Corporate Social Responsibility and Business Ethics

Week 2 Discussion Questions(DQs):

2.1.    How do different stakeholders view corporate social responsibility? What types of social commitment must managers consider regarding social responsibility?

The term “Corporate Social Responsibility” is basically concerned with a company’s responsibility or duty to operate in an honorable manner by providing good working conditions for internal employees, being a good steward of the environment and proactively working to improve the quality of life in the external communities where it operates at large. The term “stakeholders” refers to those people who have some stakes or interest on the operation of the business. It includes the internal people such as employees, board of directors, stockholders, and external people such as customers, suppliers, government, competitors, unions, local communities and the like. Each of these interest groups has some justifiable reasons for getting involved and obviously they expect or demand their needs to be satisfied or fulfilled by a firm in a responsible manner. The ways how these stakeholders view corporate social responsibility are shown below.

1.      Stockholders: Appropriate returns on investment, participation in decision making, additional stock offering, election of board of directors etc.

2.      Creditors: Timely interest payment, return on investment, priority in case of liquidation.

3.      Employees: Job satisfactions-economic, social and psychological, job autonomy, good working conditions etc.

4.      Customers: Reasonable price, quality product, services such as warranties, credit facility etc.

5.      Suppliers: Reliable buyers, continuing source of business, good relationship etc.

6.      Governments: Adherence to legislation, income and property taxes, fair and free competition etc.  

7.      Unions: Justice or benefit to their members, recognition as a negotiator for employees.

8.      Competitors: Fair competition, business statement on the part of peers etc.

9.      Local Communities: Responsible citizen, Support in community-related activities and events such as charitable and cultural projects etc.

10.  The general Public: The firm’s existence to better the quality of life, participation in and contribution to society as a whole, fair price for products etc.

While considering social responsibility, there are fundamentally four types of commitments a manager must make, are discussed below:

1.      Economic Responsibilities: The responsibility and duty of managers, as agents of the company owners, to maximize the value of a share or shareholders’ wealth. In this responsibility, a manager must try to maximize the profit whenever possible so as to maximize the shareholders’ wealth. Besides this, it also includes good payments to employees, and tax payments to its states or government.

2.      Legal Responsibilities: These responsibilities are concerned with the firm’s obligations to comply with the laws and regulations that govern the business activities in a responsible manner. For example, consumer product safety act to protect consumers from potential risks of injury in the use of consumer products, environment protection act to protect the environmental harm-pollutions.

3.      Ethical Responsibilities: Those ethical behaviors or actions of the managers which should be good enough to do as expected by others. For instance, it may include activities such as promoting workforce diversity without any discrimination, creating favorable working conditions, creating fair or equal behavior to all staffs.

4.      Discretionary Responsibilities: Those activities which are desired by the general public but voluntarily assumed by a business organization are called discretionary responsibilities such as good public relations, good citizenship, and full corporate social responsibility. For example, as a good citizenship, a company may proactively support ongoing charities, public service advertising campaigns, or other major issues in the public interest.

References

David, F. R. (2011 (13th ed.)). Strategic Management: CONCEPTS AND CASES. New Jersey : Pearson Education,Inc.

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

2.2.    How has the Sarbanes-Oxley Act changed boards of directors' thinking relative to business ethics and social responsibility? 

The Sarbanes-Oxley Act of 2002 is one of the revolutionary acts applies to public companies with securities registered under section 12 of the Securities Act of 1934 and those required to file reports under section 15(d) of the Exchange Act (Pearce II, J.A.,& Robinson, R.B., 2012, p. 57). It includes required certification for financial statements, new corporate regulations, disclosure requirements, and fines or penalties for failure to comply.

The Sarbanes-Oxley Act states that the CEO and CFO must clarify each and every report containing the company’s financial statements. As a part of review, they must attest that there is no any untrue statements or omitted important information. Furthermore, this act consists the provisions restricting the corporate control of executives, accounting firms, attorneys, and auditing committees. Executives are not allowed for their personal loans. Not only this much, the act does not give the right to executives or officers to purchase, sell, acquire, or transfer any equity security during pension fund blackout period. In addition, the SEC will provide the company’s executives with a code of ethics to adopt, and the reason of failure to meet the code must be disclosed to the SEC.

