Business Ethics/Corporate Social Responsibility

The focus in this subject is on corporate social responsibility, which involves responsibilities outside of making a profit and the key questions for corporations include: Does business have a social responsibility? If so, what is the extent and type of the responsibility?

Corporate Social Responsibility (CSR)

Definitions of CSR The impact of a companys actions on society Requires a manager to consider his acts in terms of a whole social system, and holds him responsible for the effects of his acts anywhere in that system

A companys sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship: 1. through their waste and pollution reduction process. 2.by contributing educational and social programs 3.by earning adequate returns on the employed resources.

Corporate citizenship The legal status of a corporation in the jurisdiction in which it was incorporated.

A companys role in or responsibility towards society.

Corporate Social Responsibility (CSR)

Corporate Citizenship Concepts Corporate social responsibility emphasizes obligation and accountability to society Corporate social responsiveness emphasizes action, activity Corporate social performance emphasizes outcomes, results

CCC

The concept of corporate citizenship, also known as corporate social responsibility, proposes that businesses have a responsibility to the community in which they operate and to society in general. Typically, corporate citizenship includes several areas of responsibility, such as economic, legal, ethical, philanthropic, and environmental areas.

Corporate citizenship means: To incorporate the interests of all stakeholders in business operations including, employees, customers, the community and the environment.

A business that operates in an ethical manner and supports the interests and concerns of the community in which it operates.

Part II

Multinational Corporation
-

Imperialist or Pacifist Definition Stages

Mutinational Corporation: Imperialist or Pacifist?

Multinational Corporations is among other things : a private government; often richer in assets; more populous in stockholders and employees Than some of the nation-states in which it carries on business.

Mutinational Corporation: Imperialist or Pacifist?

Simultaneously a citizen of several nation states: owe obedience to their laws has its own objectives responsive to a top management that maybe located in another nation.

Mutinational Corporation: Imperialist or Pacifist?

Critics see in the Multinational corporation: An instrument of irresponsible private economic power; An agent of economic imperialism by its home country.

Mutinational Corporation: Imperialist or Pacifist?

An international carrier of advanced management science and technology; An agent for the global transmission cultural values

Multinational Corporation defined

Owns and manages business in two or more countries. It is an agency of direct as opposed to portfolio, investment in foreign countries Holding and managing the underlying physical assets rather than securities based upon those assets.

A domestic corporation may become multinational by: 1. Establishing foreign branches; 2. Operating wholly or partially owned subsidiaries in other countries; or 3. Entering into joint ventures with enterprises in other countries

However, whatever the form, it becomes a working corporate citizen within many nations.

Characteristically, an expanding corporation travesrses the following stages: Exports its products to foreign countries; Establishes sales organization abroad. Licenses use of its patents and know-how to foreign firms that make and sell its products. Establishes foreign manufacturing facilities Multinationalizes management from top to bottom. Multinationalizes ownership of corporate stock.

1. 2. 3.

4. 5. 6.

What forces and motives have thrust the corporate institution into world arena?

Direct investment appeared to be a relatively profitable use of corporate funds.

What forces and motives have thrust the corporate institution into world arena? Reasons for foreign direct investment: 1. Entrepreneurs confront foreign barriers to their exports. - Nationalistic sentiment leads most nations to try to build their own industrial capabilities. -Raising barrier against import of manufactured products, they induce foreign as well as local firms to establish domestic industries.

What forces and motives have thrust the corporate institution into world arena? Reasons for foreign direct investment:

2. Their presence as a producer in a foreign nation enables them to adapt their products to local demands more effectively.
3. The creation of larger free-trading regions.

4. Anti-Trust laws (in the US) and keen competition .

What effects does it produce on investing in host nations and on international relationships and institutions.

The economic, political, technological and cultural effects are most striking in the less developed countries. - Based on 12 case studies made over 15 year period American corporations played an innovating and catalyctic role: * founding new industries * transmitting technological

What effects does it produce on investing in host nations and on international relationships and institutions.

* transmitting managerial skills *Transmitting capital *creating entire social infrastructure (schools, housing,health facilities, and transportation)

What effects does it produce on investing in host nations and on international relationships and institutions.

Firms have: failed to transfer technology or train local personnel. Corrupted local officials Intervened in national politics But these forms of conduct are rare today.

Corporate Social Responsibility (CSR)

Business Criticism/ Social Response Cycle

Factors in the Societal Environment Criticism of Business Increased concern for the Social Environment A Changed Social Contract

Business Assumption of Corporate Social Responsibility Social Responsiveness, Social Performance, Corporate Citizenship

A More Satisfied Society

Fewer Factors Leading to Business Criticism Increased Expectations Leading to More Criticism
2-7

Effects on Developed host countries

Europes characteristics: Politically mature societies Technologically advanced countries Socially integrated peoples Proud of their nations long histories of achievement.

