Csr and ethics

1. Corporate Social Responsibility

2. CSR a) EMPHASIS ON FAIRNESS b) HISTORICAL OVERVIEW c) POLITICAL CONTINUUM: stakeholder---------------------------------------------minimalist [left] [right]

3. Isn’t this what we have laws for? THE LAW IS NECESSARY BUT INSUFFICIENT a) THE LAW IS REACTIVE b) THE LAW IS SLOW c) BUSINESS IS CHANGE-ORIENTED & FASTER

4. Ethical Responsibilities Social Responsibilities Legal Responsibilities Economic Responsibilities

5. Corporate social responsibility In Context <ul><li>Community in a pre-modern, modern and postmodern world

6. Why we expect more from business and how “the game is played”</li></li></ul><li>Pre-modern TRADITIONAL ENTREPENEURIAL Power goes to those who succeed in “the jungle” Authority resides in those with legitimacy– size; wealth; longevity confers authority Ethics based on individual responsibility and programs minimized

7. Modern COMMUNITY OF RATIONAL RULES i) BUREAUCRATIC ii) SCIENTIFIC MANAGEMENT iii) RELIANCE ON "EXPERTS" iv) COMPREHENSIVE RULES Power goes to those who make the rules. Relies on expertise Authority goes to those who can enforce their rules Reach for the top Ethics are based on “fairness’ and programs based on rules

8. Postmodern COMMUNITY OF FLEETING EXCHANGES i) NEED TO INTERPRET ii) NEED TO BUILD CONSENSUS iii) LOOSE CONNECTIONS iv) SUSPICION OF AUTHORITY Power goes to those who can “make the deal” through networking and can handle uncertainty Authority goes to those who see and can sell coalitions and deals regardless of other levels of authority Ethics are situational; programs emerge to be responsive

9. CSR Models

11. The Case for the Minimalist

12. Minimalist CSR Traditional stockholders model, fundamentalism, Libertarian Friedman PREMISES -Shareholders are the st priority -Obey the laws -Private vs. Public[MINIMAL STATE]

13. Minimalist critiques of other models THEY DISTRACT FROM PROFITMOTIVE THEY ARE SOCIALISTIC "PUBLIC GOOD" IS SUSPECT

14. Self-interest Defining “Me”

15. Self-Interested CSR PREMISES GOOD MOTIVES NOT ENOUGH PROFITS & COMMUNITY CULTIVATING PHILANTHROPY REPUTATION

16. Critiques of other perspectives MINIMALIST IS TOO RIGID ALL OTHERS IGNORE PROFIT

17. Ford: “we endeavor to become a leading contributor to a more sustainable world”…”The Ford Motor Company Fund supports many local and national programs to affect change, provide for those in need, and improve quality of life.” “Are consumers, especially in North America, truly interested in and willing to pay for new technology?” http://www.ford.com/en/ourCompany/corporateCitizenship/ourLearningJourney/strategicIssuesUpdate/climateChange.htm

18. Social Contract

19. SOCIAL CONTRACT CSR PREMISES CORPORATION AS "MORALPERSON" IMPLICIT & EXPLICIT CONTRACT WITH SOCIETY WITH POWER COMES RESPONSIBILITY

20. Critique of alternate 1ST 2 MODELS FOCUS TOO MUCH ON PROFIT

21. Example LEAKY" CONDO PLAYERS LACKED A SENSE OF "IMPLICIT" CONTRACT WITH SOCIETY … developers “put a lot of money into marble countertops and fancy kitchens because that’s what sells the product. And consequently they don’t spend a lot of time thinking about how it looks [and functions] from the outside. It’s designing inside out.” http://www.myleakycondo.com/com020601.htm

22. Stakeholder Management

23. 3 STAKEHOLDER GROUPS: *PRIMARY [ECONOMIC] *SECONDARY [SOCIO POLITICAL] * TERTIARY [POWERLESS]

24. Critiques of alternatives 1ST 2 MODELS TOO PROFIT-FOCUSED -S-C MODEL IS TOO VAGUE

25. Examples CITIZENSBANK SHELL

26. STAKEHOLDER STEWARDSHIP

27. Stakeholder Stewardship PREMISES -CARING FOR TERTIARY -HELP NON-BENEFICIAL PARTIES -HOLD IN TRUST -ASPIRE TO HIGH IDEALS *ALL OF THIS PRESUPPOSES TIME & MONEY

28. Critiques of alternate -1ST 2 MODELS TOO PROFIT-FOCUSED -S-C MODEL TOO VAGUE STAKEHOLDER MODEL NOT AMBITIOUS ENOUGH

29. Example Ben and Jerrys “Ben & Jerry’s Head of Social Mission has returned from a two-week mission in Cote d’Ivoire and Mali on the subject of alleged child trafficking in West Africa” http://www.benjerry.com

30. Issues of trust and change: Minimalist Participants Investors/ stockholders Owners / managers Change Issues <ul><li>Hyper competition

31. globalization</li></ul>Trust Trust grows when performance meets expectation; Distrust if fails to meet expectation

32. Issues of trust and change: Self Interested Model Participants Program advocates Owners / managers Change Issues <ul><li>Competition

