Business Ethics and Corporate Social Responsibility

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Table of Contents

Introduction
The origins of CSR and business ethics
Beneficiary role of companies and its limitations
Specific applications of business ethics and CSR
Conclusion
References

Introduction

Scholars and business administrators agree that the activities of companies should be based on some moral judgment. Mere pursuit of profits is no longer acceptable for organizations that claim to be good corporate citizens. It is believed that business ethics and corporate social ethics should ensure that companies are managed in ways that benefit the whole of society.

This essay is aimed at examining this claim. In particular, it is possible to argue that this requirement should be specified and limited. Businesses can benefit the entire community by offering excellent services or good. Moreover, they should eliminate or minimize possible risks to the wellbeing of the community.

However, managers cannot possibly predict the effects of business activities on the whole of society since such effects may be difficult to trace. The main task of CSR and business ethics is to eliminate various malpractices that can harm the interests of various stakeholders such as clients, employees, or community.

Certainly, for-profit organizations can bring some improvements into the live of the community, by creating jobs or participating in charity; however, the capabilities of companies are limited and managers should also think about the profitability and the interests of the shareholders.

On the whole, one can say that business ethics and CSR should act as safeguards against various dangers, but people should not think that businesses should responsible for the wellbeing of the entire community.

In this paper I would like to illustrate how corporate social responsibility and business ethics can be applied by modern businesses. The first section will examine the reasons why many companies chose to follow to the principles of CSR and business ethics. I will also speak about the stakeholder theory that explains how enterprises interact with the community.

The second section will discuss the role of business as beneficiaries. In particular, it is necessary to show that companies cannot always benefit the whole of society, because they should also think about their organizational performance and profitability. Finally, I will discuss more specific applications of business ethics and CSR.

The origins of CSR and business ethics

First, it should be noted that such concepts as corporate social responsibility and business ethics emerged as a response to the criticism to which businesses have often been subjected by journalists, political activists or lawyers. They were supposed to reconcile the needs of businesses and the communities in which they operated.

Their goal was to make companies more accountable to the community. More importantly, business ethics and CSR had to eradicate various malpractices of for-profit organizations. In particular, one can mention such issues as failure to ensure the safety of workers or low wages (Morgan 2006, p. 306).

Moreover, businesses are often blamed for the failure to support the needs of workers, for instance, one can mention female workers who must care about their children (Pocock 2005, p. 32). Furthermore, modern companies are obliged to think about the work-life balance of workers (Pocock 2005b, p. 198). Thus, business ethics and CSR enable businesses and employees to reach some kind of a compromise.

Apart from that, companies have to respond to the pressure of governmental institutions. They are forced to respond to such issues as corporate fraud, environmental pollution, or dishonest financial reporting. Many societies have raised the performance standards for modern enterprises. Some malpractice like wage discrimination or environmental pollution are no longer acceptable either for the government or the community.

Therefore, the principles of CSR and business ethics are supposed to eliminate such malpractices that can harm the interest of various stakeholders. They have to shield businesses from public criticism, law suits or governmental action. This is one of the reasons why many business leaders are favorable of CSR. Yet, it would be an exaggeration to say that they are concerned about the benefit of the whole community.

Even the most ardent critics of corporations do not say that they have to bring improvements to the entire society. The problem is that the society is a very comprehensive term that includes every person living within a certain geographical area as well as institutions that have been created by the members of the community. Thus, one can ask how exactly companies are obliged to benefit the whole of society.

The thing is that there is no ethical imperative requiring business to think about the wellbeing of every person. Such a task is hardly possible for individuals or organizations. Certainly, one can say that companies can benefit these people mostly by providing good products or services or minimizing hypothetical dangers of their activities. Moreover, they can donate to various construction projects and even give money to the construction of roads or bridges (Banerjee 2009, p. 1555).