Effects on Developed host countries

The major economic result of the physical presence of more than 3,000 American corporations with 40,000 American employees was the stimulation of the: - Growth of production - Growth of income - Growth of living standards of Europeans.

Effects on Developed host countries

-

Improved the balance of International payments. More subtle and profound economic effects flowed from the new competition , (mass-marketing technique, price competition, hard-sell advertising, packaging) Mass production of a host of new consumer products (fresh-frozen foods, electric home appliances and plastic containers)

Effects on Developed host countries

But!!! The newcomers were criticized : -Disruption of orderly marketing - Extravagant wages and salaries - Reckless financial practices - Display insensitivity to local customs in their drive to lower cost and greater efficiency. (G.E. was condemned for dismissing French engineers;
discounts to dealers)

Goodyear & Goodrich provoked protest from French tire-makers when they doubled the traditional

Effects on Developed host countries

However, available evidence indicates that affiliates have generally earned higher rates of return on investment .

Effects on Developed host countries

The Europeans responded vigorously to the American challenge:

-Their government fostered business mergers designed to create companies able to compete with the Americans. -They expanded their research and development activities. -Basic European science has always been equal to American science.

Effects on Developed host countries

There is now general recognition that the key gap between European and American business is managerial rather than technological
In choosing Industrial leadership : - Establishing graduate school of management - Replacing nepotism with meritocracy (wherein

appointments are made and responsibilities are assigned to individuals based upon their "merits", namely intelligence, credentials, and education,[1] determined through evaluations or examinations.)

Corporations Have Acquired Tremendous Wealth and Power

WALMART

With 2002 sales of $246 billion, WalMart is larger than 150 countries, including

Norway
$189 Billion

Poland
$187 Billion

and Greece $132 Billion

Source: Institute for Policy Studies, 2005 Report.

Data Table

Source : European Commission, DG-ECFIN Greece - Gross domestic product at current market prices - Mrd EURO-GRD - AMECO data class: Data at current prices (AMECO) Period value

2012
2011 2010 2009 2008

226.1357
222.7925 230.1781 235.0218 236.9221

2007
2006 2005 2004 2003 2002

227.0791
211.3047 194.8238 185.2706 172.4311 156.6152

Part III The Consequences of Concentrated Corporate Power

-On the environment - On our Culture - In the exchange of Ideas - On government - On Society - On the Marketplace

The Consequences of Concentrated Corporate Power

ON THE ENVIRONMENT Many corporations despoil our forests, degrade the land, pollute the air and water, and resist public health regulations.

ON OUR CULTURE
Corporations promote consumption and materialism to the detriment of civic values.
Source: Challenging Corporate Rule, United for a Fair Economy, January 2000

The Consequences of Concentrated Corporate Power

IN THE EXCHANGE OF IDEAS
The concentration of corporate media ownership limits political debate, the diversity of viewpoints presented, and media access. ON GOVERNMENT Large corporations wield enormous political and electoral power.
Source: Challenging Corporate Rule, United for a Fair Economy, January 2000

The Consequences of Concentrated Corporate Power

ON SOCIETY Corporations are usurping civic space. Public functions are being privatized. ON THE MARKETPLACE Mergers and monopolies eliminate competition and remove jobs.
Source: Challenging Corporate Rule, United for a Fair Economy, January 2000

How Wealthy and Powerful Have Corporations Become?

Size & Power
Merger Mania Consolidations and Layoffs

Influence of Money in Elections Corporate Pork Barrel Tax Effort By Corporations

Corporations Have Acquired Tremendous Wealth and Power

In 2002, 52 of the worlds

largest 100 economies were corporations.

Approximately 60% of all world trade is between firms within the same parent corporation.

Sources: Institute for Policy Studies, 1999, 2000, 2001 and 2002 Reports, Global,Inc..

Corporations Have Acquired Tremendous Wealth and Power

The gap between average CEO pay and worker pay has risen from 42 to 1 in 1982 to 301 to 1 in 2003.
Field Guide to the Global Economy, 2005

Corporate Political Power

Economic Power the corporate ability to control markets.

Political power the ability of a corporation to influence government

Instruments of Corporate political Action

Endeavors to influence all phases of politics: -It makes contributions indirectly to political candidates. -gives to charities whose sponsors goodwill it seeks

Corporations Have Used Their Wealth & Power to Sway Elections and Lawmaking

In the 2000 federal election

campaigns, corporations outspent labor by 15-to-1.

In the 2004 federal election

cycle, finance, insurance, and real estate corporations led all sectors, giving $331 million to federal candidates.
Source: Center for Responsive Politics; Capital Eye, Vol. 6 No.4, www.crp.org.

Corporations Have Used Their Wealth & Power to Sway Elections and Lawmaking

Between 1998 and 2004,

Verizon corporation and General Electric corporation spent over $100 million in lobbying expenditures.

Source: www.publicdomainprogress.com