2: Corporate Social Responsibility and Business Ethics
- Page ID
- 11145
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)After reading this chapter, you should understand the following:
- Define ethics and explain the importance of good ethics for business people and business organizations.
- Understand the principal philosophies of ethics, including utilitarianism, duty-based ethics, and virtue ethics.
- Distinguish between the ethical merits of various choices by using an ethical decision model.
- Explain the difference between shareholder and stakeholder models of ethical corporate governance.
- Explain why it is difficult to establish and maintain an ethical corporate culture in a business organization.
Few subjects are more contentious or important as the role of business in society, particularly, whether corporations have social responsibilities that are distinct from maximizing shareholder value. While the phrase “business ethics” is not oxymoronic (i.e., a contradiction in terms), there is plenty of evidence that businesspeople and firms seek to look out primarily for themselves. However, business organizations ignore the ethical and social expectations of consumers, employees, the media, nongovernment organizations (NGOs), government officials, and socially responsible investors at their peril. Legal compliance alone no longer serves the long-term interests of many companies, who find that sustainable profitability requires thinking about people and the planet as well as profits.
A great society is a society in which [leaders] of business think greatly about their functions.
—Alfred North Whitehead
This chapter has a fairly modest aim: to introduce potential businesspeople to the differences between legal compliance and ethical excellence by reviewing some of the philosophical perspectives that apply to business, businesspeople, and the role of business organizations in society.
- 2.1: What Is Ethics?
- This page explores the distinctions between ethics and morality, asserting that ethics reflects societal implications and that legal compliance doesn't guarantee ethical conduct. It illustrates the long-term impacts of unethical actions in business through examples like Sears and Arthur Andersen, emphasizing the importance of reputation and goodwill in maintaining stakeholder trust. Ultimately, the text underlines that ethical behavior is crucial for long-term success and customer relations.
- 2.2: Major Ethical Perspectives
- This page explores major ethical theories influencing decision-making, including utilitarianism, deontology, and virtue ethics, emphasizing the need for diverse perspectives. It discusses the implied social contract between corporations and society, highlighting corporations' responsibilities to address societal needs.
- 2.3: An Ethical Decision Model
- This page discusses Michael Josephson's ethical decision-making model that combines virtue ethics, stakeholder analysis, and utilitarianism. It emphasizes identifying stakeholders, evaluating decisions, and considering impacts while prioritizing core values such as trustworthiness, respect, and fairness. The model aims to address ethical dilemmas and enhance awareness but acknowledges that real-world pressures can challenge ethical actions.
- 2.4: Corporations and Corporate Governance
- This page explores corporate responsibilities, contrasting Milton Friedman's profit-maximization view with stakeholder theory, which promotes accountability to various stakeholders. It examines legal structures, the agency problem, and the impacts of ethical leadership on corporate culture. The discussion underscores the repercussions of unethical practices, illustrated by a Sears Auto Center scam that eroded trust.
- 2.5: Summary and Exercises
- This page emphasizes the integration of ethics into business alongside legal compliance, focusing on frameworks like utilitarianism and virtue ethics. It advocates for a culture of ethical excellence, explores corporate behavior and dilemmas, and highlights the leadership's responsibility towards stakeholders beyond profits. The text references Milton Friedman's views on corporate purpose and discusses the implications of ethical decision-making, especially where legal enforcement is absent.
Thumbnail: Shaking hands with euro banknotes hidden in the hands. (Public Domain; Kiwiev via Wikipedia)