Ethical Perspectives and Corporate Social Responsibility

ETHICAL PERSPECTIVES

UTILITARIANISMUTILITARIANISM MORAL RIGHTS MORAL RIGHTS

KANT KANT RAWLSRAWLS

CORPORATE SOCIAL RESPONSIBILTY FRIEDMAN’S VIEWFRIEDMAN’S VIEW BUSINESS ROUNDTABLE’S VIEWBUSINESS ROUNDTABLE’S VIEW NOVAK --”BUSINESS AS A CALLING”NOVAK --”BUSINESS AS A CALLING”

ETHICAL PERSPECTIVES

Ethics can provide guidance for addressing non-market Ethics can provide guidance for addressing non-market issues, such as product safety, environmental regulation issues, such as product safety, environmental regulation & employment practices& employment practices

Ethics and corporate social responsibility can be Ethics and corporate social responsibility can be alternative to and/or preempt government intervention alternative to and/or preempt government intervention & regulation& regulation

Ethics concerned with Ethics concerned with moral standards & normative moral standards & normative issuesissues (i.e., how businesses & managers (i.e., how businesses & managers ought to ought to behavebehave))

There are different ethical perspectivesThere are different ethical perspectives

1. UTILITARIANISM

Strongest influence on our way of thinking, Strongest influence on our way of thinking, e.g., e.g., social efficiency criteriasocial efficiency criteria

Weighing economic costs & benefits of Weighing economic costs & benefits of actionsactions

CriticismsCriticisms: : does not consider distribution effectsdoes not consider distribution effects ignores intrinsic rights ignores intrinsic rights does not consider values other than economicdoes not consider values other than economic

2. MORAL RIGHTS (KANT)

Includes, civil liberties (free speech), Includes, civil liberties (free speech), political rights (right to vote, political political rights (right to vote, political equality)equality)

Emphasis on freedom and Emphasis on freedom and individual & individual & moral moral rightsrights

Embedded in U.S. constitution & legislationEmbedded in U.S. constitution & legislation

RULES USED TO DERIVE MORAL RIGHTS UniversibilityUniversibility- - “would I like everyone “would I like everyone

to behave in that manner?”to behave in that manner?” ReversibilityReversibility- - “would I want that rule “would I want that rule

applied to me?”applied to me?”

CRITICISMS OF KANTIAN MORAL RIGHTS PERSPECTIVE

How does one weigh conflicting rights?How does one weigh conflicting rights? For example:For example:

““right to life”right to life” vs. vs. “right to choice“right to choice”” equal opportunityequal opportunity vs. vs. affirmative actionaffirmative action right to smokeright to smoke vs. vs. right to breathe clean airright to breathe clean air

3. THEORY OF JUSTICE(JOHN RAWLS) Similar to Kant’s moral rights perspective, Similar to Kant’s moral rights perspective,

but adds but adds comparativecomparative dimension dimension Concerned with relative standing of Concerned with relative standing of

individualsindividuals Behind “veil of ignorance” we would Behind “veil of ignorance” we would

choose an egalitarian society (Rawls choose an egalitarian society (Rawls argues)argues)

CRITICISMS OF THEORY OF JUSTICE: Ignores the role of differential rewards in Ignores the role of differential rewards in

furthering the general welfare in a capitalist furthering the general welfare in a capitalist economyeconomy

Income “leveling” might reduce incentives Income “leveling” might reduce incentives to work and innovate and be detrimental to to work and innovate and be detrimental to long term economic growth and societal long term economic growth and societal well-beingwell-being

Cases of Applied Ethics

Affirmative Action: based mainly on moral rights Affirmative Action: based mainly on moral rights and equality principles and equality principles correcting for past wrongs; correcting for past wrongs; however, does correcting past wrong create new ones however, does correcting past wrong create new ones

(“reverse discrimination”)?(“reverse discrimination”)?

Affirmative action might also be justified by Affirmative action might also be justified by utilitarian perspective --as a way to diversify utilitarian perspective --as a way to diversify workforce and gain market insights-e.g., Levi workforce and gain market insights-e.g., Levi Strauss Corp. exampleStrauss Corp. example

Cases of Applied Ethics

MicrosoftMicrosoft Anti-trust case -- did the Anti-trust case -- did the company act in violation of moral rights company act in violation of moral rights and/or utilitarian values and objectives?and/or utilitarian values and objectives?

Access to the InternetAccess to the Internet --public policy --public policy insights from applying all three ethical insights from applying all three ethical perspectivesperspectives

CORPORATE SOCIAL RESPONSIBILITY (1) Two Different Perspectives of CSR(1) Two Different Perspectives of CSR

Milton Friedman Milton Friedman The Business RoundtableThe Business Roundtable

(2) Novak --”Business as a Calling”(2) Novak --”Business as a Calling” (3) Ben & Jerry’s Case --Group 1(3) Ben & Jerry’s Case --Group 1 (4) CSR --can it serve utilitarian ends?(4) CSR --can it serve utilitarian ends? (5) PCConnection --Matt Cookson, Director (5) PCConnection --Matt Cookson, Director

of Public Affairsof Public Affairs

FRIEDMAN (CHICAGO SCHOOL) View of Corporate Social Responsibility Managers/corporations should Managers/corporations should maximize profitsmaximize profits while while

conforming to the basic rules of societyconforming to the basic rules of society Shareholders are the Shareholders are the principalsprincipals, managers are their , managers are their agentsagents

in the pursuit of profit max. and max. shareholder wealthin the pursuit of profit max. and max. shareholder wealth Profits represent the net contribution that the firm Profits represent the net contribution that the firm

makes to the social goodmakes to the social good Managers representing shareholders and profit maximizing Managers representing shareholders and profit maximizing

also act in also act in best interest of societybest interest of society Managers using corporate resources to promote social Managers using corporate resources to promote social

objectives in fact would be objectives in fact would be undemocraticundemocratic

BUSINESS ROUNDTABLE View of Corp Social Responsibility

It is a corporation’s responsibility to serve It is a corporation’s responsibility to serve the public interest, as well as private profitthe public interest, as well as private profit

