Corporate Social Responsibility and Business Ethics - Literature review Example

Introduction The issue of corporate social responsibility (CSR) has been under debate for a period of more than 50 years. Recent analysis that was done by Secchi (2007) indicated that the definition of CSR has been changing both in practice and meaning. The view of CSR that was limited to philanthropy then shifted on the relationship between the business and the society, especially referring to the corporation contribution to finding solutions to social problems. According to Lee (2008), the current CSR represents a concept where business organisations put into consideration the society’s interests by being accountable to the impact of the business activities on employees, customers, shareholders, suppliers, communities, environment and other shareholders. Based on this definition, it is clear that organisations need to comply with the laws and take the initiatives voluntarily to improve the well-being of local community, employees and the society at large. Thus, CSR involves strategies that corporations conduct business in an ethical and society friendly manner. Activities of SCR include development of organisation-employee, relationships, partnering with local community, environment protection and sustainability among others. This article is aimed at discussing utilitarianism as the most useful theory for guiding decision making in a company, the company’s aim of making profit rather than addressing social responsibilities, and code of ethics as the most effective technique of instilling ethical behaviour in within a company. Theory of utilitarianism and decision-making According to Secchi (2007), the theories of utilitarianism can be divided into two: the corporation’s social cost and the idea of functionalism. Based on CSR, the social cost theory the non-economic forces of the corporate influence the socio-economic system in the community. Thus, this theory suggests that the corporation is required to accept the social rights and duties to participate in social cooperation. The functional theory advocates that the corporation is supposed to be part of economic system where profit making is one of the goals. A company is seen as an investment where this investment must be profitable to both stakeholders and investors. Thus, CSR serves as a defence tactic against the external attacks of the industrial system because there needs to balance social objectives and profit making for an equilibrium economic system. According to Frederiksen (2010), the ethical principle of humanitarian theory is to determine if the operation of a business would affect any stakeholder. By doing this, it will be able to make decision based on what can be regarded as morally right action, that is, the action that will bring the overall positive effects on every stakeholder. This means that the stakeholders will examine every aspect in order to evaluate the potential positive and negative outcomes of the organisation operations. If positive outcomes outweigh negative ones, then the activity can be executed and vice versa. Based on above definition, it is clear that utilitarian theory drives the organisation towards getting the possible outcomes in regard to its actions. This means that the companies that make decision using utilitarian theory and CSR leading to the best outcome. Thus, based on this theory a company makes decision in regard to what is the greatest possible good for the community by satisfying the shareholders, suppliers, employees and customers as well as observing the aim of the company of making profit (Angus-Leppan, Metcalf, & Benn, 2010). According to Brady, &Woller (1996), decision making ethics based on classical utilitarian emphasise that the utility judgements are resolved on the basis of a complex process of comparison and assessment of alternative and finally making a decision on the alternative that results provides greatest benefits over costs. Thus, those decisions that lead to maximum utility are considered ethical. If any alternative is below the best alternative, it means that it is ethically inferior. This theory has been employed in monitoring organisation where it is easier to question about the profitability of the organisation if its success does not coincide with the organisational contribution to the society. Such cases have occurred in big companies such as WALL-MART where it practices on corporate social responsibility was questioned. This is because it lacked to include its employees by extending its fiduciary duties in order to build unity, trust as well as the spirit of the firm to succeed. This is because the success of a business requires a better fiduciary relationship with the stakeholders for the company to keep its focus and for the parties to grow due to stakeholders’ satisfaction making them ideas and innovation driven. Thus, as a corporate, there is a responsibility to remain true to corporate values and mission statement (Wall-Mart, 2012). Profit making rather that social responsibility Companies use CSR to make profits rather than being socially responsible. According to Drucker (1984), the businesses are using social problems in order to gain an economic opportunity and benefit. This is achieved as the executives of the corporations drive for productive capacity, human competence, jobs that are well paying and finally they become wealthy. In this case, they pretend to be giving back to the society while the large position of what is earned is left in the hands of individuals. Friedman (1970) also argued that businesses adopt the corporate social responsibilty in order to increase the profits of the business. in this way, a corporate executive takes a social responsibility as a businessman but not for the benefit of his or her employees. friedman provides certain circumstances where a a corporate executive uses money to increase profits of the company in the name of social responsibility. In one of the circumstances, the corporate executive may refrain from making increament in the product prices with an intention of contribution to social objective which is prevention of inflation, even if the increse in the proce of the product would benefit the corporate. In another situation, the corporate executive would make expenditure in order to reduce pollution beyond the value that is of interest of the coprporate or to a value which is under the requirement of the law in order to make contribution to the social objective that is environmental improvement. In another situation, the corporate executive may hire unemployed and unqualified workmen rather than qualified ones at the expense of the profits of the corporate in order contribute to reduction of poverty as a social objective. Based on the above situations, Friedman ephasises that the corporate executive spent money belong to someone in order to contribute to a general social interest. This means that the actions of the corporate excutive in his compliance with social responsibility led to reduction to the stakeholders return given that the money he or she is spending belong to them. in other conditions, raising customer prices the the customers of the