Business policy,ethics and society

This section will cover (a) definition of business policy: strategic decisions in the enterprise; (b) ethical behaviour above and beyond the requirements of the law: what might this involve e.g. in respect of products and markets in which the business is prepared to operate? (c) does business have a responsibility towards ‘society’? For example, should businesses decide without being legally required to do so, to undertake activities which they think are in the national interest even if this may appear to conflict with strictly commercial interests? (d) if ethical/social decisions are required, who is to make them — at what levels of an enterprise — e.g. does the board make them all or are they also expected below board level? This section will also cover: (e) practical examples in the light of changing attitudes towards business and market behaviour in the 1980's and 1990's; (f) implications of attitudes towards corporate crime and of behaviour which may not be illegal but which may be regarded as ‘unacceptable’: this will be discussed with examples from experience in Australia and other countries. The section will first explain the meaning of the phrase ‘business policy’ and will briefly outline the kinds of strategic decision which have to be made in business enterprises. It will go on to consider whether there are things a business ‘ought’ or ‘ought not’ to do even if they are within the law. The section will illustrate these problems with examples in the light of changing attitudes towards business policy and market behaviour in the 1980's and 1990's. It will take into account some recent cases of corporate crime in Australia and elsewhere and also of behaviour which while neither against the law or outside the power of the board, might be thought ‘inappropriate’.     

Effective Ethical Response

Abstract

Given the need to protect channel investments, including market share and brand equity, channel members have every reason to be certain that their activities are viewed as both ethical and socially responsible by channel stakeholders. On a landscape littered with ethical and social responsibility failures, perceptions of ethical behavior and socially responsible conduct are especially important to creating and maintaining the trust necessary to ensure long-term satisfying exchange relationships. Efficient Ethical Response (EER) uses tools from the study of ethical decision making and corporate social responsibility to efficiently help channel members conduct business so that their activities are far less likely to attract unfavorable attention and concern from channel stakeholders.     

The Multinational Corporation and Global Governance: Modelling Global Public Policy Networks

Globalization has increased the economic power of the multinational corporation (MNC), engendering calls for greater corporate social responsibility (CSR) from these companies. However, the current mechanisms of global governance are inadequate to codify and enforce recognized CSR standards. One method by which companies can impact positively on global governance is through the mechanism of Global Public Policy Networks (GPPN). These networks build on the individual strength of MNCs, domestic governments, and non-governmental organizations to create expected standards of behaviour in such areas as labour rights, environmental standards, and working conditions. This article models GPPN in the issue area of CSR. The potential benefits of GPPN include better overall coordination among industry and government in establishing what social expectations the modern MNC will be expected to fill. David Detomasi is an assistant professor of international business at the School of Business, Queen’s University, Kingston, Ontario Canada. His research areas include corporate governance, corporate social responsibility, and business and society.     

Non-Governmental Organizations, Shareholder Activism, and Socially Responsible Investments: Ethical, Strategic, and Governance Implications

In this article, we document the growing influence of non-governmental organizations (NGOs) in the realm of socially responsible investing (SRI). Drawing from ethical and economic perspectives on stakeholder management and agency theory, we develop a framework to understand how and when NGOs will be most influential in shaping the ethical and social responsibility orientations of business using the emergence of SRI as the primary influencing vehicle. We find that NGOs have opportunities to influence corporate conduct via direct, indirect, and interactive influences on the investment community, and that the overall influence of NGOs as major actors in socially responsible investment is growing, with attendant consequences for corporate strategy, governance, and social performance.     

Human rights strategies for corporations

This paper presents BP's approach to ethical corporate governance. The author suggests that corporate social responsibility is in the interests of both business and the people at large. In this context co-operation between business, NGOs and activity is the best way to proceed, with each party focusing on their own field of engagement; doing business in a way that respects human rights for the companies, and campaigning and advocacy for the NGOs. Increasing transparency and risks to reputation require business to take social responsibility seriously. It is also crucial, however, to examine the boundaries of business responsibility. The challenge is to address these issues and to co-operate with other parties such as NGOs to provide clear guidelines within specific time frames. This requires bold leadership on all sides.     

