Do Business Enterprises Have A Social Obligation To Assist

Those In Need?  

AgendaAgenda

• Corporate Social Responsibility Corporate Social Responsibility MovementMovement

• The Managerial ChallengeThe Managerial Challenge• The Rescue PrincipleThe Rescue Principle• The Fairness PrincipleThe Fairness Principle• The Principle of a Minimally Fair BenefitThe Principle of a Minimally Fair Benefit• Practical and Theoretical ConsiderationsPractical and Theoretical Considerations

Push Towards Greater Social AdvocacyDirected Squarely At Multinational Corporations

Resources are necessary to address three specific problems:– AIDS crisis in Africa– Lack of vaccines for children throughout the

developing world– Uninsured children in the U.S.

Critics: Corporate Social Responsibility Movement

Most Established in Anglo-Saxon Economies

• The main duty of corporations is to its shareholders, not society-at-large (early Milton Friedman “The business of business is business”)– Pay the shareholders dividends:

• Let the shareholders decide what to do with the money

• Donate to charitable causes• Implies that social issues are peripheral to the

challenges of corporate management

Two Principles Justify Corporate Social

Responsibility In Special Circumstances

• Rescue Principle

• Fairness (or Justice) Principle

The Managerial Challenge

• Is it possible for corporate managers to heed calls for assistance in a way that does not undermine the business enterprise and its for-profit nature?

Requests For Help FromMultinational CorporationsResult Of Three Key Factors

1. Multinationals often operates in countries characterized by unrelenting poverty

2. Calls for assistance are widespread

3. Calls for multinationals to do more to meet the needs of people living in developing economies is no longer limited to activists

– Annual revenue of the five largest multinational corporations is more than double the GDP of the poorest 100 countries

– Why are corporations not doing more to assist people in need?

– From the perspective of citizens in poverty, multinationals appear well placed to do so

First-Multinationals Often Operate In Areas Characterized By Unrelenting Poverty

Second-Calls For Assistance Are Widespread

Activists Demands: Pharmaceutical CompaniesActivists Demands: Pharmaceutical CompaniesFifteenth International AIDS ConferenceFifteenth International AIDS Conference

• Immediate reduction in the price of anti-HIV/AIDS medications to levels affordable for populations of developing countries

• Removal of all conditions from concessionary price reductions

• Permission for governments to employ compulsory licensing, parallel importing, or other mechanisms to protect public health

• Guarantees for an uninterrupted supply of donations to all developing countries without arbitrary time limitations

Third-Calls For Multinationals To Do More To Meet The Needs Of People Living In Poverty Is No Longer Limited To Activists

• Former United Nations Secretary-General Kofi Annan - persuaded the leaders of multinational corporations to join the Global Compact for Assistance

• Initiative calls on multinationals to respect and promote:– Human rights (right to health care)– Labor– Environment

Currently Emerging UncertaintyAbout Global Order

"In just a few short years, the prevailing atmosphere has shifted from belief in the near-inevitability of globalization to deep uncertainty about the very survival of our global order. This is a challenge for the United Nations. But it obliges the world’s corporate community, too, to ask how it can help put things right.“

Former United Nations Secretary-General Kofi Annan

Strategy For AddressingThe Managerial Challenge

Take existing examples of assistance and ask on what basis such assistance could be justified in a manner consistent with the for-profit purpose of the business enterprise

Principles of Rescue and FairnessPrinciples of Rescue and Fairness

The Rescue Principle at WorkHIV/AIDS Crisis- Sub-Saharan Africa

• 4.3 million people newly infected with HIV in 2006; 3.0 million in 2005

• 39.5 million people infected with HIV; 25 million in 2005• 2/3 of all people infected with HIV live in Sub-Saharan

Africa -- 10% of the world's population• In all seven southern African countries:

– Prevalence rates are 20% or higher– Botswana and Swaziland rates are over 35%– 2.1 Million AIDS deaths in 2006 -- 72% of the world's

