This document provides an overview of a course on Business Ethics and Social Responsibility. The course objectives are to explain the nature and importance of business ethics, examine various ethical theories as they relate to firms, dimensions of corporate social responsibility, and the relationship between organizations, sustainability, and the environment. It discusses concepts like the origins of ethics in philosophy, normative and meta ethics theories, and applied ethics issues. It also covers corporate social responsibility and how organizations are part of society, the principles of CSR around sustainability, accountability, and transparency.
1. Business Ethics and
Social Responsibility
Course Tutor: Afework Getachew, PhD
Assistant Professor of Management Studies
2. Course Objectives:
By the end of this course, you will be able to:
Explain the nature and importance of business ethics
Describe the various ethical theories in relation to firms
Examine the dimensions of corporate social responsibility
Discuss the social responsibility of organizations
Identify issues concerning sustainability
Describe the issue of environmental performance audit and reporting
Explore the relationship between the environment and organizational
ethics
3. Nature and Concepts of Business
Ethics and Moral Standards
Highly visible business ethics issues influence the public’s
attitudes toward business and can destroy trust.
Ethical decisions are a part of everyday life for those who work in
organizations.
Ethics is a part of decision making at all levels of work and
management.
Business ethics is not just an isolated personal issue; policies
and informal communications for responsible conduct are
embedded in an organization’s operations.
This means that ethical or unethical conduct is the province of
everyone who works in an organizational environment.
4. The origins of ethics
a. How should we live?
b. Shall we aim at happiness or at knowledge, virtue, or the creation
of beautiful objects?
c. If we choose happiness, will it be our own or the happiness of all?
d. is it right to be dishonest in a good cause?
e. Can we justify living in extravaganza while elsewhere in the world
people are starving?
f. Is going to war justified in cases where it is likely that innocent
people will be killed?
g. Is it wrong to clone a human being or to destroy human embryos
in medical research?
h. What are our obligations, if any, to the generations of humans who
will come after us and to the nonhuman animals with whom we share
the planet?
5. The Origins of Ethics...
Ethics deals with the nature of ultimate value and the standards
by which human actions can be judged right or wrong.
The terms ethics and morality are closely related.
It is now common to refer to ethical judgments or to ethical
principles where it once would have been more accurate to speak
of moral judgments or moral principles.
These applications are an extension of the meaning of ethics. In
earlier usage, the term referred not to morality itself but to the
field of study, or branch of inquiry, that has morality as its subject
matter.
In this sense, ethics is equivalent to moral philosophy.
6. Mythical accounts
e.g. The hammurabi codes, Moses’s Ten Commandments, the
dialogue Protagoras by Plato
Natural Law.
Religious Ethical Ideals: Jewish and Christian Normative Views
“God does not require certain things because they are right; they are
right because God requires them. The task of ethics is to ascertain
what God expects us to do. “
Religion and morality are bound together
Early Ethical Ideals –a synergy
Greek, Roman, and Judeo-Christian
20th Century Analytic Ethical Concepts
The Origins of Ethics...
7. A.J. Ayer's Language, Truth and Logic (1935) and Stevenson's Ethics
and Language (1944).
Toulmin's Reason in Ethics (1948) and R.M. Hare's The Language of
Morals (1952) with Kurt Baier's The Moral Point of View (1957).
Philippa Foot's Theories of Ethics (1967).
John Rawl's A Theory of Justice (1971).
The Origins of Ethics...
8. Some years ago, sociologist Raymond Baumhart asked business
people, "What do ethics mean to you?" Among their replies were the
following:
Ethics has to do with what my feelings tell me is right or wrong.
Ethics has to do with my religious beliefs.
Being ethical is doing what the law requires.
Ethics consists of the standards of behaviour our society
accepts.
I don't know what the word means.
These replies might be typical of our own. The meaning of ethics is hard
to pin down, and the views many people have about ethics are
shaky/unstable.
The Origins of Ethics...
