Ethics and Corporate Social Responsibility - Essay Example

? Ethics and Corporate Social Responsibility Since late 1970s, various organizations have addressed business ethics in different ways, as well as the development of codes of conduct, hiring of corporate responsibility managers and training programs of all kinds, introduction of compliant managers and programs, the preparation and dissemination of value statements, and the addition of board-level ethics committees. Studies conducted in 1960s indicated that European-based corporations were a head of their United State-based counterparts in implementing sustainability and corporate social responsibility practices. However, in the present days, business operations in Europe and the United States are not so much different as was initially assumed. Both businesses in these regions are currently striving to establish the exact meaning for a company to be responsible and ethical. The implementation of ethics and corporate social responsibility practices in most firms have not prevented Europe and United State-base companies from engaging in unethical behaviors that cause corporate scandals. This has created increased pressure for governments and Europe-based and U.S.-based corporations to establish more structured ethics and government programs, so as to ensure that these corporations are responsible to the communities within, which they are situated. There are many challenges, which are associated with corporate responsibility. Most people believe that corporate governance is primarily concerned with the societal obligations of business; however, they are not interested in understanding the scope and nature of these obligations. Failure to address ethics requirements and corporate social responsibility (CSR) from several stakeholders has usually impaired companies’ images and careers of individuals. Thematically, this paper addresses ethics and corporate social responsibility practices and issues, while focusing on several case studies like Scandal and Nestles Companies. Key words: Business management, Ethics, and corporate social responsibility Introduction The increasing debate on the ethical behaviors that should be portrayed by corporations among executives and employees, have given rise to the controversial question on how corporate ethics efforts can be improved, and how it can address the issue of underlying causes of misconduct, including the increasing demand for sustainable business, and proactive, socially responsible practices (Banerjee, 2007). Recent researches indicate that European-based companies are far much a head in implementing sustainability and corporate social responsibility practices than their United States-based counterparts, but the question is, are they doing better work of avoiding unethical conduct on a large scale? Understanding the aspects of business ethics is a challenging task since this field is vast, and it usually encompasses issues like reputation management, corporate governance, accurate accounting, environmental stewardship, and fair labor practices (Shaw, 2010). As a matter of fact, this field is concerned with the entire scopes of responsibilities, which a corporation has for all its stakeholders, especially those who have exhibited interest in the actions and decision of the company such as suppliers, stakeholders, community, clients, and employees. The understanding of business ethics is further made complex by several terms that refer to corporate programs and offices, which are focused on communicating, monitoring, and enforcing company standards and values (Sims, 2003). In theory, people can make certain distinctions among the various aspects of business ethics such as corporate compliance, corporate responsibility, and social responsibility. However, in practical perspective, such differentiations are of no significance since corporate offices of compliance that was established in 1970s can today function similarly to social and corporate responsibility (Trevino & Nelson, 2010). In order to understand the various scopes and nature of improving the conduct of business, it is necessary to define the following terms namely, corporate compliance, corporate social responsibility (CSR), corporate governance, corporate sustainability, and business ethics. Corporate Compliance Corporate compliance is primarily focused on complying with national and local laws and regulations (Shaw, 2010). The United States business scandals of 1980, especially those related to government contracts, led to the formation of this policy measure. Corporate compliance programs and officers have been accused of failing to fulfill and respect the provisions of the law. However, it is necessary to understand that corporate officers of compliance in the modern business environment can perform in much broader contexts (Shaw, 2010). Corporate Social Responsibility (CSR) Corporate Social responsibility is closely associated with corporate responsibility, however, it primarily focuses on the obligations a corporation has to the society particularly with respect to environmental stewardship and charitable activities (Gomez & Crowthe, 2007). Corporate and social responsibility is at times understood as the tactic contract between the community and business, where community allows a business activity to operate within its jurisdiction, so