2.9 AIDS deaths

Three Pharmaceutical Companies • DIFLUCAN PARTNERSHIP PROGRAM: Pfizer donates

the antifungal Diflucan to treat opportunistic infections in persons living with HIV/AIDS in countries with prevalence rates of 1% or higher

• POSITIVE ACTION: By partnering with the Centre for African Family Studies, GSK aims to increase the participation of persons living with HIV/AIDS in national and international policy discussions

• AFRICAN COMPREHENSIVE HIV/AIDS PARTNERSHIP: Partnering with the Gates Foundation, Merck commits $50 million and continues donations of the antivirals Cirxivan and Stocrin for the duration of the partnership

The Rescue Principle Addresses The Managerial Challenge

"If you are presented with a situation in which you can prevent something very bad from

happening, or alleviate someone's dire plight, by making only a slight (or even moderate)

sacrifice, then it would be wrong not to do so.“

Thomas Scanlon, Harvard Philosophy Professor

Case of the Drowning ChildPeter Singer, Professor of Bioethics

Princeton University

• Walking past a shallow pool and see a child drowning• Have a moral responsibility to save the child• Even if this means getting wet • What underlies this responsibility is the Principle of

Rescue:– When confronted with the opportunity to prevent great

harm from occurring at little cost (getting wet) – Ought to engage in the prevention of that harm

All Three Pharmaceutical CompanyExamples Meet The Criteria To BeJustified As Instances of Rescue

1. The plight is urgent (requiring prompt action)2. Pharmaceutical companies are positioned to help

alleviate the plight3. Sacrifice incurred is moderate

In the context of the HIV/AIDS epidemic, especially in a place like Sub-Saharan Africa, there is good reason to think that the provision of assistance by pharmaceutical companies can be defended with reference to the Principle of Rescue

Justifying Assistance

(A Principle of Rescue)

• Business enterprises should "prioritize“ rather than "balance" claims in response to requests for assistance

• Balancing requires corporate managers to weigh the interests of different stakeholders

Prioritizing

Think Sequentially

Once a claim is fulfilled The next claim can be met Some claims legitimately trump

others

Prioritizing vs. Balancing

• Prioritizing protects business enterprises

• As in the case of rescue:– Built-in limit to the amount of assistance required– No requirement to alter the purpose of the business

enterprise

First-Questions of Responsibility

1. Does the Principle of Rescue apply to managers, shareholders, or the corporation itself? 

2. Are business enterprises like passers-by?

3. Do owners of the business have obligations, but not the business itself?

continued…..

First-Questions of Responsibility, Continued…..

4. Why should it be the corporation itself?

5. Why do products and services have to be given away in-kind?

6. Why should anyone concede that corporations do not have duties? Or discretion?

Second-Questions of Perception

Second-Questions of Perception

Is the case of an individual providing rescue -- as with the drowning child -- dramatically different from a corporation providing rescue?

By virtue of providing assistance, are business enterprises then seen as good?

If you give assistance once, is it then expected? Is rescue, in fact, cumulative? Will the extension of aid be good for business? If so, will this public perception influence the view of

shareholders as to the corporation’s duty to provide rescue?

Third-Questions of Preponderance

1. How should business enterprises deal with the preponderance of competing opportunities to provide rescue -- from HIV/AIDS to drowning children?

2. How should corporations choose among competing urgencies and needs?

Fourth-Questions of Urgency and Need

1. Do the definitions of what is urgent and needy influence:

• When• Where• How

rescue or assistance is applied?

Fifth-Questions Aboutthe Nature of Rescue

Does the duty of rescue go up to the extent that the ease of rescue matters?

2. If a corporation has a moderate effort or sacrifice -- or if it is no sacrifice, is that a bigger duty to rescue?

3. When are business enterprises no longer under the duty of rescue?

Sixth-Questions About the

Nature of Corporations

1. Should the nature of business enterprises be taken into account?

2. The biopharmaceutical and health industry are about helping people, does the nature of the corporation affect their answer to rescue?