9. Ethics in two things:
First, “ethics refers to well-founded/well-substantiated/
standards of right and wrong that prescribe what
humans ought to do, usually in terms of rights,
obligations, benefits to society, fairness, or specific
virtues. “
Secondly, “ethics refers to the study and development of
one's ethical standards. “
The Origins of Ethics...
10. Morality refers to belief concerning right and wrong, good and
bad –belief that can include judgment, values, rules, principles
and theories.
Whereas Ethics help us to guide our actions, define our values,
and give us reasons for being a person we are.
It is a branch of philosophy which seeks to address questions
about morality; that is, about concepts such as good and bad,
right and wrong, justice, and virtue.
Relationship B/N Ethics and Morality
11. There are four main aspects related to the application of morality.
Religious morality is concerned with human beings in relationship to
supernatural being or beings.
Morality and nature are concerned with human beings in relationship
to nature.
Individual morality is concerned with human beings in relationship to
themselves
Social morality is concerned with human beings in relationship to
other human beings. This is the most important category of all.
Relationship B/N Ethics and Morality
13. Objectives of Ethics
Ethics has a number of objectives. Some of these are:
To define the greatest good of man and establish a standard for the
same
To set/establish moral standards/norms of behavior
To study human behavior: what is moral or immoral should be
assessed
To apply judgment upon human behavior based on these standards
and norms
To suggest moral behavior and prescribe recommendations about Do’s
and Don’ts
14. Nature of Ethics
The nature of ethics can be explained by the following points:
The concept of ethics is applied to human beings only as they have
freedom of choice and means of free will. They can only decide the degree
of ends they wish to pursue and the means to achieve the ends.
The study of ethics is nothing but a field of social science in which a set of
systematic knowledge about moral behaviour and human conduct is
learned.
Ethics deals with human conduct which is voluntary not forced by
circumstances or humans. So we can say that at the ground level ethics
deals with moral judgment regarding set directed human conduct.
The science of ethics is a normative science. It is a search for an ideal
litmus test of proper behaviour.
Normative science involves arriving at moral standards that regulate right
and wrong conduct.
16. Introduction
Philosophers today usually divide ethical theories
into the following general subject areas:
Meta-ethics theory
Normative ethics theory
Descriptive Ethics theory and
Applied ethics.
17. Meta ethics Theory
Meta-ethics investigates where our ethical principles come from, and
what they mean.
It will answer questions like :-
Are they merely social inventions?
Do they involve more than expressions of our individual emotions?
Meta-ethical answers to these questions focus on the issues of universal
truths, the will of God, the nature of creation , the role of reason in
ethical judgments, and the meaning of ethical terms themselves.
e.g “All Christian Ethiopians belief that God created human being”
18. Normative ethics is concerned with the principles by which we
ought to live.
From the time of the early Greeks, principles of explanation have been
formulated and ethical theories have been set forth. Plato expressed
the importance of these principles more than two thousand years ago.
“The highest values by which moral judgments are made are often
referred to as norms, principles, ideals, or standards.”
For example, happiness is chosen by some philosophers as the highest
value by which we should judge morality; happiness may also be
regarded as a norm, a principle, an ideal, or a standard.
Normative ethics takes on a more practical task, which is to arrive at
moral standards that regulate right and wrong conduct.
Normative Ethics Theory
19. Descriptive ethics
In descriptive ethics, we consider the actual conduct of individuals—or
personal morality— and of groups—or social morality.
e.g “In Christian Ethiopian morality ; Abortion –kiling the
embryonic child in the name of saving the life of the mother is a
sin”
Applied ethics
applied ethics involves examining specific controversial issues, such as
abortion, animal rights, environmental concerns, homosexuality, or
nuclear war.
e.g “Shall abortion be legitimate enough or not by Ethiopian
constitution”.
20. Teleological or Consequentialist Theories
Egoist Hedonism (Egoism + Hedonism).
Hedonism is derived from the Greek word ‘integral’ meaning 'pleasure.'
Hedonism is ethical doctrine that pleasure is the highest goal, and
production of pleasure is the criterion of right. It views pleasure as the
ultimate goal.
'Egoism' comes from the Greek word ego "I" and is therefore, literally
"I-ism”.