33. Reputation enhancement</li></ul>Trust Trust grows when program advocates deliver enhanced corporate reputation; Distrust if do not

34. Issues of trust and change: Social Contract Participants Those with contracts with firm Owners / managers Change Issues <ul><li>Need for flexibility

35. internationalization</li></ul>Trust Trust grows when keeps legal and social contracts over time; Distrust if do willing to violate them

36. Issues of trust and change: Stakeholder Management Participants Primary and secondary Owners / managers Change Issues <ul><li>Information access to firm increases

37. Systems open to scrutiny</li></ul>Trust Trust grows when stakeholders feel included in decision making Distrust if feel excluded

38. Issues of trust and change: Stakeholder Stewardship Participants Spokespersons for tertiary Owners / managers Change Issues <ul><li>Pressure to include tertiary

39. Worry about environment</li></ul>Trust Trust grows when firm willing to negotiate with spokespersons for tertiary Distrust if feel excluded

40. Modeling the context Pre modern Minimalist Self Interested Modern The social contract Postmodern Stakeholder (management and stewardship)

41. Ethical Responsibilities Social Responsibilities Legal Responsibilities Economic Responsibilities

42. CORPORATE SOCIAL RESPONSIBILITY (CSR) AND ETHICS

43. Definitions and Relationships Corporate social responsibility (CSR) is the process by which businesses negotiate their role in society In the business world, ethics is the study of morally appropriate behaviors and decisions, examining what "should be done” Although the two are linked in most firms, CSR activities are no guarantee of ethical behavior

44. Companies can engage in CSR activities even while they are acting in unethical ways. For example, Enron was a champion of community involvement, but used off-balance-sheet partnerships to bilk investors and eventually ruin the company. Companies can say one thing and do another.

45. Reasons for CSR Activities CSR activities are important to and even expected by the public And they are easily monitored worldwide CSR activities help organizations hire and retain the people they want CSR activities contribute to business performance

46. Corporate Social Responsibility Continuum Do more than required; e.g. engage in philanthropic giving Integrate social objectives and business goals Fight social responsibility initiatives Maximize firm’s profits to the exclusion of all else Balance profits and social objectives Do what it takes to make a profit; skirt the law; fly below social radar Lead the industry and other businesses with best practices Comply; do what is legally required Articulate social value objectives

47. CSR are Grounded by Opposing Objectives (Maximize Profits to Balance Profits with Social Responsibility) and so Activities Range Widely Do what it takes to make a profit; skirt the law; fly below social radar Fight CSR initiatives Comply with legal requirements Do more than legally required, e.g., philanthropy Articulate social (CSR) objectives Integrate social objectives and business goals Lead the industry on social objectives

48. Businesses CSR Activities Philanthropy give money or time or in kind to charity Integrative philanthropy—select beneficiaries aligned with company interests Philanthropy will not enhance corporate reputation if a company fails to live up to its philanthropic image or if consumers perceive philanthropy to be manipulative These may be activities you’ll see in your firms. Integrative philanthropy—Avon Products Inc. “The company for women" donates funds to breast cancer research. In Seattle, FareStart partners with Consolidated Restaurants; Pharma companies align with Operation Smile, AIDs donations.

49. Integrate CSR Globally Incorporate values to make it part of an articulated belief system Act worldwide on those values Cause-related marketing Cause-based cross sector partnerships Engage with stakeholders Primary stakeholders Secondary stakeholders

50. Incorporate values in belief statements: McDonald's: “We believe that being a good corporate citizen means treating people with fairness and integrity, sharing our success with the communities in which we do business, and being a leader on issues that affect customers”(McDonald's Corporation, 1992). Act on values: Starbucks put resources into integrating values. Primary stakeholders are internal to the company such as owners, employees, labor unions, customers and suppliers (Clarkson, 1995). Secondary stakeholders operate external to the firm; they could be nongovernmental organizations, social activists, community groups, and governmental organizations. REI definition of social responsibility: “Achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment” includes ethics, community investments, corporate governance, environmental health and safety practices, sustainability, sourcing practices. Matt Hyde, Sr VP of Merchandizing and Logistics at REI said the only way we can be CSR is if we pursue commercial success—it’s a given that you have to make money (November 1, 2004).

51. Business Ethics Development The cultural context influences organizational ethics Top managers also influence ethics The combined influence of culture and top management influence organizational ethics and ethical behaviors

52. If national practice is bribery, then most companies in that nation will use bribery. If a top manager is unethical, then he/she sets a lead that others follow. When managers behave unethically, employees can be demoralized, lose faith in the organization, and even leave their jobs. Others might follow-the-leader themselves and engage in unethical behaviors. High demands for performance and profitability led Enron employees first to cut ethical corners and finally to break laws as well. According to one Enron controller, the logic was as follows: "If your boss was [fudging] and you have never worked anywhere else, you just assume that everybody fudges earnings. Once you get there and you realized how it was, do you stand up and lose your job? It was scary. It was easy to get into 'Well, everybody else is doing it, so maybe it isn't so bad.'"

