final Flashcards
Anita Roddick about businesses
- Business of business should not be about money. It should be about responsibility. It should be about public good, not private greed. (
Milton Friedman citata
“There is one and only one social responsibility of business – to use its resources and engage in actitities designed to increase its profits … in open and free competition without deception or fraud.”
Milton Friedman major works and ideas
Major works:
“Capitalism and Freedom” (1962)
“The Optimum Quantity of Money and other Essays” (1969)
Ideas:
○ Close to “Laissez faire“ and libertarianism
○ Close link between money supply and inflation
Milton Friedman criticism and influence
Criticism
○ Does not consider externalities
○ Keynesians, Austrian School of Economics
Friedman’s Influence:
○ Nobel Price Winner in Economics (1976)
○ Influenced Ronald Reagan, Margaret Thatcher, Governments of Chile, Estonia, Iceland, CATO Institute (libertarian think-tank)
Can a corporation have social responsibilities?
Corporations are just artificial persons
Corporate executives are just agents of shareholders
Individual responsibilities -> OK, voluntary … with own money!
Corporate executive has a “social responsibility“ only in his/her capacity as businessperson
Government -> Governing country -> Elected by the public has to serve public interests
CEO Governing company -> Elected by the shareholders Has to serve shareholders’ interests
Business reasons (enlightened self-interest)
- Extra and/or more satisfied customers
- Employees may be more attracted and/or committed (“employer branding” & “employee engagement” policies)
- Reduce risk, prevent litigation, and improve corporate image/reputation
- Long-term investment that benefits the corporation
Moral reasons
- All corporate activities have social impacts of one sort or another, and may cause social problems
- Because they are powerful, corporations should use their power and resources responsibly (sustainability issues)
- Corporations rely on the contribution of a wide set of stakeholders in the society rather than just shareholders
Corporate social responsibility
encompasses the economic, legal, ethical, and philanthropic expectations placed on organizations by society at a given point in time.
apima ekonominius, teisinius, etinius ir filantropinius lūkesčius, kuriuos tam tikru momentu visuomenė kelia organizacijoms.
Carroll’s pyramid suggests
suggests that corporate has to fulfil responsibility at four levels – Economic, Legal, Ethical and Philanthropic.
levels of Carroll’s pyramid
Economic responsibilities:
Legal responsibilities:
Ethical responsibilities:
Philanthropic responsibilities:
Carroll’s pyramid -> Economic responsibilities
Base of the pyramid; understood as the production of goods and services that consumers need and want. As a compensation for the delivery of these goods and services, the company must obtain an acceptable profit.
Carroll’s pyramid -> Legal responsibilities
Compliance with the law and any type of (public and/or private) regulations, in accordance with the basic rules by which the business must operate.
Carroll’s pyramid -> Ethical responsibilities
Obligation to do what is right, fair and reasonable, and to avoid - or at least minimize - damage to the diverse stakeholders to whom the company relates.
Carroll’s pyramid -> Philanthropic responsibilities
Corporate actions that respond to social expectations of good corporate citizenship, including the active involvement of businesses in activities or programmes that promote social welfare and improve the quality of life of the population.
CSR
is a particularly strong concept in the US, and only more recently has become so influential in Europe
Economic responsibility in us and eu
Europe – Focused on responsibility to stakeholders
US – Focused on responsibility to shareholders
Legal responsibility in us and eu
Europe State accepted as prominent power in enforcing rules of the game rather than as
US view of State as interfering in such rules
Ethical responsibility in us and eu
Europe – greater mistrust of modern corporations than US
Philanthropic responsibility in us and eu
Europe - mostly implemented compulsorily via legal framework
US – mostly implemented via voluntary acts of successful companies
Corporate Social Responsiveness
– capacity of a corporation to respond to social pressures
Four “philosophies”/levels/strategies of social responsiveness:
Reaction / Defense / Accommodation / Proaction
CSR outcomes: Three areas of Corporate Social Performance (CSP)
Social policies:
Social programmes:
Social impacts:
Social policies:
Explicit corporate social policies stating the company’s values, beliefs, and goals with regard to its social environment – often included in mission statements or in other corporate policies (e.g., environmental sustainability goals)
Social programmes:
Specific social projects or activities, measures and instruments implemented to achieve social policies (e.g., environmental management programmes)
Social impacts
Proof of specific changes achieved through social programmes implemented in a given period of time
Robert Edward Freeman (1951-)
The father of Stakeholder Theory
“A stakeholder in an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization’s objectives”
Robert Edward Freeman (1951-) major works and ideas
Major works:
* “Strategic Management: A Stakeholder Approach” (1984)
Ideas:
* Observed that traditional models suggest that shareholders are the core stakeholders
* Proposed that other parties must be also involved - such as competitors, employees, customers, suppliers, trade unions, government, civil society, etc.
Assessment of how the corporation “affects” stakeholders:
Principle of corporate rights – the corporation has the obligation not to violate the rights of others
Principle of corporate effect – companies are responsible for the effects of their actions on others
Principle of corporate rights
– the corporation has the obligation not to violate the rights of others
Principle of corporate effect
companies are responsible for the effects of their actions on others
Corporate accountability
Issue of whether a corporation is answerable in some way for the consequences of its actions – and if so, to whom.
kam yra atsakinga uz savo veiksmus
Firms have begun to become “political actors” – taken up many functions previously undertaken by government, because of:
§ Privatizations
§ Increasing corporate power & weaker government
§ Increasing encouragement or self-regulation (for example: codes of good practices)
Who controls corporations?
