Framing Business Ethics

8/16/2019 Framing Business Ethics

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Crane and Matten

Business Ethics (3rd Edition)

Chapter 2


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Framing Business Ethics:Corporate Responsibility, ta!eholders, and Citi"enship

#ecture 2


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$%er%ie&

' nalyse the notion o responsibility or

corporations*

' +istinguish the %arious concepts o CR*

' resent the sta!eholder theory o the irm*

' $utline the concept o corporate accountability*

' Critically e-amine the notion o corporate

citi"enship*' +iscuss implications o these . mostly /0born .

concepts or dierent regions


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1o&ards a rame&or! or business

ethics

hat is a corporation


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4ey eatures o a corporation

' corporation is essentially deined in terms

o legal status and the ownership of assets

' Corporations are typically regarded as

5artiicial persons6 in the eyes o the la&' Corporations are notionally 5o&ned6 by

shareholders, but e-ist independently o them

' Managers and directors ha%e a 5iduciary6responsibility to protect the in%estment o

shareholders


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Can a corporation be morally

responsible or its actions

' E%idence to suggest that legal designation o acorporation ma!es it unable to be anything butsel0interested (Ba!an 2


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Corporate ocial Responsibility


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hy do corporations ha%e social

responsibilities

' Business reasons (5enlightened sel0interest6) . E-tra and@or more satisied customers

. Employees may be more attracted@committed

. Forestall legislation . #ong0term in%estment &hich beneits corporation

' Moral reasons: . Corporations cause social problems

. Corporations should use their po&er responsibly . ll corporate acti%ities ha%e some social impacts

. Corporations rely on the contribution o a &ide set osta!eholders in society, not Aust shareholders


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hat is the nature o corporate social

responsibilities

Corporate social responsibility includes the

economic, legal, ethical, and philanthropic

e-pectations placed on organi"ations by

society at a gi%en point in time(Carroll and Buchholt" 2)


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Carroll6s our0part model o corporate

social responsibility

Philanthropic

Responsibilities

Ethical

Responsibilities

Legal

Responsibilities

Economic

Responsibilities

+esired by society

Reuired by society

E-pected by society

Reuired by society

ource: Carroll (99)


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CR in an international conte-t

' CR strong in /? =nluence else&here is more recent?

1his is partly e-plained by explicit %s? implicit CR

' Regional dierences e-ist &ith respect to all CR le%els:

. Economic responsibility' Focus in / on shareholders* France has e-tensi%e responsibility or

employees* =ndia has tradition o in%estment in the local community

. Legal responsibility' tate seen in Europe as !ey enorcer o rules* else&here go%ernment seen

&ith more scepticism (e?g? corrupt, interering &ith liberty)

. Ethical r esponsibility' ide range o local ethical %alues preerences: e-pectations %ary

. Philanthropic responsibility' Europe tends to compel gi%ing %ia legal rame&or!* else&here (e?g?, /,

=ndia, China), companies are e-pected to share their &ealth?


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$utcomes o CR: corporate social

perormance

' $utcomes delineated in three concrete areas:

. ocial policies

. ocial programmes

. ocial impacts


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ta!eholder theory o the irm


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' 1heory de%eloped by Ed&ard Freeman (9D>)

' stakeholder o an organi"ation is: . any group or indi%idual &ho can aect, or is aected

by, the achie%ement o the organi"ation6s obAecti%es(Freeman 9D>:>)

' More precise deinition o 5aects6 and 5aectedby6 (E%an and Freeman 93)

. Principle of corporate rights 0 the corporation hasthe obligation not to %iolate the rights o others

. Principle of corporate effect . companies areresponsible or the eects o their actions on others


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ta!eholder theory o the irm:1raditional management model

Firm

Shareholders

EmployeesSuppliers

Customers


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Firm

Shareholders

EmployeesSuppliers

Customers

Civil

society

CompetitorsGovernmen

t


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ta!eholder theory o the irm: net&or! model

Firm

Shareholders

Supplier

stakeholder

1

Suppliers

Customers

Civil society

CompetitorsGovernment

Employees

Civil society

stakeholder

2

Civil society

stakeholder

1

Employee

stakeholder

2

Employee

stakeholder

1

Customer

stakeholder

1

Customer

stakeholder3


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hy sta!eholders matter

' Milton Friedman . businesses should only be

run in the interests o their o&ners

' Freeman 0 others ha%e a legitimate claim on the

corporation . #egal perspecti%e

' 5ta!e6 in corporation already protected legally in some &ay

(e?g? legally binding contracts)

. Economic perspecti%e' E-ternalities . outside contractual relationships

' gency problem . short term interests o 5o&ners6 %s? long

term interests o managers, employees, customers etc?