as to provide job opportunities for its people, and earn revenue through taxation (Trevino & Nelson, 2010). In addition, the community requires the firm to preserve the environment, and transform the community to a better living place through the business’ charitable activities. According to Business for Social Responsibility (2001), socially responsible business practices respect ethical values in the interest of stakeholders, and strengthen corporate accountability (Trevino & Nelson, 2010). Responsible business practices are aimed at respecting and preserving the natural environment. Moreover, they should also empower the local community, improve quality and opportunities of life, and invest in the community where it is situated. Recent researches have also established that European-based corporations are establishing corporate environmental and social responsibility offices more often that their United States-based counterparts (Gomez & Crowthe, 2007). Some business ethics corporations believe that corporate social responsibility entails all responsibilities that firms have for all their stakeholders, and these include social, environmental and ethical responsibilities (Trevino & Nelson, 2010). Corporate Governance Corporate governance refers to a wide range of business practices and policies that executive managers, board of directors, and stakeholders have to manage themselves, and meet their investors and other stakeholders’ interests (Shaw, 2010). Over the past centuries, corporate governance has been the subject matter of increasing stakeholders’ scrutiny and attention. This policy measure is what led to the formation of powerful shareholder movements (Shaw, 2010). Former shareholder activists, which primarily consisted of large multi-billion-dollar pension fund, socially responsible and religious investment groups, including other institutional investors, are currently making use of a variety of tools to influence board behaviors, and establish corporate governance standards of excellence, and achieve shareholders’ expectations (Shaw, 2010). These investor groups are primarily concerned with addressing topics like accountability, board diversity, compensation, and independence, including a wide range of social issues such as environmental policies, community involvement, and employment ethics practices (Shaw, 2010). Corporate Sustainability According to PricewaterhouseCoopers, corporate sustainability is a way of aligning a business’ services and products with stakeholder expectations, which in turn add environmental, economic and social value (Gomez & Crowthe, 2007). A joined task force between Global Reporting Initiative (GRI) and United Nations Environmental Programme produced the GRI Sustainability Reporting Guidelines in June 2000 (Sims, 2003). This programme covers social and economic performance. Business Ethics This is a form of applied ethics. It focuses on inculcating a sense within an organization’s employees of how to conduct business responsibilities (Gomez & Crowthe, 2007). Since the term “ethic” creates a controversy in the international markets, same organizations define the concept of business ethics in the context of other terms such as business practices, integrity or responsible business conduct. Approaches to Business Ethics When business managers talk about “business ethics,” they usually refer to ways of avoiding business activities that may lead to civil law suits against their firm, criminal laws against their employees, and actions that may damage the company’s image (Andersen, 2004). Almost all managers are interested in addressing these issues because they want to protect their company’s image and prevent the loss of money. According to theoretical perspective, companies should hire public relations experts and corporate attorneys to accompany their employees to and from work. These experts are supposed to correct employees every time they exhibit any unethical behavior. In practical perspective, this move can cost companies financial disasters because it will require them to hire more corporate attorneys and public relations officers to guide all their employees (Sims, 2003). In addition, a company can choose to hire philosophers to teach their employees ethical behaviors. However, it is unfortunate that philosophers cannot teach elderly people to become ethical, since this is only possible during an individual’s early childhood stages. Moreover, even if the philosophers are capable of teaching employees ethical behaviors, hiring them is not recommendable because it is not financially efficient (Andersen, 2004). Moral companies save themselves from some public and legal nightmares, although they find this extremely expensive. This is because they have to pay special attention to environmental impacts, scrupulous marketing, product safety, human working conditions, and truthful advertising. In most cases, ideal-moral principles and business ethics cannot be improved by hiring corporate attorneys, public relations experts and philosopher, but they can be developed by economic viability (Andersen, 2004). The following are some of various ways of deriving standards of business ethics. Profit Motive Some business managers believe that a symbiotic relationship exists between business and ethics, where ethics naturally develops from a profit oriented