To whom are they accountable
Problem of democratic accountability -> transparency
Corporate transparency
CSP should be made visible to stakeholders -> transparency of CSP policies, programmers & impacts
Quality of corporate transparency: disclosure, clarity, accuracy.
Corporate citizenship -
Corporate function for governing citizenship rights for individuals
Has evolved from (traditional) corporate philanthropy to (current) political activity – corporations as political actors :
○ Governments retreating from catering social needs
○ Governments unable or unwilling to address social needs
○ Governments can only address social problems within their reach
Rights in liberal citizenship are being increasingly influenced by corporations
- Social rights - freedoms to participate in society through entitlements towards third parties (positive rights)
- Civil rights – freedoms from abuses and interference by third parties – most notably the government (negative rights)
- Political rights – freedom to participate in society governance process (e.g., to vote or hold office)
Sustainability
Long-term maintenance of systems according to environmental, economic and social considerations.
sustainability triple bottom line model
The TBL is an accounting framework that incorporates three dimensions of performance: social, environmental and economic.
Sustainability arises when
we’re able to meet the needs of today’s generation without compromising the needs of future generations.
Nine ways to achieve sustainability
First – Leave everything in the pristine state, or return in to its pristine state
Second – Develop so as to not overwhelm the carrying capacity of the system
Third – Sustainability will take care of itself as economic growth proceeds (Simon Kuznet)
Fourth – Polluter and victim can arrive at an efficient solution by themselves (Coase theorem)
Fifth – Let the markets take care of it (e.g., carbon-trade)
Sixth – Internalize the externalities (e.g., taxation, consumer pressure)
Seventh – Let the national economic accounting system reflect defensive expenditures (e.g. pollution-treatment or fire-fighting expenses increase GDP)
Eight – Reinvest rents from non-renewable resources (Hartwick rule) into sustainable projects & policies (e.g., Norway’s approach)
Ninth – Leave future generations the options of the capacity to be as well off as we are (Robert Solow)
Evaluation of all environmental, social and economic negative
impacts and benefits in decision-making processes towards more sustainable products throughout their life cycle
A product life-cycle approach to sustainability
measures a company’s total environmental impact – from raw materials, to production, distribution, consumer use, and disposal of the product by the consumer
Jozeph E. Stiglitz - he said
that GDP is not good measure because it is do not take education, health etc.
The GPI is a metric that has been suggested to
replace, or supplement GDP – consistent with “triple bottom line” considerations
Designed to take fuller account of the well-being of a nation,
only a part of which pertains to the size of the nation’s economy, by also incorporating environmental and social factors which are not measured by GDP
For instance, some models of GPI decrease in value when the poverty rate, pollution, or environmental degradation increases.
why GPI is better than GDP
- For instance, some models of GPI decrease in value when the poverty rate, pollution, or environmental degradation increases.
- The GPI is used in ecological economics, “green” economics, sustainability and more inclusive types of economics.
- The GPI includes environmental and carbon footprints that businesses produce or eliminate, including in the forms of resource depletion, pollution and long-term environmental damage.
The HDI was created to
emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone.
Summary measure of average achievement in key dimension of human development:
○ a long and healthy life (life expectancy at birth)
○ being knowledgeable (years of schooling - achieved & expected)
○ have a decent standard of living (GNP per capita
The IHDI reflects
the level of human development when inequality is accounted for.
Under perfect equality, the HDI and IHDI
are equal;
the greater the difference between the two, the greater the inequality.
○ In relatively egalitarian countries: IHDI > HDI gain in human development
○ In relatively inegalitarian countries: IHDI < HDI loss in human development
Method promoted by the Global Footprint Network to
measure human demand on natural capital (i.e. the quantity of nature it takes to support people or an economy).
ecological accounting system.
tracks this demand through an ecological accounting system.
The term “overshoot” represents
the level by which human population’s demand overshoots the sustainable amount of biological resources regenerated on Earth.
The Happy Planet Index (HPI)
is an index of human well- being and environmental impact that was introduced by the New Economics Foundation in 2006
Each country’s HPI value is a function of its:
- average subjective life satisfaction (experienced wellbeing)
- life expectancy at birth
- ecological footprint per capita
The UN Global Compact is
“the world’s largest corporate sustainability initiative”
UN Global Compact Mission:
“A call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.”
“The multi-year strategy of the UN Global Compact if to drive business awareness and action in support of achieving the Sustainable Development Goals by 2030”.
United Nations Global compact
labour
- businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining
- elimination of all forms of forced and compulsory labour
- effective abolition of child labour
- elimination of discrimination in respect of employment and occupation
“Human Resource Management” (HRM) vs. “Personnel mgmt.”
The term ‘human resource management’ and its implications have been a subject of intense debate in business ethics
Humans treated as important and costly resource (moral hazard?)
Are employees subject to a strict managerial rationale of minimizing
costs and maximizing the efficiency of the human “resource”?
The Gig Economy
Individuals being hired for a specific task, rather than being employed longer term (with the associated benefits) for exactly the same task
