Professional Documents
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Corporate Responsibility
Corporate Responsibility
Much debate. Eg: Cadbury, 1909; Davis, 1973; Eg: Carroll, 1979, 2000; etc 1960s activist movement questioned the singular economic objective of business
Asbestos Tobacco companies Discrimination Napalm/Dow Chemical
Today managers regularly confront decisions re philanthropy, pricing, employee relations, product hil th i i l l ti d t quality, environment, operations in countries with oppressive govts, etc. govts, etc.
Example: GE Citizenship Report, 2005 stressed long term health of society and the enterprise
Is all profit legitimate? Is all profit generated within the law legitimate? What is a fair distribution of a corps wealth between shareholders, employees & society? Should companies put part of wealth back into the communities in which they operate? p p ( ,p , Can markets be relied upon to set fair prices (labour, products, resources?) Can governments reliably decide the public interest?
CSR OR CR
http://www.darden.virginia.edu/corpor ateateethics/Video_Waddock_Difference_Ma kers/index.html / http://www.ti.com/corp/docs/csr/index http://www ti com/corp/docs/csr/index .shtml?DCMP=corp_general&HQS=Not Applicable+OT+csr
Corporate Responsibility Do managers have overriding ethical responsibility to serve interests of stockholders? Society? Do managers serve societys g y interests by serving the interests of stockholders? Contemporary Examples??
CR & Ethics
Ethical theory provides an overarching framework within which CR is situated. CR also embraces management theory and practice & the social context d ti th i l t t within which business operates (leadership, (l d hi organisational culture, i ti l lt values, learning, moral development, decision- ki decision d i i -making, etc). t )
CR: A definition
The voluntary assumption of h l i f responsibilities that go beyond the purely economic and legal responsibilities of business.
Consistent with earning a satisfactory level of profit. Implies willingness to forgo a certain measure of profit f non-economic ends. f f for non Integration of values (integrity, honesty, fairness, respect etc ) fairness respect, etc.) into policies, practices & decisiondecision-making.
CR: A definition
CSR is a concept whereby companies integrate social and p g environmental concerns in their p business operations and in their interaction with their y stakeholders on a voluntary basis (European Commission, 2001 cited in Tencati, Perrini & Tencati, Pogutz, Pogutz, 2004).
CSR: A definition
The C Th Canadian Business for Social di B i f S i l Responsibility defines CSR as, a companys commitment t operating it t to ti in an economically, socially and environmentally sustainable manner while recognising the interests of its stakeholders, stakeholders including investors, investors customers, employees, business p partners, local communities, the , , environment and society at large.
Example
http://www.campbellsoupcompany.co m/csr/pdfs/Campbells_2010_Social_Re / /p / p sponsibility_Report.pdf
NOTE: NOTE SEE E-RESERVE ON MOODLE EFOR SEVERAL READINGS, INCLUDING ONES BY CARROLL CARROLL.
Socioeconomic view
Moral minimum
NB: Carroll (1979) Economic, legal, ethical & discretionary responsibilities (Non hierarchical? Evolutionary?)
3 Viewpoints on CSR
What purpose should corporations serve?
Narrow, Classical Economic View
(Smith, Friedman Levitt) (Smith Friedman, Max. profits within the law Goods & services that society wants + job creation, not just profits profits.
MILTON FRIEDMAN
1912 - 2006
25 books 19 honorary degrees y g champion of capitalism advisor to presidents 1946-76 - Univ. of Chicago 19461976 - Nobel Prize, Economics 1988 - U.S. Medal of Freedom
The doctrine of social responsibility p y does not differ in philosophy from the most explicitly collectivist doctrines Defenders of CSR are unwitting puppets D f d f i i of socialism (Friedman, 1970). Capitalism is a necessary condition for political freedom (Friedman, 1962:10).
Free society = free market economic system.
Milton Friedmans view of CSR: CSR: 3 arguments in more detail 2. Agent-principal Argument Agent-p g p g
Managers are agents of the owners of the corporation (stockholders) Agents are responsible to act on behalf of their principals, in accordance with their desires. Corporate stockholders desire max legal RoI. l lR I Managers who sacrifice profits for CSR not required by law, are stealing from t i db l t li f stockholders (stealing is wrong).
Milton Friedmans view of CSR: CSR: 3 arguments in more detail 3. Taxation Argument
A manager who sacrifices profits for CSR is imposing a cost on
stakeholders. k h ld
Imposing a cost = imposing a tax. Imposing taxes without consent is taxing without representation, contrary to democracy. democracy Managers are not trained in social re-engineering/redistribution. re-engineering/redistribution
Milton Friedmans view of CSR: CSR: . In a free society there is society there
one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to game say, engages in open and free competition without deception or fraud.
