Transcript Wk05

Business 303 Sheppard
Business Society & Ethics, Week 5:
Corporate Social Responsibility (CSR)
Pro & Con
BUSINESS ETHICS WEEK 6:
MAIN QUESTIONS
1. What is Corp. Social Responsibility.
2. Where does this discussion come from?
3. What are the for & against arguments
regarding the Libertarian CSR view.
4. What is the Managerial CSR view?
5. What is the Stakeholder view of CSR?
6. How do the views fit together?
7. Are there some alternatives to CSR?
Wk. 4-2
1a. What is CSR?
• The notion that corporations have
an obligation to constituent
groups in society
other than stockholders
and beyond that prescribed by law
or union contract.
Jerry,
– Voluntary.
– Broad obligation.
Cut out the
Tom Jones jokes
or I’m going to
revoke your
degree.
Tom
Jones,
C.M.R.
1980
Wk. 4-3
1b. CSR, So What?
• There is a gap between today’s law
and the law of the future.
• What’s legal and irresponsible today
may well be illegal tomorrow.
• Examples:
– Hooker Chemical & Love Canal.
– Most Asbestos Cases.
• Paul Brouder…
• Death Benefit Cheaper than worker’s Comp.
Wk. 4-4
2. What is the current debate?
• The issue as to the proper role of
corporations regarding their
responsibility to society.
• Origins in:
– State creation of the Corp.
– Legitimacy argument.
– Noblesse Oblige.
Wk. 4-5
3. Libertarian View (1/7) [241-45]
• Business as ‘unwitting puppet.’
– They are the unwitting accomplices to the
expansion of the (socialist) welfare state.
– They are helping the expansion of the
state into private affairs.
– This results in loss of personal freedom
to pursue ones ends in a free market.
– Flaw in the argument:
• U.S. origins of the Distrust
of Big Government.
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3. Libertarian View (2/7) [241-45]
• Direct responsibility to employers.
– The fiduciary responsibility managers
have to the shareholders.
– If return is less than might otherwise be
the case the mgr. hasn’t acted legally.
• Voluntary vs. ‘social’ responsibilities.
– One may volunteer their own efforts for
whatever efforts they feel are beneficial.
– When agents do it on behalf of a
principal without permission
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they are acting ultra vires.
3. Libertarian View (3/7) [241-45]
• Using the money of the shareholders.
– Managers have a fiduciary responsibility
to the shareholders.
– They have been hired to maximize
profits as best they can.
– To use funds for any other
purpose is tantamount to
embezzlement.
Wk. 4-8
3. Libertarian View (4/7) [241-45]
• Darwinian struggle for survival. [267]
– Lose focus & others will crush you.
– Flaws in the argument:
• Pay for what you buy / Legitimate Altruism
• The opposite may be true.
• Caveat Emptor [239]
– Buyers know markets are fraught with peril.
– Flaws in the argument:
• The assumption is that consumers
understand complex issues.
• Risks may not be known or knowable.
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3. Libertarian View (5/7) [241-45]
• Business vs. civil servants.
– Not the managers job to act in the social
interest / We elect people to do this job.
– Who are managers to self select
themselves to do this job.
– Managers are effectively imposing a tax
(or spending monopoly profits.
– Flaws in the argument:
• May be better to have Powerful
organizations influenced by
both Voice & Exit (Hirschman).
• Do you really want big
government doing it all.
Wk. 4-10
3. Libertarian View (6/7) [241-45]
• The ‘suicidal impulse’ of business.
– To undertake CSR is to cut one’s
competitive position.
– This would violate managers’ obligation
to shareholders.
• Freedom vs. conformity.
– Notion that CSR compels those in an
otherwise free market to undertake acts
they would not otherwise take on.
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3. Libertarian View (7/7) [241-45]
• The expertise of business
– What do managers know about addressing social issues, let experts handle it.
– Flaws in the argument:
• You can learn.
• We expect you to
have broad knowledge.
• New expertise can be
bought (computers).
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4. An Opposing View (1/4)
• Promissory argument [246]
– The idea that managers made a promise
to shareholders to maximize profit.
– Flaws in the argument:
• Few shareholders directly purchased
shares from the company.
• In many cases employees & communities
have a larger ‘investment’ in the firm.
• Why, under such circumstances, would
shareholders hold primacy?
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4. An Opposing View (2/4)
• Agency argument [247]
– The notion that managers, as agents of
the shareholders, must profit maximize.
– Flaws in the argument:
• Again, employees & communities have a
larger ‘investment’ in the firm.
• As agents, managers have wide discretion
to pursue acts that may include CSR to
insure in the company’s long term health.
• Who says shareholders, as principles,
only want profit maximization.
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4. An Opposing View (3/4)
• Role argument [247]
– CSR means that managers are overstepping their role.
