Lesson Five: Corporate Ethics in the 21st Century Lesson Four discussed some of the most prominent behavioral theories concerning leadership as well as their ethical implications. Lesson Six will introduce some modern concepts of ethics for businesses, including socially responsible investing, corporate social responsibility, and environmentalism. With changes in public perception over time, the expectations of businesses operating within American society has changed considerably throughout the history of our nation. The classical view on the ethical role of businesses was predicated on the principle of profit maximization: the idea that the only purpose of a business is to maximize the amount of money generated for its owners. Furthermore, anything that runs counter to or distracts from this prerogative is antithetical to the essence of a business. The obligation to obey the law is implied based on the fact that businesses which violate laws typically suffer losses in the form of fines or even forced closure; so compliance with the law is a behavior that is compatible with, and in fact necessary to, the principle of profit maximization. However, things have changed. Businesses have grown to sizes and degrees of influence that present substantial threats to the welfare of communities, families, the natural environment, etc. and society no longer sees businesses as being responsible only to shareholders (McWilliams & Siegel, 2001). This lesson will discuss the ways in which changes in public perception have reshaped the ethical obligations of businesses in the 21st century. Socially Responsible Investing (SRI) One of the biggest ways in which public perception has changed business and industry is through socially responsible investment (SRI) funds. In the business startup world, some investors with strong ethical compasses have chosen to restrict the types of businesses in which they are willing to invest with their capital (Sparkes & Cowton, 2004). Some of these restricted categories are more or less unanimously seen as immoral industries. Others, however, are more controversial. · Alcohol: Obviously not all people abuse alcohol, and not all people view producers of alcohol as immoral. However, many SRI funds exclude alcohol companies because of the tragic effects that alcohol has in contexts such as drunk driving, etc. · Tobacco: Virtually the same arguments that apply to alcohol apply to tobacco, except that tobacco is vilified for its unmistakable role in cancers, emphysema, and early mortality. Thus, SRI funds typically avoid tobacco companies as well. · Gambling: Like alcohol, not all people have gambling problems or see any ethical issue with the gambling industry. However, we do know that gambling is another addictive behavior, and for this reason casinos are typically excluded from SRI funds. · Weapons: Firearms are a heated subject with all of the current political debate surrounding Second Amendment rights and the best ways ...

1. Lesson Five: Corporate Ethics in the 21st Century
Lesson Four discussed some of the most prominent behavioral
theories concerning leadership as well as their ethical
implications. Lesson Six will introduce some modern concepts
of ethics for businesses, including socially responsible
investing, corporate social responsibility, and
environmentalism.
With changes in public perception over time, the expectations
of businesses operating within American society has changed
considerably throughout the history of our nation. The classical
view on the ethical role of businesses was predicated on the
principle of profit maximization: the idea that the only purpose
of a business is to maximize the amount of money generated for
its owners. Furthermore, anything that runs counter to or
distracts from this prerogative is antithetical to the essence of a
business. The obligation to obey the law is implied based on the
fact that businesses which violate laws typically suffer losses in
the form of fines or even forced closure; so compliance with the
law is a behavior that is compatible with, and in fact necessary
to, the principle of profit maximization.
However, things have changed. Businesses have grown to sizes
and degrees of influence that present substantial threats to the
welfare of communities, families, the natural environment, etc.
and society no longer sees businesses as being responsible only
to shareholders (McWilliams & Siegel, 2001). This lesson will
discuss the ways in which changes in public perception have
reshaped the ethical obligations of businesses in the 21st
century.
Socially Responsible Investing (SRI)

