Chapter 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 corporate social irresponsibility (CSI).

Answer 1

Incresing profit through saving on maintenance and employee safety cost.

Company increases profits and employees bear the cost because saving on building maintenance and safety can be very dangerous for employess and in some incidents even lead to death.

Question 2

How can CSI be defined?

Answer 2

A certain harm occurs through corporate activity and the behavior of the company infringed legal or social norms of acceptable behavior.

Question 3

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

Answer 3

CSI is a violation of legal and/or ethical responsibilities.

Question 4

Which negative consequences can be caused by CSI for the firm?

Answer 4

• lawsuits
• financial losses through settlements and sales declines
• increased cost of capital
• market share deterioration
• network partner loss
• other costs associated with negative reputation

Question 5

Which negative consequences does CSI incur for the general trust in business?

Answer 5

CSI can cause a decline in the general trust in business which can lead to loss of legitimacy of business.

Question 6

What are the main developments referred to as globalization?

Answer 6

1. Internationalization
   - increase in cross-boarder transactions.
2. Liberalization
   - increase in trade liberalization
3. Universalization
   - global spread of products, lifestyles and ideas
4. Westernization
   - export of western culture to other, culturally different world regions.

Question 7

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

Answer 7

Shareholders:
-Potential for greater profitability but also 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:
-Cheap prices, greater choice of products, but also criticism of westernization and exploitation of vulnerable consumer groups in developing countries.

Suppliers and Competitors:
-Small scale indigenous competitors exposed to powerful global players, suppliers in developing countries face regulations from MNCs through supply chain management.

Civil Society (NGOs, local communities):
-Possible erosion of traditional community life, increased power of MNCs where governments are weak.

Government and Regulation:
-Weakening of government power and increasing power of private businesses in political realm.

Question 8

Which cultural issues do companies face whose activities cross boarders?

Answer 8

Companies whose activities cross boarders find themselves confronted with new and diverse, sometimes even contradicting ethical demands.

Moral values taken for granted in the home market may get questioned.

Question 9

What are distinguishing factors of CSI incidents?

Answer 9

1. Severity and Relevance
   - How big is the harm done? How many people are affected? (Severity)
   - Can I myself be affected by the harm done? Can I identify with the affected party? (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
   - How spread over time and places?
5. Frames positioning the firm as causal
   - media reports, public acknowledgement of guilt, apology
6. Perceived disposition for irresponsible behavior
   - does the firm have reputation for this kind of incident?
7. Size and prominence of the company
8. Intentionality and Motivation
   - Did the company act intentionally? Selfish motives?
9. Affected party non-complicity
   - does the affected party have a share in the guilt?

Question 10

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

Answer 10

1. Effect undesirability
2. Corporate culpability
3. Affected party non-complicity