Ethics and corporate social

responsibility
Anne Daguerre
 Learning outcomes
1- Be able to explain the notion of
ethics
2- Be able to explain the utilitarian,
individualism, justice, and practical
approaches for making ethical
decisions
3- Be able to explain corporate social
responsibility (CSR)
4- Discuss how managers can create
a more ethical organisation
 Outline

1-What is ethics?
2-Examples, causes and
consequences of ethical breaches
3- Approaches for making ethical
decisions
4- Corporate social responsibility
(CSR)
5- The business case for ethics
6- Policies for managing
sustainability and ethics
7- Conclusion
 What is ethics?
Code of moral values and principles that
govern the behaviour of a person or a
group with respect to what is right or
wrong
Sits between codified legal rules (what is
lawful or not) and personal standards
(free choice)
Ethics pertain to the domain of social
standards
An action can be unethical whilst still
being lawful (Daft 2020, p.147)
 Examples of unethical
behaviour

Volkswagen December 2015

Many VW cars being sold in America had a
"defeat device" - or software - in diesel
engines that could detect when they were
being tested; designed to cheat US
emissions tests
In 2019 German prosecutors filed charges
against executives for having withheld
information from shareholders in order to
shore up firms’ share price.
Causes of unethical behaviour

1- Pressure to meet short term

earning goals under the shareholder
value model (Volkswagen scandal
illustrates this)
2- Culture of tolerance of unethical
behaviour (cutting corners, taking
short cuts)
3- Small breaches often lead to
bigger ones
4- Fear of speaking up
 Consequences of unethical
behaviour
High costs associated with ethical
breaches
Loss of confidence in the organization due
to insurmountable reputational damage
Volkswagen has set aside $ 33 to pay for
fines and legal costs as a result of
Dieselgate

All managers face ethical dilemmas, i.e.

when it’s not easy to ‘do the right thing’
because of conflicts between different
imperatives and interests
 Frameworks for making ethical
decisions
Ethical dilemmas: the transition to a green
economy involves cutting fossil fuels and
closing down mines and oil plants but at
the expense of local jobs (which is the
reason why politicians often do not want
to make these decisions)
Short-term or long term horizon?
Which group should be compensated for,
looked after the most? Are some
stakeholders more deserving than others?
 Utilitarian approach

Jeremy Bentham and John Stuart Mill

late 18th century and 19 century
th
economists and philosophers
Pleasure over pain
An action is right if it promotes
happiness or pleasure not just for the
performer of the action but also for
everyone else affected by it
Optimizes benefits for the greatest
number of people
Actions should be evaluated on the basis
of their consequences for the majority
 Individualism approach

Adam Smith on self-interest in Wealth of

Nations 1776
 Moral rights approach
Human beings have fundamental rights
that cannot be taken away from them;
this is based on the dignity of human
life.
Moral rights must be preserved and
protected
1- Right to privacy
2- Right of free consent
3- Freedom of speech
4- Right to life and safety
 Justice approach
Moral decisions must be based on
standards of equity, fairness and
impartiality.
Distributive justice (treat people equally)
Procedural justice (rules should be
clearly stated and applied consistently;
right to be heard and appeal a decision
is fundamental procedural justice)
Compensatory justice: individuals or
communities have to be compensated
for cost of injuries by parties responsible
 Practical approach or
business ethics
Issue is not about what is right or wrong

Instead, it’s a balancing act between

interests of different stakeholders

Based on standards of behaviour in

society at large but also on professional
codes of conducts
Three levels of moral development
based on Kohniberg,
 Stages of moral development

Preconventional level: people obey

authority to avoid detrimental
personal consequences
Conventional level: we conform to
ethical codes of conduct because
this is what is expected of us and
enables social acceptance and
belonging in a group
 Stages of moral
development
Postconventional or principled: the
individual has internalised high
standards of ethical behaviour based on
universal principles of justice and will
disobey unethical guidelines or orders,
because personal integrity comes first
 Giving vs taking

• Most leaders operate at conventional

level
• Few principled leaders but they have
the greatest level of influence on
others (leading by example, asking
oneself what can I do for others rather
than simply what’s in it for me or
reputation of the organisation)
• People work harder and more
effectively when managers out
interests of others before their own
(Daft, 2020, p. 156)
 Corporate Social Responsibility (CSR)

• 1953: Social Responsibilities of the

Businessman by Howard R. Bowen

• What are the responsibilities of

business people (men only at the time)
according to US society?