Consequently, egoistic hedonism is the doctrine that the pursuit and
production of one's own pleasure is the highest good and criterion of
right action.
It is the doctrine that each individual should pursue primarily his or her
own pleasure
21. Utilitarianism (Social Hedonism)
The central concern of utilitarianism is to ask something
like "what should I do to bring about the most happiness
to the most people?"
Utilitarianism derives from the principle of utility or
usefulness.
To put it briefly, utilitarianism is the doctrine that
argues:”That we ought to act to promote the greatest
balance of good over evil. That we ought to act to promote
the greatest balance of pleasure over pain.”
22. Deontological or Nonconsequentialism
Deontological (act oriented) ethics
The deontological approach is based on the idea that teleological
thinkers flatly deny--that actions have intrinsic moral value.
Some actions are considered inherently good (truth-telling,
keeping promises, respecting the rights of others); others are
bad (dishonesty, coercion, theft, manipulation).
“No matter how much good comes from lying, argues a
deontological thinker, the action will never be right”.
23. Ethical Egoism
According to ethical egoism, an act is right when it best promotes the
individual's long-term self-interest.
In short, to the proponents of this theory, when trying to decide that
certain code of conduct is right or wrong, each of us must look only to
our own long-term advantage.
Proponents of ethical egoism try to defend this theory based on
psychological egoism. This view holds that human beings are selfish
and cannot do anything other than pursue self-interest.
Evaluating the Moral Character Of Actions
24. Ethical Relativism
Ethical Relativism is the view that right and wrong are a function of the
moral teachings of each particular society.
This theory argues that an act is right when the social group to which
one belongs approves it and wrong when it is rejected.
This would mean that ethics is a function of group teachings, and that
the very terms 'right' and 'wrong' are nothing more than reports of what
one's society happens to value.
Evaluating the Moral Character Of Actions
25. Naturally, societies tend to differ fundamentally in their moral teachings
and moral rules. The following points can be considered as examples.
One society permits polygamy, while another regards it as criminal
One praises entrepreneurial pursuits; another may regard it as
something replete with fraudulent practices.
One society may uphold to the principles of pacifism; on the contrary,
other societies may acclaim violence or military confrontations.
Evaluating the Moral Character Of Actions
27. Introduction
CSR “analyses economic, legal, moral, social and physical aspects of
environment ”.Barnard (1938).
CSR is concerned with what is– or should be – the relationship
between global corporations, governments of countries and
individual citizens. More locally the definition is concerned with
the relationship between a corporation and the local society in
which it resides or operates.
According to the EU Commission (2002)
“...CSR is a concept whereby companies integrate social and
environmental concerns in their business operations and in their
interaction with their stakeholders on a voluntary basis.”
28. Corporations are Part of Society
Hetherington (1973: 37) states
“There is no reason to think that shareholders are willing to tolerate
an amount of corporate non-profit activity which appreciably
reduces either dividends or the market performance of the stock.”
Conversely, writing at a similar time, Dahl (1972: 18) states
“...every large corporation should be thought of as a social
enterprise; that is an entity whose existence and decisions can be
justified insofar as they serve public or social purposes.”
29. Similarly Carroll (1979), one of the early CSR theorists states that:
“business encompasses the economic, legal, ethical and
discretionary expectations that society has of organization at a
given point in time”.
More recently this was echoed by Balabanis, Phillips and Lyall (1998),
who declared that:
“in the modern commercial area, companies and their managers
are subjected to well publicised pressure to play an increasingly
active role in [the welfare of] society.”
Corporations are Part of Society
30. The Ethiopian context
One strategic business consultant Known as Yibekal wrote an
article(2015) and tried to call upon on a reporter page business firms
to strengthen CSR by denying the traditional business making in
Ethiopia .He said that:
“ Ethiopian businesses ought to focus on developing along with the
society. Driving luxury cars while society is struggling with the
harrowing forces of poverty is by no means viable. So it is not fair for
executives to take long vacations in America and Asia, whereas their
clients (consumers) could not afford a bus fare to their homes.”