– Flaws in the argument:
• If you reduced pollution more
than the law required would
courts say you could not?
• Other issues of the best
public interest.
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4. An Opposing View (4/4)
• Polestar argument [248]
– Easiest & obvious guide to managers’
actions (moral decisions are difficult).
– Notion that managers need a guide that
logically gives primacy to shareholders.
– Flaw in the argument:
• Just because moral judgments
are inherently difficult does not
mean that they do not need to be
made.
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5. The Managerial View (1/2)
• Scientific Management.
– Our job is to improve performance.
• Corp. Internal decision structure.
– Inward looking hierarchical (Mechanistic).
• Narrow definition of s-holders.
• The explicit social contract.
– Material advancement for discretion.
• Moral Agency.
– Is only possible for real live humans.
Wk. 4-17
5. The Managerial View (2/2)
• Managerial managers.
– Neither transforming nor servant.
• Pre-NIMBY.
– Corporate influence.
– The company owned town.
• Stakeholders.
– Inequality.
• Legal regulation is sufficient.
• Tolerance of imperfect competition.
Wk. 4-18
6. The Stakeholder View (1/4) [246-75]
• New view of moral agency.
– Top Management Teams & Boards have
the ability to be moral agents.
– These folks also are charged with
developing & maintaining corp. culture.
• Corp. Internal decision structure.
– Strategic exchange in- / out- ward focus
(Organic / Corp Culture argument).
• Wider definition of s-holders.
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6. The Stakeholder View (2/4) [246-75]
• Avoiding ‘tragedy of the commons.’
– Reducing the spoiling of the air & water.
• Equitable sharing of costs.
– Internalization of externalities.
• The implicit social contract.
– Broad concern in exchange for profit.
• Persons as ‘ends unto themselves.’
Wk. 4-20
6. The Stakeholder View (3/4) [246-75]
• Solidarity & social-mindedness.
• Co-op capitalism.
– Cooperative moves
• Social audit
– Numerous different stakeholders with
differing views of performance.
– Looking at multiple bottom lines.
Wk. 4-21
6. The Stakeholder View (4/4) [246-75]
• Altruistic vs. selfish motives?
– At least a balance of interest.
• Social efficiency.
– What does it mean to say that the
corporation provides value.
• Ethical codes.
– One critical step toward establishing an
ethical corporate culture.
– Be careful, the courts may hold you to it.
– They’re only as good as the leadership.
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7. Johnson & Johnson’s Credo (1/4)
We believe our 1st responsibility is to
doctors, nurses & patients,
to mothers and fathers and all others who use
our products and services.
In meeting their needs everything we do must
be of high quality.
We must constantly strive to reduce our costs
in order to maintain reasonable prices.
Customer’s orders must be
serviced promptly and accurately.
Our suppliers & distributors must have
an opportunity to make a fair profit.
7. Johnson & Johnson’s Credo (2/4)
We are responsible to our employees, the men &
women who work with us throughout the world.
Everyone must be considered an individual. We
must respect their dignity & recognize their merit.
They must have a sense of security in their jobs.
Compensation must be fair & adequate &
working conditions clean, orderly and safe.
Employees must feel free to make suggestions &
complaints.
There must be equal opportunity for employment,
development & advancement for those qualified.
We must provide competent management, and
their actions must be just and ethical
7. Johnson & Johnson’s Credo (3/4)
We are responsible to the communities in which
we live & work and to the world community as
well.
We must be good citizens - support good works
& charities and bear our fair share of taxes.
We must encourage civic improvements and
better health and education.
We must maintain in good order the property
we are privileged to use, protecting the
environment & natural resources.
7. Johnson & Johnson’s Credo (4/4)
Our final responsibility is to our stockholders.
Business must make a sound profit.
We must experiment with new ideas. Research
must be carried on, innovative programs
developed and mistakes paid for.
New equipment must be purchased, new
facilities provided and new products launched.
Reserves must be created to provide
for adverse times.
When we operate according to
these principles, the stockholders
should earn a fair return.
8. Clash of the Three Visions
Libertarian, Managerial, Stakeholder
• The social duty of philanthropy.
• Implicit social contract.
– Written and unwritten laws.
– Interpretation.
– Global impact.
• ‘Narrow’ stakeholder capitalism.
– Primary stakeholders.
• ‘Wide’ Stakeholder capitalism.
– Secondary & tertiary stakeholders.
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9. Alternatives to C.S.R.
• Legal Regulation (Command & Control?)
• Taxation (Pollution Tax)
• Legal Liability (We will be sued!)
• Ethical Codes (Professions: Legal / Medical)
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Midterm
• Short Answer: 8 questions 7% each.
• Multiple Choice 44 questions 1% each.
• Some names to remember.
– Jones
– Kohlberg
– Lindblom
– Machiavelli
―
Milgram
― Mintzberg
― Rest
― Zimbarto
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