Yet, it is difficult to argue that business administrators have to think only about the benefit of the community. They should also be concerned with the profitability of the enterprise and the interests of stockholders. Provided that they do not cope with this task, the very sustainability of many companies can be at risk. This is another argument that should not be overlooked.

It should be noted that such notions as corporate social responsibility and business ethics take their origins in the stakeholder theory. According to this approach companies should not be seen only as isolated agents that merely deliver goods or services to clients. More likely, they should be regarded as entities that can impact a variety of stakeholders, for instance, buyers, workers, or community.

It is possible to refer to such an author as Joel Bakan (2005) who believes that corporations are probably the most important institutions in the world since they shape practically every area of human life (p. 5). Furthermore, business administrators should also take into account that these stakeholders can significantly affect the performance of any organization.

For instance, clients, who believe that a company neglects their safety needs, may simply use the products or services a different company. This is why corporate executives should understand that unethical practices can eventually result in the loss of profits.

Corporate social responsibility and business ethics are importance because they show how companies should interact with various stakeholders. However, CSR or business ethics do not eliminate the idea that companies have to make profits.

More importantly, the promotion of public welfare must not harm the financial aspects of performance. This is why people should not assume that companies will act as social beneficiaries. This is the main issues that should be taken into account.

Admittedly, managers should not regard themselves as “morally neutral characters” (Roberts 1984, p. 288). They cannot exclude ethical consideration from the decision-making process (Watson 2003, p. 169). The thing is that they can gain the trust of other employees by showing that they adhere to certain ethical principles such as integrity.

Similarly, companies can gain the trust of customers by demonstrating that they genuinely care about their needs. Nonetheless, one cannot oblige them to think only about the welfare of the welfare of the community. Such a requirement will not be feasible. Thus, people should not put rely on those corporate executives who argue that they are concerned only with the benefit of the public since such claims are not always substantiated.

Beneficiary role of companies and its limitations

At this point, it is important to discuss some limitations of CSR and business ethics. Special attention should be paid to the ability of businesses to bring improvements to the community. However, firms have responsibilities to their stockholders who want organizations to be run effectively. The general premise is companies are obliged to create certain benefits for the community.

Thus, the question arises how they should do it. First of all, they are supposed to provide goods and services that can create some value for people. This is probably the most important requirement and the sustainability of every company depends on its ability to create this value. Nevertheless, this requirement is a necessity, rather than a moral obligation. Businesses do not CSR or business ethics in order to remember about it.

Secondly, it is possible the creation of jobs. This is one of the most important benefits that firms can bring to the society. In this way, they can improve the welfare of the population by increasing their purchasing power. However, there is a significant limitation of this requirement. The thing is that the development of technologies enables businesses to reduce the number of workers and eventually improve their cost-efficiency.

In many cases, they no longer need to hire more workers. The performance of a company is assessed according to its cost-efficiency, and many organizations try to reduce their labor force and employ only those people who can best contribute to organizational success. Thus, business administrators are not morally obliged to think about the creation of jobs, since they should also think about the productivity.

Therefore, there is some conflict between the needs of for-profit organizations and the needs of the society. In some cases, the most efficient business practices can harm some members of the community. This is the critical issue that people should take into account. If managers take business ethics and CSR to their extreme, they may endanger the interests of shareholders.

Additionally, it is assumed that businesses are obliged to promote diversity and empower those people who were previously discriminated, for instance, on the basis of race, gender or disability (Strachan, French, & Burgess, 2009, p. 18). One of their roles is to reduce inequalities existing in the society. To some degree, this requirement is quite legitimate because even nowadays a great number of people may be disadvantaged due to some reasons.

For instance, some industries are called male-dominated; in particular, one can mention auditing industry (Jonnengard, Stafsudd, & Elg 2010, p. 722). Besides, many people may not secure employment because of their disability. This is why companies should promote affirmative action which is required by legislation (Ainsworth, Knox, & O’Flynn, 2010, p. 660). Nevertheless, one should take into account, businesses have to hire the most skilled and motivated candidates. HR professionals have to look at the experience of an employee, and his/her skills.

