Beyond obedience to the law, what responsibility do corporations have to act ethically or in the social interest? Part of the role of an ethical business is to maximize profits in order to increase revenue to shareholders. Thus, any money spent on corporate social responsibility (CSR) measures could be seen as wasteful or unrelated to business objectives.
CSR extends beyond the traditional view of charity and involves employee policies, a corporation's relationship to the community, and sustainable business models. For example, a business whose core operations pollute the environment or exploit workers would not be considered socially responsible. What's known as the Triple Bottom Line incorporates "people, planet, and profit" into the measurement of a company's success.
Some believe that companies should abide by a "stakeholder theory," in which they are responsive, not only to investors, but to governments, civil society, and the general public. Does social responsibility improve the bottom line? How can these interests be balanced?
Understanding of the various theories related to business ethics, including shareholder v. stakeholder value, sustainable business practices, corporate social responsibility, and philanthropy.
Documentary film The Corporation
What if corporations were human beings? According to a pyschiatrist in this documentary tracing the history and activities of corporations, they have ''all the characteristics of a prototypical psychopath.''
Ask students to contemplate the following questions in relation to The Corporation:
I. Are corporations in aggregate beneficial for society? Should corporations be required to actively contribute to social causes, or merely to do no harm? Why or why not?
II. Should corporations be granted rights normally accorded to individual citizens? Why or why not?
III. What effects do corporations have on government via lobbying and donations? What are the current regulations limiting the political influence of businesses? Are those regulations effective, or should they be either stricter or more lenient?
IV. Is it socially unsustainable for average CEO compensation to exceed the average worker's wage by a factor of 400 or more? Besides monetary compensation, in what other ways can companies recruit, incentivize, and reward talent?
Thomas Donaldson, "Moral Minimums for Multinationals," Ethics & International Affairs 3 (1989)
Donaldson argues that major changes are necessary in the decision-making process as well as in the conduct of multinational corporations in order to exercise moral obligations and meet culture-specific needs of host countries.
William M. Evan and R. Edward Freeman, "A Stakeholder Theory of the Modern Corporation: Kantian Capitalism," in chapter 2 of Ethical Theory and Business (Englewood Cliffs, NJ: Prentice Hall, 2008)
Evan and Freeman critique managerial capitalism, or "shareholder theory," and explain an alternative view that the role of a corporation is to balance the needs of all stakeholders.
Milton Friedman, "The Social Responsibility of Business Is to Increase its Profits," The New York Times (September 13, 1970)
According to Friedman, corporate managers are primarily agents of the corporation's owner. Though managers may feel the need to give money to charity or in some way engage in a social cause, they do so as individuals, not businesses.
Giles Gibbons, "Brands focus: Social marketing—The power of suggestion," Ethical Corporation (April 22, 2009)
Brave brands should exceed consumer expectations by using their power to pursue social causes, says Gibbons.
Michael E. Porter and Mark R. Kramer, "Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility," Harvard Business Review (December 1, 2006)
How should executives think about CSR? Perceiving social responsibility as an opportunity rather than as damage control or a public relations campaign requires a mindset that, according to the authors, will become increasingly important to competitive success.
RELATED ETHICS QUESTIONS:
A. Corporations are legal entities independent of their founders, employees, and investors. This limits the liability of individuals involved in the company, should something go wrong with corporate operations. Some companies, including Nikon, have replaced their traditional corporate charters with "corporate social responsibility charters." Should all companies undertake similar initiatives? How real are the obligations in CSR charters? What other ways can social responsibilities be defined and upheld?
B. In light of climate change, the financial crisis, and globalization in general, should we reform companies to put people and sustainability before profit? Can companies be responsive to the needs of their consumers and investors and also lead the way in influencing values and advancing social causes?
C. Should we regulate companies so that they internalize costs, such as environmental degradation? At what level should standards be set, and by whom? How can realistic and effective standards be agreed upon?
MORE LESSONS IN THE BUSINESS ETHICS SERIES:
What is the role of the corporation in society?
Corporate human rights policies
Ethics and supply chains
The green economy