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ne& role or management

' ccording to Freeman, this broader %ie& o

responsibility to&ards multiple sta!eholders

assigns a ne& role to management?

' Rather than simply being agents oshareholders, management has to ta!e into

account the rights and interests o all

legitimate sta!eholders:

. Stakeholder democracy Stakeholder democracy

. Corporate governanceCorporate governance


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ta!eholder thin!ing in an

international conte-t

' $ne could argue that although the

terminology o sta!eholder theory is

relati%ely ne& in places li!e Europe or sia,

the general principles ha%e actually been practised or some time:

. German super%isory board includes employee

representati%es

. 54eiretsu6 system in Hapan (Chaebol in 4orea), anet&or! o ban!s, manuacturers, suppliers and

ser%ice pro%iders


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+ierent orms o sta!eholder theory

' +onaldson reston (9I):

. Normative stakeholder theory: attempts to

pro%ide a reason &hy corporations should ta!e

into account sta!eholder interests . Descriptive stakeholder theory: attempts to

ascertain &hether (and ho&) corporations actually

do ta!e into account sta!eholder interests

. Instrumental stakeholder theory: attempts toans&er the uestion o &hether it is beneficial for

the corporation to ta!e into account sta!eholder

interests


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Corporate accountability

1he irm as a 5political6 actor


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Corporate accountability

' Corporate accountability reers to &hether

a corporation is ans&erable in some &ay or

the conseuences o its actions

' Firms ha%e begun to ta!e on the role o5political6 actors . ta!en up many o the

unctions pre%iously underta!en by

go%ernment because:

. Go%ernmental ailure

. =ncreasing po&er and inluence o corporations


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Reasons or the political role o the irm

' Go%ernment ailure . Ris! society thesis

' Rise o 5subpolitics6

' 5$rgani"ed irresponsibility6

' Corporate po&er on the rise . #iberali"ation and deregulation results in more po&er

and choice or pri%ate actors

. ri%ati"ation o 5public6 ser%ices

. Responsible or employment decisions

. Globali"ation

. Go%ernments increasingly encourage sel0regulation


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Corporate citi"enship


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+eining corporate citi"enship: three

perspecti%es

' limited vie! of CC

. this essentially euates CC &ith corporate

philanthropy

' n e"uivalent vie! of CC . this essentially euates CC &ith CR

' n e#tended vie! of CC

. this ac!no&ledges the e-tended political role o

the corporation in society


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Commitments to corporate

citi"enship

Oil & gas,France

ining,

!ustralia

"anking &

#inancialservices, $S!

So#t%are, $S!

Company Source

BHP

Billiton

Microsoft

Toyota

Citibank

CC statement emphasis added'(ndustry &

origin

Sustaina)ility

*eport, 2++

- .he Company/s community investment programs should create sustaina)le,

long0term value #or our host communities and demonstrate the Company/s

citizenship .he critical uestion in regard to our success is %hether %e have

managed to leave a lasting positive legacy in the communities %here %e operate

2++ Citi4enship

*eport

5e de#ine citizenship as the positive impact that Citi has on society and the

environment through its core )usiness activities, philanthropy, diversity e##orts,volunteerism and pu)lic policy engagement, as %ell as the philanthropic initiatives

undertaken )y the Citi Foundation

CS* *eport,2++

Sustaina)ility

*eport, 2++

.otal is committed to contri)uting to the sustaina)le development o# hostcommunities around the %orld (n addition to )eing a normal part o# good

corporate citizenship, this policy #osters good relationships %ith neigh)ors and

greater acceptance o# our operations

Total

!utomo)iles,

6apan

Citi4enship

*eport 2++7

.he Corporate Citizenship Division %as organi4ed in 6anuary 2++8 as a

speciali4ed division to rein#orce corporate social contri)ution activities and

integrate corporate social contri)ution #unctions that had )een per#ormed )y

multiple divisions

icroso#t/s endorsement o# the $9 Glo)al Compact signi#ies that %e are

committed to aligning our )usiness operations and strategies %ith 1+ esta)lished

principles :-;


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1hree %ie&s o corporate citi"enship

*eciprocity, ie >putting

something )ack/


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n e-tended %ie& o CC

ocial role o the corporation in go%erning citi"enship

ocial rights corporation as pro%ider@ignorer

Ci%il rights corporation as dis0@enabler

olitical rights corporation as channel@bloc!age

Corporate citi$enship


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ummary

' Business ethics is related to the social role o thecorporation

' Conining corporations to commercial acti%itiestoo limited

' +ierent perspecti%es and their rele%ance inEuropean conte-t . CR . ta!eholder theory

. Corporate accountability' Eects o globali"ation on role o corporation' Corporate citi"enship is latest concept in the ield

Documents

Framing Business Ethics