They are the most important criteria. Therefore, companies cannot employ a person only because he/she represents an ethical or racial group that was previously discriminated or disadvantaged. Thus, the corporate social responsibility of enterprises has some limitations. One should expect that companies will be willing to promote social justice at the expense of their performance.

Thirdly, some supporters of corporate social responsibility may believe that businesses should participate in charitable activities or support volunteer projects. Some organizations may be engaged in such activities, but management should also think about daily operations and expenses of a company. Thus, promotion of community welfare should not be done at the expense of efficiency.

On the whole, these examples are important because they should that there are some limits to corporate social responsibility. The critics of corporations have to remember that the very existence of these corporations depends on their profitability. In this regard, one can refer to such a company as Shell that currently operates in Nigeria (Banerjee 2009, p. 1555). It has contributed to the construction of roads, hospitals or power utilities in the country (Banerjee 2009, p. 1555).

Yet, it is believed that the operations of this company do really contribute to the welfare of the population. In this case, the problem is that many corporations have to work with very corrupt governments, and even when they contribute to charity, other people may not see any significant improvement because the money of the corporation will not be used appropriately.

This case shows that the welfare of population does not depend only on the activities of private businesses, even if they are powerful international corporations. Surely, CSR and business ethics emphasize social performance of firms, but governments still remain responsible for welfare of individuals. It has to be their major concern.

There is another reason why people should not expect that CSR and business ethics are supposed to benefit the whole of society. The problem is that this formulation is too vague; it does not describe how exactly companies are supposed to act or who they should benefit. This lack of clarity is the main reasons why many people are skeptical about the usefulness of CSR and business ethics.

The problem is that too many executives often claim that their companies are responsible corporate citizens. However, they do not tell what exactly they do in order to benefit the community. However, in many cases, their words may just be a form of pretence. This is why people should be very specific when they identify the goals or corporate social responsibility and business ethics.

Specific applications of business ethics and CSR

Thus, people should pay more attention to the specific applications of CSR and business ethics. As it has been said before, the main rationale for these safeguards is to create an environment in which malpractices will not be possible. In particular, one can speak about such activities as wage discrimination of workers, corporate fraud, inside trading, violation of customers’ rights and so forth.

The principles of business ethics should act as guidelines for every employee of an organization. Managers and corporate executives have to make sure that the interests and rights of their stakeholders are put under threat.

Overall, various corporate scandals highlight the need for business ethics and CSR. For example, one can refer to case of Enron (Bakan 2005, p. 23). This example eloquently demonstrates that lack of meaning ethical judgment can lead to the failure of the company and significant losses for its investors (Bakan 2005, p. 23).

Thus, the principles of corporate social responsibility are adopted in order to reduce the risk of corporate fraud that may threaten investors, employees, pension funds, and so forth.

Additionally, CSR and business ethics are supposed to help individuals who may be forced to act in an immoral way. As it is pointed out by High Willmott (1993) corporate cultures can sometimes become too totalitarian and a person may be pressured to comply with the decisions or values of the group even if some of these decisions are not ethical (p. 521).

Some organizations may become too authoritarian and they can view stakeholders only as economic objects (Knights & Roberts 1982, p. 51). Thus, business ethics is aimed at minimizing the influence of peer pressure because this influence is not always beneficial.

According to the famous psychologist Stanley Milgram (1974), people are more likely to commit immoral acts when they feel that some authority figure will take responsibility for their actions (p. 21).

Companies that adopt the principles of business ethics and CSR try to make sure that people feel free to express their opinions when they feel that some decisions are not ethical.

Another application of business ethics and CSR may be related to the labor practices of an organization. For example, some companies operating in economically advanced countries employ very people from Africa or Eastern Europe and these individuals may be reduced to the status of slaves since they have no civil rights and they cannot refer to any governmental authority (Bales 2012, p. 12).