DO YOU BUY THIS ARGUMENT?
Corporations are Part of Society
31. Some reflections on CSR
Profit is all that matters
Drucker (1984) had the opinion that: “business turns a social problem
into economic opportunity and economic benefit, into productive
capacity, into human competence, into well-paid jobs, and into
wealth”.
CSR is conditional
Moir (2001) is more ambivalent: “whether or not business should
undertake CSR, and the forms that responsibility should take,
depends upon the economic perspective of the firm that is
adopted”.
32. The Effects of CSR on
Organizational Activity
The utilisation of natural resources as a part of its production processes
The effects of competition between itself and other organisations in the
same market
The enrichment of a local community through the creation of
employment opportunities
Transformation of the landscape due to raw material extraction or waste
product storage
The distribution of wealth created within the firm to the owners of that
firm (via dividends) and the workers of that firm (through wages) and the
effect of this upon the welfare of individuals
And more recently the greatest concern has been with climate change
and the way in which the emission of greenhouse gases are
exacerbating this.
33. The Principles of CSR
Sustainability.
Sustainability therefore implies that society must use no more of a
resource than can be regenerated.
Measures of sustainability would consider the rate at which
resources are consumed by the organisation in relation to the
rate at which resources can be regenerated.
Unsustainable operations can be accommodated for either by
developing sustainable operations or by planning for a future
lacking in resources currently required.
34. Understandability to all parties concerned;
Relevance to the users of the information provided;
Reliability in terms of accuracy of measurement, representation of
impact and freedom from bias;
Comparability, which implies consistency, both over time and
between different organisations.
Accountability.
This concept implies a recognition that the organisation is
part of a wider societal network and has responsibilities to all
of that network rather than just to the owners of the
organisation.
The Principles of CSR
35. Transparency
Transparency, as a principle, means that the external impact of the
actions of the organisation can be ascertained from that organisation’s
reporting and pertinent facts are not disguised within that reporting.
Transparency is of particular importance to external users of such
information as these users lack the background details and knowledge
available to internal users of such information.
Transparency therefore can be seen to follow from the other two
principles and equally can be seen to be a part of the process of
recognition of responsibility on the part of the organisation for the
external effects of its actions and equally part of the process of
transferring power to external stakeholders.
The Principles of CSR
36. The prominence of CSR
Poor business behavior towards customers
Treating employees unfairly
Ignoring the environment and the consequences of
organizational action.
Nowadays..
Changing emphasis in companies
Sustainability
Recognizing CSR
Environmental issues and their effects and implications
37. The dimensions of CSR
Economic responsibility.
Social Responsibility.
Legal Responsibility.
Environmental responsibility
Philanthropic Responsibility
38. Externalizing costs
Spatial externalization
Spatial externalization describes the way in which costs can be transferred
to other entities in the current time period. Examples of such spatial
externalization include:
Environmental degradation though such things as polluted – and therefore
dead – rivers or through increased traffic imposes costs upon the local
community through reduced quality of life;
Causing pollution imposes costs upon society at large;
Waste disposal problems impose costs upon whoever is tasked with such
disposal;
Removing staff from shops imposes costs upon customers who must
queue for service;
Just in time manufacturing imposes costs upon suppliers by transferring
stockholding costs to them. In an increasingly global market then one
favorite way of externalizing costs is through transfer of those costs to a
third world country.
39. Temporal externalization
Deferring investment to a future time period and so increasing reported
value in the present.
Failing to provide for asset disposal costs in capital investment appraisal
and leaving such costs for future owners to incur;
Failure to dispose of waste material as it originates and leaving this as a
problem for the future;
Causing pollution which must then be cleaned up in the future;
Depletion of finite natural resources or failure to provide renewable
sources of raw material will cause problem for the future viability of the
organization;
Lack of research and development and product development will also
cause problems for the future viability of the organization;
Eliminating staff training may save costs in the present at the expense of
future competitiveness.