2. One of the biggest ways in which public perception has changed
business and industry is through socially responsible investment
(SRI) funds. In the business startup world, some investors with
strong ethical compasses have chosen to restrict the types of
businesses in which they are willing to invest with their capital
(Sparkes & Cowton, 2004). Some of these restricted categories
are more or less unanimously seen as immoral industries.
Others, however, are more controversial.
· Alcohol: Obviously not all people abuse alcohol, and not all
people view producers of alcohol as immoral. However, many
SRI funds exclude alcohol companies because of the tragic
effects that alcohol has in contexts such as drunk driving, etc.
· Tobacco: Virtually the same arguments that apply to alcohol
apply to tobacco, except that tobacco is vilified for its
unmistakable role in cancers, emphysema, and early mortality.
Thus, SRI funds typically avoid tobacco companies as well.
· Gambling: Like alcohol, not all people have gambling
problems or see any ethical issue with the gambling industry.
However, we do know that gambling is another addictive
behavior, and for this reason casinos are typically excluded
from SRI funds.
· Weapons: Firearms are a heated subject with all of the current
political debate surrounding Second Amendment rights and the
best ways to address gun violence in America. However,
because of the enormously large rates of violent gun-related
crime in the United States (compared to other civilized nations),
weapons are a non-sequitur for SRI funds.
· Nuclear Power: This is perhaps the most controversial
category of all. The intentions of nuclear energy companies
don’t inevitably entail harm to anyone, and in fact these
companies only seek to provide sustainable, environmentally-
friendly power to the societies they serve. However, given the
tremendous risk that nuclear power plants carry---realized in
places such as Chernobyl and Fukushima---SRI funds have
generally blacklisted these companies.

3. · Illegalities and Ill-Repute: Above and beyond those categories
already discussed, it goes without saying that any companies
which are found guilty of illegal conduct such as collusion,
price fixing, fraud, etc., or disreputable behavior such poor
product safety, unfair labor practices, environmental pollution,
etc. will be excluded from SRI fund eligibility, notwithstanding
the industries in which they operate.
Evolution of Corporate Social Responsibility
Aside from business investors, businesses themselves have also
seen an evolution of the expectations that societies have for
their own conduct, and more recent views pressure businesses to
consider more than just their shareholders in making decisions.
· Classical View: As discussed supra, the historical view of
businesses was that their only obligation was to make as much
as much money as possible, pursuant to the principle of profit
maximization. Arguments in favor of the classical view include
that social responsibility dilutes a business’s purpose, that it is
unreasonably expensive, and that businesses lack the skills and
accountability to address societal concerns (Davis, 1973).
· Modern View: The more modern view of businesses is that,
because they benefit from the societies in which they operate,
they have an affirmative obligation to avoid any behaviors
which would degrade the quality of those communities or the
people that comprise them. Arguments in favor of the modern
view include the importance of public expectations, the benefit
of long-term profits if businesses help to sustain the
communities from which they profit, the public image value of
businesses that act in socially responsible ways, and the fact
that self-regulation of social maintenance would mitigate the
need for burdensome governmental oversight.
There a variety of ways in which businesses may pursue a
course of social responsibility. Philanthropy, donation of money

4. or resources, volunteering, sponsorships for public benefit, and
other strategies may be adopted. Additionally, a business may
seek to measure its level of social responsibility by a number of
different metrics. For example, a business might look to
industry standards and try to meet or exceed the efforts of its
competitors. Another way would be to look to public opinion
and try to address the most urgent concerns of the community in
a responsive fashion. Finally, a business might decide to be
proactive, and seek out new and uncharted ways of contributing
to societal welfare, blazing a trail and going above and beyond
the scope of current precedent.
Environmentalism
In addition to social welfare, another subject that has been
heavily on the radar in terms of business responsibility is
environmental consciousness. Over 95% of scientists today
agree that human activity and the burning of fossil fuels is
affecting the global climate, and that these effects will be the
biggest challenges of the new millennia. Public perception is
slowly shifting away from the charlatans who denounced global
warming as a hoax for years, and in the direction of reasoned
assessment of our actual circumstances. With that in mind, there
has been an increased pressure on businesses to do their part in
conserving natural resources and reducing carbon footprint, in
the interest of fighting back against this runaway greenhouse
problem (Dummett, 2006). From this, several different positions
in terms of commitment to environmentalism have emerged,
ranging in their degree of sensitivity.
· The Legal Approach: The legal approach is the least-sensitive
environmental approach for businesses, and as the name
implies, this is a paradigm under which business obey the laws
pertaining to environmental preservation (e.g. the Clear Air Act,
the Clean Water Act, EPA regulations, etc.) and nothing more.
· Market Approach: The market approach is when businesses

