Business Ethics and Corporate

Social Responsibility
• Corporate Social Responsibility is because
this will help us understand how business
ethics and CSR are related to each other
• Business Ethics is some times confused
with corporate social responsibility
• Theories of corporate social responsibility
provide answers to the important
questions “What is the purpose of
Business?”
Corporate Social Responsibilities
The phrase corporate social responsibility
refers to corporation responsibilities or
obligation towards society. There is some
disagreement which includes
Do companies have a Are they obligated to
responsibility to maximize profits for
donate to charities or their shareholders or
to give their stakeholders
employees higher
wages and customer
safe products
 Economist Milton Friedman
Views
Free enterprises , private property system
corporate executives work for the owners of
the company and today theses owners are
the shareholders of the company
Company responsibility is to legally and
ethically make as much money as possible for
its owners to maximize the profit. We can call
it shareholder view of CSR
 Main Reasons
• Shareholder owns the company
• Company is their, only their property, only
they have the moral right to decide what it
should be used for
• Owners hire executive to the run the
company to earn maximum profit do what
the stakeholder want
• Further says company must operate within
the rules of society including both the rules
of the law and the rules of “ethical customs”.
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• A manager has no right to give money to social
causes when doing so will reduce shareholders
profit, because the money does not belong to
the managers but to the share holders
• Does not think managers should use company
resources to benefit others at the expense of
share holders. He does think that companies
ultimately provide great benefits for society
 Critics…
• The executive is the employee of the company so it
will legally serve in the better interest of the
company rather than in the interest of shareholders.
• Shareholders only holds stock and this them very
limited rights to vote and elect board of directors
• The executive doesn’t have any idea how to run the
company as the stakeholder want the company to be
run legally, anyways to run the company in the
better interest of the employees
• The company will best serve society
 Example
A company might knowingly pollute a
neighbor hood with substance that is
not yet legal in order to save the cost
of reducing it pollution and thereby
more competitive
Different View of Corporate
Social Responsibility

Stake Holders Theory

Edward Freeman & David Reed
• A stakeholder is any identifiable group or
individual who can affect the
achievement, or an organizations
objectives or who is affected by the
achievement of an organization objectives
• A stakeholder is short is anyone who has a
stake in what the company does
 Example
• General Motors impact the lives of
customers when it decides how much
safety it will build into it cars
• It impact employees when it sets salaries
• It impacts the local community when it
shut down its plants
• It impact when government changes laws
and regulations for General motors
 Stake Holders Theory
Finally Says
Says that the manger should give
stakeholders a fair share of profit, but
in a way that allows all other stake
holders to also get their fair share.

Two Arguments
Instrumental and Normative
 Instrumental Normative

Responsive to all stakeholders in Moral and ethical obligation to be

the best interest of the responsive to all its stakeholders
corporation not to be in the best (Principle of fairness) To share the
interest of the shareholders profit at the cost of others mutally
Salaries,
Treating employees decently
Other benefits
 Thus…
• Business ethics is the part of social responsibility
is one of the obligation owe to the society
• The social responsibility of the business
encompasses the economic, legal, ethical
expectations that society has of organization.
• Friedman explicitly says that company should
live up to the ethical and legal expectations of
the society and it will support the greater
economic benefits of the society