Corporate Social Responsibility Quiz

Business Ethics - Stakeholder Relationships, Social Responsibility, and Corporate Governance (Part 2)

• Business ethics deals with moral principles and distinguishes between right and wrong behavior.
• Social responsibility is an organization's obligation to maximize positive impact on stakeholders and minimize negative impacts.
• It can be understood as a contract with society, contrasting with business ethics which outlines conduct rules.
• Business ethics includes social obligations towards employees, customers, suppliers, and competitors.
• Social responsibility focuses on a company's social obligations.
• Ethical decision-making in the workplace is crucial, as exemplified by workplace tragedies like the Bangladesh sweatshop fires.
• Businesses adopting social responsibility policies and practices have positive community and environmental impact (e.g., Patagonia).
• Social responsibility comprises four levels: economic, legal, ethical, and philanthropic.

Carroll's CSR Pyramid

• Philanthropic responsibilities: being a good corporate citizen
• Ethical responsibilities: doing what is right and avoiding harm
• Legal responsibilities: obeying laws as society's codified rules
• Economic responsibilities: being profitable

Social Responsibility and Business Ethics

• Corporate citizenship is the extent to which businesses meet economic, legal, ethical, and philanthropic responsibilities.
• Business performance is strengthened by stakeholder orientation.
• Stakeholder orientation is the degree to which a company understands and addresses stakeholder demands.
• This approach fosters trust, loyalty, and profitability through long-term stakeholder relationships.
• Includes social concerns vital to society's well-being, like poverty, injustice, and educational inequalities.

Issues in Social Responsibility

• Major issues include data privacy, consumer protection, sustainability, and corporate governance.

• Privacy: Cybercrimes like identity theft are significant marketing issues impacting consumers.

• Consumer protection: Laws are in place to safeguard consumers from deceptive practices, like misleading advertisements, unsafe environmental hazards, and faulty products.

• Sustainability: Businesses must prioritize environmental considerations (and stakeholder well-being) due to environmental challenges like global warming.

Corporate Governance

• Corporate governance ensures the direction and control of companies through a system of rules, practices, and processes.
• Strong corporate governance limits the potential for unethical conduct.
• Governance principles include accountability, transparency, fairness, responsibility, and risk management.
• Stakeholder acceptance and trust are crucial results of effective corporate governance.
• Directors have a duty of care to make sound, informed decisions, and avoid causing harm, as well as a duty of loyalty to the organization's best interests.

Social Responsibility and the Importance of Stakeholder Orientation

• Legal and economic responsibilities are vital determinants of a company's performance.
• Economists like Milton Friedman posit that market constraints are more effective for preventing wrongdoing than regulations.
• Adam Smith believes individuals contribute to the common good through their production actions.
• Evidence indicates that caring for the well-being of stakeholders leads to higher profits.

Corporate Governance and Providing Responsibility to Stakeholders

• Maximizing profits is often the primary goal for most businesses, and stakeholders' interests are often balanced by corporate directors.
• External influences include government regulations and stakeholder pressure for ethical conduct, fostering positive brand attitudes and consumer identification.
• Executive compensation is impacted by internal and external equity considerations. A ratio of highest-paid executive wages to median employee wages influences stakeholder perceptions and trust in the organization.

Implementing a Stakeholder Perspective

• Steps include assessing corporate culture, identifying stakeholder groups, and identifying stakeholder issues.
• Evaluating current practices and selecting social responsibility initiatives require assessing the organization's commitment to stakeholders and social responsibility.
• Identifying resources and determining urgency involves financial and organizational investment levels, as well as assessing the importance and stakeholder pressures on specific social issues.
• Important feedback for assessing a firm's practices and contributions to issues includes evaluating stakeholder perceptions, understanding contributions to specific issues, and conducting formal research.