Framing business ethics (CSR, stakeholder theory) Flashcards
What is a corporation? (3 things)
- Typically regarded as artificial persons in the eyes of the law
- Notionally “owned” by shareholders, but exist independently of them.
- A corporation is essentially defined in terms of legal status and the ownership of assets.
What are the arguments for and against corporations having social responsibility?
Against: The shareholder Theory: Milton Friedman 1970
- only human beings have moral responsibility for their actions
- it is managers responsibility to act solely in the interest of shareholder
- Social issues and problems are the problem of the state/government rather than corporate managers.
For: Stakeholder theory (Edward Freeman) 1984
- The principles of corporate rights: corporations should not violate the rights of others
- The principles of corporate effects: companies are responsible for the effects of their actions on others
French and Moore (1979 and 1999)
- every corporate internal decision structure, which direct decisions are in line with goals
- all organisations manifest a set of beliefs and values that generally lay out what is regarded as right or wrong in the corporation organisational structure
Define CSR
The attempt by companies to meet the economic, legal, ethical and philanthropic demands of a given society at a particular point in time (Carroll 1991)
What is Carroll’s four-part model of CSR?
Economic: Required
Legal: Required
Ethical: Expected
Philanthropic: Desired
What about CSR in an international context? (USA, India and France)
- Economic responsibility:
USA: focus on shareholders
France: employees
India: local community - Legal responsibility:
France: key enforcer of rules
USA & India: government seen with scepticism (corrupt) - Ethical responsibility:
wide range of ethical values and preferences: expectations vary - Philanthropic responsibility:
USA & India: companies are expected to share their wealth
France: tends to compel giving via legal framework
Distinguish between Implicit and Explicit CSR?
Explicit CSR: Liberal Market Economies
- Describes corporate activities that assume responsibility for the interest of society
- Consists of voluntary corporate policies, programs and strategies (individualism, liberalism, isolated actors)
Implicit CSR: Coordinated market economies
1- Describes corporations’ role within the wider formal and informal institutions for society’s interests and concerns
2. Consists of values, norms, and rules that result in requirements for corporations
3. Motivated by the societal consensus on the legitimate expectations
Differentiate between the two CSR strategies, contemporary and traditional CSR? (focus, driver, relation to tbl, response and motto)
FOCUS: T: Risk C: Reward DRIVER: T: Image, brand, public acceptance C: Performance, markets and Products RELATION TO TBL: T: no clear link to value creation and business model. CSR is distribution of created value. C: Clear link to value creation and business model. CSR is value creation RESPONSE: T: Reactive and defence C: Accommodative and Pro-active MOTTO: T: CSR is bolted on C: CSR is built in
What are the outcomes of CSR for social performance?
- Social Policies: social policies stating company value, beliefs and goals in respect to social environment (in mission statement)
- Social programs: programmes and activities implemented to achieve social policies. (investment in local charity or school)
- Social Impacts: assess changes that corp has achieved through social programmes implemented.
Define stakeholders
Those who have a stake or claim in some aspect of a company’s products, operations, markets, industries and outcomes. (customers, investors, employees, suppliers, gov agencies and communities)
- relationship is a two way street
What are the different relationships in the stakeholder theory?
- Traditional relationship: only considers the primary stockholders of the firm (employees, customers, suppliers and shareholders)
- Stakeholder model:
Looks at larger number of stakeholders (including gov, competitors and civil society) - Network Model:
considers tier 2 stakeholders such as supplier stakeholder 1, civil society stakeholder 1 etc.
What is the concept of leverage?
- seeks to explain the power that MNC’s hold over supply chain partners in that they can force these partners to adopt practices that adhere to sustainability performances set by MNC’s.
- explains that MNC’s also have responsibility for their indirect actions that are undertaken by supply chain partners.
What is the stakeholder interaction model?
- there is a two-way relationship between firms and a host of stakeholders. In addition to the input of primary stakeholders, input from secondary stakeholders also exist (mass media, competitors, trade associations and special interest groups)
What are the three aspects/approaches to stakeholder theory?
- Normative:
- attempts provide reason why corps should consider stockholder interests
- principle and values help dictate how to treat stakeholders - Descriptive:
- attempt to ascertain whether corps actually take into account stakeholder interests
- focus on actual behaviour, addressing decisions and strategies in stakeholder relationships - Instrumental:
- examines relationships and describes outcomes of particular behaviours
- attempts to answer whether it is beneficial for corp to consider stakeholder interest
- aimed at maximising shareholder value by paying attention to relationships
What is a stakeholder orientation?
The degree to which a firm understands and addresses stakeholder demand
activities involves: generation of data about stakeholder groups, info distribution, org responsiveness
Why do stakeholder matter? (for/against)
Friedman: business should only be run in the interest of their owners - against
Freeman: others have legitimate claim on the corporation - for:
1. legal perspective: stake in corp, means, already legally protected in some way
2. economic perspective: externalities (outside contractual relationships),
3. agency problem: short term interest of owners vs long term interest of managers, employees and customers.
