Business ethics and social responsibility Flashcards
THE MEANING OF ETHICS - ETHICS & DECISION-MAKING
How does the 2nd definition of ethics relate to the role of the company secretary?
What is an Ethics Code?
What is the purpose?
The ethics of governance is based around what?
(Ethics = (2) a code of behaviour considered correct,)
Cosec often become involved in setting or helping to establish expected standards of corporate behaviour = sometimes have to write or be expected to judge others against an Ethics Code
ethics code = a set of norms that are expected to apply to all people within a particular organisation or grouping
Purpose of intended organisational norms = to act as a benchmark to allow us and others to measure the behaviour of ourselves, and others, against the perceived ‘moral fitness’
the alignment of the ethics of individuals = CA2006 makes no reference to a collective board and each individual duty starts ‘A director…’
BUSINESS ETHICS IN THE DEVELOPMENT OF STRATEGY - THE SCOPE OF BUSINESS ETHICS
Foss (1997) suggested that within the decision-making context, the decision-maker needs to integrate what into the process?
Why is this important?
Constance Bagley (2003) devised a straightforward ‘decision tree’, to encapsulate the core ethical questions at the heart of strategic decision-making.
What is the importance of this tree?
By following the decision tree, when are the only 2 situations when an action should be taken?
need to integrate ethical issues into the process
by being able to demonstrate its ethical virtues to its various stakeholders, firms
incorporate ethical planning as part of the strategic planning process, and are then able to generate a positive reputation to the stakeholders
importance = it illustrates that the ethical nature is not always straightforward = sometimes the ethical decision may not always be in the best interests of the organisation (identified by Bagley as maximising shareholder value).
Should only ‘do it’ if:
(1) the proposed action is legal, it maximises shareholder value, and it is ethical; OR
(2) the proposed action is legal, it doesn’t maximise shareholder value but it would not be ethical to not take the action
BUSINESS ETHICS IN THE DEVELOPMENT OF STRATEGY - DIMENSIONS OF ETHICS
Chryssides and Kaler (1996) suggest that the same 2 core dimensions of ethical behaviour that affect each individual – principles and situation – will also strongly influence the evolution of ethical norms within a business.
What are the 5 different views of business ethics they suggest?
Name an example for each.
- Business is business = the aims of an organisation are purely commercial
(e.g., selling goods with a known fault might be perceived as acceptable under this view) - Act consistently within the law = it is accepted that the law is there to protect the greater good of all concerned and therefore should underpin ethical decision-making
(e.g., faulty goods would not be perceived as acceptable under this view, but such goods may not be for the greater benefit of the individual or for society) - Good ethics mean good business = the coincidence theory = organisational sustainability is closely aligned with the perception by stakeholders of good business ethics
(e.g., it might be acceptable to manufacture and sell a particular product, but if deemed to be damaging to organisation’s reputation, it would likely be withdrawn) - Conventional morality = the business will operate in line with the moral codes of the society within which it is based
(problems = such codes will evolve with the passage of time and codes will differ significantly within different geographic locations (e.g. bribery is accepted in some parts of the world and illegal in others)) - Universal morality = people in the business world should maintain the same standards of ethical behaviour in business as they would in their private lives = seen as setting a high ethical standard.
(e.g., strategic thinking is often aligned with the tactics developed to win a war)
BUSINESS ETHICS IN THE DEVELOPMENT OF STRATEGY - THE PURPOSE OF A CODE OF ETHICS
The code of ethics document will inevitably include 2 complementary but necessarily different aspects of a code. What are they?
What are the pressures (2) and what will they affect (3)?
- principles, standards and expected modes of conduct (behaviours)
- practical guidelines = a decision-tree type approach (‘if this happens, what do I do’) or set of quite specific instructions
The pressures = combination of societal values and legal requirements, will affect style, impact, and effectiveness of the code
CORPORATE SOCIAL RESPONSIBILITY AS PART OF STRATEGY
What is the recognition of CSR by an organisation, in its fundamental form?
In practice what does this mean?
= a commitment to contribute to economic development from within an ethical framework, while seeking to improve the quality of life for its employees and their families, the local community and society at large
In practice = the ability of an organisation to link its DM to a set of ethical values, while complying with legal requirements and maintaining a respect for how the organisation will/may affect the people within its wider stakeholder environment.
CORPORATE SOCIAL RESPONSIBILITY AS PART OF STRATEGY - CARROLL’S PYRAMID OF CSR
Carroll (1991), places the concept of CSR into a pyramid framework to help businesses what?
What are the 4 levels?
