between cultures, many philosophers disagree with relativism as a theory.

Many philosophers claim that, ultimately, moral principles and values are objective. This view is called ‘moral objectivism’, or ‘moral realism’.

There are cases which indicate the truth of realism, e.g. that it is generally viewed to be universally morally wrong to kill or torture innocent people. This doesn’t depend on one’s cultures. All culture recognise that certain things are objectively morally wrong.

Question 69

Why might cultural relativism matter for businesses?

Answer 69

Businesses must decide whether to adopt local norms/ customs when operating in different cultures. This is particularly an issue where the norms/ customs are different than those of the company’s own country.

Legal standards differ in different jurisdictions. And companies must decide whether and if so how they will navigate legal differences, particularly if the laws in question are unjust (e.g. those that permit bribery).