Corporate social responsiveness: Choosing between hierarchical and contractual control

Metaphors from strategic management can be applied effectively to business ethics programs. While effective strategies help implement ethical decisions that are formulated in good faith, ostensibly value-neutral control mechanisms can indirectly affect the substantive nature of policies and decisions themselves. This article examines the effectiveness of various corporate social responsibility implementation strategies. It also addresses the effects of implementation choices on the substantive formulation of ethical decisions and policies.Implementation and evaluation of corporate social responsibility programs through models of responsiveness are integrated into the social policy cycle using four tools: strategic control and performance control approaches, and hierarchical control and contractual control structures. The choices made among these forms of control approaches and structures, which as implementation mechanisms are typically considered to be value-free devices, may affect the substance of corporate social responsibility content. Hierarchical control structures, which use outside directors, tend to be associated with performance control approaches, and are biased towards applying utilitarian approaches to ethical decision making. Contractual control structures are compatable with strategic control approaches, and generally favor the application of principle-based approaches to ethical decision-making. Both the content and the quality of ethical decisions will be affected by differences between hierarchical and contractual control.Steven R. Salbu is an Assistant Professor at the Graduate School of Business, University of Texas at Austin; J. D. William and Mary. He has recent/forthcoming publications inBusiness Ethics Quarterly, Business and Professional Ethics Journal, Harvard Journal of Law and Public Policy, Tulane Law Review, Indiana Law Journal, St. John's Law Review, Marquette Law Review. He is an ethics consultant for Fortune 500 companies and was awarded the Wharton Advisory Board Outstanding Teaching Award.The author gratefully acknowledges the helpful suggestions of John Allison, Tom Dunfee, and Bill Shaw.     

Stakeholder Learning Dialogues: How to Preserve Ethical Responsibility in Networks

The shift in corporate strategy, from vertical integration to strategic alliances, has developed hand in hand with the evolution of organizational structure, from the vertically integrated firm to the network organization. The result has been the elimination of boundaries, more flexible organizations, and a greater interaction among individuals and organizations. On the negative side, the specialization of firms on single areas of competence has resulted in the disaggregation of the value chain and in the disaggregation of ethical and legal responsibility. To illustrate this point, the paper considers some cases, such as the case of the "beer girls" of Southeast Asia, who are used unethically by distributors to sell beer and liquor. To deal with the problem of the disaggregation of ethical responsibility, managers can use organizational culture and ethical values to control the performance of employees and of other organizations. Contemporary developments in business ethics also offer tools for dealing with the problem. For example, "global corporate citizenship," integrated social contracting theory, and stakeholder learning dialogues provide ways of integrating the interests of all stakeholders. The task is now to use these new approaches to create a governance process that incorporates the voices of all stakeholders, especially the voices of those stakeholders that have legitimate and urgent moral claims, but lack the power to establish those claims.     

Embedding Corporate Social Responsibility in Corporate Governance: A Stakeholder Systems Approach

Current research on corporate social responsibility (CSR) illustrates the growing sense of discord surrounding the ‘business of doing good’ (Dobers and Springett, Corp Soc Responsib Environ Manage 17(2):63–69, 2010). Central to these concerns is that CSR risks becoming an over-simplified and peripheral part of corporate strategy. Rather than transforming the dominant corporate discourse, it is argued that CSR and related concepts are limited to “emancipatory rhetoric…defined by narrow business interests and serve to curtail interests of external stakeholders.” (Banerjee, Crit Sociol 34(1):52, 2008). The paper addresses gaps in the literature and challenges current thinking on corporate governance and CSR by offering a new conceptual framework that responds to the concerns of researchers and practitioners. The limited focus of existing analyses is extended by a holistic approach to corporate governance and social responsibility that integrates company, shareholder and wider stakeholder concerns. A defensive stance is avoided by delineating key stages of the governance process and aligning profit centred and social responsibility concerns to produce a business-based rationale for minimising risk and mainstreaming CSR.     

