Csr & ethics
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Corporate social responsibility (CSR) refers to how businesses address social issues, while business ethics examines morally appropriate behaviors. Although related, CSR does not guarantee ethical behavior. Reasons for CSR include meeting public and stakeholder expectations, and contributing to business performance through hiring and reputation. However, CSR activities exist on a continuum from maximizing profits to leading on social issues. While a global business ethic is emerging, developing global ethics codes faces challenges around negotiation power dynamics, rules stifling innovation, and keeping pace with changing globalization.
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Csr & ethics
- 1. CORPORATE SOCIAL RESPONSIBILITY (CSR) AND ETHICS By Isha Aggarwal
- 2. Definitions and RelationshipsDefinitions 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 is no guarantee of ethical behavior
- 3. Recent Evidence of CSR InterestRecent Evidence of CSR InterestAn Internet search turns up 15,000 plus response to “corporate citizenship” Journals increasingly “rate” businesses (and NGOs) on socially responsive criteria: ◦ Best place to work ◦ Most admired ◦ Best (and worst) corporate reputation
- 4. Reasons for CSR ActivitiesReasons for CSR ActivitiesCSR 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
- 5. 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 Social responsibility initiatives Comply; do what is legally required Integrate social objectives and business goals Lead the industry and other businesses with best practices Do more than required; e.g. engage in philanthropic giving Articulate social value objectives Corporate Social Responsibility Continuum
- 6. CSR are Grounded by Opposing ObjectivesCSR are Grounded by Opposing Objectives (Maximize Profits to Balance Profits with Social(Maximize Profits to Balance Profits with Social Responsibility) and so Activities RangeWidelyResponsibility) and so Activities RangeWidely 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
- 7. Businesses CSR ActivitiesBusinesses CSR ActivitiesPhilanthropy ◦ 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
- 8. IIntegrate CSRntegrate CSR GloballyGloballyIncorporate 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
- 9. Business Ethics DevelopmentBusiness Ethics DevelopmentThe cultural context influences organizational ethics Top managers also influence ethics The combined influence of culture and top management influence organizational ethics and ethical behaviors
- 10. The Evolving Context for EthicsThe Evolving Context for EthicsFrom 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
- 11. Emergence of a Global Business EthicEmergence 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
- 12. Ways Companies Integrate EthicsWays 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
- 13. Johnson & Johnson’s CredoJohnson & Johnson’s Credo We believe our first responsibility is to the doctors, nurses and patients, To mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices.
- 14. Johnson & Johnson’s CredoJohnson & Johnson’s Credo (contd...)(contd...) Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Every one must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs.
- 15. Johnson & Johnson’s CredoJohnson & Johnson’s Credo (contd...)(contd...) Compensation must be fair and adequate, And working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.
- 16. Johnson & Johnson’s CredoJohnson & Johnson’s Credo (contd...)(contd...) We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens – support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources,
- 17. Johnson & Johnson’s CredoJohnson & Johnson’s Credo (contd...)(contd...) Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed And mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return
- 18. External Assistance with EthicsExternal Assistance with Ethics Industry or professional codes Certification programs, e.g., ISO 9000 Adopt/follow global codes ◦ Caux Round Table Principles
- 19. Reasons for Businesses to Engage inReasons for Businesses to Engage in Development of a Global Code of BusinessDevelopment of a Global Code of Business EthicsEthics 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
- 20. Four Challenges to a Global EthicFour 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
Editor's Notes
- 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. Similarly Parmalat helped many Parma people and gave $2 million to restore the sixteenth-century Correggio frescoes at Parma Cathedral. But he diverted hundreds of millions from publicly held Parmalat to family owned companies like soccer team Parma AC and Parmatour. Companies can say one thing and do another.
- Bullet 1 from Fleming, John E. (2004). Corporate citizenship revisited. AOM Newsletter, 35(1): 4. A 2002 U.S. poll conducted by the Wall Street Journal/NBC showed public esteem for business leaders dropped following reports that companies like Enron, Andersen, and others. Fifty seven percent of respondents said corporate standards and values dropped in the past 20 years compared with 38% who said they were the same. This compares to 1998 when respondents’ reports were 53–42%. They proportionately said government should regulate business, and that has occurred, for example Sarbanes-Oxley. From: Harwood, John. (2002, April 11). Public’s esteem for business falls in wake of Enron scandal. WSJ, D5. Corporate scandals in Japan (former Mitsubishi Motors executive arrested on suspicion of professional negligence re: defective truck parts); Citibank turfed from Japan for irregularities. Corporate scandals also in Europe: ABB and Barnevik pay; hold kickbacks to suppliers; also make this a worldwide phenomenon.
- On the left side of the continuum we see that the objective is to maximize firm’s (or individual) gains to the exclusion of all else (an example is Tyco whose CEO and CFO faced trail for larceny—converting $600 m of company assets to their own use); on the right is objective to balance social (CSR) and profit objectives.
- 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.
- 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).
- 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.'"
- 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.
- Create a cohesive ethical program that meets multiple and sometimes conflicting demands.
- 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).
- Accountants have a professional code of ethics that companies rely on.
- 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.
- 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.