Framing Business Ethics Flashcards
What is a corporation?
- a corporation is essentially defined in terms of legal status and the ownership of assets
- corporate personhood: corporations are artificial persons (if you strip corporations of human element they will still have some rights such as the the right to enter in agreements, the right to sign contracts, the right to sue and be sued)
Should corporations have social responsibilities? (Argue against)
Friedman (1970) the social responsibility of businesses is to make profits, that is the only responsibility they have, they owe nothing towards society.
- 3 elements against this:
1. Only humans have a moral responsibility towards society
- Managers responsibility is to act solely in the interest of shareholders
- Social issues are of the responsibility of the state or government only, not corps.
Can corporations have social responsibilities? (Arguments for)
- corporations have some degree of responsibility towards society (support by literature)
2 elements:
1. Every organization has a corporate internal decision structure which directs decisions in line with predetermined goals (French, 1979)
- All organizations manifest a set of beliefs and values that lay out what is generally regarded as right or wrong in the corporation: organizational culture (Moore, 1999)
What is CSR?
CSR is the attempt by companies to meet the economic, legal, ethical and philanthropic demands of a given society at a particular point in time.
However CSR is a very abstract term, due to its evolvement over time and is very dynamic. (Means different things to different people)
What is the model used for CSR? And how does it work?
Carroll’s four part model of CSR:
4 main elements of responsibilities: Economic (required) Legal (required) Ethical (expected) Philanthropic (desired)
How does CSR differ internationally?
Economic responsibility:
- focus in US has a strong focus on shareholders, and overall stronger CSR influence (explicit) France: unions are much stronger (larger responsibility towards employees) India has tradition of investment in local communities
Legal responsibility:
- state is in france seen as key enforcer of rules, elsewhere the government is seen with more skepticism.
Ethical responsibility:
- wide range of local ethical values and preferences expectations vary
Philanthropic: Europe tends to compel giving via legal framework, elsewhere (USA, India) companies are expected to share their wealth
- there is therefore different emphasis in all countries b
What is explicit CSR?
“liberal market economies”
- adopted by U.S. firms
- corporations go out of their way to articulate what they are doing , the benefits of what they are doing and how it benefits the company
- more of an individualist approach
- companies may act alone, more liberal (they do what they think is best for their company)
What is implicit CSR?
- in the UK, United approach which is framed in a much more governed way
- consists of values, norms and rules that result in requirements for corporations
- motivated by the societal consensus on legitimate expectations of the roles of corporations
What are the strategies of CSR?
Due to different focuses of strategies of corporate CSR: the two main focuses are:
Traditional CSR:
- company do not go out of their way to embed responsibilities into their operations. They make profits and when they have made their profits,they then use some of the value of the profit to engage towards CSR.
- CSR is bolted on
Contemporary CSR:
- corporations ebbed CSR in what they are doing, hey look for opportunities using CSR to make profits
- CSR is built in
What are the outcomes of CSR?
- social policies ( might redefine their mission, the vision and what they are all about in order to engage with CSR)
- social programs: might decide to engage with certain activities to embed environmental programs, to build a school or support local charity
- Impact of social programs: some impacts might be difficult to quantify, due to subjectivity.
What is the stakeholder Theory? ( and two principles)
Any group or individual who can be affected or is affected by the achievements of an organization.
2 principles:
- principles of corporate rigs: corps have the obligation to not violate the rights of stakeholders
- principles of cooperate effects: companies are responsible for the effects of their actions on others
Accredited to Edward freeman 1984
Define stakeholder
Those who have a stake or claim in some aspect of a company’s products, operations, markets, industry and outcomes.
(Customers, investors, employees, government agencies, communities)
- relationship is a two way street
What is the traditional management model?
Firm does not see beyond the shareholders,
What is the stakeholder model?
Adds governments competitors, competitions and civil society as keyed elements of the model.
What is the network model?
Extends to a wider group of stakeholders, tier 1 and 2. So this would include primary and secondary stakeholders
Differ between primary and secondary stakeholders.
Primary stakeholders: those who’s continued association is absolutely necessary for a firms survival (employees, customers, investors, governments, and communities)
Secondary stakeholders: do not typically engage in transactions with the firm and are not essential to a firms survival ( media, trade associations, special interest groups)
What is the stakeholder interaction model?
This is the interaction between secondary and primary stakeholders
What are the three aspects/approaches to stakeholder theory?
Normative (at the very extreme) the ideal scenario of which companies are meant to behave in relation to their stakeholders
Descriptive: how organizations actually behave when it comes to their stakeholders, not how.
Instrumental: explains the middle ground between the normative and the descriptive , describes that if companies behave in correct ways the outcome will be positive.
What is a stakeholder orientation?
The degree to which a firm understands and addresses stakeholder demands.
It involves activities that facilitate and maintain value with stakeholders:
- generation of data about stakeholder groups
- distribution of that information
- responsiveness of organizations as a whole
Why do stakeholder matter?
Freeman argues that we have an extended view of our responsibility, including:
- legal: stake in the corporation already protected legally in some way
- economically:
externalities; outside contractual relationships
Agency problem: short term interests of owners vs long term interests of managers, employees, customers etc
What is the new role of management?
It is a broader view of responsibility towards multiple stakeholders.
What is corporate accountability?
The corporation is responsible for the consequences of its actions
- the firm takes the role of political actors: some of the roles that the governments used to do, corporations are now doing it.
What are the redone of the political role of the firm?
- Government are failing
- cooperate power is on the rise due to:
- Liberalization and deregulation results in more power and choice for private actors
- Privatization of public services
- Responsible for employment decisions
- Governments increasingly encourage self-regulation
What is corporate transparency?
The degree to which corporate decisions, policies, activities and impacts are acknowledged and made visible to relevant stakeholders.
