Global Trends And Ethics Coursework.docx

Global Trends and Ethics C10GT

Should companies subscribe to codes of corporate social responsibility? Support your response with reference to ethical theory. You may illustrate your case with examples from real life of companies which do (or do not) have codes of Corporate Social Responsibility.

13/03/2018

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The following paper aims to answer the question of whether companies should subscribe to codes of corporate social responsibility. In order to determine a delicate position that deemed to be appropriate, the paper engages in a critical debate, containing a great proliferation of theories, approaches and terminologies based on literature surrounding the concept of corporate social responsibility among firms. In doing so, the paper addresses the evolution of corporate social responsibility for a solid understanding of the concept, along with emerged themes and models associated with it, such as corporate social performance (CSP). Then an analysis of institutional, organisation and individual levels is conducted in order to reach a reasonable position in relation to firms’ employment of codes of CSR. This discussion is supported with examples from different industries, with special reference to ethical theory. The researched literature was carried out through the lens of Heriot-Watt Discovery platform and Google Scholar. Keyword searched included terms such as: corporate social responsibility, ethical theory, stakeholders’ management, society and business, morality, and firms’ instrumental and normative motives. The concept of corporate social responsibility (CSR) has a diverse and long history. Its concerns have grown significantly since the second half of the 20 century (Bowen, 1953; Davis, 1960; Dodd; 1932; Frederick, 1960). On a wide range of issues, CSR not only become a central area of prominence in the business press and among political figures (Buhr and Grafstrom, 2004) but a body of academic literature has also emerged around it (Margolis and Walsh, 2003; Garriga and Melé, 2004; Campbell, 2007). It is important to trace the evolution of CSR as a definitional construct and as a concept, and come to appreciate what it has meant in the past and still represents (Carroll, 1991). Such a quest is primary to provide a solid foundation to reasonably assess the possibility of exercising such a concept by firms. There is an abundance of corporate social responsibility definitions, which are, according to Dahlsrud (2008), consistently referring to five dimensions, including: environmental, social, economic, stakeholder and voluntariness dimensions. Perhaps well-known is Carroll’s (1999) literature review of CSR in academic literature, dating the first formal literature of the 1950s and then move one toward the 1960s, 1970s to 1990s. Bowen’s (1953) work marked the beginnings of the modern period of literature on CSR, which was referred to more often as social responsibility (SR). He proceeded from the idea that the largest businesses were dominant centers of decision making and power and those actions touched citizen’s lives at various degrees. His thoughts on CSR are orientated to businessmen at that time who have the obligations to pursue policies and actions that are desirable and in line with objectives and 2

value of our society. In line with Bowen ideas on firm’s social concerns, Davis (1960) developed the concept in attempts to formalise and accurately refer to what CSR implies. Davis (1960) set his definition of social responsibility by stating that “…decisions and actions taken for reasons at least partially beyond the firm’s direct economic and technical interest’’ (Davis, 1960, P.70). This indicates that that certain socially responsible business decisions can be clarified by having a chance to bring economic gain to the firm, while paying it back for its socially responsible outlook. Another major contributor to the significant growth of social responsibility during the 1960s was Joseph W. McGuire. He asserted that corporations have not only economic and legal obligations but also certain responsibilities to society which goes beyond these common obligations. McGuire (1963) elaborated more in these obligations to cover various areas such as participation in welfare of the community, in its employee’s satisfaction, an interest in politics and in the whole social world at large. Walton (1967) addressed many facets of CSR to include an essential ingredient of the corporation’s social responsibilities, which is a degree of voluntarism. This is associated with the acceptance of costs involved that may have a direct impact on economic returns. Johnson’s (1971) advanced the concept by emphasising on the importance of managerial balance in terms of multiplicity of interests. This means that socially responsible firm focuses not only on striving for larger profits for its stockholders, but also consider and appreciate local communities, employees and what constitutes the nation overall. Another significant scholars on CSR are Manne and Wallich (1972). They emphasised on the element of volunteerism by saying that business expenditures may have multiple rather single motives. It is complex to distinguish between that which is in response to social norms and that which is ‘’purely voluntary’’. Furthermore, Manne and Wallich (1972) introduced three basic elements to exercise corporate social responsibility, involving: the setting of objectives, the decision whether to pursue given objective and then the financing of these objectives. In the 1990s, the corporate social responsibility concept transitioned notably to alternative themes such as business ethics theory, stakeholder theory and corporate citizenship, and CSP. The notion of corporate social performance model was introduced by Carroll (1970) under which CSR may be comprehensively subsumed. This covers three-dimensional aspects, including: integration of responsibility, responsiveness and social issues. Wartick and Cochran (1985) formulated these into a framework of principles, processes and policies. Carroll (1991) proposed a model consisted of four responsibilities as consecutive layers within a pyramid. The economic responsibilities as the base upon all others rest, and then built upward through legal, ethical and philanthropic categories (Carroll, 1991, p.42). This implies that CSR firm should 3