Corporate response to an ethical incident: the case of an energy company in New Zealand

The ethical behaviour and social responsibility of private companies, and in particular large corporations, is an important area of enquiry in contemporary social, economic and political thinking. In the past, a company's behaviour would be considered responsible as long as it stayed within the law of the society in which it operated or existed. Although this may be necessary, it is no longer sufficient. In this paper, we examine an energy company's response to an ethical incident in New Zealand which prompted different responses across the country about the role of business in society. Thus, we argue that when a corporation is accused of unethical behaviour, executives of the company are usually compelled to offer responses to defend their actions and corporate image. Further, we use communicative response model, social issue life cycle theory, and organisational learning, to analyse the incident and how the company responded. Using social issues life cycle theory and organisational learning theory, we demonstrate that sustained pressure can potentially trigger a change of strategy that may serve to improve the ethical posture of a corporation and thereby improve the corporate image long term. We conclude that, although corporations may understand the significance of social issues to the performance and success of their business, this same understanding does not always translate into meaningful social action.     

Explicating Ethical Corporate Marketing. Insights from the BP Deepwater Horizon Catastrophe: The Ethical Brand that Exploded and then Imploded

Ethical corporate marketing—as an organisational-wide philosophy—transcends the domains of corporate social responsibility, business ethics, stakeholder theory and corporate marketing. This being said, ethical corporate marketing represents a logical development vis-a-vis the nascent domain of corporate marketing has an explicit ethical/CSR dimension and extends stakeholder theory by taking account of an institution’s past, present and (prospective) future stakeholders. In our article, we discuss, scrutinise and elaborate the notion of ethical corporate marketing. We argue that an ethical corporate marketing positioning is a prerequisite for corporations which claim to have an authentic ethical corporate identity. Our article expands and integrates extant scholarship vis-a-vis ethical corporate identities, the sustainable entrepreneur and corporate marketing. In delineating the breadth, significance, and challenges of ethical corporate marketing we make reference to the BP Deepwater Horizon (Gulf of Mexico) catastrophe of 2010.     

Values that create value: socially responsible business practices in SMEs – empirical evidence from German companies

Socially responsible business and ethical behaviour of companies have been of interest to academia and practice for decades. But the focus has almost exclusively been on large corporations while small- and medium-sized enterprises (SME) have not received as much attention. Thus, this paper focuses on socially responsible business practices of SME entrepreneurs or owner–managers in Germany. Based on the assumption that decision-makers in SMEs are the central point where all business activities start, members of a German entrepreneurs association were approached in the course of a qualitative and quantitative survey. They were asked to assess in what way their social responsibility is expressed in specific management practices towards selected stakeholder groups. These practices in turn were assumed to result in perceived positive reactions of the respective stakeholders and subsequently to positively influence the firm's financial performance, i.e. cost reductions and increase in profits. In the paper, a research model is presented that elaborates the relationship between an SME executive's social responsibility and the value creation of a firm, i.e. whether (personal) values create (economic) value. It was found that socially responsible management practices towards employees, customers and to a lesser extent society have a positive impact on the firm and its performance. As such, values can create additional value.     

Engaging values in international business practice

Managerial decisions and behaviors in the international business arena have ethical implications across cultures and countries. The need for ethics and core values in business practice has been heightened by continued business scandals and ethical managerial lapses that have violated public trust. Global businesses can offer practical guidance and set ethical examples for others to follow by establishing corporate values beyond written business codes. Four key work values (Honesty, Fairness, Concern of Others, and Achievement) known to be present in businesses across cultures, are put forth as a baseline start for multinational corporation leaders. Offered is a process for making the core values unique to an organization, and for adopting and training managers in the use of core values. Presented is evidence of managerial implementation of the core work values, and managers’ alignment of work values with organizational strategies. By addressing the values and principles of their workplaces, international businesses can achieve cross-cultural ethical practices, managerial alignment, and global social responsibility.     

Proximity and Rationalisation: The Limits of a Levinasian Ethics in the Context of Corporate Governance and Regulation

In this article, I explore how the ideas of French philosopher Emmanuel Levinas offer insights into a debate often held today in the field of corporate governance, concerning the relative merits of statutory and voluntary approaches to the regulation of business. The philosophical position outlined by Levinas questions whether any rule-based systematisation of ethical responsibility, either statutory or voluntary, can ever equate to a genuine responsibility for the other person. I reflect on how various authors have adapted Levinas’s philosophy to form a critique of bureaucracy and rule following in business, and the lack of ethical authenticity in corporate codes. However, this article also considers the question of whether a theoretical separation can be made between an ethical responsibility based on sensibility (as is suggested by Levinas) and a rational conceptualisation of how one is required to act. Considering the difficulty of disentangling these notions of ethics, I return to the problem of corporate governance and suggest an approach to stakeholder conflict based on mediation and dialogue, which rules out neither principles of conduct nor an openness of responsibility to the Other.     