business. In simple approach, good business ethics results in good business practices (Griseri & Seppala, 2010). This also implies that moral business practices results in higher profit margins. For instance, companies prefer manufacturing safe products because this reduces product liability lawsuits. A case study on Nestle revealed that long-term best interest of its businesses are served by seeking a trusting and lasting relation with the public (Griseri & Seppala, 2010). However, this simple and weak approach, however, has some limitations. In the first place, corporations with moral business practices only achieve economic advantage in the long term run. This is less advantageous for companies seeking short-term profits like Nestle. Secondly, some moral business practices cannot be economically viable in a long-term run. This is the case with Scandal Company that prefers retaining its older employees at the expense of hiring more young and more efficient employees (Trevino & Nelson, 2010). Lastly, and most significant, moral business practices that are recommendable for businesses depend on what will create profit at that particular time. A particular moral business practice might be profitable in one market and at the same time economically not viable in another market. From these examples, it is obvious that the relationship between morality and profit is both incidental and limited (Shaw, 2010). The other approach, which is the strongest version, asserts that in a free and competitive market, the profit motive will actually bring about a morally business environment (Griseri & Seppala, 2010). This means that workers demanding privacy or customers demanding safe products will only work for, or buy products from companies that satisfy their demands. Businesses that do not meet their demands are likely not to survive in these regions. In simple words, good business results usually results in good ethics. However, critics of this theory such as Milton Friedman, argues that this approach will only be applicable when the United States governments create a truly free and competitive market (Trevino & Nelson, 2010). This strong approach, however, also has some limitations. First, it asserts that workers and customers will only prefer what is morally proper. However, it has been established that customers sometime prefer buying less safe products in order to save money. For instance, customers may choose to buy cars without air bags, even though, this exposes them to higher risks of harming themselves, which is also morally irresponsible. Additionally, employees may choose to forgo demands of privacy at the work place if the company offers them high and enough wages. In summary, not all moral business practice emerges from profit principles as argued by either the first or the second approaches (Griseri & Seppala, 2010). Following the Law The other approach to business ethics is that moral obligations are dictated by what the law requires. In culturally pluralistic society, the only moral business practices that are endorsed by national social groups are those that are already exist within the law (Sims, 2003). These may include guidelines for product safety, honesty in advertising, hiring and firing practices, and safe working conditions. Other than the law, business obligations also depend on the interests of subgroups like those operated by environmental activists and traditional Muslims. Moral business activities in these subgroups are bound by their obligations, but they are not restricted to anybody outside that subgroup (Sims, 2003). Corporate Social Responsibility In the modern business environment, it is expected that business organizations will do more than just providing goods and services to their clients, and in turn acquire profit from that activity. Business activities have the responsibility of establishing a corporate relationship with the clients they serve that is the community at large. Corporate social responsibility is important since the society gets to benefit from the business organization not only conventionally by buying goods and services, but also through positives issues instigated by the organizations in questions (Banerjee, 2007). The positive impact instigated by the business organization, in most instances is referred to as giving back to the community. Corporate social responsibility aids in building a better relationship between the business organization and the community they serve. Through corporate social responsibility, a business organization is likely to take responsibility for all the effects that come along because of its business activities. Through corporate social responsibility, business organizations invest their money in the whole community (Sims, 2003). Corporate social responsibility in business organizations, in most cases, has been measured in terms of either being good or bad. A positive impact usually reflects a good social responsibility while a negative impact is a reflection of a bad corporate social responsibility. For instance, Nestle as a company demonstrated a bad corporate social responsibility when it initiated a campaign, which had the objective of selling out its product, baby formula, to a new market in the third world. This act was highly unethical since it was clear that Nestle was replacing breast-feeding with its baby formula. In