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Management an Introduction
Chapter 5 – Corporate responsibility
Malpractice, philanthropy and enlightened self-interest
Philanthropy is the practice of contributing personal wealth to charitable or similar causes. Notable examples like Bill Gates recognise that their business success is in part due to the society in which they work, and that they have an obligation to return some of their wealth to it. Enlightened self-interest – Acting in a way that is costly or inconvenient at present, but which is believed to be one’s best interest in the long term. E.g.: Giving substantial sums to charity and hope that this will improve their reputation. Corporate responsibility – refers to the awareness, acceptance and management of the wider implications of corporate decisions. These can arise throughout an organisation, at any stage of the value chain.
Perspective on individual responsibilities
Three domains of human action
Ethics refers to a code of values that guide human action by setting standards of what is acceptable. Laws do not prohibit them, but shared values about acceptable behaviour constrain people.
Evaluating an action
…whether it is ethical. Moral principle – The rules that societies develop, and which members generally accept as valid guides to action (do not steal, etc.) Utilitarianism – Evaluate action against its effect on the balance of pleasure and pain in society Human rights – Effect on human rights, which a society recognises Individualism – Effect on their own interests Diverse personalities, backgrounds and experiences lead to different judgements. Perspectives on corporate responsibility Social contract consists of the mutual obligations that society and business recognise they have to each other. Society depends on business for products; business in turn depends on society (it requires input, e.g.: employees). The social contract is not specified by law, and may not serve a company’s narrow economic interest.
Stakeholders and corporate responsibility Ethical investors are people who only invest in businesses that meet specified criteria of ethical behaviour. Corporate responsibility can sometimes only satisfy one group of stakeholders at the expenses of others. ‘Any position taken by a firm and its management, social, ethical or otherwise, has trade-offs that cannot be avoided’ (Devinney, 2009).
Stakeholders influence managers
Stakeholders vary in their influence. If the most powerful expects something the managers will usually deliver that.
Managers influence stakeholders
…for example through lobbying governments to alter laws in their favour. Corporate responsibility and strategy
Responsible action as the corporate mission
Michael Porter – Companies can do better if they create shared value, by balancing the interests of many stakeholders
Responsible action to meet customer needs
Ethical consumers are those who take ethical issues into account in deciding what to purchase.
Responsible action as part of strategy
Following responsible practices towards their use of resources because it fits their business strategy
Does responsible action affect performance?
Under pressure from stakeholders, some firms use responsible practices of the types shown to increase revenue and/or reduce costs. Managing corporate responsibility
Leading by example
Senior managers set the tone for an organisation by their actions. If others see they are acting in line with stated principles, their credibility will rise and others are likely to follow.
Codes of practices
…is a formal statement of the company’s values, setting out general principles on matters such as quality, employees or the environment.
Corporate responsibility structures and reporting
…formal systems and roles that companies create to support responsible behaviour. Ethical audits are the practice of systematically reviewing the extent to which an organisation’s actions are consistent with its stated ethical intentions.