Carroll suggests that the following core attributes need to be associated with each responsibility
ETHICAL RESPONSIBILITIES
Carroll suggests that what 3 core attributes need to be associated with the ethical responsibilities?
challenge and consider 4 distinct levels of responsibility, which are required to ensure that CSR is part of the wider business objectives
(1) economic responsibility = be profitable. required by society
(2) legal responsibilities = obey laws and regulations. required by society
(3) ethical responsibilities = do what is just and fair; avoid harm. expected by society
(4) philanthropic responsibilities = be a good corporate citizen. desired by society
Ethical responsibilities
(1) An organisation needs to develop its own ethics code (the way it expects employees to behave)
(2) There needs to be some concept within an organisation of the moral and ethical norms that are acceptable to society (both generic and specific)
(3) An organisation needs to encourage its employees to be ‘good corporate citizens’.
CORPORATE SOCIAL RESPONSIBILITY AS PART OF STRATEGY - CARROLL’S PYRAMID OF CSR
ECONOMIC RESPONSIBILITIES
Carroll suggests that what 4 core attributes need to be associated with the economic responsibilities?
LEGAL RESPONSIBILITIES
Carroll suggests that what 3 core attributes need to be associated with the legal responsibilities?
Economic responsibilities:
(1) If an organisation is enabled or allowed to exist within a society, then it has a responsibility to that society in return.
(2) Society needs organisations that are profitable (within a democracy this allows for the levying of taxation to generate funds for the public good)
(3) Profits enable the direct reward of owners, but also allow reinvestment in the organisation to drive forward both the organisation and the stakeholder society that it is serving.
(4) Organisations that are not successful within their projected field of operation will eventually fail = will have a knock-on cost to society.
Legal responsibilities:
(1) Any organisation needs to operate within the legal framework of the society where it exists.
(2) The laws are there for the greater good and protection of society as a whole.
(3) It is important for an organisation to produce products/services that meet at least the minimum legal standards required for the protection of consumers.
CORPORATE SOCIAL RESPONSIBILITY AS PART OF STRATEGY - CARROLL’S PYRAMID OF CSR - PHILANTHROPIC RESPONSIBILITIES
Carroll suggests that what 5 core attributes need to be associated with the philanthropic responsibilities?
(1) This takes an organisation above the economic, legal and ethical and into a discretionary area where organisations may want to, or may want to be seen to be ‘giving back’.
(2) There is a fine line between altruism (an unselfish concern for the welfare of others) and philanthropy (the performing of charitable actions).
(3) There is a risk that the desire within an organisation, or within its leaders, to be seen to be going above and beyond for the greater good of others can both enhance and damage organisational reputation dependent on the views of others.
(4) Carroll uses the pyramidal structure to illustrate the gradual building of CSR within an organisation.
(5) The starting point is financial stability (going-concern, viability) and the requirement is to operate within the law.
This can then enable the evolution of ethical and philanthropic practices in the belief that they will enhance the economic good (either tangibly or intangibly) and thus complete the circle.
CORPORATE SOCIAL RESPONSIBILITY AS PART OF STRATEGY - TAKING AN ETHICAL STANCE
Every organisation will naturally take a slightly different stance on its approach to CSR. What will this be based upon? (3)
Johnson et al. (2017) produced a matrix identifying a range of different CSR approaches with the dynamics that were driving them. What are the 4 modes?
Are they defensive, reactive, proactive or defining?
Based upon its current and historic culture, the views of the current employees and the stakeholder expectations
(1) Laissez-faire = the organisation gets on with ‘life-as normal’ = focused on driving profitability and shareholder value
* Its CSR approach = to achieve the minimum required to comply with regulation and expectation.
DEFENSIVE = the organisation will find reasons to avoid additional expenditure on CSR activities
(2) Enlightened self-interest = the organisation recognises the commercial benefit of taking a positive CSR stance and in building greater sustainability into the supply chain.
REACTIVE = the organisation will be perceived as responding to CSR opportunities.
(3) Stakeholder interaction = the organisation recognises the benefit of working closely with its wider stakeholder community and has developed the ability to account for its operation and output from a triple-bottom-line perspective, or its equivalent
PROACTIVE = the organisation will be perceived as leading and
opening CSR opportunities.
(4) Shaper of society = the organisation and/or its key leadership team are seen as visionaries who have the ability to influence social change.
DEFINING = the organisation will establish benchmarks and best practice for others.
CORPORATE SOCIAL RESPONSIBILITY AS PART OF STRATEGY - THE AUDITING OF CSR
How do Savitz and Weber (2006) suggest the differentiation between the 3 different aspects of the triple bottom line? (3,for each)
ECONOMIC = (1) sales, profitability, return on investment, (2) taxes paid, (3) jobs created
ENVIRONMENTAL = (1) air quality, (2) water quality, (3) waste produced
SOCIAL = (1) labour practices, (2) community impact, (3) human rights
SOCIAL BUSINESS AND CREATING SHARED VALUE
How does Professor Muhammad Yunus define a social business? (4)
(1) social business = a non-dividend company that is created to address and solve a social problem
(2) no personal gain is desired by investors
(3) purpose of the investment is purely to achieve one or more social objectives through the operation of the company
(4) once the original investment has been recouped by the investors, profit stays within the company to expand its outreach and increase the social impact