53. The Evolving Context for Ethics From domestic where ethics are shared To international where ethics are not shared when companies: Make assumptions that ethics are the same Ethical absolutism—they adapt to us Ethical relativism—we adapt to them To global which requires an integrative approach to ethics

54. Most firms are developed within a nation, borrowing their ethical practices from them. When they go international, they face new ethical challenges. NIKE Inc. was "founded on a handshake" with implicit belief that "business with all of our partners [would be] based on trust, teamwork, honesty and mutual respect. We expect all of our business partners to operate on the same principles." Nike discovered that their overseas subcontractors were not treating workers with respect, and this suggests that Nike's view of these principles and what they meant did not result in desired subcontractor behavior.

55. Emergence of a Global Business Ethic Growing sense that responsibility for righting social wrongs belongs to all organizations Growing business need for integrative mechanisms such as ethics Ethics reduce operating uncertainties Voluntary guidelines avoid government impositions Ethical conduct is needed in an increasingly interdependent world—everyone in the same game Companies wish to avoid problems and/or be good public citizens Create a cohesive ethical program that meets multiple and sometimes conflicting demands.

56. Ways Companies Integrate Ethics Top management commitment in word and deed Company codes of ethics Supply chain codes Develop, monitor, enforce ethical behavior Seek external assistance

57. Fundamental honesty and adherence to the law. Product safety and quality, workplace health and safety precautions Conflicts of interest Employment practices Fair practices in selling and marketing products or services Financial reporting Supplier relationships Pricing, billing, and contracting Trading in securities and/or use of insider information Payments to obtain business Acquiring and using information about others Security and political activities Environmental protection Intellectual property or use of proprietary information (Business Roundtable, 1988).

58. External Assistance with Ethics Industry or professional codes Certification programs, e.g., ISO 9000 Adopt/follow globalcodes Caux Round Table Principles Accountants have a professional code of ethics that companies rely on.

59. Reasons for Businesses to Engage in Development of a Global Code of Business Ethics Create the same opportunity for all businesses if there are common rules Level the playing field They are needed in an interconnected world They reduce operating uncertainties If businesses don’t collaborate, they may not like what others develop

60. A. Maintaining or creating the opportunity for business activities. b. All firms should be operating according to the same principles; this produces the "level playing field" upon which many organizational leaders prefer to play. c. Ethical codes are needed and are possible in a world that is interdependent on many other dimensions of business activities. d. They reduce operating uncertainties and, e. Growing public interest in a global code of ethics suggests that if businesses don't develop such codes, they will be developed by other bodies that may be unfavorable to business interests.

61. Four Challenges to a Global Ethic Global rules emerge from negotiations and will reflect values of the strong Global rules may be viewed as an end rather than a beginning Rules can depress innovation and creativity Rules are static but globalization is dynamic Global rules are likely to emerge from a negotiation process; they are unlikely to reflect values and habits consistent for all cultures. To the extent that these rules are developed by firms from the Westernized countries, they may not incorporate concerns for much of the world. Second, global ethics may be viewed as an end point rather than a beginning point for developing global ethics. Organizations may hide behind global codes, claiming that the absence of rules means that all behaviors are acceptable as conditions change. Organizations may/will find loopholes then use the rules in defense. A global code of ethics also may serve to depress innovation, since some will hesitate to act in the absence of clear guidelines. However, a static set of guidelines is unlikely to keep pace with globalization.

62. Individual Ethics In Organizations Ethics An individual’s personal beliefs regarding what is right or wrong or good or bad. Ethical Behavior Behavior that is acceptable in the eye of the beholder. However, it also refers to behavior that conforms to generally accepted social norms. Examples of Unethical Behavior “Borrowing” office supplies for personal use. “Surfing the Net” on company time.

63. Determinants of Individual Ethics Family Influences SituationalFactors Values andMorals Experiences PeerInfluences Individual Ethics

64. Organizational Ethics Organizational Ethics moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and people outside the organization

65. Managing Ethical Behavior Begins with top management which establishes the organization’s culture and defines what will and will not be acceptable behavior. Includes training on how to handle different ethical dilemmas. Developing a code of ethics. A written statement of the values and ethical standards that guide the firm’s actions. Managing Ethics in Organizations

66. Social Responsibility and Organizations Social Responsibility The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions. Areas of Social Responsibility Stakeholders: customers, employees, and investors. The natural environment: environmentally sensitive products, recycling, and public safety. The general social welfare: charitable contributions, and support for social issues such as child labor and human rights.

67. Arguments For and AgainstSocial Responsibility

68. Highest Degree of Social Responsibility Proactive Stance Accommodative Stance Defensive Stance Obstructionist Stance Lowest Degree of Social Responsibility Approaches to Social Responsibility Source: Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permission.

69. Managing Social Responsibility:Formal Organizational Dimensions Legal Compliance Extent to which the organization conforms to local, state, federal, and international laws. Ethical Compliance Extent to which members of the organization follow basic ethical/legal standards of behavior. Philanthropic Giving Awarding of funds or gifts to charities or other social programs.

70. Managing Social Responsibility:Informal Organizational Dimensions Organizational Leadership and Culture Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt. Whistle Blowing The organizational response to the disclosure by an employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

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