Corporate stakeholdersCorporate stakeholders include not only include not only shareholdersshareholders, but also: , but also: employees, employees, communities, and society at largecommunities, and society at large

Corporation is a legal entity, creation of the Corporation is a legal entity, creation of the state, and therefore it should not be viewed state, and therefore it should not be viewed as the sole owner of “its” assetsas the sole owner of “its” assets

NOVAK --BUSINESS AS A CALLING

Private firms add to society’s well-beingPrivate firms add to society’s well-being Private corporations create wealth beyond the Private corporations create wealth beyond the

wealth that existed before it came into being wealth that existed before it came into being (similar to Friedman’s view)(similar to Friedman’s view)

(Even) the pope argues: (Even) the pope argues: “when a firm makes a “when a firm makes a profit, this means that productive factors of the profit, this means that productive factors of the earth are used to satisfy human needs and are at earth are used to satisfy human needs and are at the service of the whole society”the service of the whole society”

NOVAK’S VIEW OF MANAGERIAL ETHICS

Business corporations generate an important Business corporations generate an important form form of human communityof human community

Managers therefore have responsibility for Managers therefore have responsibility for creating creating moral communitymoral community at workplace (more in at workplace (more in line with business roundtable)line with business roundtable)

Firms and managers responsibilities include: Firms and managers responsibilities include: facilitating rewards for hard work (consistent facilitating rewards for hard work (consistent

with our merit-based society) with our merit-based society) promoting upward mobilitypromoting upward mobility

Managerial Ethics: What are managers responsible for? Adherence to the letter & intent of the lawAdherence to the letter & intent of the law Honesty and integrityHonesty and integrity Contributions to the development.of Contributions to the development.of

employees and communities employees and communities Capability of withstanding Capability of withstanding full disclosurefull disclosure of of

activities, a willingness to reveal to activities, a willingness to reveal to family/community/general public any actionfamily/community/general public any action

Ben & Jerry’s Case

Group 1 case leadershipGroup 1 case leadership

Functionality of CSR: Does it (Can It) Contribute to Profitability?

(+’s)(+’s) Good public relationsGood public relations, can improve public image , can improve public image Can be used as “tool” to reach common goalsCan be used as “tool” to reach common goals

-can guide employee behavior-can guide employee behavior

-can lead to shared values and cooperative effort-can lead to shared values and cooperative effort

- - “larger” purpose“larger” purpose for corporation and employees e.g., could be for corporation and employees e.g., could be used for recruitmentused for recruitment

Can help Can help avoid costly errorsavoid costly errors that may result from too narrow a that may result from too narrow a focus on short term profits (e.g., Exxon Valdez)focus on short term profits (e.g., Exxon Valdez)

In general, can help firms better In general, can help firms better anticipate nonmarket pressuresanticipate nonmarket pressures, , that can affect profitabilitythat can affect profitability

CSR (-’s)

Can take away from the focus of the corporationCan take away from the focus of the corporation Expensive, according to Friedman, by definition corporate Expensive, according to Friedman, by definition corporate

social responsibility reduces profits social responsibility reduces profits Corporations and managers are best at maximizing net Corporations and managers are best at maximizing net

worth, that is ultimate responsibility of business.worth, that is ultimate responsibility of business. Managers are trained in business, not social policy and/or Managers are trained in business, not social policy and/or

ethicsethics Dangerous, corporate activity outside the market in social Dangerous, corporate activity outside the market in social

responsibility arena can give managers discretion over use of responsibility arena can give managers discretion over use of corporate funds to promote their personal political and social corporate funds to promote their personal political and social beliefs- csr can be “undemocratic”beliefs- csr can be “undemocratic”

CONCLUSION: Ethics & Corporate Social Responsibility ““Power” of the Power” of the private market as a regulator of not only private market as a regulator of not only

economic behavior (most efficient use of resources by firms) economic behavior (most efficient use of resources by firms) but also corporate social practicesbut also corporate social practices

As consumers (employees) become more concerned with social, As consumers (employees) become more concerned with social, environmental and product safety issues and are provided with environmental and product safety issues and are provided with more info they are positioned to regulate corporate behavior and more info they are positioned to regulate corporate behavior and ethics through their purchases (decisions where to work)ethics through their purchases (decisions where to work)

Corporate social responsibility and ethical considerations Corporate social responsibility and ethical considerations influence purchase decisions of influence purchase decisions of consumersconsumers, employee decisions , employee decisions of of where to workwhere to work, and , and investorinvestor decisions and thereby can decisions and thereby can contribute to profitability and net equity/worthcontribute to profitability and net equity/worth

Corp Social Responsibility in action in New Hampshire PCConnection (Matt Cookson)PCConnection (Matt Cookson)