Milton Friedmans Free Society y Friedman is defending a free market economic system charactersised by: Open & f O free competition titi Numerous buyers & sellers Who have perfect information Who are all rational utility maximisers Absence of external costs & market regulation. regulation
Review to Date
Narrow Classical Economic View
Max shareholder value, uphold law & ethical custom, enlightened long-term value max. long Friedmans free society, agent-principal and agenttax arguments. Critique of Friedmans free market Critique of maximising ones self-interest: selfutilitarian principle, Kant, individual rights. Non fiduciary responsibilities of managers (eg dont lie, cheat, steal, harm, coerce)
The Classical View Grounded i f G d d in free market, k t neoclassical economic theory Adam Smith (1723-90) (1723 The Wealth of Nations (1776) (1776) the best economic system recognises individual self interest Role of the invisible hand in coordinating self interest for common good
The Classical View Appeals to utilitarianism and individual rights to freedom and property for ethical foundations Utilitarian defence
if we all pursue our own business interests, society would be better served d an invisible hand would coordinate individual self-interested behaviour selfso that social good resulted
Imperfect competition Imbalance of knowledge between buyer and seller Unjust distribution of the greatest good
Can corporations be licensed to always act only in their best interests without regard for the interests of others?
Socioeconomic view
Moral minimum
NB: Carroll (1979) Economic, legal, ethical & discretionary responsibilities (Non hierarchical? Evolutionary?)
Moral minimum
Affirmative duties vs negative injunctions (prevent harm/do no harm) Example: BHP Billitons environmental policy Billiton s (2005) states that its duty is to,
ensure it has management systems to ensure identify, control, and monitor environmental risks arising from its operations and to conduct research and establish programs to conserve resources, resources minimise waste, improve waste processes, and protect the environment.
Simon, Powers & Gunneman (1972) However duties of citizens are not openopen-ended Obligation to prevent harm capability need proximity last resort Kew Garden Principles Garden
Bowie (1991)
Now argues that part of corporate social responsibility is to help solve social problems but all stakeholders p should have a say in how money is to be spent
Review to Date
Narrow Classical Economic View
Max shareholder value, uphold law & ethical , p custom, enlightened long-term value max. long Friedmans free society argument and agentagentprincipal and tax argument. argument
SocioSocio-Economic View
Stakeholder interests should be explicitly incorporated in the organizations purposes. organization s
Review to Date
Socio Economic View (cont)
- Moral minimum
- Stakeholder Theory
Stakeholder Theory y
Business has myriad social relationships Relationships carry obligations
employees suppliers consumers local community / society y y investors
Classical model: benefit stockholders Stakeholder: benefit all who have a stake in the business
Stakeholder Roles Owners have a financial stake in the corporation and expect a return on their investment. Employees have their jobs and usually their livelihood at stake. Suppliers provide raw materials to the corporation, thus the corporation is vital to the supplier's success. success
Stakeholder Roles
Customers exchange resources for the products or services of th firm and i d t i f the fi d in return receive the benefits of the products or services. Local community grants the corporation the right to build facilities in their area; in turn, the community benefits from the tax base and economic contributions of the corporation. Managers must look after the health of the corporation and carefully balance p y the conflicting claims of all stakeholders.
Stakeholder Theory
In the stakeholder theory, the y, function of business is the harmonisation of the interests of the various stakeholders. But how?
John R. Boatright
Shareholders As Owners
Equity Argument Managers do not appear to have a special fiduciary responsibility to shareholders because the shareholders already have built-in protections that other builtstakeholders do not possess.
Shareholders are sufficiently protected by the right they have to elect the board of directors, vote on shareholder , resolutions, etc.
Socioeconomic view
Moral minimum
NB: Carroll (1979) Economic, legal, ethical & discretionary responsibilities (Non hierarchical? Evolutionary?)
Arguments for: A t f
Corporate citizenship: business & society interwoven Duty of gratitude Social power (balance power with responsibility) p y) Prudent stewardship of societys resources Discourages Govt. regulation Promotes long-term profits for business long Corrects social problems caused by business
Colman (1998).
Millennium Poll
http://www.globescan.com/news_arch ives/MPExecBrief.pdf / p
Government Initiatives
Parliamentary Joint Committee on Corporations and Financial Services (Aust.) ( ) http://www.aph.gov.au/Senate/committee/corp orations_ctte/corporate_responsibility/report/in dex.htm dex htm ASX: all listed companies to have a Code of Conduct and a Code of Ethics in place and on website (2004). US Federal Sentencing Guidelines for O ga sat o s ( SGO), 99 , 00 Organisations (FSGO), 1991, 2004
http://www.wcsr.com/downloads/pdfs/csmemo45.p df
FSGO, 2005
1. 2. 2 3.
4. 5.
6. 7.
Establishment of written standards Communication and training of ws Periodic auditing, monitoring & enforcement and provision of anonymous reporting mechanisms Enforcement through incentives & discipline Appropriate and timely responses to violations Oversight by senior management Due care in delegating discretional authority
Government Regulation Hand of government approach. Societys interests best served by g g legal regulation of business rather than the free market (invisible hand). Milton Friedman
government to enforce the moral minimum
Advantages of Govt Regulation Govt. Protects socially responsible corporations from competitive disadvantages Forces a moral minimum on indifferent corporations Reflects generally accepted moral g y p standards and therefore in tune with the greater market