framing business ethics
TRANSCRIPT
-
8/16/2019 Framing Business Ethics
1/34
Crane and Matten
Business Ethics (3rd Edition)
Chapter 2
-
8/16/2019 Framing Business Ethics
2/34
Framing Business Ethics:Corporate Responsibility, ta!eholders, and Citi"enship
#ecture 2
-
8/16/2019 Framing Business Ethics
3/34
$%er%ie&
' nalyse the notion o responsibility or
corporations*
' +istinguish the %arious concepts o CR*
' resent the sta!eholder theory o the irm*
' $utline the concept o corporate accountability*
' Critically e-amine the notion o corporate
citi"enship*' +iscuss implications o these . mostly /0born .
concepts or dierent regions
-
8/16/2019 Framing Business Ethics
4/34
1o&ards a rame&or! or business
ethics
hat is a corporation
-
8/16/2019 Framing Business Ethics
5/34
4ey eatures o a corporation
' corporation is essentially deined in terms
o legal status and the ownership of assets
' Corporations are typically regarded as
5artiicial persons6 in the eyes o the la&' Corporations are notionally 5o&ned6 by
shareholders, but e-ist independently o them
' Managers and directors ha%e a 5iduciary6responsibility to protect the in%estment o
shareholders
-
8/16/2019 Framing Business Ethics
6/34
-
8/16/2019 Framing Business Ethics
7/34
Can a corporation be morally
responsible or its actions
' E%idence to suggest that legal designation o acorporation ma!es it unable to be anything butsel0interested (Ba!an 2
-
8/16/2019 Framing Business Ethics
8/34
Corporate ocial Responsibility
-
8/16/2019 Framing Business Ethics
9/34
hy do corporations ha%e social
responsibilities
' Business reasons (5enlightened sel0interest6) . E-tra and@or more satisied customers
. Employees may be more attracted@committed
. Forestall legislation . #ong0term in%estment &hich beneits corporation
' Moral reasons: . Corporations cause social problems
. Corporations should use their po&er responsibly . ll corporate acti%ities ha%e some social impacts
. Corporations rely on the contribution o a &ide set osta!eholders in society, not Aust shareholders
-
8/16/2019 Framing Business Ethics
10/34
hat is the nature o corporate social
responsibilities
Corporate social responsibility includes the
economic, legal, ethical, and philanthropic
e-pectations placed on organi"ations by
society at a gi%en point in time(Carroll and Buchholt" 2)
-
8/16/2019 Framing Business Ethics
11/34
Carroll6s our0part model o corporate
social responsibility
Philanthropic
Responsibilities
Ethical
Responsibilities
Legal
Responsibilities
Economic
Responsibilities
+esired by society
Reuired by society
E-pected by society
Reuired by society
ource: Carroll (99)
-
8/16/2019 Framing Business Ethics
12/34
CR in an international conte-t
' CR strong in /? =nluence else&here is more recent?
1his is partly e-plained by explicit %s? implicit CR
' Regional dierences e-ist &ith respect to all CR le%els:
. Economic responsibility' Focus in / on shareholders* France has e-tensi%e responsibility or
employees* =ndia has tradition o in%estment in the local community
. Legal responsibility' tate seen in Europe as !ey enorcer o rules* else&here go%ernment seen
&ith more scepticism (e?g? corrupt, interering &ith liberty)
. Ethical r esponsibility' ide range o local ethical %alues preerences: e-pectations %ary
. Philanthropic responsibility' Europe tends to compel gi%ing %ia legal rame&or!* else&here (e?g?, /,
=ndia, China), companies are e-pected to share their &ealth?
-
8/16/2019 Framing Business Ethics
13/34
-
8/16/2019 Framing Business Ethics
14/34
$utcomes o CR: corporate social
perormance
' $utcomes delineated in three concrete areas:
. ocial policies
. ocial programmes
. ocial impacts
-
8/16/2019 Framing Business Ethics
15/34
ta!eholder theory o the irm
-
8/16/2019 Framing Business Ethics
16/34
ta!eholder theory o the irm
' 1heory de%eloped by Ed&ard Freeman (9D>)
' stakeholder o an organi"ation is: . any group or indi%idual &ho can aect, or is aected
by, the achie%ement o the organi"ation6s obAecti%es(Freeman 9D>:>)
' More precise deinition o 5aects6 and 5aectedby6 (E%an and Freeman 93)
. Principle of corporate rights 0 the corporation hasthe obligation not to %iolate the rights o others
. Principle of corporate effect . companies areresponsible or the eects o their actions on others
-
8/16/2019 Framing Business Ethics
17/34
ta!eholder theory o the irm:1raditional management model
Firm
Shareholders
EmployeesSuppliers
Customers
-
8/16/2019 Framing Business Ethics
18/34
ta!eholder theory o the irm
Firm
Shareholders
EmployeesSuppliers
Customers
Civil
society
CompetitorsGovernmen
t
-
8/16/2019 Framing Business Ethics
19/34
ta!eholder theory o the irm: net&or! model
Firm
Shareholders
Supplier
stakeholder
1
Suppliers
Customers
Civil society
CompetitorsGovernment
Employees
Civil society
stakeholder
2
Civil society
stakeholder
1
Employee
stakeholder
2
Employee
stakeholder
1
Customer
stakeholder
1
Customer
stakeholder3
-
8/16/2019 Framing Business Ethics
20/34
hy sta!eholders matter
' Milton Friedman . businesses should only be
run in the interests o their o&ners
' Freeman 0 others ha%e a legitimate claim on the
corporation . #egal perspecti%e
' 5ta!e6 in corporation already protected legally in some &ay
(e?g? legally binding contracts)
. Economic perspecti%e' E-ternalities . outside contractual relationships
' gency problem . short term interests o 5o&ners6 %s? long
term interests o managers, employees, customers etc?