Having said these all the above, it is certainly true that the Sarbanes-Oxley Act has summarized the important laws and regulations made for public company’s executives or a board of directors and many others regarding business ethics and social responsibilities.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

2.3.    Explain the five principles of collaborative social initiatives.

The term “Collaborative Social Initiatives” or CSIs refer to social actions or activities initiated by a collaborative approach of a single company or multiple companies to make a positive change in the society. Through CSIs, each partner or firm not only benefits by sharing their knowledge, skills, and capabilities, they also use it as a tool to make a brand recognition in the eyes of stakeholders. There are basically five principles of collaborative social initiatives as described below:

1. Identify a Long- Term Durable Mission: In order to make the greatest social contribution, companies must identify an important, long- standing policy challenge and they participate in its solution over the long term. It basically includes the long term problems such as global hunger, ill health, substandard education, and degradation of the environment. For example, AES’s Carbon Offsets program which has been initiated to reduce a global warning by effective means of Carbon offsets.

2. Leverage Core Capabilities: Contribute “What We Do": Companies strive to maximize the benefits of their corporate contributions by leveraging their core capabilities and contribute products and services that are based on expertise used in or generated by their normal operations. Such contributions create a mutually beneficial relationship between the partners. For instance, in IBM’s Reinvesting Education, it uses its leading expertise, educational consultants and technology to support school restructuring.

3. Contribute Specialized Services to a Large- Scale Undertaking: Companies are likely to get the greatest social impact when they make specialized contribution to large- scale cooperative efforts. For example, In case of IBM’s Reinvesting Education, it monitors the program with rigorous, independents from the center for children & Technology in conjunction with the Harvard Business School (Pearce II, J.A.,& Robinson, R.B., 2012, p. 72).

4. Weigh Government's Influence: Taking government support for corporate participation in CSIs- or at least willingness to remove barriers- can have an important positive influence. It helps to get tax incentives, liability protection, and other forms of direct and indirect support for businesses that help to foster business for long term. Endorsements can also be very valuable.  N case of IBM, for instance, IBM teams works with the U.S. Department of Education and the U.K. Department of Education and Employment on many reinvestment projects. (Pearce II, J.A.,& Robinson, R.B., 2012, p. 72).

5. Assemble and Value the Total Package of Benefits: It is possible to gain even the greatest benefits from their social contributions when companies put a price on the total benefit package. The valuation should include both the social contributions delivered and the reputation effects solidify or enhance the company's position among its constituencies. In case of IBM’s Reinvesting Education, for example, it views a long term commitment to education as a strategic business investment. By investing in its future customers and workforce, IMB feels that success is being promoted.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

2.4.    Compare and contrast the different approaches to business ethics.

First let me define what ethics actually is, ethics refers to the concept of right and wrong, fair and unfair, moral and immoral that reflect society’s beliefs about the actions of an individual or a group. Business ethics typically can be defined as the applications of general principles and standards to business behaviors. While defining the most critical quality of ethical decision making, the consistency comes at first so that most managers often strive to adopt a philosophical approach. Based on it, there are basically three fundamental approaches to business ethics as described below.

1.      The Utilitarian Approach: It refers to judging the appropriateness of a particular action based on a goal to provide the greatest good for the greatest number of people. For example, a company that decides to move their production facilities from one part of the country to another. How much good is expected from such move? How much harm? If the good appears to outweigh the harm, the decision to move may be deemed an ethical one, by the utilitarian approach.

2.      The Moral Rights Approach: It refers to judging the appropriateness of a particular action based on a goal to maintain the fundamental rights and privileges of individuals and groups. It differs substantially from the utilitarian approach on ethics and would not allow, for instance, the harming of some individuals in order to help others. In this approach, each person must be treated equally, with the same level of respect and no one is treated as a means to an end. For instance, a standard of truthfulness, the rights of human beings to life and safety, freedom of speech, and private property etc. are considered as some of the examples of this approach.

3.      The Social Justice Approach: It includes judging the appropriateness of a particular action based on equity, fairness, and impartiality in the distribution of rewards and costs among individuals and groups. It includes different principles such as the liberty principle, difference principle, distributive-justice principle, fairness principle, and natural duty principle.

References

David, F. R. (2011,13th ed.). Strategic Management: CONCEPTS AND CASES. New Jersey : Pearson Education,Inc.

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.