Communication of Corporate Social Responsibility: A Study of the Views of Management Teams in Large Companies

In light of the many corporate scandals, social and ethical commitment of society has increased considerably, which puts pressure on companies to communicate information related to corporate social responsibility (CSR). The reasons underlying the decision by management teams to engage in ethical communication are scarcely focussed on. Thus, grounded on legitimacy and stakeholder theory, this study analyses the views management teams in large listed companies have on communication of CSR. The focus is on aspects on interest, motives/reasons, users and problems related to corporate communication of CSR information. A questionnaire survey and in-depth interviews confirm that there is a distinct trend shift towards more focus on CSR in corporate communication. Whilst this trend shift started as a reactive approach initiated by the many corporate scandals, the trend shift is now argued to be of a proactive nature focussed at preventing legitimacy concerns to arise. These findings are significant and interesting, implying that we are witnessing a transit period between two legitimacy strategies. Furthermore, the findings suggest that the way respondents argue when it comes to CSR activities coincides with consequentialism or utilitarianism, i.e. companies engage in CSR activities to avoid negative impacts instead of being driven by a will to make a social betterment or acting in accordance with what is fundamentally believed to be right to do. This provides new input to the ongoing debate about business ethics. The findings should alert national and international policy makers to the need both to increase the vigilance and capacity of the regulatory and judicial systems in the CSR context and to increase institutional pressure to enhance CSR adoption and CSR communication. Furthermore, stakeholders need to be careful in assuming that CSR communication is an evidence of a CSR commitment influencing corporate behaviour and increasing business ethics.     

Inverting the Pyramid of Values? Trends in Less-Developed Countries

The authors discuss the consistency of transnational companies in their home, as well as in less developed host countries, concerning ethics, values and social responsibility. Ethical behavior offers good reputation, credibility and tradition to the corporation. It leads to corporate social, environmental and economic responsibilities, cooperating to the desired sustainability. This paper analyzes the inversion of values that corporate governance systems have suffered. The meaning and implication of the corporate social responsibility is investigated and discussed. A “pyramid of values” is built upon individual ethical values at the basis. Over them, the organizational ethical values should indicate the limits of operations, so that the corporate social responsibility can be sustained, in the top. The authors comment that ethical values no longer lead the organization. Its communication with the stakeholders, specifically through reports, has been gradually replacing the code of ethics and corporate values. These reports have taken the basis of the pyramid leading the organizations to socially irresponsible and unethical behavior. They do not guarantee transparency or communicate the needs of the society. It appears that transnational companies do not behave the same way in their home country as they do in host countries, particularly in less developed regions like Latin America and Africa. Lack of communication and transparency may induce employees to unethical decisions and transform the reporting system into a marketing instrument. In order to guarantee compliance with the codes, transparency and ethical responsibility, communication within the organization is essential.     

Ethical consumerism: a view from Finland

Business ethics and corporate social responsibility have gained more attention in recent years. However, the consumers’ perspective on ethics is still a little researched area. This study reports a survey (n = 713) on the views of Finnish consumers about ethics in trade. Consumers’ willingness to promote business ethics as well as the obstacles to ethical consumption are investigated. The results of the study show that while the majority of the respondents regard business ethics as important, this attitude does not translate into their choice behaviour. Consumers are uncertain about which products and firms follow ethical rules and which do not. The most important obstacles to ethical consumption were difficulties in obtaining information, problems in product availability and high prices of ethical products.     

