Corporate Social Responsibility and Ethical Decision Making

A collection of vocabulary terms and their definitions related to corporate social responsibility and ethical decision-making.

Corporate Social Responsibility (CSR)

The responsibilities that businesses have to the societies within which they operate.

Economic model of CSR

Limits a firm's social responsibility to the minimal economic responsibility of producing goods and services and maximizing profits within the law.

Managerial capitalism

Holds that the primary obligation of business managers is to serve the interests of the stockholders by maximizing profits.

Stakeholder model of CSR

Recognizes that every business decision affects a variety of people, benefiting some and imposing costs on others.

Integrative model of CSR

Combines social and economic goals within the core strategy, showing that companies can pursue profit while making a positive social impact.

Corporate sustainability report

Provides stakeholders with financial and other information regarding a firm's economic, environmental, and social performance.

Reputation management

The practice of caring for the 'image' of a firm.

Corporate Governance

The structure by which corporations are managed, directed, and controlled toward fairness, accountability, and transparency.

Conflict of interest

When a person's personal interests conflict with the proper exercise of their judgement on behalf of others.

Fiduciary duties

A legal duty, grounded in trust, to act on behalf of or in the interests of another.

Sarbanes-Oxley Act (2002)

A US federal law that mandates certain practices in financial record keeping and reporting.

Internal control

Mechanisms established internally to comply with financial reporting laws and regulations.

Committee of Sponsoring Organizations (COSO)

A private sector initiative established in 1985 to improve the quality of financial reporting.

Insider trading

Trading of securities by those who hold private inside information.

Duty of loyalty

Requires board members to give undivided allegiance when making decisions affecting the organization.

Negligence

Unintentional failure to exercise reasonable care not to harm other people.

Implied Warranty of Merchantability

A business implicitly assures its product is suitable for its purchase.

Tort law

A legal approach that aims to compensate individuals harmed by the actions of others.

Consumer vulnerability

When a person has an impaired ability to make informed consent to market exchange.

Gatekeepers

act as “watchdogs” to ensure those in the marketplace play by the rules and conform to the market functions as it should

• control environment

• risk assessment

• control activities

• information and communication

• ongoing monitoring

Elements of an internal control structure

• Duty of care

• Duty of good faith

• duty of loyalty

Legal duties of board members

Marketing

an organizational function and a set of processing for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders

• product

• price

• promotion

• placement

The four P’s of Marketing

• the person must freely consent to the transaction

• consent must not only be voluntary, but also informed

• decide if other values are affected

Ethical Framework for Marketing

Contract law, tort law, strict liability

Product Safety laws

Contract law

the ethics implicit in contracts, is one legal approach to product safety

caveat emperor

assumes every purchase involves the informed consent of the buyer and, therefore, it is ethically legitimate

Implied Warranty of Merchantability

a business implicitly assures its product is suitable for its purchase

Strict Liability

legal doctrine that addresses questions of legal and ethical responsibility for cases in which no one is at fault, but someone has been harmed

Incentive and Financial Burden

Ethical Debates in product liability

incentive

holding a business responsible works as an incentive only if the harm was something they could have predicted and prevented; if the harm was

Financial Burden

claims businesses are best able to pay for damages, however many end up bankrupt by product liability claims 

respondent superior

doctrine that holds an employer responsible for the actions of their employees when performing ordinary duties

John Kenneth Galbraith

claimed that advertising and marketing created the very consumer demand that production aimed to satisfy

Dependence effect

consumer demand depended on what producers had to sell

• First, by creating wants, advertising was changing the "law" of supply and demand on its head – demand turns out to be a function of supply

•  Second, advertising and marketing creates irrational and trivial consumer wants and distorts the entire economy

• Finally, by creating consumer wants, advertising and other marketing practices violate consumer autonomy

dependence effect 3 major and unwelcome implications

Consumer vulnerability

when a person has an impaired ability to make an informed consent to the market exchange

Stealth/undercover marketing

marketing campaigns where subject is unaware they are the target of a marketing campaign, targets vulnerable populations