Business Ethics

Dr. Asif Mahmood,University of Management & Technology, Lahoreasif.mahmood@umt.edu.pk

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Professional Practice

CORPORATE SOCIALRESPONSIBILITY (CSR)

Chapter 04

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WHY CORPORATE SOCIAL RESPONSIBILITY?

The pragmatic reason is that business must use its power responsibly in society or risk losing it• A firm’s managers scan the environment and are on alert to act in ways that avoid

economic harm, maintain legitimacy, and ensure a good corporate reputation. A more proactive, ethical reason for corporate social responsibility argues

that businesses, as part of society, have a responsibility to behave ethically.• This ethical perspective is more likely to support proactive corporate policies and

practices that extend beyond current legal or regulatory requirements Third reason to be socially responsible is a strategic one. The strategic

approach is more proactive and affirmative than the pragmatic approach because it asks companies to identify and acknowledge company activities that can do harm (or that can be particularly helpful)• E.g., a company that has committed itself to sustainable business practices will

adhere to its more expensive U.S. guidelines when disposing of toxic wastes in developing countries despite little in the way of local regulation or oversight.

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TYPES OF CORPORATE SOCIAL RESPONSIBILITY

Economic Responsibilities• The economic responsibilities of a business involve its

primary function of producing goods and services that consumers need and want, while making an acceptable profit.• This statement also means that some businesses simply should not

exist, because society has deemed them to be harmful no matter what their potential for profit. E.g., Kite Flying

Legal Responsibilities• The law guiding business practice can be viewed as a

fundamental precept of the free enterprise system

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TYPES OF CORPORATE SOCIAL RESPONSIBILITY

Ethical Responsibilities• Ethical responsibilities go beyond legal responsibilities to

encompass the more general responsibility to avoid harm and do what’s right. E.g., tobacco sale and advertisement to minors where no legal restriction.

Philanthropic Responsibilities• Philanthropic responsibilities center on the corporation’s

participation in activities that promote human welfare or goodwill generally through donations of time and money or products and services. E.g., Bill Gates and his wife has careated world’s largest endowment

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IS SOCIALLY RESPONSIBLE BUSINESSGOOD BUSINESS?

The Benefit of a Good Reputation• Studies have found that workers are more attracted to firms with a

reputation for social responsibility Socially Responsible Investors Reward Social Responsibility

• Socially responsible investors are those shareholders who clearly care about the financial and the social bottom line of a business.

The Cost of Illegal Conduct• For example, stock prices drop in the short term in response to

announcements of allegations of corporate crime and in response to announced penalties.

The Cost of Government Regulation• E.g., ban on Youtube

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What the Research Says about SocialResponsibility and Firm Performance