endeavour to make a profit and obey the law while being ethical and good corporate citizen. It should be noted that businesses should not meet these levels in sequential fashion but that each is to be met at all times for ‘true’ social responsibility. The corporate social responsiveness is presented as the action stage of CSR, as in how firms actively respond to social concerns. Firms could employ various philosophies and strategies of social responsiveness. These are: reactive, accommodative and proactive (Carroll, 1991). The social issues category or policies as referred by Wartick and Cochran (1985) are delineated into three concrete areas, including: social policies, social programmes and social impacts. These three dimensions of Carroll CSP model were reformulated by Wood (1991) into much more comprehensive and explicit model to become observed as the principles of CSR, the process of social responsiveness and the outcomes of corporate behaviour. Given a historical evolution of corporate social responsibility concept on the basis of decadeby-decade, and acknowledging the notion of corporate social performance model, which outlines the responsibilities expected, strategies to be implemented in return, and possible outcomes of such a corporate behaviour. It is about time to critically discuss the diverse views about firms’ employment of CSR, with a consultation of ethical theories in order to arrive to a logical destination. The question of whether firms should subscribe to codes of corporate social responsibility is far more complex than simply answering by yes or no. this is due to various contrasting factors, theories and assumptions involved. Since the CSR literature is highly fragmented (Waddock, 2004), and firms have a unique legal status structure and typically regarded as ‘artificial persons’ in the eyes of the law due to having certain rights and responsibilities in relation to various groups as noted by Crane and Matten (2016), the following debate will integrate institutional, organisational and individual level of analysis for a comprehensive determination. Institutional and organisational concentrates on instrumental motives, and theories related to institutional theory, and resource-based view of the firm. On other hand, individual level of analysis typically draw upon psychological theories and focus on normative motives (Aguinis and Glavas, 2012). This debate occupies a pluralism ethical stand of position, which accepts different backgrounds and moral convictions while at the same time suggesting that a consensus can be reached based on basic rules and principles. Before a firm decides to perform the codes of CSR, there are key aspects that should be closely examined. This includes the outcomes resulted from such a practice, the degree of influence of the key factors that could or force a decision of entering the domain of corporate social responsibilities, and to what extend they meet the moral judgement. At an institutional 4