Externalizing costs
40. Discussion Questions
Consider The organization you are working in or that you
know and discuss the following points:
a) Which CSR dimension/s drive your organization?
b) Are the CSR principles being applied in your
organization?
c) Are there any costs externalised or being externalised
by the operations of your organization?
d) Do you recommend CSR to your organization? Why? Or
why not?
42. Introduction
“There is no reason to think that shareholders are willing to tolerate an
amount of corporate non-profit activity which appreciably reduces
either dividends or the market performance of the stock.”
Hetherington 1973
“....every large corporation should be thought of as a social enterprise;
that is an entity whose existence and decisions can be justified insofar
as they serve public or social purposes”.
Dahl 1972
43. The Social Contract
Recently the Social Contract has gained a new prominence as
it has been used to explain the relationship between a
company and society.
44. What is a stakeholder?
There are several definitions of stakeholder.
Those groups without whose support the organization would cease to exist.
Any group or individual who can affect or is affected by the achievement of
the organization’s objectives.
The most common groups who we consider to be stakeholders include: •
Managers• Employees• Customers• Shareholders • Suppliers.
Then there are some more generic groups who are often included:
Government
Society at large
The local community.
AND TODAY
The future.
45. Multiple stakeholding
It is normal to consider all of these stakeholder groups separately. It
should be noted however that each person will belong to several
stakeholder groups at the same time.
For example a single person might be a customer of an organization
and also an employee and a member of the local community and of
society at large.
He or she may also be a shareholder and a member of a local
environmental association and therefore concerned about the
environment. Most probably that person will also be concerned about
the future also, on their own behalf or on behalf of their children.
We can therefore see that it is often not helpful to consider each
stakeholder group in isolation and to separate their objectives. Reality
is more complex.
What is a stakeholder?...
47. Stakeholder Theory
Stakeholder theory states that all stakeholders must be considered
in the decision making process of the organization.
The theory states that there are 3 reasons why this should happen:
It is the morally and ethically correct way to behave
Doing so actually also benefits the shareholders
It reflects what actually happens in organization
48. Details of Stakeholder Theory
Clarkson (1995) suggests that a stakeholder is relevant if they have
invested something in the organisation and are therefore subject to
some risk from that organisation’s activities.
He separated these into two groups: the voluntary stakeholders, who
choose to deal with an organisation, and the involuntary stakeholders,
who do not choose to enter into – nor can they withdraw from – a
relationship with the organisation.
49. Clarkson (1995) suggests that the voluntary stakeholders include
shareholders, investors, employees, managers, customers and
suppliers and they will require some value added otherwise they can
withdraw their stake and choose not to invest in that organisation
again.
It is argued that involuntary stakeholders such as individuals,
communities, ecological environments, or future generations do not
choose to deal with the organisation and therefore may need some
form of protection may be through government legislation or
regulation. Other more specific interest groups may be relevant for
certain industries due to the nature of the industry or the specific
activities of the organisation.
50. For example utility industries have been regulated by a regulator since
privatisation and thus the regulator is a stakeholder of these
organisations.
Similarly certain industries are more environmentally, politically or
socially sensitive than others and therefore attract more attention from
these stakeholder groups, again the water or nuclear industries
provide examples here.
51. To Whom do you think that the Ethiopian
community could be the involuntary
stakeholder
52. To Whom do you think that the Ethiopian
community could be the involuntary
stakeholder
electric power corporation ?
Transport service operators?
Commercial banks?
the Water and sewerage authority?
The telecommunication corporation ?
53. Mitchell, Agle and Wood (1997) develop a framework for
identifying and ranking stakeholders in terms of their
power,
legitimacy and
urgency.
If a stakeholder is powerful, legitimate and urgent then its
needs will require immediate attention and given primacy.
Irrespective of which model is used, it is not controversial to
suggest that there are some generic stakeholder groups
that will be relevant to all organisations.
54. ? As an employee of your organization,
which of the above variables do you
think you possess of?
? As a customer of a local beer, which
of the above variables do you think
you are in possession of?
? As a shareholder in a local company,
which of the variables do you feel you
are in possession?
