WK8- Business Ethics and Corporate Social Responsibility

Understanding Ethics

• Definition: Individual beliefs about right or wrong relating to decisions, behaviors, or actions.

Business Ethics

• Importance: Consideration of values in decision-making impacts stakeholders.

• In modern business, ethical conduct is crucial for strategic competitiveness.

Case Study: Volkswagen Scandal

• Overview: VW faced emissions scandal leading to a significant lawsuit.

• Immediate repercussions included:

  • Loss of $16.9 billion in market value within days

  • Sales drop of 20% in the first three months according to The Guardian

  • Total possible costs of scandal estimated at $34.5 billion by Forbes.

Stakeholders Involved with VW

• Primary stakeholders:

  • Customers

  • Employees

  • Dealers

  • Shareholders

  • Every aspects of the environment

  • Other auto manufacturers

  • Executives and board members

  • Governments

  • Courts

Benefits of Business Ethics

• Key advantages:

  • Builds trust among customers and the public

  • Increases competitiveness and strengthens brand reputation

  • Aids compliance with regulations

  • Offers protection from litigation

  • Enhances employee morale and loyalty

  • Fosters adherence to organizational culture

  • Encourages positive societal changes

  • Prevents revenue loss

The Purpose and Responsibilities of MNCs

• Key question: What is the purpose of multinational corporations (MNCs), and what are their responsibilities?

CSR Movement Context

• Quote from The Economist: "The CSR movement has won the battle of ideas... the question is not 'Whether' but 'How?'"

• Perspectives:

  • Maximize shareholder value exclusively

  • Broader interests of society beyond profits

Milton Friedman's Stance on CSR

• Quote: "The social responsibility of business is to increase its profits."

• Perspective:

  • Business has one responsibility: maximizing profits for shareholders while adhering to legal and ethical standards.

Interdependence of Society and Business

• Society's needs from business include:

  • Employment and wages

  • Investment and innovation

  • Taxation forms

• Business's needs from society include:

  • Demand creation

  • Public assets and infrastructure

  • Legal protection

Corporate Social Responsibility (CSR) Definition

• Definition by Davis (1973):

  • Firm's consideration of issues beyond mere economic and legal requirements.

• Definition by Carroll & Buchholtz (2009):

  • CSR includes economic, legal, ethical, and philanthropic expectations from society.

Key Elements of CSR

• CSR emphasizes responsibilities beyond profit-making, including:

  • Addressing social problems linked to corporate actions

  • Recognizing a broader constituency than just stockholders

  • Acknowledging impacts that exceed market transactions

  • Valuing human interests beyond economic focus.

Justification for Engaging in CSR

• Moral Arguments:

  • It is the ethical responsibility to act positively for society.

  • Increasing concern for natural resources and environmental issues.

• Instrumental Arguments:

  • CSR drives business success; ignoring it can harm firms.

  • Emerging consumer demographics emphasizing health and sustainability.

The Case Against CSR

• Arguments include:

  • Business primarily exists for economic activity.

  • Managers should focus on shareholders' objectives.

  • CSR can foster superficial efforts instead of real change, leading to mere 'Window-Dressing'.

Surveillance Capitalism Defined

• Definition:

  • The commodification of personal data for profit, leading to predictive analytics and manipulation of consumer behavior.

• Context: Tied to companies like Google, Facebook, YouTube, and WhatsApp.

Corporate Social Responsibility (CSR) is when a company considers more than just making money or following the law. It includes ethical, legal, and social expectations from society. CSR focuses on helping solve social problems related to business activities and recognizing that businesses should care about more than just profits.