3 Corporate Social Irresponsibility

Question 1

Please name and explain an example for a trade-off between economic and social value-creation that could lead to coporate social irresponsibility (CSI).

Answer 1

The fashion industry faces a trade-off between work-related safety and health issues and the need to produce cheaper and thereby increase its profits.

Question 2

How can CSI be defined? How does CSI relate to the CSR pyramid introduced by Carroll?

Answer 2

A certain harm occurs through corporate activity and the behavior of the company infringed legal or social norms of acceptable behavior. CSI is simply the opposite side of the responsibility coin according to Lange and Washburn.

CSI is a violation of legal and or ethical responsibilities. The legal aspect was introduced by Friedmann, the ethical aspect was later added by Carroll.

Question 3

Which negative consequences can be caused by CSI for the firm? Which negative consequences does it incur for the general trust in business?

Answer 3

The success of an organization depends partly on satisfying normative expectations from its environment. Otherwise it risks losing current and potential members, as well as outside endorsement and support, and it risks providing “ammunition for adversaries”.

Possible consequences: lawsuits, financial losses, increases in cost of capital, market share deterioration, network partner loss, other costs associated with a negative reputation

Question 4

What are the main developments referred to as globalization?

Answer 4

The link between social connections and a certain territory has been continously weakened, with two main developments being especially important:

1. Technological innovation: modern communication and transportation technology
2. Political developments: erosion of national borders

“Globalization is the progressive eroding of the relevance of territorial bases for social, economic, and political activities, processes, and relations”

Question 5

What are ethical impacts of globalization on the levels of different stakeholder groups?

Answer 5

• Shareholders: potential for greater profitability, greater risk through lack of regulation
• Employees: outsourcing production to developing countries, provides jobs in those regions but also raises the potential for exploitation
• Consumers: cheaper prices, greater choice of products, but also critcism of westernization and exploitation of vulnerable consumer groups in developing countries
• Suppliers/ Competitors: exposed to powerful MNCs, supplier face regulation through SCM
• Civil society: erosion of traditional community life, increased power of MNCs
• Government and regulation: weaking of government power, increasing political power of MNCs

Question 6

Which cultural issues do companies face whose activities cross borders?

Answer 6

They find themselves confronted with new and diverse, sometimes even contradicting ethical demands. Moral vlaues taken for granted in the home market may get questioned.

Question 7

What are distinguishing factors of CSI incidents?

Answer 7

1. Severity and Relevance (effect undesirability):
   
   1. How big is the harm done? How man people are affected? (Severity)
   2. Can I myself be affected by the harm done? Can I identify with the affected party? (Personal Relevance)
2. Corporate Culpability: How easily can the guilt be traced back to the company‘s behavior?
3. Unexpectedness: Was the incident likely to occur or was it surprising?
4. Concentration in time and space: Was the incident very concentrated in time and space or was it spread over a long time period and diverse places?
5. Frames positioning the firm as causal: Are media reports presenting the firm as the bad guy? Has there been a public acknowledgement of guilt/ an apology of the top management?
6. Perceived disposition for irresponsible behavior: Does the firm/industry have a reputation for this type of incident to occur?
7. Size and prominence: How large and publicly visible is the company?
8. Intentionality and Motivation: Did the company act intentionally? And was the behavior driven by selfish motives?
9. Affected party non-compliance: Does the affected party have a share in the guilt for the incident to occur?

Question 8

Which main three factors in the attribution of CSI does the framework of Lange and Washburn (2012) propose?

Answer 8

• Observer assessments of effect undesirability
• observer assessments of affected party noncomplicity
• observer assessments of corporate culpability

Question 9

Please apply the Lange and Washburn framework to the case of the Volkswagen “Dieselgate” emission scandal.

Answer 9

Main factors:

1. Effect undesirability: medium-high
2. Corporate Culpability: high
3. Affected party non-compliance: high

Additional factors:
•Unexpectedness: high
•Concentration in time: high
•Identification with the affected party: high
•Identification with the firm: medium-high
•Frames positioning firm as causal: high (public acknowledgement of guilt, apology, new CEO)
•Perceived disposition for irresponsible behavior: low
•Size and prominence: high