corporates means that he or she spent customer’s money. In addition, the actions of the corporate executive also would led to lowering of some employees’ wages which means that he or she is spending their money. In such situations, it is clear that the money use for the achievement of the social objective did not affect the corporate as well as some of the employees especially the executives. This show situations where corporate social responsibility is used to increase or maintain the profits of the company as well as making corporate excutives wealthier while exploiting other stakeholders in the name of social responsibilities (Freeman & Hasnaoui, 2011). This is also an explanation of Drucker (1984) statement while he observed that businesses use social problems to gain an economic opporunity. Karnani (2012) also found out that there are flaws in application of corporate responsibility where most companies are aimed at engaging in social responsibilities that leading to profit making. This leaves other responsibilities unattended. He argues that companies comply with social responsibility where that can gain something. For instance, in food industries, outlets specialising with fast food engaged in social responsibility of considering a healthier market because they profited through expansion of the offering by providing salads as well as other options that appealed the consciousness in health. In addition, other companies have found opportunities for new sources of revenue by providing whole-grain, low fat and other types of foods that are growing in terms of popularity with an aim of improving social welfare. In such situation, the corporate executives get wealthier at the expense of employees and the community through provision of healthier foods but at higher prices. In another situation, companies such as automakers are getting more profit by responding to the demands of the consumers through provision of vehicles that are fuel-efficient in order to achieve the social objective of environmental protection. Thus, such companies are getting significant boost of their profits with an aim of enhancing social welfare through reduction of consumption of energy as well as costs reductions. In other situations many large companies usually claim that they are no getting into the business for just profits but with the intention of serving larger social purpose. They try to trumpet their effort for production of quality, healthier and efficient products in order to make the world a better place, but in real sense, they are aimed at increasing their profit using social responsibilities are an excuse (Karnani ,2012). This was also echoed by Barnett (2012) who realised that the company’s main aim is to maximize their profits but not really commitment towards social responsibility given that they benefit through using the stakeholders earnings. Code of ethics and ethical behaviour within an organisation Managers in these days must be very sensitive to the issues concerning ethical behaviours and social responsibilities as pressure from employees, interest groups, public, legal as well as governmental concerns. Thus, they need to draw lines between various concerns and ethical behaviours within the company. Ethics deal with the action of human and it can be considered as philosophical thinking in regard to morality, moral problems as well as moral judgements. It is important to consider that organisations exist within the society and they should be bound by moral codes and expectations of the society they are in and contribute to the furthering and betterment of its own interests (Drucker, 2007). According to Ferrell (2004), that it is essential that managers as well as employees should have a good understanding of how to deal with issues of ethics in the workplace. The most effective way of dealing with ethical issues is use of code of conduct or ethics. This ensures that the employees are able to demonstrate morals and ethics according to the culture of the organisation and be able to reinforce the conduct through their work and through examples. By having a clear and open communication between the management and employees and among employees it is easier to avoid unethical issues. Thus, clear understanding of the culture of the organisation is enhanced through code of conduct (Ketteringham, 2008). Sims (1992) adds that ethical consciousness in any organisation is encouraged from top management to the lowest level through caring about ethical practices. Such practices are reinforced and supported by the code of ethics at all levels of management. Since ethics are set of beliefs that are different in people, it is through the code of ethics in a company that is effective in guiding the decisions and behaviours of different persons while they will be working either individually or in groups within the company. According to (Trevino & Brown, 2004) code of ethics will also be the best way for the employees to make personal decisions in determining what is right or wrong, what is just or unjust and the situation fairness within the company. As they are different from person to person based on one’s religion, belief or family, they are essential in the success of practicing business but they should be guided through code of ethics. While conducting business, it is clear that most bad ethical behavioural are usually deemed newsworthy, but it is through the code of ethics that they can be controlled. In any business, when the company or an individual fails to make an ethical decision, they will be exposed everywhere. This shows how essential is to have a company’s code of ethics in order to deviate from such situations. Stevens (2008) adds that presence of code of ethics will improve the employee’s decision. He argues that absence of knowledge development in regard to ethical reasoning within an organisation will lead to practicing of fraud. Most employees are usually faced with ethical issues especially due to their responsibilities that the public may have placed on them. Without code of ethics, issues such as fraud will be present within the organisation. Thus, code of ethics serves as effective way for instillation of behaviour in any organisation. Conclusion Based on the article, utilitarianism is the most effective theory for guiding the process of decision making. This is because it balances the social objectives and the profit making of the company. Thus, investment must be profitable to both stakeholders and investors. The main aim of companies is directed towards making profit rather than social responsibility. This has been shown as companies pretend to be achieving social objective but are aimed at increasing their profit and making the corporate executives richer at the expense of the stakeholders. Ethical behaviours are very essential for the success of the organisation both internally and externally. Thus, it is the most effective tool for addressing ethical behaviours within the organisation. 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Retrieved on August 22, 2012 from: http://www-biz.aum.edu/kevinbanning/ethics.pdf Wall-Mart 2012, Wal-Mart and Corporate Social Responsibility. 22 Aug 2012,     Read More