Business Ethics Chapter 17

Interplay between Business Ethics, CSR, and Corporate Governance

• The interplay between business ethics, corporate social responsibility (CSR), and corporate governance is crucial in reducing organisational risk and promoting sustainable business.
• King IV Report (2016) highlights the importance of good governance, which requires leaders to direct and control organisational operations in an ethical and effective manner.
• This is supported by ethical leadership, ethical culture, and responsible corporate citizenship.

Morality, Ethics, and Business Ethics

• Morality refers to a person's or group's standards for determining right and wrong, good and bad, and what deserves respect and what does not.
• Important sources of morality include law, family, school, and religious institutions.
• Ethics refers to the evaluation of moral standards.
• Business ethics involves the investigation and evaluation of the moral dimension of business operations, helping to identify, analyse, and propose solutions for ethical challenges faced in everyday business practice.

Normative Ethics

• Normative ethics is a branch of ethics that defines and systematises the principles employed when making moral decisions and judgments.
• It prescribes how people ought to act and defines different normative ethical theories that prescribe different principles for morally correct action.
• Examples of normative ethical theories include utilitarianism, deontology, and virtue ethics.

Micro- and Macro-Economic Level Impact on Business Ethics

• Descriptive ethics describes how people act by empirically investigating the moral attitudes of individuals and groups.
• The micro-economic level involves the study and evaluation of economic activities within organisations, including informal norms, formal policies, and leadership decisions and actions.
• The macro-economic level involves the study and evaluation of macro societal institutions that determine the rules of the game, enabling and constraining business activities and shaping business practices.

Corporate Social Responsibility (CSR)

• CSR refers to the impact that business has on society at the meso-economic level.
• The narrow view of CSR holds that the only social responsibility of business is to increase its profits as long as it stays within the rules of the game.
• The broad view of CSR argues that business has both negative and positive duties to society, including refraining from harming society and actively contributing to the welfare of society.

Stakeholder Theory

• The goal of business is to create value for its stakeholders by managing conflicting claims between stakeholders and minimising trade-offs.
• Stakeholders include groups that are vital to the success and survival of the organisation, such as employees, managers, suppliers, consumers, and shareholders.
• The broad view of stakeholders includes any group that affects or is affected by the organisation, including government, competitors, and society at large.

Corporate Citizenship

• Corporate citizenship draws attention to the rights, obligations, privileges, and responsibilities that organisations have in the societies within which they are embedded.
• In South Africa, according to the King IV Report, business is expected to contribute to socio-political reform and development by accepting societal and stakeholder obligations.

Components of Good Governance

• Corporate governance concerns the systems and processes according to which organisations are directed and controlled in an ethical and effective manner.
• The pillars of corporate governance include integrity (ethical leadership), competence (effective leadership), responsibility, accountability, fairness, and transparency.

The Statutory and Voluntary Approach to Corporate Governance

• The statutory approach involves governance requirements being legislated, with a focus on compliance and quantitative measures.
• The voluntary approach involves a qualitative, principle-based approach, with companies having discretion in determining how good governance practices are implemented.
• Examples of the statutory approach include the Sarbanes-Oxley Act (2002, USA), while the voluntary approach is exemplified by the King IV Report on Corporate Governance for South Africa (2016).

South Africa's Governance Regime

• The King Reports (I, II, III, and IV) provide guidance on corporate governance in South Africa.
• Key features of the King Reports include their applicability to all organisations, stakeholder-orientation, and emphasis on integrated reporting.
• King IV (2016) promotes inclusive capitalism, with a focus on shared prosperity and the six capitals (financial, human, intellectual, social, relationship, and natural).