this case, Nestle portrayed a negative impact, which went ahead in tainting its corporate image (Sims, 2003). Many business organizations have enhanced their corporate social responsibility by initiating projects that aim at giving back to the community by helping impoverished individuals. Kellogg Company exemplifies corporate social responsibility. Kellogg is a company that fosters in the production of foodstuff such as corn flakes. The management of Kellogg Company has highly based its policies on corporate social responsibility, and as a result, the company operates for more than 100 years. Kellogg Company ensures corporate social responsibility through protecting the environment, advocating healthy living by selling nutritious products and sticking on promoting ethical standards. Additionally, Kellogg Company is committed in promoting good corporate citizenship through ensuring there is diversity in the work force, and a safe and healthy working environment (Banerjee, 2007). The best and most desired way of ensuring that corporate social responsibility becomes a success is by business organizations taking an intimate interest on the families of its workforce, clients and all the individuals in the community and society. Nestle Company had a bad corporate social responsibility, when it failed to recognize the important aspects of breast-feeding and instead focused on making profit by selling baby formula to third world countries. In this case, Nestle did not take an intimate interest on the families by considering the fact that breast-feeding is very essential during the first six months of a child’s life (Sims, 2003). Taking into consideration, the case of Nestle Company and Kellogg Company it is clear that corporate social responsibility is an aspect that starts within the company’s management. The credit of demonstrating either a good or a bad corporate social responsibility goes to the company’s management. A failure of ensuring corporate social responsibility is a weakness on the side of the management. As long as a business organization has ventured in producing and availing products to customers who form the community and society, the organization should voluntarily also ensure that these individuals live an environment that is safe and healthy (Sims, 2003). The current business environment should go beyond making profits and include taking a keen interest on promoting the society, economy and the environment. In essence, not only does the environment and society stand to benefit through corporate social responsibility, but also business organizations. When business organizations establish good repertoire regarding corporate social relationship, then the community will tend to be interested in being part of the workforce in that organization. Ultimately, through the positive impact of corporate social responsibility a business organization has a better chance of taking a big share in the market (Banerjee, 2007). Conclusion Most corporations are currently struggling to adopt and integrate moral business ethic and corporate social responsibility practices in their operations. The implementation of moral business ethics and corporate social responsibility is usually not an easy task; however, effective moral business ethics practices can help in protecting the image of the company and prevent loss of money. Ideal moral business ethics and corporate social responsibility practices cannot be improved by hiring public relations experts, or corporate attorney, or philosopher, but they can be developed by economic viability. A simple approach asserts that in a free and competitive market, the profit motive will actually bring about a morally business environment, which implies that high profit margins create moral ethics amongst a company’s employees. Corporate social responsibility is focused on addressing the relationship between a company and the community within which it is located. Researchers say that this is a symbiotic form of co-existence, where the community allows a business to operate within its region, and in return offers its people employment opportunities, and earn revenue through taxation. Failure to address ethics requirements and corporate social responsibility (CSR) from several stakeholders has usually impaired companies’ images and careers of individuals. It is, therefore, recommendable that all corporations should adopt and integrate moral business ethics and corporate social responsibility practices so as to protect their images, maintain a strong relationship with the local community, and protect their employees’ careers. References Andersen B. (2004). Bringing business ethics to life: achieving corporate social responsibility. california: ASQ Quality Press. Banerjee S. B. (2007). Corporate social responsibility: the good, the bad and the ugly. London: Edward Elgar Publishing. Gomez A. M, Crowther D. (2007). Ethics, psyche and social responsibility. Farnham: Ashgate Publishing, Ltd. Griseri P, Seppala N. (2010). Business Ethics. New York: Cengage Learning EMEA. Shaw W. H. (2010). Business Ethics: A Textbook with Cases. New York: Cengage Learning. Sims R. R. (2003). Ethics and Corporate Social Responsibility: Why Giants Fall. New York: Greenwood Publishing Group. Trevino L. K, Nelson K. A. (2010). Managing Business Ethics. New York: John Wiley and Sons. Read More