3. Does it make a difference?

The Fairness Principle: Coca-Cola

Largest private-sector employer in Africa

• In 2001, the company launched the Coca-Cola African Foundation to develop interventions focused primarily on their employees and employee families:– Health care– Education– Environment

The Fairness Principle:Coca-Cola

• In its 2006 Foundation report, the company stated:– "HIV/AIDS is now the biggest threat facing Africa's development

and future“– “There are moral and business enterprises imperatives to

addressing the pandemic”• The company has an enormous stake in the health of the

continent:– Coca-Cola's African business enterprises generated $827 million

in net operating revenues – 21% increase in net operation income from 2005

• “Coca-Cola's momentum is threatened by the HIV/AIDS pandemic“

--Alexander Cummings, Chair, Coca-Cola African Foundation

Coca-Cola Africa Has Spent Over $30 Million On HIV/AIDS

Programs Since 2001

• Coca-Cola Africa comprises a community of some 300,000 people:– 1,500 direct employees and their families– 60,000 bottling employees and their families

• Program is particularly comprehensive:– Awareness and prevention programs– Community involvement and treatment– Care and support for all employees and their families

Coca-Cola Africa Focused On HIV/AIDS Programs Between Now And 2010

• Partnered with NGOs for technical assistance:– UNAIDS– The International Labour Organization– UNICEF for technical assistance

• Coca-Cola is exploiting any means possible to address the AIDS crisis:– Using its bottlers to deliver educational books and

materials developed by organizations like UNAIDS– Donating billboards for educational purposes– Asking its advertising and marketing partners to

donate their time and expertise to developing communications programs

ChevronTexacoAddressing The Root Causes Of

HIV/AIDS

• Since early 1990s, ChevronTexaco has worked to improve blood banks and blood services in Angola:– Goal: decreasing the risk of contamination through

blood transfusions

– In its 2006 Foundation report on African activities: new HIV cases due to blood transfusions have fallen from 24% to less than 1% in fifteen years

Principle of a Minimally Fair Benefit

1. In an exchange –

2. If some, but not all, parties are above a minimal threshold of well-being and entitlement

3. Then it would be wrong for the parties far above the threshold not to assist other parties to come closer to that threshold

1. If lack of basic health care places one below the minimal threshold

2. Then the provision of assistance by Coca-Cola Africa and Chevron Texaco might be defended with reference to this Principle of Fairness

3. In the context of an exchange, heeding calls for assistance need not undermine the purpose of the business enterprise

4. The challenge is not whether it is permissible to provide assistance

5. But rather to determine whether all parties are above the minimal threshold and if not, what can be done to move parties closer to the threshold within the limits of the exchange 

Chevron And The Principle Of Minimally

Fair Benefit

Practical And TheoreticalConsiderations For business enterprises

Practical and TheoreticalConsiderations

For Business Enterprises

1. Make transparent the potential need to engage in assistance

2. Specify the limit on resources for assistance before that assistance is offered

3. Shift from thinking in terms of balancing needs to prioritizing needs

4. Locate managerial responsibility within a broader framework of social responsibility

Global Compact for Assistance:1,500 Multinationals Participating

• In general, corporations do pay attention to key stakeholders in making business decisions

• Many business enterprises engage in a number of philanthropic activities and corporate social responsibility programs

• The point is not necessarily to exhort business to do more by way of providing assistance

Managerial Issue

Is there a way to think about the provision of assistance that allows corporations to decide when heeding certain calls is appropriate and when heeding certain calls is not, from the perspective of respecting the fundamental purpose of the business enterprise?

Need A Broader Framework

• Corporations will continue to face the need to make decisions regarding aid:– Constantly changing circumstances– Continued calls upon them to do this

• As such, there is a need for a broad framework according to which business enterprises can decide whether or not it is appropriate to heed a given call

Summary

• The principles of rescue and fairness justify corporate social responsibility in special circumstances:

– With the current threats to global order, there are widespread demands for corporations that operate in developing economics to do more to meet the needs of people living in unrelenting poverty– to make things right

– Corporations should prioritize claims in response to requests for assistance