• Being a good corporate citizen, i.e.

acting in the interests of society as a
whole and not just the organization
 Milton Friedman’s view on CSR in 13
September 2020 New York Times article

“There is one and only one social

responsibility of business—to use
its resources and engage in
activities designed to increase its
profits so long as it stays within the
rules of the game, which is to say,
engages in open and free
competition without deception
fraud.”
“A Friedman doctrine-- The Social Responsibility Of
Business Is to Increase Its Profits”, by Milton Friedman
Carrol’s pyramid of CSR
Stakeholder mapping
 Measuring CSR
• Companies assessed on their
performance along environmental,
social and governance dimensions
(ESG)
• Balanced scoring system for
measuring CSR
• Stakeholder mapping helps
identify interests and relative
power of various stakeholders
 The business case for CSR
• Organisations that take ethical
decisions and CSR seriously are in
fact more profitable
• Important societal and consumer
pressure on businesses to do the
‘’right thing’
• As a result of Covid-19, companies
have benefited from huge
subsidies and are expected to do
more in return for the greater good
The triple bottom line
United Nations global compact (ten
principles for business)
 Business case for SDGs

• Managers and corporations have to

place environmental and social concerns
at the top of hierarchy of imperatives
• Against Friedman 1970
• Showing SDG awareness and progress
towards the SDGs is good business
• But how far does the triple bottom line
actually go? Does planting a tree
actually compensate for carbon
emissions?
 Managing social responsibility

• Value oriented approach vs. structure

oriented approach
• Values oriented approach targets
individuals 'desire to be ethical
• Speaks to their personal values
• Ethical leadership is core: leading by
example, be role models for employees
• Volunteerism
• Codes of conduct
 Codes of conduct

A statement setting out guidelines regarding the ethical

principles and standards of behaviour expected of a
professional person or company. For example, the
Market Research Society has a professional code of
conduct and utility companies have customer charters.
Codes of conduct have no statutory effect but can have
legal consequences: e.g. a code of conduct for the
handling of personal data in a particular trade may be
referred to by a court in determining whether there is a
case of misuse of data under the GDPR.
Codes of conduct
 Structural policies

Instead of just relying on voluntary codes

of practice and employee/employer good
will, companies put in place mechanisms
to ensure adherence to code of conduct

Ethics chief, compliance office, ethics

training

Policy in place to uphold standards and

monitor policy implementation and
practice
 Whistle-Blowing

• Employee disclosure of company

wrongdoing falls into the category of
whistle-blowing
• In theory strong protections for whistle-
blowers
• Companies have confidential hotlines for
whistle-blowers and are taking steps to
encourage reporting of whistle-blowing
• However, most operate non disclosure
agreements on certain aspects
Whistle-Blowing: the case of Facebook

• Frances Haugen was formerly a

member of Facebook’s civic
misinformation team, and has
detailed Facebook’s unethical
business practices.
• These include prioritizing profit
over the safety of users,
repeatedly lying to investors and
amplifying the January 6th Capitol
Hill attack on their platform.
• Use of Non Disclosure
Agreements (NDAs) for Facebook
moderators, Hern 11 February
2021
 Conclusion

Business ethics and CSR are not the same

Increased pressure on business to do the right
thing as a result of UN Global Compact 2015 and
the 17 Sustainable Development Goals (SDGs)
Organisations have developed monitoring and
reporting tools to explain how they behave like
good corporate citizens
This indicates that Friedman’s view is buried
But suspicion that CSR and business ethics have
become a business, a profit making entreprise
Growing consumer interest in environmentally
friendly products can lead to greenwashing
References

Bowen, H. (1953). Social responsibilities of the businessman. New York:

Harper & Row.

Carroll, A. B. (1991). The pyramid of corporate social responsibility:

toward the moral management of organizational stakeholders. Business
Horizons, 34(4), 39–48.

Daft R. L (2021), ‘Managing Ethics and Social Responsibility’, in daft R.

(ed), Management, 14th edition, Cengage, p. 144-173.

Friedman M, 1970, ‘A Friedman doctrine-- The Social Responsibility Of

Business Is to Increase Its Profits’, New York Times, 13 September
1970.

Hern A. (2021), ‘Facebook moderators 'told not to discuss working

conditions’, The Guardian, 11 February 2021