55. Recently the Centre for Business Performance, Cranfield University,
has set up a “Catalogue of measures” related to their Performance
Prism that contains measures of each of the “dimensions of
performance” – stakeholder satisfaction; strategies; processes;
capabilities; and stakeholder contributions.
The stakeholders identified were customer, employee, investor,
regulator & community, and suppliers and in total the catalogue
includes over 200 relevant measures.
56. Environmental Impact Reporting
Organisations which choose to report externally upon the impact of their
activities on the external environment tend to do so voluntarily. In
doing so they expect to derive some benefit from this kind of
accounting and reporting.
increased disclosure of the activities of the organisation is a reflection of
the growing power and influence of stakeholders, without any form of
legal ownership, and the recognition of this influence by the
organisation and its managers.
57. Risk Reducing
In order to fully recognise and incorporate environmental costs and
benefits into the investment analysis process the starting point needs to
be the identification of the types of costs and revenues which need to be
incorporated into the evaluation process.
Enhanced company or product image – this in itself can lead to increased
sales
Health and safety benefits
Ease of attracting investment and lowered cost of such investment
Better community relationships – this can lead to easier and quicker
approval of plans through the planning process
Improved relationship with regulators, where relevant
Improved morale among workers, leading to higher productivity, lower staff
turnover and consequently lower recruitment and training costs
General improved image and relationship with stakeholders
59. Defining sustainability
Sustainability is concerned with the effect which action taken in the
present has upon the options available in the future.
Sustainable development refers to “Development which meets the
needs of the present without compromising the ability of future
generations to meet their own needs”
sustainable development is often misinterpreted as focusing solely on
environmental issues. In reality, it is a much broader concept as
sustainable development policies encompass three general policy
areas: economic, environmental and social.
UN’s 2005 World Summit Outcome provides a Document, that refer to
the “interdependent and mutually reinforcing pillars” of
sustainable development as economic development, social
development, and environmental protection.
60. The Brundtland Report
This report is considered to be extremely important in addressing the
issue of sustainability. The report described seven strategic
imperatives for sustainable development:
Reviving growth;
Changing the quality of growth;
Meeting essential needs for jobs, food, energy, water and sanitation;
Ensuring a sustainable level of population;
Conserving and enhancing the resource base;
Reorienting technology and managing risk;
Merging environment and economics in decision-making.
61. Redefining sustainability
Societal influence, which we define as a measure of the impact that
society makes upon the corporation in terms of the social contract and
stakeholder influence;
Environmental Impact, which we define as the effect of the actions of
the corporation upon its geophysical environment;
Organizational culture, which we define as the relationship between
the corporation and its internal stakeholders, particularly employees,
and all aspects of that relationship; and
Finance, which we define in terms of an adequate return for the level
of risk undertaken. These are all necessary in order to ensure not just
sustainability but to also enable sustainable development. Moreover it
is the balance between them which is crucial.
62. Distributable sustainability
A central tenet of our argument is that corporate activity, to be sustainable,
must not simply utilise resources to give benefit to owners but must
recognise all effects upon all stakeholders and distribute these in a
manner which is acceptable to all of these – both in the present and in the
future.
This acts as a form of balanced scorecard to provide a form of evaluation for
the operation of sustainability within an organization. It concentrates upon
the 4 key aspects, namely:
Strategy
Finance
Distribution
Technological development
64. What is business Ethics
Ethics can be defined as overall fundamental principles and practices
for improving the level of wellbeing of humanity.
Business ethics is the honest, respectful and fair conduct by a business
and its representatives in all of its relations (Aras, 2006).
ethical behavior and ethical business has effects not only on
stakeholders, and shareholders but also on the entire economy.
when we act ethically in business decision-making process this will
ensure more effective and productive utilization of economic
resources.
65. a. Ethical behavior in business can be regarded as the
terms of conditions or individual or collective norms
/standards that shareholders and stakeholders would
expected to manifest while running their business.
b. effective and productive Ethical business have
appropriate Ethical behavior in all its decision–making
process.
c. A business, which does not respect ethical criteria and
fails to improve them will disrupt its integrity and unity.