Striking a Balance Between Rules and Principles-based Approaches for Effective Governance: A Risks-based Approach

Several recent studies and initiatives have emphasized the importance of a strong ethical organizational DNA (ODNA) to create and promote an effective corporate governance culture of trust, integrity and intellectual honesty. This paper highlights the drawbacks of an excessively heavy reliance on rules-based approaches that increase the cost of doing business, overshadow essential elements of good corporate governance, create a culture of dependency, and can result in legal absolutism. The paper makes the case that the way forward for effective corporate governance is to strike an optimal balance between rules-based and principles-based approaches. The recent corporate scandals have demonstrated that the ethical ODNA is critical to the driving force and basis of legal and regulatory requirements. Effective governance means adhering to ethical principles, not merely complying with rules, and is a crucial guardian of a firm’s reputation and integrity. It is through an effective corporate governance program (that is, one that optimally captures and integrates the appropriate aspects of rules-based and principles-based approaches, and identifies and assesses the related risks) that an organization can reconfigure its ODNA for improved performance. Focusing on the ethical ODNA as the basis of new governance measures provides an opportunity to develop a competitive advantage as it represents a potential source of differentiation, strengthens the relationship with all stakeholders of the organization by building a culture of trust and integrity, and re-instills investor confidence. This paper employs dialectical reasoning that links the ODNA through principles-driven rules in developing a risks-based approach. A comparison from a risk assessment perspective between rules-based and principles-based approaches is presented. Although there have been few applications employing dialectical reasoning in business research, this methodology can be extremely useful in isolating ethical issues and integrating them into the business process. The risks-based approach captures the benefits of both rules-based and principles-based approaches, and incorporates trust-based principles such␣as solidarity, subsidiarity and covenantal relationships.Sundera Arjoon is a Senior Lecturer in Ethics at the Department of Management Studies, The University of the West Indies, Trinidad, He has served as Head of Department (2002–2005) and as Deputy Dean of the Faculty of Social Sciences (1996–2002). His publications have appeared in the Journal of Business Ethics, Journal of Markets and Morality, Global Development Studies, Social and Economic Studies, Applied Financial Economics, and the Journal of Eastern Carribean Studies. His current teaching and research interests include ethical decision-making, corporate governance, virtue ethics and familial ethics.     

Corporate Directors and Social Responsibility: Ethics versus Shareholder Value

This paper reports on the results of an experiment conducted with experienced corporate directors. The study findings indicate that directors employ prospective rationality cognition, and they sometimes make decisions that emphasize legal defensibility at the expense of personal ethics and social responsibility. Directors recognize the ethical and social implications of their decisions, but they believe that current corporate law requires them to pursue legal courses of action that maximize shareholder value. The results suggest that additional ethics education will have little influence on the decisions of many business leaders because their decisions are driven by corporate law, rather than personal ethics. Jacob Rose is Associate Professor at Southern Illinois University Carbondale. His research emphasizes judgment and decision making in accounting and governance contexts.     

Business Should Be Its Own Therapist: Observing the "Governance Ethics" of Taiwanese Enterprises

Taiwanese enterprises generally display a tacit acceptance and practice of globally-recognized business ethics such as the respect of human rights. Yet some Taiwanese business supervisors subscribe instead to a philosophy of leadership, dubbed "pseudo-harmony", which actively seeks to evade responsibility and any conflict of interest with profitability. Meanwhile other Taiwanese entrepreneurs are even less enlightened, dictatorially upholding self-serving regimes which operate on a philosophy which is euphemistically referred to as "householder management".These attitudes result in the sub-optimal development of "organizational democratization" within Taiwanese enterprises and hi-light the fragility of "ethical leadership" in Taiwan. There is a strong argument, therefore, that Taiwanese business needs to become both its own analyst and therapist if it is to enhance its "governance ethics". Only this way can the nation's enterprises evolve their ethical responsibilities to stakeholders and sustain their competitiveness in a global market that increasingly demands an adherence to ethical standards.     

Dynamic Transparency,Prudential Justice,and Corporate Transformation: Becoming Socially Responsible in the Internet Age

This article brings together two concepts of ethical practice into a single construct that describes how modern corporations can responsibly meet the information needs of their stakeholder networks in a way that promotes both corporate self-interest and widespread distributive justice. Internet technology is providing corporations with transformative tools that permit and encourage the exercise of social responsibility through “dynamic transparency.” “Prudential justice” is a concept representing a set of values that can provide an ethical justification for corporate implementation of dynamic transparency. This article argues that by using dynamic transparency in accordance with the provisions of prudential justice, firms can avoid many crises and manipulative or deceptive information transfers, can fulfill their responsibilities regarding stakeholders’ informational rights, and can undergo an organizational culture transformation that allows them to move from pure corporate egoism to a beneficial mix of self-interest and corporate social responsibility.