5. base their degree of environmental sensitivity on the level of
concern of their customers. If a business’s client base has little
regard for environmental concerns, then the business will follow
suit. However, as a contrasting example, a significant portion of
hotel guests have been found to be moderately concerned about
man’s impact on the environment, and so many hotels are
actively looking for ways to augment their environmental
conservation programs in hopes of appeasing their markets
(Wahba, 2008).
· Stakeholder Approach: The stakeholder approach goes a step
further than the market approach. In addition to considering the
views of customers, businesses adopting the stakeholder
approach will also look to the concern of other parties involved
in their operations, including employees, suppliers, and the
community at large.
· Activist Approach: The final and most-sensitive environmental
position is called the activist approach, and this is where
businesses actively look for ways to conserve resources, reduce
carbon emission, and improve the environment notwithstanding
the views of stakeholders or impacts on the bottom line, but
instead because it is the right thing to do.
Conclusion
In this lesson, we discussed some modern concepts of ethics for
businesses, including socially responsible investing, corporate
social responsibility, and environmentalism. In Lesson Six, we
will discuss some of the types of power wielded by leaders, as
well as the dichotomy between transactional and
transformational leadership.
References
Davis, K. (1973). The case for and against business assumption
of social responsibilities. Academy of Management Journal,
16(2), 312-322.

6. Dummett, K. (2006). Drivers for corporate environmental
responsibility (CER).Environment, Development and
Sustainability, 8(3), 375-389.
McWilliams, A., & Siegel, D. (2001). Corporate social
responsibility: A theory of the firm perspective. Academy of
Management Review, 26(1), 117-127.
Sparkes, R., & Cowton, C. J. (2004). The maturing of socially
responsible investment: A review of the developing link with
corporate social responsibility. Journal of Business Ethics,
52(1), 45-57.
Wahba, H. (2008). Does the market value corporate
environmental responsibility? An empirical examination.
Corporate Social Responsibility and Environmental
Management, 15(2), 89-99.
Lesson Five: Corporate Ethics in the 21st Century
Lesson Four discussed some of the most prominent behavioral
theories concerning leadership as
well as their ethical implications. Lesson Six will introduce
some modern concepts of ethics for
businesse
s, including socially responsible investing, corporate social
responsibility, and
environmentalism.
With changes in public perception over time, the expectations

7. of businesses operating within
American society has changed considerably throughout the hist
ory of our nation. The classical
view on the ethical role of businesses was predicated on the
principle of profit maximization: the
idea that the
only
purpose of a business is to maximize the amount of money
generated for its
owners. Furthermore, anything
that runs counter to or distracts from this prerogative is
antithetical to the essence of a business. The obligation to obey
the law is implied based on the
fact that businesses which violate laws typically suffer losses in
the form of fines or even forced
closure; so compliance with the law is a behavior that is
compatible with, and in fact necessary to,
the principle of profit maximization.
However, things have changed. Businesses have grown to sizes
and degrees of influence that
present substantial thr
eats to the welfare of communities, families, the natural
environment, etc.
and society no longer sees businesses as being responsible only
to shareholders (McWilliams &
Siegel, 2001). This lesson will discuss the ways in which
changes in public perception
have
reshaped the ethical obligations of businesses in the 21st
century.