66. CSR, Ethics and Corporate Behavior
Carroll (1979: 500) describes CSR in these terms: “the social
responsibility of business encompasses the economic, legal, ethical,
and discretionary expectations that society has of organizations at a
given point in time”.
After his definition, in 2002 Whetten et al. defined CSR as “societal
expectations of corporate behavior; a behavior that is alleged by a
stakeholder to be expected by society or morally required and is
therefore justifiably demanded of a business”
67. A company has to be socially responsible even though it is not a legal
obligation (Aras & Crowther 2008) – which is one of the most
important characteristics of CSR.
These provide the platform upon which social responsibility is built.
a. Corporate behaviour encompasses not only the ethical, and legal
behavior but also the social responsibility of the organizations
b. Corporate behavior has effects not only on stakeholders and
shareholders but also on the entire economy.
68. Corporate Reputation
The reputation of the corporation is often the most important factor in
gaining a competitive advantage as well as building financial and
social success.
There are many benefits claimed for being perceived as having a good
corporate reputation:
One of the main is concerned with the fact that it improves
shareholder value;
a strong corporate reputation inspires confidence in investors, which in
turn leads to a higher stock price for a company.
It brings increased customer loyalty to the products of the company.
A positive customer perception of a company extends to its products.
69. Corporate Reputation
Equally a strong corporate reputation is an influential factor for forming
partnerships and strategic alliances.
similarily a company with a solid reputation is more influential on
legislative and regulatory governmental decision-making.
Employee morale and commitment are higher at corporations with a
good corporate reputation.
At a time of a crisis a good corporate reputation can shield the
company from criticism and even blame, and can help it communicate
its own point of view more easily to audiences that are willing to listen
to its point of view.
71. The Concept of Performance
The nine categories of performance measurements are:
Quality of management;
Quality of goods and services;
Capacity to innovate;
Quality of marketing;
Ability to retain top talent;
Community and environmental responsibility;
Financial soundness;
Value as long-term investment;
Use of corporate assets.
72. Social Accounting
Social accounting first came to prominence during the 1970s when the
performance of businesses in a wider arena than the stock market,
and its value to shareholders, tended to become of increasing
concern. This concern was first expressed through a concern with
social accounting.
This can be considered to be an approach to reporting a firm’s
activities which stresses:
the need for identification of socially relevant behaviour,
the determination of those to whom the company is accountable for
its social performance and
the development of appropriate measures and reporting techniques.
73. Social Accounting..
Thus social accounting considers a wide range of aspects of
corporate performance and encompasses a recognition that
different aspects of performance are of interest to different
stakeholder groupings.
These aspects can include:
The concerns of investors
A focus upon community relations
A concern with ecology
74. Social Accounting...
Measuring performance in terms of these aspects will include, in
addition to the traditional profit based measures, such things as:
Consumer surplus
Economic rent
Environmental impact
Non-monetary values.
75. Aspects of performance
Churchman (1967) states that measurement needs the following
components:
Language to express results;
Specification of objects to which the results will apply;
Standardisation for transferability between organisations or over time;
Accuracy and control to permit evaluation.
76. The balanced score card
Kaplan and Norton(1992) identified four components of the balanced
scorecard, each of equal importance, and each having associated
goals and measures.
The four components are:
Financial perspective – how does the firm look to shareholders;
Customer perspective – how do customers perceive the firm;
Internal business perspective – what must the firm excel at;
Innovation and learning perspective – can the firm continue to
improve and create value.
77. The Environmental Audit
ISO14000 Environmental audit
The extent of compliance with regulations and possible future
regulations
The extent and effectiveness of pollution control procedures
The extent of energy usage and possibilities increasing for energy
efficiency
The extent of waste produced in the production processes and the
possibilities for reducing such waste or finding uses for the waste
necessarily produced
78. The Environmental Audit
ISO14000 Environmental audit
The extent of usage of sustainable resources and possibilities for the
development of renewable resources
The extent of usage of recycled materials and possibilities for
increasing recycling
Life cycle analysis of products and processes
The possibilities of increasing capital investment to affect these issues
The existence of or potential for environmental management
procedures to be implemented