-
8/16/2019 Framing Business Ethics
21/34
ne& role or management
' ccording to Freeman, this broader %ie& o
responsibility to&ards multiple sta!eholders
assigns a ne& role to management?
' Rather than simply being agents oshareholders, management has to ta!e into
account the rights and interests o all
legitimate sta!eholders:
. Stakeholder democracy Stakeholder democracy
. Corporate governanceCorporate governance
-
8/16/2019 Framing Business Ethics
22/34
ta!eholder thin!ing in an
international conte-t
' $ne could argue that although the
terminology o sta!eholder theory is
relati%ely ne& in places li!e Europe or sia,
the general principles ha%e actually been practised or some time:
. German super%isory board includes employee
representati%es
. 54eiretsu6 system in Hapan (Chaebol in 4orea), anet&or! o ban!s, manuacturers, suppliers and
ser%ice pro%iders
-
8/16/2019 Framing Business Ethics
23/34
+ierent orms o sta!eholder theory
' +onaldson reston (9I):
. Normative stakeholder theory: attempts to
pro%ide a reason &hy corporations should ta!e
into account sta!eholder interests . Descriptive stakeholder theory: attempts to
ascertain &hether (and ho&) corporations actually
do ta!e into account sta!eholder interests
. Instrumental stakeholder theory: attempts toans&er the uestion o &hether it is beneficial for
the corporation to ta!e into account sta!eholder
interests
-
8/16/2019 Framing Business Ethics
24/34
Corporate accountability
1he irm as a 5political6 actor
-
8/16/2019 Framing Business Ethics
25/34
Corporate accountability
' Corporate accountability reers to &hether
a corporation is ans&erable in some &ay or
the conseuences o its actions
' Firms ha%e begun to ta!e on the role o5political6 actors . ta!en up many o the
unctions pre%iously underta!en by
go%ernment because:
. Go%ernmental ailure
. =ncreasing po&er and inluence o corporations
-
8/16/2019 Framing Business Ethics
26/34
Reasons or the political role o the irm
' Go%ernment ailure . Ris! society thesis
' Rise o 5subpolitics6
' 5$rgani"ed irresponsibility6
' Corporate po&er on the rise . #iberali"ation and deregulation results in more po&er
and choice or pri%ate actors
. ri%ati"ation o 5public6 ser%ices
. Responsible or employment decisions
. Globali"ation
. Go%ernments increasingly encourage sel0regulation
-
8/16/2019 Framing Business Ethics
27/34
-
8/16/2019 Framing Business Ethics
28/34
Corporate citi"enship
-
8/16/2019 Framing Business Ethics
29/34
+eining corporate citi"enship: three
perspecti%es
' limited vie! of CC
. this essentially euates CC &ith corporate
philanthropy
' n e"uivalent vie! of CC . this essentially euates CC &ith CR
' n e#tended vie! of CC
. this ac!no&ledges the e-tended political role o
the corporation in society
-
8/16/2019 Framing Business Ethics
30/34
Commitments to corporate
citi"enship
Oil & gas,France
ining,
!ustralia
"anking &
#inancialservices, $S!
So#t%are, $S!
Company Source
BHP
Billiton
Microsoft
Toyota
Citibank
CC statement emphasis added'(ndustry &
origin
Sustaina)ility
*eport, 2++
- .he Company/s community investment programs should create sustaina)le,
long0term value #or our host communities and demonstrate the Company/s
citizenship .he critical uestion in regard to our success is %hether %e have
managed to leave a lasting positive legacy in the communities %here %e operate
2++ Citi4enship
*eport
5e de#ine citizenship as the positive impact that Citi has on society and the
environment through its core )usiness activities, philanthropy, diversity e##orts,volunteerism and pu)lic policy engagement, as %ell as the philanthropic initiatives
undertaken )y the Citi Foundation
CS* *eport,2++
Sustaina)ility
*eport, 2++
.otal is committed to contri)uting to the sustaina)le development o# hostcommunities around the %orld (n addition to )eing a normal part o# good
corporate citizenship, this policy #osters good relationships %ith neigh)ors and
greater acceptance o# our operations
Total
!utomo)iles,
6apan
Citi4enship
*eport 2++7
.he Corporate Citizenship Division %as organi4ed in 6anuary 2++8 as a
speciali4ed division to rein#orce corporate social contri)ution activities and
integrate corporate social contri)ution #unctions that had )een per#ormed )y
multiple divisions
icroso#t/s endorsement o# the $9 Glo)al Compact signi#ies that %e are
committed to aligning our )usiness operations and strategies %ith 1+ esta)lished
principles :-;
-
8/16/2019 Framing Business Ethics
31/34
1hree %ie&s o corporate citi"enship
*eciprocity, ie >putting
something )ack/
-
8/16/2019 Framing Business Ethics
32/34
n e-tended %ie& o CC
ocial role o the corporation in go%erning citi"enship
ocial rights corporation as pro%ider@ignorer
Ci%il rights corporation as dis0@enabler
olitical rights corporation as channel@bloc!age
Corporate citi$enship
-
8/16/2019 Framing Business Ethics
33/34
-
8/16/2019 Framing Business Ethics
34/34
ummary
' Business ethics is related to the social role o thecorporation
' Conining corporations to commercial acti%itiestoo limited
' +ierent perspecti%es and their rele%ance inEuropean conte-t . CR . ta!eholder theory
. Corporate accountability' Eects o globali"ation on role o corporation' Corporate citi"enship is latest concept in the ield