8. Socially Responsible Investing (SRI)
One of the biggest ways in which public perception has changed
business and industry is through
socially responsible investment (SRI) funds.
In the business startup world, some investors with
strong ethical compasses have chosen to restrict the types of
businesses in which they are willing
to invest with their capital (Sparkes & Cowton, 2004). Some of
these restricted categories are
more or le
ss unanimously seen as immoral industries. Others, however,
are more controversial.
·
Alcohol:
Obviously not all people abuse alcohol, and not all people view
producers of
alcohol as immoral. However, many SRI funds exclude alcohol
companies because of
the
tragic effects that alcohol has in contexts such as drunk driving,
etc.
·

9. Tobacco:
Virtually the same arguments that apply to alcohol apply to
tobacco,
except that tobacco is vilified for its unmistakable role in
cancers, emphysema, and
early mortality. Th
us, SRI funds typically avoid tobacco companies as well.
·
Gambling:
Like alcohol, not all people have gambling problems or see any
ethical
issue with the gambling industry. However, we do know that
gambling is another
addictive behavior, and for this reason
casinos are typically excluded from SRI funds.
·
Weapons:
Firearms are a heated subject with all of the current political
debate
surrounding Second Amendment rights and the best ways to
address gun violence in
America. However, because of the enormously large rates of
violent gun
-
related
crime in the United State
s (compared to other civilized nations), weapons are a non

10. -
sequitur for SRI funds.
·
Nuclear Power:
This is perhaps the most controversial category of all. The
intentions of nuclear energy companies don’t inevitably entail
harm to anyone, and
in fact these companies only seek to provide sustainable,
environmentally
-
friendly
power to the societies they se
rve. However, given the tremendous risk that nuclear
Lesson Five: Corporate Ethics in the 21st Century
Lesson Four discussed some of the most prominent behavioral
theories concerning leadership as
well as their ethical implications. Lesson Six will introduce
some modern concepts of ethics for
businesses, including socially responsible investing, corporate
social responsibility, and
environmentalism.
With changes in public perception over time, the expectations
of businesses operating within
American society has changed considerably throughout the
history of our nation. The classical
view on the ethical role of businesses was predicated on the
principle of profit maximization: the
idea that the only purpose of a business is to maximize the
amount of money generated for its
owners. Furthermore, anything that runs counter to or distracts
from this prerogative is

11. antithetical to the essence of a business. The obligation to obey
the law is implied based on the
fact that businesses which violate laws typically suffer losses in
the form of fines or even forced
closure; so compliance with the law is a behavior that is
compatible with, and in fact necessary to,
the principle of profit maximization.
However, things have changed. Businesses have grown to sizes
and degrees of influence that
present substantial threats to the welfare of communities,
families, the natural environment, etc.
and society no longer sees businesses as being responsible only
to shareholders (McWilliams &
Siegel, 2001). This lesson will discuss the ways in which
changes in public perception have
reshaped the ethical obligations of businesses in the 21st
century.
Socially Responsible Investing (SRI)
One of the biggest ways in which public perception has changed
business and industry is through
socially responsible investment (SRI) funds. In the business
startup world, some investors with
strong ethical compasses have chosen to restrict the types of
businesses in which they are willing
to invest with their capital (Sparkes & Cowton, 2004). Some of
these restricted categories are
more or less unanimously seen as immoral industries. Others,
however, are more controversial.
people view producers of
alcohol as immoral. However, many SRI funds exclude alcohol
companies because of

12. the tragic effects that alcohol has in contexts such as drunk
driving, etc.
apply to tobacco,
except that tobacco is vilified for its unmistakable role in
cancers, emphysema, and
early mortality. Thus, SRI funds typically avoid tobacco
companies as well.
problems or see any ethical
issue with the gambling industry. However, we do know that
gambling is another
addictive behavior, and for this reason casinos are typically
excluded from SRI funds.
current political debate
surrounding Second Amendment rights and the best ways to
address gun violence in
America. However, because of the enormously large rates of
violent gun-related
crime in the United States (compared to other civilized nations),
weapons are a non-
sequitur for SRI funds.
category of all. The
intentions of nuclear energy companies don’t inevitably entail
harm to anyone, and
in fact these companies only seek to provide sustainable,
environmentally-friendly
power to the societies they serve. However, given the
tremendous risk that nuclear