level, there are various reasons why firms feel they must/should to engage in CSR. Stakeholders’ pressures serve as an important catalysts for firms to engage in CSR and pursue associated type of initiatives (Stevens et al, 2005). These coming specifically coming from consumers influence through product purchasing and evaluation (Sen and Bhattacharya, 2001), community (Marquis et al, 2007) and the media through public statements (Davidson and Worrell, 1988). The mains motives behind stakeholders’ pressure can be due to instrumental, relational or moral reasons as noted by Aguilera et al (2007). Additionally, institutional forces including standards and certification (Christmann and Taylor, 2006) also impact the likelihood of implementing CSR actions. However, these forces can lead to symbolic practices to comply with minimum requirements instead of a true CSR actions. On other hand, there are institutional-level outcomes of CSR that can be obtained as result of the predictors mentioned. These include improvement in a firm’s reputation (Waddock and Graves, 1997), positive product and firm evaluations by consumers (Sen and Bhattacharya, 2001), and high degree of loyalty (Maignan et al, 1999). Such outcome implies that firms should adopt the concept of corporate social responsibilities. An example of negative reputation and firm evaluation is oil giant ExxonMobil experience of international consumer boycott during 2000s Crane and Matten (2016). This resulted in associating the firm with “world’s no.1 climate criminal”, along with an organised campaign to avoid purchasing its goods. At an organisational level, firms’ instrumental motivation and normative reasons form a fundamental base for firms CSR engagement (Aguinis and Glavas, 2012). This can be seen through the thought of having CSR is beneficial for business in terms of competitiveness (Bansal and Roth, 2000), and the pursuit of higher morals (Aguilera et al, 2007). Additionally, firm’s structural aspects are also influential on CSR actions. This by integrating the CSR pride within firm’s values and mission (Bansal, 2003), and having an organisational structure that tend to be open towards relationships with society. On other hand, organisational level outcomes are divided into CSR and financial outcomes and non-financial outcomes. Orlitzky et al (2003) concluded that a positive relationship between CSR and financial performance occurs. Furthermore, non-financial outcomes include acquiring better competitive advantage, perceived quality of management (Waddock and Graves, 1997), and improved demographic diversity in relation to ethnic minorities and woman (Johnson and Greening, 1999). Given the possible favourable outcomes generated from motives highlighted in the lights of organisational level, it is therefore a strong signal of encouragement for firms to be socially responsible. At an individual level, there are different psychological related behaviour that motivates individuals working in a firm to engage in CSR policies and actions. This is 5

essentially associated with commitment from supervisors (Muller and Kolk, 2010), and extended to cover its antecedents, involving congruence of individual values with organisational values as part of decision making (Bansal, 2003). Additionally, Aguilera et al (2007) stated that employee psychological needs drive engagement in CSR by developing interest in improving self-esteem and self-actualisation. On other hand, individual level outcomes are represented in employee psychological attachment to the organisation. This sense of belonging results in employee engagement, increased organisational identification and better employee relations (Glavas and Piderit, 2009). These CSR benefits generated from an individual perspective is another area that supports the assertion that firms are suggested to exercise the codes of social responsibility, especially for the businesses who prioritise human assets and appreciate the value of their employees. Xerox, the printing giant offers programs supporting social concerns. Their involvement community program involves directly employees. Since 1974, more than half a million employees contributed in this program. As a result, Xerox earned not only community recognition but also employees’ commitment. The analysis of the three levels in relation to the reasons and diverse positive outcomes demonstrate why it is advantageous for the companies to subscribe to code of social corporate responsibility. In arguing against CSR, Friedman (1970) asserts that commitment to CSR is a conflict between interests of managers and shareholders. He argues that managers are engaged in CSR policies and actions for personal interest such a way to further their own career and political agenda though the expense of shareholders. This is believed to be consistent with agency theory. These are reasons of self-interest, and not CSR at all. He stated also that resources are devoted for one specific reason, which is to increase firm profitability. This conflicting interest could be dependent to an extent on ethical position of decision makers. In regards to ethical theory, when managers decides to respond positively to stakeholders’ interest in CSR, by devoting resources to promote CSR, the questions of morality arises. Based on consequentialist theories, as long as the outcome of subscribing to corporate social responsibilities is desirable by responding to different social concerns of different interest groups, the action is morally right even though a manager may have profit as a main reason in first place. Egoism as well as utilitarianism can be used in this context. On other hand, if the manager has intention of profit arises from a pure genuine social actions then the action is morally right, not because of the consequences they produce. This is strongly linked to ethics of duties, and rights and justice. 6

Given the debate discussed above, it is deemed to be appropriate for firms to subscribe to codes of social responsibility. This decision is determined based on proven positive outcomes generated across the three levels, and due to increased degree of stakeholders’ pressure to influence firm’s engagement to CSR, especially among consumers, community and media. However, firms are advised to examine closely the mediators and moderators of CSROutcomes relationships, as these provides mechanisms and conditions under which CSR initiatives may influence the required or expected outcomes.

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Aguinis, H. and Glavas, A., 2012. What we know and don’t know about corporate social responsibility: A review and research agenda. Journal of management, 38(4), pp.932-968.

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