This is the main tragedy. In his article, Bill Cooke (2003) speaks about the legacies of slavery and the practices used by managers in the ante-bellum America (p. 1895). The thing is that slavery has not been eradicated in the modern workplace.

This problem can be effectively addressed if there is proper legislation. Moreover, corporate executives who adhere to the rules of ethics and CSR will ensure that none of company’s divisions is engaged in unlawful labor practices.

These examples illustrate specific applications of business ethics and corporate social responsibility. Provided that organizations use them as safeguard, they can protect themselves against many risks such as governmental fines or poor publicity. Moreover, they can benefit employees, stockholders, or customers. If business administrators choose to focus on more specific tasks, the work of many organizations can be improved.

Conclusion

On the whole, this discussion leads to several important points. First of all, business ethics and CSR should be regarded as a system of checks and balances that have to prevent or minimize the risk of malpractices within the company. They should ensure that companies adhere to the principles of integrity or openness.

Business administrators have to avoid any harm to clients, workers, or environment. This is the most important requirement. Certainly, they can bring such benefits as reduction of inequality, charity, or promotion of employee’s rights. However, they should also be concerned with the maximization of revenues. So, corporate social responsibility and business ethics cannot guarantee that companies strive to benefit the whole of society.

This promise may not be fulfilled. Instead they should ensure that no harm is done to the community. In particular, these safeguards should protect long-term interests of various stakeholders who are dependent on private businesses. If this approach is adopted, CSR and business ethics will be much more effective.

References

Ainsworth, S., Knox, A. & O’Flynn, J 2010, ‘A Blinding Lack of Progress’: Management Rhetoric and Affirmative Action’, Gender, Work and Organization, vol. 17 no. 6, pp.658-678.

Bakan, J. 2005, The Corporation: The Pathological Pursuit of Profit and Power, Simon & Schuster, New York.

Bales, K. 2012, Disposable People: New Slavery in the Global Economy, Updated with a New Preface, University of California Press, Berkeley.

Banerjee, S. 2009, Necrocapitalism, Organization Studies, vol. 29 no. 12, pp. 1541-1563.

Cooke, B. 2003 ‘The Denial of Slavery in Management Studies’, Journal of Management Studies, vol. 40 no. 8, pp. 1885-1918.

Jonnengard, K., Stafsudd, S., & Elg U 2010, ‘Performance Evaluations as Gender Barriers in Professional Organizations: A Study of Auditing Firms’, Gender, Work and Organization, vol. 17 no. 6, pp. 721-741.

Knights D. & Roberts J 1982, ‘The Power of Organizations or the Organization of Power’, Organization Studies, vol. 3 no. 1, pp. 47-63.

Milgram, S. 1974, Obedience to Authority: An Experimental View, Taylor & Francis, New York.

Morgan, G. 2006, Images of Organization, SAGE, London.

Pocock, B. 2005, ‘Work/Care Regimes: Institutions, Culture and Behaviour and the Australian Case.’ Gender, Work and Organization, vol. 12 no. 1, pp. 32-49.

Pocock, B. 2005b, ‘Work–life ‘balance’ in Australia: Limited progress, dim Prospects’, Asia Pacific Journal of Human Resources, vol. 43 no. 2, pp. 198-209.

Roberts, J. 1984, ‘The moral character of management practice’, Journal of Management Studies, vol. 21 no. 3, pp. 287-302.

Strachan, G., French, E., & Burgess J 2009, Managing Diversity in Australia: Theory and Practice, The McGrow-Hill Companies, Sydney.

Watson, T. 2003, ‘Ethical choice in managerial work: The scope for moral choices in an ethically irrational world’, Human Relations, vol. 56 no. 2, pp. 167-185.

Willmott, H. 1993, ‘Strength is Ignorance, Slavery is Freedom: Managing Culture in Modern Organizations’, Journal of Management Studies, vol. 30 no. 4, pp. 515-552.

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