OT- W5 Flashcards
What is corporate social responsibility about?
It encompasses the relationship between an organization and their wider societal and ecological environment.
Organizations act to contribute to sustainable economic development, contributing to society at large. They try to prevent morally reprehensible practices. Thus, organizations are not only economic actors, but also moral actors.
Describe the shareholder view on CSR (Milton Friedman)
The shareholder view has long been the dominant one, Milton Friedman argued that an organization is responsible solely towards its owners aka shareholders. From this view an organization maximizing profits for its shareholders is simultaneously improving CSR as long as it plays within the rules of the game. How profits are produced is not relevant.
What critiques are there on the shareholder view?
- Focusing** solely on shareholder profit maximization promotes short term thinking and focus toward purely economic growth** and measurable success criteria other criteria are not take into consideration
- Orientated solely to shareholders** excluding other stakeholder groups** (such as employees)
- Turns a blind eye on external consequences, resulting in a isolated view on the firm
- Naïve about the understanding of firms’ regulatory environment and compliance to law
- Countries don’t necessarily have well-arranged regulations and these regulations are sometimes under-enforced
- The theory assumes that firms comply to law which is not always the case
What is the shareholder view?
A stakeholder is any group or individual who is affected by or can affect the achievement of an organization’s object. In this view it is argued that an organization should keep into account all stakeholders and actively manage this entire business environment, keeping account the various groups different wants and needs. Therefore the interest of shareholders: maximizing profit is an important goal in this view but not the only one. This means that it is more complex to define main goals as there may be conflict of interest.
What critique is there on the stakeholder view?
The stakeholder view…
* ….increases the complexity of management
processes and blurs organizational goals
* … lacks insights into how to deal with conflicting
stakeholder demands, which often cannot be
pursued at the same time
* … ultimately remains in the realm of shareholder
prioritization, as stakeholders close to the
organization are often preferred
Who designed the model on the salience of stakeholders and how does it work?
Mitchell, Agle and Wood have come up with a model to define what stakeholders are most salient for a firm. They defined three characteristics to assess the importance of a stakeholder:
* **Power: **How dependent are we an organization on this stakeholder?
* Legitimacy: Do we perceive (/ is it widely perceived that) this stakeholder’s roles and claims as appropriate and valid?
* Urgency: Does the stakeholder’s claim require immediate attention?
Within the model the relevance of a stakeholder is defined by how many given criteria they tick off, if a firm ticks off X characteristics:
* One attribute: ‘latent’ or low salience
* Two attributes: ‘expectant’ or moderate salience
* Three attributes: ‘definitive’ or high salience
Firms will pay more attention when a stakeholder is of higher salience.
What are codes of conduct and what functions do they serve?
= specific documents that detail
moral guidelines or ethical rules for employees and/or
for suppliers.
They serve to..
* … provide ethical guidance and rules for behavior
* … clarify expectations
* … often outline procedures for verification and
remediation as well as support for implementation
* … set forth standards for working conditions, like
wages, hours, child labor, discrimination, and
occupational health and safety, and sometimes
environmental standards
Name three ways to audit codes of conduct
- By the firm or supplier themselves
- By external auditors (auditing firms)
Downside: auditing firms will most likely write reports to the liking of the client (supplier or firm) - By letting independent external parties audit, such as trade unions.
This will most likely lead to the least bias
Name the limitations of a code conduct
- Codes outline rules, they do not
automatically imply implementation - Code implementation often follows a
‘policing‘ rather than developmental
approach - Auditing of codes not able to detect the
most severe issues - Auditing codes often seen as risk
management tool for Western firm
What makes codes of conduct neccessary?
- Because global supply chains are so complicated, codes of conduct serve to effectively communicate ethical standards
- Globally it is hardly possible to provide hard laws, so other forms regulation; soft laws such as codes of conduct emerged
- Global supply chains contain human rights abuse, too low wages, no health and safety
conditions, insufficient building safety etc. To prevent this the codes of conduct are implemented.
As a result of the Rana Plaza collapse, the Bangladesh Accord was established as a new approach to auditing factory safety. What does this accord entail?
Basically, a huge auditing program for Bangladeshi garment factories, focusing mainly on building safety.
The accord requires:
1. Transparency across factories re audit reports and corrective action plans‘ (as compared to audit reports
being kept a secret)
2. Legally binding for member firms (as compared to voluntary codes of conducts)
3. Commitment of lead firms to support suppliers financially or otherwise in remediations (‘shared
responsibility’ as compared to ‘policing’ approaches)
− Elected health and safety committees in factories (worker involvement)
− Trainings for workers on labour rights, complaint mechanisms, right to refuse work in unsafe factories
Explain the business case approach
It mainly argues that ethical behavior will lead to increased financial succes. The motivation for firms to act ethically with this approach is the financial incentives. As a result, firms will only act responsibly if there is financial gain.
Criticism: if firms only focus on situations where ethics pay, the most important issues will remain unaddressed.
Explain the managerial control approach of ethics
From this perspective codes are tools to manage and control employee behavior. Codes are used to control employees and the labor process. The organizations‘ ethics has priority over the individuals‘, firms prescribe ethical behavior
Criticism: firms prescribe ethical behavior of their employees in various domains, increasingly
intruding into private life (e.g. rules re use of social media)
Explain the ethics as risk management perspective
Ethics can help firms to maintain reputation, the motivation to work ethically is self-interest.
Criticism: not effective in tackling systemic change, can lead to counter-productive immunization and
creation of PR facades
Explain the ethics as a political tool perspective
Corporations take up regulatory tasks, previously belonging to the tasks of governments. The motivation for ethical behavior within this perspective is political power.
Criticism: unilateral, voluntary corporate self-regulation not able to tackle systemic problems; not
legally binding; attempt to pre-empt hard regulation
